Advanta Back in the News With Bankruptcy
By Steven Gibbs
November 11, 2009
The last time Advanta was in the news, it was at the beginning of the year and at that time their small business credit cardholders were receiving letters that they could not longer make any new purchases. This time around it seems that the news has not gotten any better as Advanta Corp filed to reorganize under Chapter 11 bankruptcy protection.
Like so many other companies, the reason behind this bankruptcy is because they feel they would not meet the obligations of paying their debt, even after listing $363 million in assets and $331 million in debt. However like many other large corporations who file bankruptcy, there is a twist. The twist in this case is that Advanta Bank Corp, which is the main operation that issued small business credit cards, is not part of the filing; simply because troubled banks are handled by regulators. Instead it is thought this branch of operations could eventually be taken over by the FDIC or sold to another company.
For at least one group of cardholders bankruptcy is not the answer they are looking for, as they are still paying skyrocketed interest rates on their card accounts. Instead they have filed a class action lawsuit, which stems from a settlement between the FDIC and Advanta over deceptive and unfair practices. These practices include habitually enticing business owners with low interest rate credit cards only to drastically raise their rates later with no reason. At the moment it is stated that over 300 thousand business cardholders still owe more than $2 billion.