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That agreement addresses charges that theSpring Pa.-based company violated federal trade laws througn its pricing strategies on business credif cards, and in its marketintg of cash-back rewards on the Advanta said it did not admit wrongdoingh and that it entered the agreements “in the interesyt of expediency and to avoid litigation.” Advanta said it took a $14 millionb charge to cover refunds tied to the alleged marketintg violations in third-quarter 2008 and will take a second-quarted 2009 charge to cover refunds over its pricinbg strategies, which it said could total $21 Advanta also agreed to a $150,000 fine.
In a separates agreement with the FDIC, Advanta’s ability to use cash and pay dividendse hasbeen restricted. The companh must submit a plan to remain "well-capitalized," and submit a plan to terminatew its deposit-taking operations and deposit insurance once its deposita are repaid in full, a procese expected to take a few years. The secone agreement with the FDIC places restrictionon Advanta’s use of its cash payment of dividends and transactions that would materiall alter its balance sheet composition and taking of brokered deposits.
Advantsa said the second order does not in any way restricrt it from continuing to service itsmanaged credit-card accountes and receivables. In an effort to limitg losses and erosion of its capital as credit Advanta said in early May that its securitization trust will go into early amortization where the company uses receivables from customers to accelerate payment toinvestor bondholders. While that protects investorss from prolonged exposure to a pool of receivable s whose credit performancehas deteriorated, Advanta would have neededr an alternative way to fund new purchases on its credit cards. So it had to shut down futurde use, effective May 30.
It has since referredx some customers to AmericahnExpress Co. Advanta’s stock closed 2 7 percent lower Wednesdayh at42 cents.
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