Advanta Bank Closed by Utah Regulators

Posted by: John Tozzi on March 22, 2010

Advanta Bank Corp., the small business credit card lender that last year settled “unfair and deceptive practices” charges with regulators over rate hikes imposed on small business customers, was seized by Utah banking regulators Friday.

“We just found them to be in an unsafe and unsound condition,” Michael Jones, chief examiner for the Utah Department of Financial Institutions, told me. “They needed additional capital because they were taking significant writedowns and losses on their [small business] credit card portfolio.” Advanta spokeswoman Amy Holderer declined to comment but said parent company Advanta Corp. would issue a statement in an 8-K filing today or tomorrow.

What does this mean for small business borrowers? When Utah regulators seized Advanta bank, the FDIC was named receiver and could not find a buyer for Advanta’s operations. For borrowers who owed money to Advanta Bank, “right now the FDIC is the owner of those loans,” Jones says.

Some Advanta borrowers have already had their debts sold to third-party debt collectors. Advanta’s seizure shouldn’t affect them. It’s unclear whether it will affect those whose debt is now owned by the FDIC.

Advanta issued exclusively small business credit cards. In 2007 the bank was the fifth-largest issuer of small business bank credit cards (which excludes American Express and Discover), with 1.3 million accounts and $14 billion in annual payment volume, according to The Nilson Report, a credit card industry newsletter. Business owners often use credit cards for convenience to cover every day expenses. Many also use them as a source of longer-term financing in lieu of bank loans or credit lines.

Many Advanta borrowers, hit by rate hikes, have been trying to negotiate lower payments and interest rates, and at least one group was seeking class action status for a lawsuit against the bank. The FDIC received 976 complaints about Advanta raising interest rates in the 18 months leading up to Jan. 2009. (Peruse the comments on this post and others for small business owners’ stories about their dealings with Advanta.)

Advanta stopped making new credit card loans and cut off credit to existing customers in May 2009. By that time, the bank had become notorious for repricing interest rates, sometimes to over 30%, on cards opened with 0% APRs or other low teaser rates. In July, Advanta settled with the FDIC over rate hikes and agreed to pay $35 million in restitution, without admitting nor denying wrongdoing. Advanta Bank’s parent company, Spring House (Pa.)-based Advanta Corp., filed bankruptcy under Chapter 11 in November.

In filings with regulators, Advanta reported $205 million in loan charge-offs in 2009. In December, the bank reported $1.62 billion in assets and $1.52 billion in liabilities.

Advanta’s seizure is unlikely to have much effect on the availability of credit for small businesses. Advanta cut off all new lending, including to existing customers, last year. The most significant consequence may be whether those borrowers trying to renegotiate their payments and write down their debts will have an easier time doing so now that the FDIC is their creditor.

I have a call in to the FDIC. We’ll update as we get more information. For Advanta coverage from our archives, click here.

Update, March 23, 2010: FDIC spokesman David Barr would not comment on any potential consequences of the seizure for Advanta borrowers. Advanta Corp., the bank’s former parent company, filed an 8-K that I’ve uploaded here.

Reader Comments

MIKE kRAMER

March 23, 2010 01:44 PM

We were one of those small business that got caught in the rate hike 22%. we just got done paying the bill off ,is there any way to recoup some of our losses ,from the law suit. they forced us into credit counseling and ruined our credit score .

Carole

March 23, 2010 02:04 PM

Now I am in dilema. #1. Should I cash my whopping $134 restitution check (I was attempting to reserve my right to sue. #2. Should I pay Advanta or FDIC as I re-negotiated with Advanta after they refunded (some) fees and reduced interest. I have a payment coming due. I will be watching closely. Thanks for the update.

Peg

March 23, 2010 04:14 PM

We too are 'one of those' small businesses caught in the rate hike - ours is about 37%!!! One late payment two years ago. Insane. Paying it off has been a horrible burden but I am afraid to stop as I don't want to ruin my credit rating. Wish the people making the big bucks would feel some pain for this but I'm betting they walk away and the consumer keeps paying. I have tried calling a half dozen times to request a drop in the rate... nothing. Who got a 'restitution check'?

Paul

March 23, 2010 06:48 PM

Peg,
Ask them about their hardship program. I got a payout over 5 years at 9.9%. If you can pay quicker it is less. I had a consultant. Best advice, don't pay them for a while and they will come around. I asked for the hardship program and they said they did not have one. Then when I owed them enough money, they said they had a hardship program. What is the frigging difference?

Paul

March 23, 2010 06:59 PM

Peg,
My second try to help you. Ask for the hardship program because they say they do not have a hardship department. You can negogiate a loan from 0% to 9.9% depending on the years of payoff.
These jerks on this website are as bad as the banks, I said one word and they deleted my message.

Ed Tomko

March 23, 2010 07:28 PM

I was qualified for a hardship after 3 months of sending in paperwork and being given the runaround. I contacted an attorney several months ago and we WILL be joining in the class action suit. I suggest everyone jump on board w/ this suit.

Paul

March 23, 2010 07:33 PM

Peg,
It was the hardship department that I always asked for. Then when I owed them enough money, they said they had a hardship program. That is when I said what was the difference.
I do not know whether this site will allow me to post my e-mail but I will glady tell anybody about my Advanta problems and maybe you will not make the same mistake as I did.
paul@dixiecraft.com

Victoria

March 23, 2010 10:11 PM

I was set-up on the hardship program with Advanta. I mailed in my letter with my first payment like the letter requested. I then received my next statement saying that I was seriously delinquent on my account. I called their office and they told me everything was fine, just send in my next payment. Then I started receiving rude, harrassing calls from their collections department. I called to straighten it out and a young lady yelled at me, treated me like I was stupid, told me the reason this happened was because I mailed in my payment with the letter (which the letter instructed me to do) and then she proceeded to hang up on me. I called back, got a supervisor, whom was sort of apologetic but also treated me like I was stupid because I didn't fax the letter and told me if I didn't get the letter faxed back within 2 days then there was nothing he could do for me. I'm not sure if I make my payments to them if their hardship program is really what they say it is??? Not real happy with my treatment with this company. Does anyone know their president or is he out of a job??

Chris

March 24, 2010 10:05 AM

It'll be interesting to see what will happen with the hardship program now that this has happened. For those interested instead of calling customer service in India this number gets you to "Protfolio Managers" who are actually in the US (or at least speak English well) and can enroll you in one of two options. Not sure if you have to go through the not paying for a few months process first to become eligible or not though.

Mario

March 24, 2010 11:07 AM

I am on the there 9.9% program and am going to stop paying them for now. The FDIC will have to sell the debts and I will deal with the buyer. I may be wrong here, but all those programs now that the fdic is in the picture are not worth anything? Someone jump in and correct me if I am wrong?

Rich

March 24, 2010 02:36 PM

my advanta acct charged off a few months ago but as of last week it was still with the bank, just outsourced to a collection co (sage). i tried to get on a hardship plan i could afford but they wouldn't budge. what should i expect now that fdic has taken over?

George

March 24, 2010 05:54 PM

I'm nearing 90 days late on $20K, I refused to pay after the 2nd rate jack to 30%. At 60 days a "senior manager" left a voicemail offering a payment plan. Day later I received a letter offering a budget program at 9.9% or hardship program at 3.9% for 12 months, then 16.9%. Today a voicemail from Advanta offering an APR of 10% or even 4%. Based on how they've treated me (and others as described on numerous internet sites)I have no reason to believe anything they say, so I'll just wait for now....

Scott

March 25, 2010 08:17 AM

Dennis Alter must be related to Bernie Madoff. I had never missed a payment to anyone in my life. Didn't care that they froze my credit line. But taking a perfect payment history from 5% to 35% should land Alter in jail. I hired a lawyer who wrote them a letter attached 24 receipts for 24 electronic payments to, prove I was never late, copied the FDIC and they returned the letter unopened. I refuse-repeat! REFUSE to send a payment to a pretend bank who charges Mafia interest rates. They have trashed my credit report. But they can shove it because I will not reward crooked business practices with another payment.

Alter is the same fellow who promised investors 11% CD deposits under the facade of the name "Advanta" folks did not think to ask if it was Advanta "Bank" or Advanta "Corporate". I read his last ditch effort swindled Mom and Pop's out of $138m. At best they may get back pennies on the dollar. Interesting how all of the above took place right after Alter built himself the largest house in PA. Spent $83m, then files bankruptcy. Where's the justice???

Barry

March 26, 2010 09:50 AM

Directly asking Advanta for a settlement is another strategy to resolve outstanding balances, but don't want to file bankruptcy or pay the high interest in the hardship program.

Marie

March 26, 2010 01:29 PM

Anyone managed to reach a human being about their CC balances? I've been through 5 numbers either reading me the press release, giving me another number to call or hanging up one me...

800-275-3342
800-537-4048
800-705-7255
800-451-3213
267-525-4218

calvin

March 26, 2010 03:14 PM

I wrote a letter to the person that wrote and told me the account was closed, anf the interest rate would be29.9%. I told him I would not any more at that rate. I never leard from him, but I did start getting rude calls from collectors. I told them to contact the credit department in Utah. After a month the collecto called and said that would reduce the rete to 16%. I said refund late charges and refund interest at the higher rate. He did.I'm waiting for the next chapter.

Eric

March 26, 2010 05:44 PM

A collector for Advanta called today 3/26/10, and offered to settle my debt and wanted me to make the payment immediately. It seemed fishy. I just found this article and now I am not sure what to do. I am very hesitant to settle with Advanta if they no longer own the loan.

Fred

March 26, 2010 08:13 PM

Yeah, I'm getting these calls from folks who say they're calling about the Advanta account, but who knows where they are calling from....? I don't trust them.

Kathy

March 28, 2010 09:22 PM

I am among those who never missed a payment on my Advanta account only to have my interest rate increased on a $800 cash advance to 35.99%. I continue to may payments on the transfer balance payment but unlike other accounts, there isn't any percentage of the the monthly payment applied to the cash advance amount because the interest rate is much higher. I was initially impressed with Advanta for offer Small business the opportunity to a credit line, but they have proven to be the worst. I refuse to allow them to destroy my credit that I have worked to achieve all these years.

Mario

March 29, 2010 12:57 AM

Anyone know if the FDIC reports to your personal credit report if you stop paying now that there no more Advanta.

Drayo

March 29, 2010 10:01 AM

unfortunately, you still owe the money and are responsible. the fdic taking over has no bearing on this fact. you all need to address these balances with the agencies that are calling you. they have bought your debt. you can normally get very fair settlements.

Mario

March 30, 2010 01:09 PM

According to the fdic - no one has bought advanta debt. Tried to call and nothing? just recordings. Not going to keep paying - I want to settle and move on, but have no idea how??

Brian

March 30, 2010 02:56 PM

Here is a link to the FDIC website that may clear up a lot of quesitons regarding Advanta Bank Credit Cards. http://www.fdic.gov/bank/individual/failed/advanta-ut_q_and_a.html#section20

Maria

March 30, 2010 07:08 PM

I am trying to settle with Advanta. However, if the FDIC owns the debt, how does Advanta have the authority to settle our debt if they do not own it? I am leary of sending in the money now.

Margaret

April 6, 2010 09:08 AM

We don't even have an account with Advanta Bank, but they have called us at least two dozen times about another person with a similar name and different social security number. In spite of a letter telling them to not call us as they had the wrong person, they gave our name to Phillipps Cohen Assoc., who are not calling about this same manner. Letters don't work. What do we do now?

jeff t

April 6, 2010 10:44 AM

does anyone continue to make payments online? advanta's website has been shut down and we are on paperless statements. will customers be individually contacted?
thanks

Calvin

April 8, 2010 08:09 PM

I have been delighted with Advanta service and rates and was sad to see them stop doing business before I could work out a buyout as their rates and the fact they do not report unless the borrower screws up was great for a small business that depends on the owners being credit worthy. I reffered them to dozens of clients and we were all sad o see them close by far one of the best lending experiences I have had

Tom

April 10, 2010 05:07 PM

> does anyone continue to make payments online?

Any time a bank changes their domain, especially when they tell you about it via email, you should be highly skeptical, but it does appear that the now FDIC owned credit card operations have been moved to https://www.advantabankcorp.com/ADV/Login/CardmemberLogIn.page? (If you go to http://www.advanta.com/ (note, no "s" on htps, as the secure server seem to have gone away), it also links to advantabankcorp.com.) The Verisign SSL certificate appears legit, though that alone doesn't say much.

Annoyingly the FDIC FAQ mentioned above doesn't mention the new payment site.

Mario

April 11, 2010 01:58 PM

Hey Calvin,

I guess you where speared having you interest rate jacked from 7.99% to 37% as I did for doing nothing wrong. I for one am delighted as you, but no for there services, but for them being shut down by the FDIC.

John

April 11, 2010 05:26 PM

You can still make payments etc on line. Access you account through:
www.advantabankcorp.com/ADV

Lana

April 14, 2010 01:15 PM

I signed up for their hardship program. 4.99% interest for one year, reduced monthly payments,(after one year 16.99%), all late fees stop supposedly. I signed the paperwork,made by 1st payment. Have now received latest statement reflecting my payment BUT interest rate still shows 29.99% interest w/ $39 late fee. I called Advanta at the # on the statement and a very angry man basically was YELLING at me, telling me to ignore the statements and just make my next payment. He told me NOONE ELSE questions this??!!!!!!! This does not seem smart or logical?? Why wouldn't statements reflect the hardship rate? I am very suspicious. Anyone else have similar situation going on?

Joseph A. Banks

April 14, 2010 06:55 PM

Lana,
Your experience makes it difficult for me to justify even speaking with Advanta about my 20K balance. They've rate jacked me twice to > 29.99% and I just don't trust them. Unlike Calvin's experience (does he live on Mars?), Advanta has been the worst credit card company I've ever dealt with. I'll just let my credit score plummet, ignore their incessant calls, and see what happens. When will the FDIC or the remaining Advanta skeleton crew sell their accounts off to someone else? I wonder how many folks will be chased off into bankruptcy by this insipid worthless company...

Andrew Williams

April 15, 2010 01:10 AM

I'm with Calvin,
I never had a Problem with Advanta.
I never had a clue they were even in trouble. I must admitt I have never used a cash advance in my life, but I for one felt sorry for them. Until I read of of these horror stories, I was convinced someone would buy up the accounts and open up the funding. Should I pay off the small 2,000.00 balance, or see what happens with the FDIC?

Nancy

April 16, 2010 09:55 AM

I am not using my business address since this is public. How do we get information on the class action suit. Web site says keep paying these obscene fees.

Don

April 16, 2010 10:07 AM

I'd like to pay off our balance but the when I click the link I I get a warning that the security certificate is "untrusted". What's up?

Nancy

April 16, 2010 10:07 AM

I just called the 800-705-7255 number and got a woman in India. I was told they have no hardship program. She told me the credit cards had nothing to do with the FDIC closing. If you go on line to pay the bill that information comes ups immediately. I asked again for the hardship program and she said she never heard of it and it did not exist. Then she hung up on me.

Nancy

April 16, 2010 02:55 PM

This morning I called the FDIC at 877-875-4744.I spoke with a very nice woman. She took my information and said someone would contact me. I told her about the phone call with India, the hang up etc. She was aware of this. I told her my entire conversation with the representative. I told her many of us would like to work out a solution, however, the call center will not speak
with us about an issue, hangs up or says they are not associated with the closing.
Call the FDIC and just maybe we can get some resolution if they hear from enough of us.

bob

April 17, 2010 11:16 AM

I just found out about this after trying to pay online. It(bankruptcy & seizure) couldn't have happened to a better group of people. I have not received a class action notice. Have they gone out? It seems from the comments that they have. If so, who are the lawyers for the class and how do I contact them?

Mario

April 18, 2010 12:09 PM

Class action... I am in - Just tell me where to sign up.

Pete

April 19, 2010 06:40 AM

Ironically, the FDIC is now in the position of being one of the most usurious institutions in the land as it apparently has no intention of scaling back the outrageous 35% interest rates on Advanta small business credit card amounts!!!

Richard

April 19, 2010 10:53 AM

Some den of thieves called NCB Management now handles tghe "customer service" functions of Advanta (and the FDIC, presumably). Call them at 1-877-304-6426. I too had a late fee which they finally agreed to take off the account when I explained how low they are on my priority list. Let them chase us all for the money.

Troy

April 19, 2010 05:25 PM

I've simply given up, can't afford the 29.99% interest rate. 3 months late and now they offer to reduce the rate back to 16% - I don't think so.

Class action suits are useless since there is nothing left to sue, and it appears the FDIC is OK with +30% interest rates...

Maybe the teabaggers will help us.

Angie

April 19, 2010 05:59 PM

Called customer service # on my statement today. Told them my business was failing and that I needed to talk to someone who could help me. Shawn said he was the only one (indian accent)
I told him I could no longer make the payments and that I was in the process of listing the building I own and run my business out of and needed an extension and waiving of late charges with the intention of paying the bill in full when building is sold. He could not make any concessions at all not even lowering the rate even after he acknowledged that I had been a customer for 15 years and had never been late on a payment. The emotions I am feeling faced with the prospect of closing my business after 28 years is overwhelming. I am doing everything I can to not take out bakruptcy but the banks and credit card companies act as if that is exactly where they want you to go. I am almost 65 years old and watching my life's work going up in smoke. Did I mention that I own a title comnpany? This meltdown was totally out of my control and ability to survive. I tried to borrow my way out since we have been thru similar situations before but I never dreamed it would go on this long. I need help but am running into a brick wall every which way I turn. Am I being stupid for trying to do the honorable thing or should I just join the deadbeats and try to go on with the rest of my bleak looking life. I think I went off on a tangent here but the Advanta mess is just one of the many cc companies that has ripped us off just because they could. Although they are by far the
worst. I am being charged 34.99% and have been since the crisis started. But I can now say that they have received the last payment I will voluntarily make. The bankruptcy trustee can now decide if they get anything else out of me.

tammy

April 19, 2010 11:53 PM

OMG, i cant believe the interest it has jumped to, trying to pay this card and it keeps getting higher and higer, up to 30's per cent, what can we do help!!!!!!!!!!!!!!!!!!!!!!!!!

Gaby

April 20, 2010 10:11 PM

I filed for bankruptcy in 2008, however since my Advanta business card never appeared on my credit report, my lawyer never included it in the bankruptcy. I just received a letter on March 7th of 2010 (never received anything before) from Sage Capital Recovery demanding payment in full. Soon after I was contacted by phone to make payment arrangements with a very nice and understanting person. When the time actually came to discuss the arrangement, he transferred me to his "manager" who was totally rude to me and treated me like I was an idiot demanding payment immediately! I am not about to let them intimidate me, and will have to wait and see what happens with this whole Advanta thing.

pete

April 21, 2010 10:06 AM

Everyone concerned over FDIC continuing these indefensible rates should contact House Financial Services Committee http://financialservices.house.gov/contact.html to ask why government is not lowering these rates. Think what a stimulus this would be to small business if they were to cut it back to even 18%!
So lodge complaints, get in touch with individual congressperson, and tell two friends to do the same!!!

Bob

April 26, 2010 02:34 PM

Gaby: If you had a "no asset" bankrputcy your debt with advanta is probably discharged by operation of law. Call your lawyer!

KEN

April 29, 2010 11:11 AM

April 30, 2010

MY COMPANY WENT UNDER SEVERAL YEARS AGO. I KEPT MAKEING PAYMENTS, NEVER MISSED. I RECEIVED A STATEMENT GOING UP FROM 7.5 TO 26% NEXT MONTH 27%. I CALLED THEM AND ASKED TO SPEAK TO A MANAGER. I WAS TOLD THAT I COULD NOT AND THERE IS NOT A THING I COULD DO. I KEPT CALLING AND FINNALY SAID,"I CAN'T DO THIS ANYMORE. THEY PUT ME BACK TO 7.5% SAID IF I MISS A PAYMENT OR WAS LATE, IT WOULD BE OVER 30%. I AM OVER 60 YEARS OLD, HAVE 1 CHILD AT HOME AGE 13 AND HELP WITH 3 GRANDKIDS. I AM WORKING 7DAYS A WEEK, 16 TO 20 HOURS A DAY!!! WHAT MORE CAN I DO?????? WHO WILL HELP????????

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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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