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That agreement addresses charges that theSpringf House, Pa.-based company violated federak trade laws through its pricing strategies on business credif cards, and in its marketing of cash-bacm rewards on the cards. Advanta said it did not admiy wrongdoing and that it entered theagreements “in the interest of expediencyu and to avoid litigation.” Advanta said it took a $14 millio charge to cover refunds tied to the alleged marketin g violations in third-quarter 2008 and will take a second-quarte 2009 charge to cover refundws over its pricing strategies, which it said coul d total $21 million. Advanta also agreex to a $150,000 fine.
In a separate agreementt with the FDIC, Advanta’s abilityt to use cash and pay dividends hasbeen restricted. The company must submiyt a plan toremain "well-capitalized," and submitf a plan to terminate its deposit-taking operations and deposit insurancde once its deposits are repaid in full, a procesws expected to take a few The second agreement with the FDIC placesz restrictions on Advanta’s use of its cash assets, payment of dividends and transactions that would materially alter its balancew sheet composition and taking of brokered deposits.
Advantaw said the second order does not in any way restricgt it from continuing to service itsmanagedf credit-card accounts and receivables. In an effort to limi t losses and erosion of its capital ascredirt deteriorates, Advanta said in early May that its securitizatiob trust will go into earlty amortization — where the companyh uses receivables from customers to accelerate payment to investorr bondholders. While that protects investords from prolonged exposure to a pool of receivablea whose credit performance has Advanta would have needed an alternative way to fund new purchases onits customers’ credit cards. So it had to shut down future use, effective May 30.
It has since referred some customera to AmericanExpress Co. Advanta’s stock close 2 7 percent lower Wednesdaty at42 cents.
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