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Advanta Corp., the credit-card company that cut off almost 1 million small-business accounts after posting three quarterly losses, said the default rate more than doubled in June from May to 56.9%.
Advanta started charging off loans after they were delinquent 120 days, the Spring House, Pa.-based lender said in a federal filing for its Advanta Business Card Master Trust Advanta Series. Loans previously were deemed uncollectible after 180 days, the industry standard.
The policy "was changed as a result of closing customer accounts to future use," the filing said.
Advanta's charge-off rate dwarfs the national average, which set a record in June when it topped 10.4%, according to Fitch Ratings. Bank of America Corp. on July 15 posted the highest June write-offs among the nation's biggest lenders at 13.86%, a rate that includes consumer credit cards, CCR Newsline previously reported.
Delinquencies for Advanta loans 30 to 119 days past due rose to 8.12% in June, compared with 7.07% in May, and "early stage" delinquencies for accounts 30 to 59 days late increased to 3.64%, from 2.71%, the filing said. Advanta spokesperson Amy Holderer did not comment beyond what the filing stated.
The company's future will depend on "how bad losses get" as it winds down the credit-card unit, FBR Capital Markets analyst Scott Valentin said July 10 after Advanta announced plans to cut its workforce by about half, leaving it with fewer than 200 employees.
The Federal Deposit Insurance Corp. ordered Advanta to submit a plan that "provides for the termination of the bank's deposit-taking operations and deposit insurance after the bank's deposits are repaid in full," the company said in regulatory filing July 1. The process could take several years.
