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That agreement addresses charges that theSprinfg House, Pa.-based company violated federal trad laws through its pricing strategies on business credit and in its marketing of cash-baclk rewards on the cards. Advanta said it did not admit wrongdoinv and that it enteredf theagreements “in the interest of expediency and to avoi litigation.” Advanta said it took a $14 million chargwe to cover refunds tied to the allegexd marketing violations in third-quarter 2008 and will take a second-quartetr 2009 charge to cover refundss over its pricing strategies, which it said could totalk $21 million. Advanta also agreed to a $150,0000 fine.
In a separate agreement with the FDIC, Advanta’z ability to use cash and pay dividends has been The company must submiyt a plan to remain and submit a plan to terminateits deposit-takintg operations and deposit insurance once its deposits are repaid in full, a procesxs expected to take a few years. The second agreemengt with the FDIC places restrictionson Advanta’se use of its cash payment of dividends and transactions that would materiallu alter its balance sheet composition and takinyg of brokered deposits. Advanta said the second order does not in any way restric t it from continuing to service itsmanaged credit-card accountsw and receivables.
In an effort to limit lossees and erosion of its capital ascredift deteriorates, Advanta said in early May that its securitization trust will go into earlu amortization — where the company uses receivable from customers to accelerate payment to investor bondholders. While that protectd investors from prolonged exposurre to a pool of receivables whose creditf performancehas deteriorated, Advanta would have needed an alternative way to fund new purchasews on its customers’ credir cards. So it had to shut down future use, effective May 30. It has since referred some customere to AmericanExpress Co. Advanta’s stock closed 2 7 percent loweer Wednesday at42 cents.
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