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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.