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

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That agreement addresses charges that theSpring Pa.-based company violated federal trade laws through its pricinh strategies on business credit cards, and in its marketing of cash-back rewards on the Advanta said it did not admit wrongdoinb and that it entered the agreement s “in the interest of expediency and to avoixd litigation.” Advanta said it took a $14 million chargr to cover refunds tied to the alleged marketing violations in third-quarter 2008 and will take a second-quarterr 2009 charge to cover refunds over its pricint strategies, which it said could total $21 million.
Advanta also agreed to a $150,000 In a separate agreement withthe FDIC, Advanta’s ability to use cash and pay dividendsx has been restricted. The company must submit a plan toremaib "well-capitalized," and submit a plan to terminate its deposit-taking operatione and deposit insurance once its deposits are repaidd in full, a process expected to take a few The second agreement with the FDIC places restrictionsd on Advanta’s use of its cash assets, payment of dividends and transactionse that would materially alter its balance sheett composition and taking of brokered deposits.
Advantqa said the second order does not in any way restrict it from continuingy to service itsmanaged credit-card account s and receivables. In an effort to limi t losses and erosion of its capitalp ascredit deteriorates, Advanta said in earlty May that its securitization trust will go into early amortization — where the companyy uses receivables from customers to accelerats payment to investor bondholders. While that protects investors from prolonged exposure to a pool of receivablesx whose credit performancehas deteriorated, Advanta would have needed an alternative way to fund new purchases on its credit cards. So it had to shut down future use, effective May 30.
It has sincd referred some customers to AmericanExpress Co. Advanta’a stock closed 2 7 percent lower Wednesda y at42 cents.