Thanks to everyone for all your comments and stories about the settlement checks from Advanta.

I confirmed that there is a lawsuit pending in California against Advanta over rate hikes, and the plaintiffs are seeking designation as a class action. The suit was filed in June in Santa Clara County Superior Court. The case has not been certified as a class action yet. The court documents aren't easily available online, but I got a copy of the complaint from one of the attorneys involved, and with permission I posted a PDF here. (I've emailed Advanta for comment on the suit and a few other questions -- will update with what I hear.)

Some more details on the settlement from the FDIC: So far, Advanta has offered restitution to 138,194 customers whose interest rates were raised, for a total of $18.1 million. That makes the average payout so far $130.98. To business owners who are still paying over 30% APRs on balances of thousands of dollars, that's a pittance. (Further payments for rate hikes and relating to the cash-back rewards program are pending.)

A few other points. Several readers noted that Advanta negotiated with them only after they stopped making payments. (Can't link to individual comments here unfortunately, but these are all from the last post.) Alena writes:

I opened my small business account with Advanta at 0% interest for 12 month, and then paid 7.99%. It was the lowest interest rate card and because of that I used Advanta card frequently. In the middle of doing business with Advanta I received inserted pamphlet, which I didn't read closely, however next month my interest rate jumped to 24.99%. ... I thought it was a human error, so I called Advanta for an adjustment, but they said they couldn't help me, because their company is hurting and they have to pass the charges on their clients. At that point I was hurting too and I stopped making payment. They harassed me for about 30 days 2-3x a day. I explained, that I can't pay their interest rate and we negotiated the rate down to 16.99%

This is something like the catch-22 we often hear about with mortgage modifications: Lenders won't negotiate with people who are on top of their payments, so there's an incentive to default to get a better rate. But business owners should realize that, even if they have a corporation or an LLC, credit card debts are almost always personally guaranteed. So delinquency on an Advanta card will likely affect your personal credit rating. Here's what happened to reader Lynne:

I stopped paying 2 months ago. I figured what can they do since it was under our corporation. Well they did something. Advanta has never showed up on my personal credit, until yesterday. They somehow got it to show up on my personal credit report and marked me 30 days late which dropped my score from 780 to 715.

Meanwhile, reader Earl Blankenship takes an entertaining jab at Advanta:

I have an account with Advanta that they raised to 34.9%. I tried to talk to these people, but I have never talked to such a rude arrogant bunch of thugs in my life. And I am A Used Car Dealer!!!!!!!!!!!

The more I think about this and hear stories from Advanta borrowers, the whole situation seems like such a waste. Businesses that borrowed in good faith at attractive rates are now creaking under the weight of the debt at jacked up APRs. The company's million small business cardholders have been cut off from all new lending.

Advanta itself, a 58-year-old enterprise, is teetering. In the four most recent quarters, it has lost close to a half billion dollars, including $330 million in the quarter ending June 30, 2009. The company was done in by steeply rising delinquencies -- should they have been surprised customers who borrowed at 8% couldn't make payments at 30%?

Hundreds of Advanta employees, many likely uninvolved with the bank's failed strategy, have lost their jobs: the company employed as many as 900 people in recent years, but has laid off all but 200. They and their families are out of luck.

The regulators supposed to protect borrowers failed too. The restitution agreement the FDIC reached is clearly too little too late to help most borrowers.

I'm sure a few people gained -- investors who sold before the stock tumbled, a few executives who drew big salaries. But mostly you look around this situation and see everyone losing. When business transactions work correctly, value is created and everybody gains, customer and company alike. This is the opposite: Everybody loses. What a waste. Entrepreneurs who want a reminder of the difference between creating something of long-term value and looking for a quick, easy, short-term profit, take note.