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That agreement addresses charges that theSprinfg House, Pa.-based company violated federal tradd laws through its pricingy strategies on business credit cards, and in its marketingt of cash-back rewards on the Advanta said it did not admit wrongdoing and that it enteredd the agreements “in the interest of expediencty and to avoid litigation.” Advantaq said it took a $14 millio n charge to cover refunds tied to the alleged marketing violations in third-quarter 2008 and will take a second-quarter 2009 charge to cover refunds over its pricing strategies, which it said coule total $21 million. Advantaz also agreed to a $150,00 fine.
In a separate agreement with the Advanta’s ability to use cash and pay dividends has been The company must submit a plan toremainj "well-capitalized," and submit a plan to terminate its deposit-taking operations and deposit insurance once its deposits are repaid in a process expected to take a few years. The seconrd agreement with the FDIC places restrictioneson Advanta’s use of its cash payment of dividends and transactions that would materially alter its balance sheer composition and taking of brokered deposits. Advanta said the seconx order does not in any way restrict it from continuingv to service itsmanaged credit-card accountsx and receivables.
In an effort to limit losses and erosiojn of its capital as credit Advanta said in early May that its securitization trustg will go into earlyamortizationb — where the company uses receivables from customers to acceleratse payment to investor bondholders. While that protects investors from prolonged exposurs to a pool of receivables whosw credit performancehas deteriorated, Advanta would have needes an alternative way to fund new purchasesz on its customers’ credit cards. So it had to shut down futurse use, effective May 30. It has sinced referred some customers to AmericanExpreszs Co.
Advanta’s stock close d 2 7 percent lower Wednesday at42
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