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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-baci rewards on the cards. Advanta said it did not admity wrongdoing and that it entered theagreement “in the interest of expediency and to avoid Advanta said it took a $14 milliomn charge to cover refunds tied to the allegede marketing violations in third-quartere 2008 and will take a second-quarter 2009 charge to cover refundds over its pricing strategies, which it said could totapl $21 million. Advanta also agreed to a $150,000 fine.
In a separatr agreement with the Advanta’s ability to use cash and pay dividendds hasbeen restricted. The companhy must submit a plan to remain and submit a plan to terminatreits deposit-taking operations and deposit insurancw once its deposits are repaid in full, a process expected to take a few The second agreement with the FDIC placesx restrictions on Advanta’s use of its cash assets, paymenrt of dividends and transactions that would materially alter its balance sheetf composition and taking of brokeree deposits. Advanta said the second ordet does not in any way restrict it from continuingh to service itsmanaged credit-cars accounts and receivables.
In an effort to limit losses and erosion of its capital ascredig deteriorates, Advanta said in early May that its securitizatiohn trust will go into earlt amortization — where the company uses receivablesx from customers to accelerate payment to investof bondholders. While that protects investorse from prolonged exposure to a pool of receivables whosde credit performancehas deteriorated, Advanta woul d have needed an alternative way to fund new purchasex on its customers’ credit cards. So it had to shut down future use, effective May 30. It has since referred some customers to AmericanExpress Co.
Advanta’s stock closedf 2 7 percent lower Wednesday at42
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