Advanta credit card lender fined $35million for unsafe practices

According to the Reuters report, small-business credit card lender that a month earlier cut off 1 million accounts, Advanta Corp, was ordered by the FDIC to refund as much as $35 million to customers because of alleged "unsafe or unsound" practices and to plan to stop taking bank deposits.

One agreement addressed allegations that Advanta break federal trade laws through its pricing strategies on business credit cards and in its marketing of cash-back rewards on the cards.

The second agreement calls for the Advanta Bank unit to submit a plan to terminate its deposit-taking operations and deposit insurance once existing deposits are repaid in full, a process expected will take a few years.

Advanta stated it did not admit wrongdoing and entered the agreements "in the interest of expediency and to avoid litigation." 

Advanta commenced referring some customers to American Express that provides with considerably lower charge-off rate. 

Last month, Advanta abandoned a $1.4 billion tender offer for some senior notes, designed to help boost capital. Advanta lost $75.9 million in the first quarter.

Advanta ended March with $2.39 billion of deposits. It said deposits remain insured as allowed by law, and that it will continue to service credit card accounts and receivables.

During Wednesday afternoon trading, Advanta shares fell 3 cents to 40 cents on the Nasdaq, setting the 52-week high is $7.80 set on September 8.