Advanta Customers Beware: Credit Line is About to be Cut Off

Advanta to shut down credit without notice

Earlier this month, Advanta Bank Corp. announced that it will be shutting down customer’s credit lines on June 10. However, on Friday Advanta changed the cutoff date to May 30, which is Saturday.

To make matters worse, The Consumerist reports that an Advanta representative says that because of “postal problems,” customers will not receive notice that their credit lines are being shut down until the end of the month.

Left in the dark

News media have reported on the impending credit cutoff, but Advanta Bank Corp. has not contacted customers through any means other than the “snail mail” that will reportedly not reach card holders until their credit is already shut down.

Advanta mainly supplies credit cards to small businesses. As I am sure small business owners know, there are no easy loans out there right now. Advanta customers who were planning to rely on credit from Advanta Bank Corp. to keep their businesses going will find themselves in a tough situation.

How many will be affected?

Advanta says that it will freeze nearly 1 million accounts May 30. Advanta Bank Corp says it has lost $76 million because of customers defaulting on payments.

Advanta says shutting off credit lines will be a step toward cutting its losses and preserving its capital. Despite the fact that Advanta customers will have their credit lines terminated without prior warning, they are still expected to pay their debts.

A memo from Advanta

An internal memo distributed at Advanta Bank Corp. says “there would be no acceleration in payments due.” However:

“Customers would be able to pay down accounts and we would continue to service customers and collect payments as we do now.”

Advanta credit card holders aren’t the only people who will be affected by this move. The internal memo also warns that “our staffing levels could be significantly affected.” The company already eliminated 300 jobs earlier this year.

From an Advanta customer

In the Philadelphia Inquirer, an Advanta customer confirms that she had not gotten any word from Advanta Bank Corp. regarding her credit line being shut off.

“I was just on the phone with one of their representatives last week discussing payments, and they didn’t even mention this,” Jennifer Duff of Exton said. “It’s ridiculous.”

Duff isn’t very optimistic about finding a new source of credit for her business.

Duff said she had not started looking for a replacement card. “Given the current economy, I’m not hopeful we’ll be able to get anything.”

What will become of Advanta?

An article in the Philadelphia Inquirer says “Advanta faces having to reinvent itself.” However, industry analysts don’t see a reinvention in the company’s future.

Instead, the analysts say:

“It will collect the debts its existing customers owe, use the money to pay off as much of what it borrowed as possible, and then cease operations.”

The Inquirer reports that at the end of April, Advanta’s outstanding credit card balances were $4.5 billion. The internal memo says that this month Advanta launched a purchase offer for up to $2.2 billion for its credit card backed bonds.