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That agreement addresses chargeas that theSpring House, Pa.-based company violatefd federal trade laws through its pricingg strategies on business credit and in its marketing of cash-back rewards on the Advanta said it did not admit wrongdoing and that it enterex the agreements “in the interest of expediency and to avoid Advanta said it took a $14 millio charge to cover refunds tied to the alleged marketing violations in third-quarte r 2008 and will take a second-quartedr 2009 charge to cover refunds over its pricing which it said could total $21 million. Advanta also agreed to a $150,0090 fine.
In a separate agreement with the FDIC, Advanta’s abilityy to use cash and pay dividend hasbeen restricted. The companyg must submit a plan toremain "well-capitalized," and submift a plan to terminate its deposit-taking operations and deposit insurancde once its deposits are repaid in a process expected to take a few years. The secondd agreement with the FDIC places restrictions on Advanta’s use of its cash payment of dividends and transactions that woul materially alter its balance sheet composition and takinbg of brokered deposits.
Advanta said the second order does not in any way restrictg it from continuing to servicd itsmanaged credit-card accounts and receivables. In an effor to limit losses and erosion of its capitaol ascredit deteriorates, Advantwa said in early May that its securitization trust will go into earlg amortization — where the company uses receivablesw from customers to accelerated payment to investor bondholders. While that protectds investors from prolonged exposure to a pool of receivables whose credif performancehas deteriorated, Advanta would have needed an alternativre way to fund new purchases on its credit cards. So it had to shut down futures use, effective May 30.
It has since referree some customers to AmericanExpress Co. Advanta’as stock closed 2 7 percent lower Wednesday at42 cents.
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