Advanta Customers' Next Option: Small Claims Court

Posted by: John Tozzi on October 2, 2009

Small business owners who feel they have been charged improper interest or fees by Advanta can consider seeking remedy in small claims court.

I want to be clear that we’re not in the business of giving legal advice. Business owners should talk to their lawyers about something like this. But we’ve fielded a lot of comments from Advanta customers whose credit card rates were drastically raised, and this hasn’t come up yet.

Many people want to know whether they should cash the checks that went out this week under Advanta’s settlement with the FDIC. By cashing the check, which is supposed to be restitution for two months’ worth of excess interest charges, a borrower releases Advanta from future liability. But many business owners still have balances of thousands of dollars, accumulating interest at 30%+ APRs. The average restitution check for $131 won’t help much.

Last night I spoke to Alan Finkel, a Long Island attorney who is involved in the lawsuit against Advanta in California. Finkel is a divorce mediation attorney who was an Advanta customer himself. He helped organize the suit in California (because it’s a more favorable jurisdiction for this type of action), but other attorneys who specialize in this kind of case are leading the litigation. We’ve posted the complaint here. Advanta declined to commment on the suit.

Finkel himself says he plans to hold off on cashing his restitution check and pursue a claim in New York small claims court. (He’s not a plaintiff in the California action.)

There are lots of questions still to be settled about the California lawsuit. It could be moved to a different state, or to a federal court. It has not yet been certified as a class action (although this determination could be made in the coming weeks). If the court certifies it as a class action, it’s not clear whether it would be restricted to Advanta customers in California or nationwide. And even if there is an eventual settlement or award of damages, it’s not clear how much money plaintiffs would see. There’s also the question of whether Advanta will still exist or have any money left to pay out.

Some borrowers have filed other individual lawsuits against Advanta. Suing in civil court is usually expensive and time consuming, but if the amount of damages borrowers seek is under a certain limit (generally somewhere between $3,000 and $10,000), they may be able to file a much simpler claim in small claims court. The limits and rules vary for each state. (Here’s a useful guide to the state small claims courts, and here’s a primer on bringing a claim.)

Please keep the comments and emails coming. Your participation has been crucial to reporting this story. If any readers have taken Advanta to small claims court, let us know what your experience was.

Also, I asked Advanta about their policy for renegotiating rates, after many commenters have observed that the company seems to negotiate only with customers who stop payments. For what it’s worth, here’s Advanta’s non-answer: “The facts and circumstance of each customer are unique to that customer. Customers with questions about their account should call our customer service area at (1-800-705-7255) to discuss their specific questions.”

The big question is why the FDIC settlement was such weak medicine. Seems like a fair resolution would have at least included an order to lower the jacked up APRs and forgive the excess interest, if not restitution for the interest already paid.

Reader Comments

alan finkel

October 2, 2009 2:45 PM

john

very good article covering our conversation. i think your readers will benefit lots of confused consumers. my take on the fdic settlement is that they did what they thought was proper, but they are still a government agency, with much bigger fish to fry right now

alan

Doug Carpenter

October 2, 2009 3:39 PM

Great article as usual John!

Margaret Craig

October 2, 2009 7:17 PM

Great article John!

I too was a victim of Advanta. I went to google and searched "Advanta Sucks" and found Alan's site about Advanta. One person stated that they had contacted the FDIC to file a complaint. I wrote a letter that dat to the FDIC and reported what Advanta had done to me. My interest had gone to 32.99%, I always paid on time, never missed a payment and always paid way more than the minimum. I transfered the balance to another card.

I was amazed 30 days after I contacted the FDIC I received a full refund of the overcharged interest. I think what Alan is doing is fantastic.

Christina

October 3, 2009 5:19 PM

Advanta's new policy on negotiating rates is requiring you to contact a credit counseling service. I called AGAIN today . . . was told they would not work with me, I need to call the number they gave me, then they'd work with them. Ugh! Why should I have to pay for and go through credit counseling when they are the ones robbing people blind???

Very frustrated.

kristianna

October 4, 2009 11:18 PM

Nice article.I have had problems also. I am a good customer, pay before due date and more that the minimum. They just upped my rate from 9.99% to 35%! they won't budge on it either. I have never defaulted on any payment ever in my credit history.
reisezubehor

K Nick

October 5, 2009 11:25 AM

Very good article, Mr. Tozzi. I was wondering myself about small claims court as a means of settlement for the severe rate hike. I'm not a proponent of lawsuits, but in this case what Advanta has done is horrible. This type of rate hike could easily push many companies into bankruptcy. Also, I think many business owners do not realize that they can be held PERSONALLY responsible for their company's credit card debt. Many cards state this in the "fine print". Thank you for keeping this story current.

T Woodson

October 5, 2009 1:52 PM

I'm in the same situation as the rest of you guys and called the office today after receiving a check for $387.72. OMG! Everyone was from India and very hard to understand. They did not answer the question! I was so frustrated and decided I would write the FDIC and hopefully be able to recoup the approximately $250.00 in interest I pay monthly and/or at least credit it to the account so I can get this paid in full. Margaret, can you elaborate on the overcharged interest you received as a refund. Did they reduce your interest rate to your original rate and then give you a refund for all of the months that you were paying the higher rate???

Scott

October 5, 2009 2:51 PM

I just got a check for $751.88 what a joke. My intrest rate went from 7% to 27% for no reason. I transferd the balance to another card at a cost of $1200. witch lowered my credit score and the give me 700 bucks. I hate this bank and would love to join a Class action

Azim

October 6, 2009 1:46 AM

I've had good success in Small Claims Court, although in those cases I was the creditor trying to collect from delinquent customers.

I've managed to preserve a near-perfect credit score for myself and my business all my life but for the first time ever I'm actually thinking of taking a hit by completely stopping all payments to these crooks. Like everyone else, I went from a 0% promotional APR straight to a 30% APR with no warning (other than a fine print flier Advanta CLAIMS to have sent me -- which I do not recall ever seeing). Like nearly everyone else I had NEVER missed a payment, been late with a payment, gone over my limit etc.

Many thanks to John for continuing to cover this. This is major news and needs to get massive exposure. Lowlife scum like this cannot simply get away with these types of actions. If even half of Advanta's million customers simply stopped paying it would send a serious message.

mike m

October 6, 2009 4:09 AM

My rate was jacked up by these thugs in July of 2008 from 7.99 to 25.19%, but I did not realize it until I received my Sept 2008 statement-I never received any notification that it was going up. I contacted Advanta that day in September, and wanted to know why it went up 3x since I had excellent credit, never late, never paid less than the minimum-and they told me that it was because it was because of something on my credit report? I have NEVER been late for ANY payment in over 30 years in business...that same day, I transfered the entire amount of my balance to my checking account from my savings account, and paid these leaches off-and went on a campaign to complain to anyone who would listen (FTC, FDIC, attorneys general of various states, BBB, various consumer complaint forums, and Mr Finkle)-and, with great glee, have monitored the freefall of Advanta's A&B class stocks. I got a check for $54 today, and I will cash it, but I will also sent a letter to Mr. Moore and to Dennis Alter (arrogant CEO) expressing my hatred for them and what they stand for: greedy shylocks who hurt a lot of good, small business owners. I am fortunate in that being in business for 30 years I did not have to fall victim to their larcenous practices-but you can be certain, many have and the governments slap on the wrist is not nearly enough-Alter, Moore, and other board members should be subjected to criminal charges, but won't be-google their names and you will see most contribute heavily to politicians (Obama and Biden are recipients in a big way in the past. Advanta is just the worst of the worst-BOA. Discover, MC and Visa are all doing the same thing, just not on such a grand scale as Advanta-people need to wake up to this corruption and complain.

Bob

October 8, 2009 12:52 PM

My contract with Advanta calls for mandatory arbitration if there is a disput concerning the bill. I sent a certified letter requesting that we go forward and they will not reply. I just sent another certified letter again requesting they comply with the terms of our contract (which they authored) and said I would stop any further payments until they answered my request. This will be the first time I have ever been late on any payment for over 20 years. If every card holder would do the same thing, they would be forced to come to the table and settle this matter. Think about it.

Antonio

October 8, 2009 6:40 PM

Brilliant! I did the same. Your next round will be with the thugs from Phillips and Cohen (who act like attorneys, but are not) They will send you a mock summons, then offer to lettle for 45-50% after many abusive phone calls.

Don

October 12, 2009 3:26 PM

I received a reimbursement check for $598 from them at the end of September for the high interest rates, but I've paid out more than that since my rate increased to 30+% this year. However since I've missed a few payments I got a call to lower my rate back down to 10% range if I made a payment with them. Now should I cash the check or what

Randy from Houston

October 13, 2009 1:22 PM

I'm one of their victims. I have never been late or over limit, yet my interest went from 7.99% to 34.99%. My account was closed in May, with a million others. Of course, the Indian that I spoke to today said there is not option to lower my interest, then told me that Advanta will always be open to my complaints. I asked in what way would they be open to my complaints, and he refused to answer. I will gladly join a class action. The $46 they just sent me is a drop in the bucket. I won't cash it until I see what is going to happen with a class action.

Mike

October 14, 2009 1:24 AM

What will happen to my personal credit if I stop making payments for a couple months. I know they can come back on you personally but will not making payments for a couple months show up? I am wondering if they will offer to give you a lower rate before they come after you personally. I still owe a balance of nearly $24,000 at 34.99%.

Beth

October 14, 2009 9:55 AM

My husband had a business account with Advanta. He just received a check for $250. He's not sure if he should cash it or not. Margaret Craig, or anyone else that knows, how do you go about writing letter to the FDIC and about Advanta to see if more money is available? thanks everyone for your comments.

Marilyn

October 14, 2009 9:36 PM

Great info here...thanks to everyone for sharing. I was actually on my way to the bank to cash my $377 check last week when I decided to go online first and see what others are saying and doing. Like many of you, I was never late, paid over the amount due and went from 7.9% to 29% overnight. My credit has already taken a hit this year due to lower income to debts ratio. Despite all your good info, I am still in a state of flux and don't know what to do. Anyone else here from NJ that wants to file a Class Action suit? What's $377 when they robbed me of a couple thousand dollars?

Debbie

October 15, 2009 9:07 AM

I am yet another victim of Advanta's "loan-sharking skills". I had a card that was suppose to be a 7.9 fixed APR (I even kept the paperwork from when I applied for this card at this rate) My interest went up to over 35.% despite always paying more that the minimum payment every month and never being late. I called Advanta and was told I was a "liar" that they never offer a card at 7.9%...(got so mad) and mailed them a copy of the original agreement showing the fixed 7.9% offer I was offered, but nothing changed. I sent in additional letters stating I was opposed to this interest hike...but was ignored. I finally told them I would not pay one more cent on this card until they fixed this interest rate. My account now has been turned over to a collect agency that now keeps threatening to sue me, however not once did Advanta agree to go beck to the original agreement of 7.9%. They offered to drop the interest some (not much), but the accumulated high interest was never dropped. Now I am not suggesting that anyone else do as I did, because I am sure now my credit is shot due to my actions over this, but I am one of the few people who can keep my business a float without credit, so I chose this route hoping to get Advanta to go back to the original agreement. Since then the collection agency has threatened to sue me (funny how I got that letter in the mail the same day Advanta sent me a check asking me to cash it so I would not sue them). I did NOT cash the check. Good Luck to everyone else here who has had the same problems with Advanta. Thanks for starting this informative site.

Steve

October 19, 2009 4:37 PM

Debbie, we are in a similar situation. We had a starting APR of 7.9, ended at 29.9. Not sure what happened but as we continued to pay we received a letter stating our account was closed. We then received a check for our 'rewards' which was about $90 and we cashed it. Then after I lost my job, I had no choice but to stop paying. They have called non-stop and I have made no effort to talk to them, because when my wife attempted to call and 'work out a deal' on her account they told her to seek credit counseling and just pay the bill. I don't answer the phone, or respond to any of their letters. They are now threatening to push us off to their "legal" department for litigation. Yes, our FICO score has suffered severely but like many have said, the entire country is suffering so in that sense, it hasn't bothered me. We stopped using credit cards over a year ago and since my job loss we have had to stop paying many other people, not by choice but there simply is not enough money coming in to pay for anything other than those things you need to survive such as food, housing and clothing.

We did receive a check for $143.00 for the interest settlement but I am thinking against cashing it at this time. I don't care if I get anything 'out' of Advanta, I'd rather just forget they even existed.

Matthew

October 20, 2009 11:09 AM

Advanta news---
Stock plummit-
Law Offices of Howard G. Smith Announces Investigation On Behalf Of Current and Former Employees Of Advanta Corporation Who Invested In Advanta Corp. Employee Savings Plan

Kendall Law Group Announces Securities Class Action Against Advanta Corp.

Coughlin Stoia Geller Rudman & Robbins LLP Files Class Action Suit Against Advanta Corporation

Advanta Corp. hit by shareholder lawsuit

Scott

October 21, 2009 1:39 PM

I was leaning toward small claims court or trying to join a class action suit, but this new information leads me to believe I should cash my check. My concern is that with so many hands out to Advanta there won't be anything left for the little guy. Any thoughts?

Gregory J. Wilson

October 24, 2009 12:28 AM

Like so many in this article I to received a "refund" from Advanta, my question is two fold one, should cash the check, two is there anyone I can contact with advise?

Mike Collins

November 11, 2009 12:36 PM

I never received a check, even though I filed an FCC complaint. I did, however, manage to get them to reverse all interest charges and revert back to my original rate in exchange for closing my account and just paying it off as originally agreed. I paid it off entirely all at once. Good riddance. If they go bust, that is payback enough for me...except will someone please send that S.O.B. CEO of there's a large lump of coal to his mansion in PA?

brad

November 23, 2009 1:35 PM

Is there a legal method for a 2nd party, let's just say the community of 'us', can contact all Advanta credit card customers and relate the fact that if we all stop paying at once, it'll sink that ship so fast they won't have time for their Indian call centers to hassle us at all?

As for the credit card division, Advanta's only income is from us paying these excessive interest fees.

Poorly run companies like these are continuing this recession. Just think that if instead of paying $350 a month in interest to them, we contributed $350/month back out into the economy. That's consumer electronics. That's gifts for our children. That's small business stability, or even expansion. That's a new car (a small one, but still).

They've ruthlessly capitalized on people who were using legitimate lines of credit in tougher economic times, and pushed us all to the breaking point with their mismanaged greed.

There's really no legitimate reason they should be allowed increase our interest rates 2x-5x and somehow show US as negligent to our credit scores when we can't keep up with their absurd demands.

Mike Collins, exactly how and who did you speak with to get them to reverse all interest charges?

Marty

December 1, 2009 5:10 PM

So they went bankrupt and closed my account. Tell me again why I continue to pay off what I owe them?

Tom

December 3, 2009 2:21 PM

I was never late never missed a payment and they raised my interest rate to 34.99%. Thanks to my inlaws they helped pay them off. I feel like they owe me.

Mark

January 9, 2010 5:16 PM

Advanta should be shot!
I was on hold for 40 minutes, for a call that lasted not even 40 seconds. I wrote them a letter saying that i can no longer afford to pay the outstanding balance at such a high APR (27.99%). So, I basically wrote them saying to no longer expect payments on this account. I did write that i was open to discussion and negociation in the unlikely event that Advanta becomes more flexible regarding their finance charges....
I'll keep you posted!
:)

Peggy Randall

January 15, 2010 6:54 PM

Trying to get a class action suit against these bozos off the ground in NJ. I was in touch with a NJ attorney who expressed initial interst but hasn't gotten back to me. Their website is http://www.njconsumerfraudlawyers.com/

Maybe if he hears from enough of us he might at least say yes or no or refer us to someone who can indeed help!

I used my Advanta card to finance the renovation of my business. It's not a ton of money but it's a painful check to write each month, especially when 90% of it is interest (I was never,not once, late with a payment and they jacked up my interest to 34%!!!!). The FDIC settlement is a complete joke. I didn't cash their "settlement" checks. I continue to make the payments because I'm not willing to trash my credit. But somebody has to do something.

Brad

January 28, 2010 7:55 PM

So, I skipped my Dec 5th payment, and 5 days after that I started receiving 6x calls a day, from 8 different numbers associated with U.S. addresses from North Carolina to California, never leaving a message even once on my business phone, my cell phone and for some odd reason, my son's cellphone. (?!)

At the 40 day mark, they stopped calling.

At the 45 day mark, they offered me 16.99% if I made the two late payments and the current month's payment

At the 55 day mark, they've offered to let me participate in one of two available plans: 9.99% on a 5 year payoff or a 3.99% for first 12 months, then 16.99% after that.

The 1st of these two options would require me signing a new agreement with them, which I'm not sure I want to do, given the fact that I do have my original paperwork with them with the 7.9% rate, class action lawsuits springing up all over, and the FDIC about to take them over.

David

February 20, 2010 1:42 PM

I have same sort of story, but do not wish to be redundant. Another side would be the daily periodic rate. It does not jive with conventional math (APR/365 days in a year=DPR). I noticed that it has been wrong for as long as I have had the account. After patients and persistence with the India call center, I atleast got this much out of someone..."APR/360=DPR". More patients and persistence got me more..."360 days in a year because there is five holidays". Me says, so there are five holidays in the year that I do not have to pay interest, could you tell me what the five holidays are? Could not answer that and I am still waiting for a return call from a supervisor, who is never available.
On the surface, it seems like pennies, but it also inflates the average daily balance. Given compounding, this can add up. It can add up even more if the "new math" is applied to 1 million card holders.
I have not been able to find any ammortization calculators that do it this way or allow me to change to a 360 day year. The scam math goes against the definition of DPR.
I will post any updates on this matter.

Angry in Maryland

May 25, 2010 9:59 AM

This is still going on. Advanta (or somebody using that name) is still harrassing people who will not pay their massively over-inflated interest rates.

Allow me to speak for a moment on behalf of every American that is or has been a victim of Advanta's fraud, extortion, and racketeering...

Get your money from Dennis Alter. Before he blows it all hiring Elton John for another private birthday party or on his $80 million dollar mansion.

Phantom Debtor

September 1, 2010 10:16 PM

There are a few suits by Advanta/FDIC here and there, but by and large defaulted debtors are escaping their grasp. The more difficult it is for ACT, Phillips & Cohen, Sentry and Sage (the main collectors for Advanta debt) to get any traction, the less likely it is that FDIC will be able to get any junk debt buyer to step forward and pony up to participate in the JDC program and partner up with FDIC to purchase the debt and pursue the debtors.

This stuff may all march steadily toward the statute of limitations drop dead dates for suit, and debtors may be off the hook (except to the extent they get forms 1099-c they can't sufficiently offset with forms 982).

Inez

May 2, 2011 10:54 PM

Received letter from Law Firm in Calif. re: Creditor: Advanta Bank Corp in Receivership of the FDIC about my Advanta debt. Business credit card in name of S Corp that I personally guaranteed. Had to stop paying a year ago due to their interest rate increase for no reason and my business is going under. Am in process of closing biz,dissolving S Corp. Does receiving letter asking for payment in full amount from a law firm mean they are going to sue me? Do I need to hurry and file for personal bankruptcy? I have no assets and no money.

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About

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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