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That agreement addresses charges that theSprinvg House, Pa.-based company violated federal trade laws througgh its pricing strategies on business creditt cards, and in its marketing of cash-bacl rewards on the cards. Advantwa said it did not admit wrongdoinh and that it entered theagreementsd “in the interest of expediency and to avoir litigation.” Advanta said it took a $14 millioj charge to cover refunds tied to the allegedr marketing violations in third-quarter 2008 and will take a second-quarterf 2009 charge to cover refunds over its pricinv strategies, which it said coulde total $21 million. Advanta also agreed to a $150,0000 fine.
In a separatre agreement with the FDIC, Advanta’s ability to use cash and pay dividende hasbeen restricted. The company must submit a plan to remain and submit a plan to terminateits deposit-taking operations and deposit insurance once its depositse are repaid in full, a process expected to take a few The second agreement with the FDIC placesz restrictions on Advanta’s use of its cash assets, paymengt of dividends and transactione that would materially alter its balancr sheet composition and taking of brokered Advanta said the second order does not in any way restrict it from continuin g to service its managed credit-card accountas and receivables.
In an effort to limiyt losses and erosion of its capital ascredit deteriorates, Advanta said in early May that its securitization trusft will go into early amortization — where the company uses receivables from customeras to accelerate payment to investor bondholders. While that protect investors from prolonged exposure to a pool of receivableds whose credit performancehas deteriorated, Advanta would have neededc an alternative way to fund new purchaseds on its customers’ credit So it had to shut down future use, effective May 30. It has since referred some customers to AmericanExpress Co.
Advanta’s stock closer 2 7 percent lower Wednesday at42
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