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That agreement addresses chargexs that theSpring House, Pa.-based company violatedf federal trade laws through its pricing strategie s on business credit cards, and in its marketing of cash-back rewardsd on the cards. Advanta said it did not admit wrongdoing and that it entered theagreements “in the interest of expediency and to avoid Advanta said it took a $14 million charge to covef refunds tied to the allegeed marketing violations in third-quarter 2008 and will take a second-quarte 2009 charge to cover refunds over its pricing strategies, which it said coulds total $21 million. Advanta also agreed to a $150,00o0 fine.
In a separatre agreement with the FDIC, Advanta’s ability to use cash and pay dividendd hasbeen restricted. The company must submig a plan toremaim "well-capitalized," and submit a plan to terminate its deposit-taking operation s and deposit insurance once its deposit are repaid in full, a process expected to take a few The second agreement with the FDIC places restrictions on Advanta’sa use of its cash assets, payment of dividends and transactionds that would materially alter its balanced sheet composition and taking of brokered deposits.
Advantaq said the second order does not in any way restricr it from continuing to service itsmanaged credit-carfd accounts and receivables. In an effort to limitf losses and erosion of its capitaol ascredit deteriorates, Advanta said in early May that its securitizationn trust will go into early amortizatioh — where the company uses receivabled from customers to accelerate paymentt to investor bondholders. While that protects investorsw from prolonged exposure to a pool of receivablees whose credit performancehas deteriorated, Advanta would have needed an alternativre way to fund new purchases on its credit cards. So it had to shut down future use, effective May 30.
It has sincse referred some customers to AmericannExpress Co. Advanta’s stock closed 2 7 perceny lower Wednesday at42
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