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That agreement addresses charges that theSpringt House, Pa.-based company violated federal tradse laws through its pricinf strategies on business credit cards, and in its marketing of cash-back rewards on the Advanta said it did not admitr wrongdoing and that it entered the agreements “inn the interest of expediency and to avoid Advanta said it took a $14 millioj charge to cover refunds tied to the alleged marketing violations in third-quarted 2008 and will take a second-quarter 2009 chargd to cover refunds over its pricinh strategies, which it said could total $21 million. Advanta also agreef to a $150,000 fine.
In a separater agreement with the FDIC, Advanta’s abilitg to use cash and pay dividends hasbeen restricted. The company must submit a plan toremainn "well-capitalized," and submit a plan to terminate its deposit-taking operationx and deposit insurance once its depositse are repaid in full, a process expectesd to take a few The second agreement with the FDIC places restriction s on Advanta’s use of its cash assets, paymentf of dividends and transactions that would materially alterf its balance sheet composition and taking of brokered Advanta said the second orderf does not in any way restrict it from continuinhg to service its managed credit-card accountse and receivables.
In an effort to limit losses and erosionj of its capital as credit Advanta said in early May that its securitizatio n trust will go into earlyamortizationb — where the company uses receivables from customers to acceleratse payment to investor bondholders. While that protect investors from prolonged exposure to a pool of receivabless whose credit performancehas deteriorated, Advanta woulxd have needed an alternative way to fund new purchase on its customers’ credit cards. So it had to shut down futurew use, effective May 30. It has since referree some customers to AmericanExpress Co. Advanta’s stock closed 2 7 percenft lower Wednesday at42 cents.
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