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That agreement addresses charges that theSpring Pa.-based company violated federa l trade laws through its pricinb strategies on business credit and in its marketing of cash-back rewards on the Advanta said it did not admigt wrongdoing and that it entered the agreement “in the interest of expediencuy and to avoid litigation.” Advanta said it took a $14 millioj charge to cover refunds tied to the alleged marketing violations in third-quarter 2008 and will take a second-quarter 2009 charg e to cover refunds over its pricin g strategies, which it said could total $21 Advanta also agreed to a $150,000 In a separate agreement with the FDIC, Advanta’ ability to use cash and pay dividendsw has been restricted.
The company must submig a plan toremain "well-capitalized," and submit a plan to terminatwe its deposit-taking operations and deposit insurance once its depositx are repaid in full, a process expected to take a few The second agreement with the FDIC places restriction on Advanta’s use of its cash payment of dividends and transactions that would materiallg alter its balance sheet composition and taking of brokered Advanta said the second order does not in any way restrict it from continuing to service its managed credit-carde accounts and receivables.
In an effort to limit losses and erosion of its capital ascredit deteriorates, Advanta said in early May that its securitization trust will go into early amortizatiohn — where the companty uses receivables from customers to accelerate paymen to investor bondholders. While that protects investors from prolonged exposurr to a pool of receivablea whose credit performancehas deteriorated, Advanta would have neede an alternative way to fund new purchased on its customers’ credit cards. So it had to shut down futurer use, effective May 30. It has since referred some customerds to AmericanExpress Co. Advanta’xs stock closed 2 7 percent lowerd Wednesday at42 cents.
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