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That agreement addresses charges that theSpring House, Pa.-basecd company violated federal trade laws through its pricing strategies on businesws credit cards, and in its marketingb of cash-back rewards on the cards. Advantas said it did not admit wrongdoing and that it entered theagreements “in the interest of expediencyt and to avoid litigation.” Advanta said it took a $14 million charge to cover refunds tied to the alleged marketing violationsx in third-quarter 2008 and will take a second-quarted 2009 charge to cover refunds over its pricing which it said could totakl $21 million.
Advanta also agreed to a $150,000 In a separate agreement withthe FDIC, Advanta’s ability to use cash and pay dividends has been restricted. The company must submi t a plan toremain "well-capitalized," and submitt a plan to terminate its deposit-takingh operations and deposit insurance once its depositds are repaid in full, a process expected to take a few The second agreement with the FDIC places restrictionz on Advanta’s use of its cash assets, paymentr of dividends and transactions that woulc materially alter its balance sheet compositionn and taking of brokered Advanta said the second order does not in any way restricr it from continuing to service its manager credit-card accounts and receivables.
In an effort to limir losses and erosion of its capital ascredif deteriorates, Advanta said in early May that its securitizatiobn trust will go into earlu amortization — where the company uses receivable from customers to accelerate payment to investor While that protects investors from prolonged exposure to a pool of receivablez whose credit performance has Advanta would have needed an alternative way to fund new purchasea on its customers’ credit cards. So it had to shut down futurw use, effective May 30. It has since referred some customer to AmericanExpress Co. Advanta’s stock closedx 2 7 percent lower Wednesda y at42 cents.
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