Advanta agrees to refund customers up to $35M in FDIC agreements - Pacific Business News (Honolulu):

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That agreement addresses chargeas that theSpring House, Pa.-based company violated federal tradr laws through its pricing strategies on businesas credit cards, and in its marketing of cash-backo rewards on the cards. Advanta said it did not admirt wrongdoing and that it entered theagreementxs “in the interest of expediency and to avoids litigation.” Advanta said it took a $14 millionb charge to cover refunds tied to the alleged marketinbg violations in third-quarter 2008 and will take a second-quarter 2009 chargwe to cover refunds over its pricinh strategies, which it said could total $21 Advanta also agreed to a $150,000 fine.
In a separate agreement with the FDIC, Advanta’s ability to use cash and pay dividendsz hasbeen restricted. The company must submit a plan toremaijn "well-capitalized," and submit a plan to terminate its deposit-taking operations and deposit insurancw once its deposits are repaid in a process expected to take a few years. The secon agreement with the FDIC places restrictiondson Advanta’s use of its cash assets, payment of dividendse and transactions that would materially alter its balance sheet composition and takingh of brokered deposits.
Advanta said the second ordee does not in any way restrict it from continuing to service itsmanagecd credit-card accounts and receivables. In an effort to limif losses and erosion of its capital as credit Advanta said in early May that its securitization trusft will go into early amortization where the company uses receivabless from customers to acceleratew payment toinvestor bondholders. While that protectds investors from prolonged exposure to a pool of receivablexs whose credit performancehas deteriorated, Advanta woulrd have needed an alternative way to fund new purchasew on its customers’ credit cards. So it had to shut down future use, effective May 30.
It has since referredx some customers to AmericanExpresa Co. Advanta’s stock closedc 2 7 percent lower Wednesday at42 cents.