Advanta Settles "Deceptive and Unfair Practices" Charge for $35 Million

Posted by: John Tozzi on July 2, 2009

Advanta agreed to pay $35 million in restitution to small business cardholders who saw their APRs jacked up unfairly, in a settlement announced by the FDIC. The agreement also covers small business customers who signed up for cash-back rewards programs that made it “effectively impossible” for customers to get the advertised rewards.

Advanta, with more than a million small business credit card accounts, cut off all new lending to customers at the end of May after mounting losses. As part of its settlement with the FDIC, the credit card company also agreed to a cease and desist order. Advanta “did not admit or deny any liability” in the settlement. I’ve requested a comment from their spokeswoman, and will update if we get one. [See update below.]

Advanta has to pay restitution by September to eligible customers, defined in the order as:

(i) any Cash Back Accountholder who, during the period from January 17, 2004 to the effective date of this ORDER, applied for and received a Bank credit card in response to a written, web-based, or alternative media solicitation or advertisement for a Bank credit card that provided Cash Back Rewards, that did not contain the words “up to” preceding the Stated Cash Back Reward. …

(ii) any Bank credit card accountholder whose credit card account was repriced … from June 1, 2007 through 200S unless an accountholder exercised the opt-out right pursuant to the Bank’s notice of change in terms. This includes existing Bank credit card accountholders and former Bank credit card accountholders of a credit card account that is now closed, charged off, or has been transferred by the Bank.

It’s not clear how many customers that includes — Advanta has to compile a list to notify. More coverage from Bloomberg. We’ll update as we hear more. In the meantime, feel free to share your Advanta horror stories in comments.

Update: Advanta had no comment but referred its 8-K filing.

Also, the FDIC says that between July 2007 and January 2009 it received 976 complaints about Advanta’s repricing of interest rates. That’s not counting any complaints filed with the FTC or state regulators.

Reader Comments

Laurel Delaney

July 3, 2009 5:50 PM


Great reporting John. You know how to complete the loop!

Regards,
Laurel

Danny

July 5, 2009 9:38 PM

If Advanta can change the terms of the agreement when a customer is in good satnding, then why can't the settle with Advanta under these circumsatnces. If seems that Advanta would more likely be favorable to reaching a debt settlement with their customers even at 5o% or less. They ought to be happy to get money than none at all.

Maryjo

July 14, 2009 2:51 PM

What does this mean in regards to current billings. My intrest rate has been raised to over 30% which is 800.00 a month is intrest!!!! Should I pay this or wait to hear from the company?

chad drobisch

July 23, 2009 6:27 PM

They jacked my rate to over 30% for no reason and when I complained they offered 27.99% as a good faith gesture. I will be interested in seeing how long it takes for them to get in touch with me about this settlement while they rake in the interest.

Julie

August 3, 2009 6:37 PM

Is the settlement for every Advanta account holder in the United States?

John Tozzi (BusinessWeek reporter)

August 4, 2009 10:55 AM

Hi Julie,

customers eligible for the restitution are described on pages 6 and 7 of the PDF here: http://www.fdic.gov/news/news/press/2009/pr09109a.pdf

Basically it includes cash back card holders going back to 2004 (excepting some who had certain language in their agreements) and credit card holders who's interest rates were raised from June 1, 2007 through 2008.

Have any Advanta customers been contacted about restitution yet?

Mike

August 31, 2009 6:55 PM

On page 3 it says:
"1. Within sixty (60) days of the effective date of this
ORDER, the Bank shall commence the restitution and other relief
described below and complete such restitution within one hundred
and twenty (120) days of the effective date of this ORDER."

Agreement is dated June 30th, 2009 so by my count 60 days is Aug 29th, 2009. Some of us should be hearing from them. I haven't yet. Their people didn't know anything a month ago; what a surprise!
Anybody?

Brandon

September 5, 2009 12:27 PM

Is the restitution only for 2 months? My interest rate was raised to over 36% like a year ago..Should I only expect 2 months interest back?

Deborah

September 28, 2009 4:26 PM

My interest rate was raised to 34.99% almost a year ago. I had been at around 16% or 17%. Today I got a letter from John F. Moore, President, Advanta Bank Corp., with a check in the amount of $36.95 attached. This is apparently the result of the settlement Advanta reached with the FDIC regarding Advanta's "Repricing Event," which they state occurred between 6/1/07 and 12/31/08. The check is valid for only 120 days, and it states very clearly that by accepting and cashing the check, the payee is agreeing to release Advanta and its parent and subsidiaries from any further action. I still have an outstanding balance with them, on which I'm paying this egregious rate, and would like to know what recourse I might have. I don't intend to cash the check, as $36.95 doesn't come close to two months' interest. But I can't sit still and watch them get away with this. Any suggestions?

Todd

September 28, 2009 4:51 PM

I also received my check today and am wondering whether it's a good idea to cash it or wait to see if there is further action I can take. I was given an introductory offer of 0.00% and then 7.99% thereafter. However, it was increased to my present rate of 24.99% for no apparent reason. It would have increased to 34.99% if I hadn't opted out and cancelled the account. Unfortunately, I still have a rather large balance. I called to request a rate decrease and was sent to an apparent call center in India. I was told the computers were down and I would receive a call back which never happened. Is there a class action suit or any other legal means to recoup the outrageous interest rates or at least decrease them?

Deborah

September 28, 2009 5:01 PM

I mistyped the period of time for which the check is valid. It's 180 days, not 120 days. Sorry about that.

Is there anyone else out there who still carries a balance with Advanta under this extraordinarily high interest rate?

Mike

September 28, 2009 5:46 PM

What a joke!! I received my check today also but it was off by a decimal point at least. I thought they had to pay all of the increased interest amount back and drop the rate back to where it was before it was "repriced". Two months worth was a waste of effort and waiting.

Looks like the only one who benefited was the government who got $150,000 penalty.

I'm seriously considering stopping any further payments.

EVE STAATZ

September 28, 2009 9:52 PM

I HAD TRANSFERRED OTHER CARDS TO ADVANTA FOR A PROMISED LOW INTEREST RATE.I WAS NEVER LATE,NEVER OVER THE LIMIT AND IN FACT PAID MORE THAN MINIMUM EACH TIME. THEY RAISED IT TO OVER 36% FROM A VERY LOW RATE..SO I TRANSFERRED BACK DOWN TO LOW RATES AND CLOSED ADVANTA. AFTER GETTING A CHECK TODAY 9/09 FOR CLOSE TO $360 I FOUND THIA ARTICLE.WENT TO THIS SITE http://www.thisismoney.co.uk/ AND FOUND "TEN STEPS TO RECLAIM CREDIT CARD CHARGES".. IT'S ABOUT TIME THE PEOPLE GOT WISE... SO SAD WHATS GONE ON FOR SO LONG

Genny

September 29, 2009 2:52 PM

I also have an outstanding balance on my account. Which now carries a 34.7% interest rate, up from 7.99% I was promised. Never been late, never missed a payment, etc. I got a little bitty check from them today, asking for it to be signed and cashed, so as to release them from any possible lawsuits...Are they crazy? The interest they are collecting from me on this balance must be illegal. The ability to close down the account was not sent to my office, or if it was it was missed or I would have opted out on keeping it. Instead they raised the rates and closed it for me for no reason on our business side, but for lack of funds on Advanta's side. I have contacted my states respresentatives on this matter without much response, other than the comments about the Feb 2010 program that will stop these banks from stealing from us, lying to us etc. I will NOT cash this check from them. Thank you Eve for the website, I will follow up with this.

jerry romo

October 5, 2009 11:20 PM

I also got a check today but a few monthe back I got sick of the interest I was paying them and called them saying I was not going to pay them any more. They transfered me to a different department and I was told that if I could set my account on auto pay they would lower my interest rate to 6% and I did and they did. Threaten them people you have to be willing to fight for your money

Scott

October 6, 2009 9:37 AM

I got a check yesterday. They blindsided me with a crazy rate a year or two ago. I got out of there as quick as possible. It was nice to get an unexpected check, but I don't think the amount would put a dent in how much they unfairly charged me.

Now if we could get the same action on Chase cards. My family has two accounts, both with "fixed rates for the life of the loan" that were only fixed for one year. It's amazing the bait and switch they are getting away with. I could understand if my account was delinquent, but it wasn't.

Enough rambling from me.

David

October 6, 2009 5:54 PM

Like many, got the initial attractive rate offer, transfer balances, etc -- last Fall, rate was now at 36.33% -- I quit paying! - in Nov/Dec, got agreement to refund ~200 in late fees/interest and got rate of 9.99%, which was 'their best offer'. Still outrageous given the interest rate climate of the last year. These guys have really been sticking it to their customers for the past 3 years.

Conrad Hiser

October 7, 2009 11:17 AM

I also recieved my check the other day and after reading the comments above and doing some other research, promptly called to "threaten" them to get the A.P.R. lowered. They basically told me that there wasn't anything they could do and gave me a credit card counseling ph # to call. I laughed and proceeded to tell them I didn't need counseling. That I was in good standing with all my outstanding debts, I simply needed my A.P.R. lowered in these hard times. They refused to do it. What options do I have and do I cash the check that they sent me????

Cheryl

October 7, 2009 1:07 PM

Yes, I received a check as well. I don't know if I should cash the check that they sent me? Any advice?

Jenifer

October 7, 2009 5:26 PM

I received a check today as well, but I haven't heard on this site if there is further action that is being taken. Does anyone know?

Cindy

October 8, 2009 12:09 PM

I also received a check. I called and wanted them to lower my rate. They said they could not. i asked to speak to a supervisor. I got the same run around, and that I could speak to a debt counselor. I told them that debt counseling was not what i needed. I pay 1000 a month but with 300 interest, I just want to pay it off a get rid of the card. I asked how much to settle and they had a person from India call me and they said they could do nothing. I will not cash the check. I wonder what to do next?

marc

October 8, 2009 3:25 PM

To those of you who are as upset as I am, I found a lawyer in Commack New York I believe that is doing a class action against Advanta. The name is Alan Finkel. please emial dec458@msn.com for more information

Kevin Welch

October 10, 2009 10:49 AM

I also received a check. I called and wanted them to lower my rate. They said they could not. I asked to speak to a supervisor. Who was Indian with the name of Angel Jones. I got the same run around, and that I could speak to a debt counselor. I told them that debt counseling was not what i needed. I pay 1000 a month but with 34 interest and they said they could do nothing. I will not cash the check. I wonder what to do next? Not only do the banks rape us with interest, they are farming out American Jobs to India. With unemployment at a all time high, I would think they could at least hire Americans to tell us their is nothing they can do to lower interest and offer a toll free number for credit counciling. It is time for a credit card revolt in this country.

George

October 26, 2009 9:01 PM

Advanta was horrible to work with. Offered a large credit line .... was within terms with the exception of two consecutive months where the payment showed up WITHIN TWO days of the due date. Yes, late, but ... late enough to go from 7.85% to 29.99% ........ fortunately, I received payment from a job that had been written off .... I was able to pay off my card in full.

I RECEIVED A $115 CASH BACK REWARDS CHECK AS A SETTLEMENT TODAY ..... NOT SURE IF I SHOULD CASH IT OR WAIT TO SEE IF MORE WILL BECOME AVAILABLE THROUGH LITIGATION.

Todd

October 28, 2009 12:08 AM

richard

December 22, 2009 8:37 PM

I had a $15K balance at Advanta and I defaulted and never paid another dime because they raised my rate to 29%+. BofA, Chase, Citi, and Discover all did the same, 29%+, so a year ago I decided they can all go to blazes. American credit card holders desperately needed the FDIC, FTC, Congress, and the Senate Finance Committee to protect us, but "our" Government failed us miserably. so my vigilante action was all I was left with. Thanks Senator Dodd.

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What's it like to run your own company today? Entrepreneurs face multiple hurdles new and old, from raising capital and managing employees to keeping up with technology and competing in a global marketplace. In this blog, the Small Business channel's John Tozzi and Nick Leiber discuss the news, trends, and ideas that matter to small business owners. Follow them on Twitter @newentrepreneur.

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