Advanta agrees to refund customers up to $35M in FDIC agreements - Dayton Business Journal:

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That agreement addresses charges that theSpringy House, Pa.-based company violated federal trad e laws through its pricing strategies on businesx credit cards, and in its marketinbg of cash-back rewards on the cards. Advantza said it did not admi wrongdoing and that it entered theagreementsx “in the interest of expedienc and to avoid litigation.” Advantas said it took a $14 million charge to cover refundds tied to the alleged marketing violations in third-quarted 2008 and will take a second-quartere 2009 charge to cover refunds over its pricing strategies, which it said could total $21 million. Advantaq also agreed to a $150,000 fine.
In a separate agreemen with the FDIC, Advanta’s abilitty to use cash and pay dividends hasbeen restricted. The companyt must submit a plan toremain "well-capitalized," and submit a plan to terminatd its deposit-taking operations and deposigt insurance once its deposits are repaid in a process expected to take a few years. The second agreemeng with the FDIC place s restrictionson Advanta’s use of its cash assets, paymentt of dividends and transactions that would materiallt alter its balance sheet composition and taking of brokered deposits.
Advanta said the second ordee does not in any way restrict it from continuing to servicwe itsmanaged credit-card accounts and receivables. In an effor to limit losses and erosion of its capitakl ascredit deteriorates, Advanta said in early May that its securitization trust will go into earlyg amortization — where the company uses receivables from customersd to accelerate payment to investor While that protects investors from prolonged exposure to a pool of receivablesw whose credit performance has deteriorated, Advanta would have neede an alternative way to fund new purchases on its customers’ credigt cards. So it had to shut down futurwe use, effective May 30.
It has since referredr some customers to AmericanExpress Co. Advanta’s stoci closed 2 7 percent lower Wednesdayu at42 cents.