March 25, 2010
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News: Advanta Loses Its Fight
The small business credit card lender that shut off all accounts last year has been shut down by the Utah banking authorities. According to the Utah Department of Financial Institutions, Advanta Bank Corp., was just too unsafe to continue doing business. The company was suffering from extremely high credit card defaults and losses from its card portfolios. In 2009 alone, the bank was forced to write-off nearly $205 million in credit card defaults. Just last December, Advanta reported $1.62 billion in assets with nearly $1.52 billion in liabilities, leaving little room to operate. Advanta had also been trying to regroup after it settled an “unfair and deceptive practices” suit.
After Utah seized the bank, it was turned over to the Federal Deposit Insurance Corp. (FDIC) who was named receiver. The FDIC was not successful in finding a buyer for the bank. Some small business credit card debt has already been sold to several other third party debt collectors and the balance have been turned over to the Feds. The FDIC receivership should have no affect on any credit cardholder that was sold to a third party debt collector; however, it is not known how the change will affect those accounts being held by the FDIC. that continue to owe Advanta Corp.
At one time, Advanta was the fifth largest provider of small business credit cards. During the recession and credit crunch, many businesses resorted to their cards to fund their businesses. Increased interest rates and additional fees forced many small business owners out of business. Advanta was sited as being involved in unfair practices. During the recession over an 18 month period, the FDIC logged 976 complaints against the bank for unfair interest rate increases. In view of several class action suits filed against Advanta and the lack of additional resources to fund operations, the Utah banking authorities felt the bank was unsound. Advanta is expected to issue a statement shortly regarding the 8-K filing.