Dennis Alter and the Tragedy of Advanta

Construction of his new house? $80 million. Donation to Temple University? $15 million. Cranking up interest rates on his customers’ credit cards to nearly 40 percent? Shameless.
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By Matthew Teague

THE GREATER ADAPTION of Dennis Alter’s career, so far, may have been his recognition of a whole new type of credit market. “Business to business,” people called it, or simply, “B2B.”

A decade ago, there was more or less no such thing. A small-business owner who needed credit could apply for a traditional bank loan, or could use his personal credit card. Alter saw an untapped market there: a community of people who would likely use their credit cards constantly, and would have powerful motivations to pay them off on time. So when Advanta’s sub-prime mortgage adventure came to a close, Alter refocused his company on this narrow — but potentially lucrative — new field.

There had been two types of credit cards, previously. Consumer cards are the personal lines of credit that most people use in daily life, and are tied to personal credit history; the holder is responsible for payments. Corporate cards are custom-made for large companies or government agencies with fleet costs, extensive travel and so forth, and while employees may carry them, they’re not tied to personal credit; the company is responsible. This new category that Advanta embraced — small-business cards — sat somewhere between. Owners of small businesses could use their personal histories to access much larger lines of credit, to purchase inventory, make payroll in a pinch, and so forth; the holder was the company, and so was responsible for payments.

Big fat credit lines would mean big fat profits for Advanta. Sure, the loans came with some risk. But Alter cranked up Advanta’s old credit analytics machinery, and it spat out the names of one worthy candidate after another. A real estate broker in Rhode Island. A Hollywood producer. A Web designer from Oregon. Alter had discovered a vein of gold — or platinum, in some cases — and Advanta rushed to exploit it before giants like Citibank and Capital One could catch up. “These cards went from one percent of the overall market to 11 percent in the past decade,” said David Robertson, publisher of the Nilson Report, a credit industry trade paper. Advanta cannonballed into the deep B2B waters, focusing everything on the new niche. And why not? Alter’s computer models, manned by 75 analysts, showed that as long as the company picked the right customers, it would be fine.

The trouble was, it turns out that computers can’t read history books. This sort of credit card was so new that it hadn’t yet gone through even a single macroeconomic cycle. In previous financial downturns, no one had small-business cards, so the computers couldn’t predict how those people would behave during calamity. There were no such algorithms. And everyone seemed to overlook one critical factor: All those small- business owners with gleaming, high-limit B2B cards also still carried their own personal cards. So as the economy slowed down last year — before the crash — those customers faced two options:

1) They could prop up their business accounts with their personal cards. Or,

2) They could just let them crumble.

“People started borrowing money, using personal credit to pay the Advanta bill,” Robertson said. “So everything looked fine on the surface. And Advanta didn’t realize people were about to start dropping off the credit map” — which is to say, to stop paying their bills. “It was the first downturn in history where millions of small-business owners were holding business credit cards. They got hit in an extraordinary way.”

And now Advanta, like its agonized customers, faced a choice of its own: Prop them up. Or just let them crumble.

 
 
Originally published in Philadelphia Magazine, October 2009

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  • mikemark8

    2012, it’d be nice to see an update on what this robber baron is up to currently-I have no doubt he still thinks he has helped people, but his greed and deceit should always be remembered. Whenever I am near his Ambler ‘palace’ or the mocking ‘tribute’ he used stolen money to fund at Temple, I am reminded of how his greed hurt thousands of families and small businesses. Hell is too good for Alter.

  • T.

    Has he been indicted yet, or already in prison?

  • Anna

    Hooray, Advanta has closed and can no longer screw anyone else. Advanta card was an important part of our growth in our early days and then all _ _ _ _ broke loose. Thank God they can no longer screw

  • George

    Seems to be a consensus that the CEO Dennis Altruister ran this company into bankruptcy. How did he yield so much power? Seems ridiculous that the Board or other mucky mucks couldn’t rein in the ba

  • william

    Totally accurate. Alter had much smarter people than him running consumer cards and mortgage. He sold both at the right time and made a ton of money and so did a number of people that worked for him. His ego, huge but very fragile and his inability to trust anyone is at the root of Advanta’s ultimate demise. As he ages, his behavior is more bizarre, his decisions are that of an old man with many regrets and anger towards the people that rightfully benefited from Advanta in it’s heyday. He is full of resentment towards former executives, his wife and his anger clouded his ability(weak as it always was) to manage the business effectively and entrust the right people to carry on. The flavors of the month were trusted with huge decisions and raised interest rates on the best customers. They left with their share while their decisions took the company down.

  • Paul

    As a 13 year veteran of Advanta, I would like to clarify a couple of things. One, the small business card was started by Advanta in 1994 but was not on Dennis’ radar until he had killed the consumer card and mortgage operations with sub-prime, high interest lending (exactly the opposite of what Jack Alter envisioned). When the mortgage operation started floundering the execs realized the business card was keeping Advanta afloat, and almost immediate sold mortgages to Chase and started running the business card into the subprime boneyard.
    There are also those defending Advanta as being another “victim” of the economy. I don’t have room here to counter that, but history will show that Alter’s policies were prime contributors to Advanta’s failure as well as part of the overall economic meltdown.

  • Researcher

    GO HERE Right now: https://www2.fdic.gov/starsmail/index.asp

    Just 200 more justifiable complaints will make a
    difference.

  • Robert

    As a small business owner, I too was seduced by Advanta’s attractive “Small Business” credit card introductory offer a few years ago. I financed close to $10,000 worth of equipment for my business on the account, then a year ago Advanta increased my APR from 9% to 36% (and I’ve never been a day late on paying). Today, I just attained a personal loan from USAA (the most ethical financial institution I’ve ever done business with) for 12%, which will save me $4400. on the remaining $8500 balance on my account, as opposed to enriching the already wealthy Mr. Alter and his associates.

    Deceitful, predatorial bastards like Mr. Alter and his associates are a poor excuse for human beings, and if I ever had the opportunity to meet him/them in a room it would not be pretty.

  • Paul

    I also worked at Advanta. It was the worst professional experience of my 25 year career. He in not only a terrible business person he is also a horrible human being. Most of his direct reports saw this coming and left before the meltdown. He’s mean spirited, has a huge but very fragile ego and barley average intelligence. He would never make it as a CEO outside of Advanta. He took his father’s business a drove it into the ground. Of course he’ll walk away with a ton of cash but Advanta is finished. Let’s not forget Bill “The Creature” Rosoff. He is just as much to blame for Advanta’s demise as Alter. He simply keeps a lower profile.

  • Michael

    What this man did to me is terrible. We all have the same story. Instant hi rate. He should be hung in the public square. YOU FUCKEN BASTARD

  • Joe

    he’s a terrible man. for all the good he does, it’s always in his name. comes with conditions, ultimatums or watch out when you get on his bad side. he is ruthless, nasty, insensitive, cold, vindictive. a lousy businessman that makes his business decisions based on his personal agenda, emotions and fondness of the idea or the person or people involved. the sandbox is only big enough for him and his brilliant ideas.

  • Peter

    If there is a new-age businessman that fills the mold of the J. Foster Kane in the classic movie “Citizen Kane,” it is Dennis. A man coming from very humble beginnings who reaches the pinnacle of success, wants the general populace to love him (in Alter’s case, through charitable giving –but only if his name can be attached to the project in bold, golden print) but whose flaws ultimately come home to roost and spell the ruin of his enterprise. A tragedy, and repeat of history.

  • Anonymous

    Dennis was always King of Bad Decisions.

    I feel sorry for his lovely wife and step-children. They will all survive this fiasco, I am sure. Where there is money, there will be lots of Trust Funds, prenups etc.

    Dennis and his supporters took down many families and small businesses. He didn’t make the false statements and iffy decisions on his own.

    Maybe he will live long enough to see another scheme come to life and suck all the life out of that, too.

  • cece

    his son is in my grade at my school and its obvious how incredibly rich they are

  • Scott

    I will never understand Alter’s business model. Lure honest small business owners with 7% interest, then nail them to the wall with 30% rates, quadruple their payments and force them to either pay it off or trash their credit. How many small businesses have been struggling then put under by this man and his practices? So far today alone I learned of two class actions against Advanta. 1 from employees and another from Investors. Just wait until the customers get rallied up! Mr. Alter-you Sir are an American Villan.

  • Philip

    Icontracted for a 2.99% rate, without notice or opt out opportunity–went to 32.99%.Allways paid on time well above minimum required. Dennis Alter is a thief of the third magnitude–a total scum.

  • mike

    to the former employee-I had my rate go from 7.99 to 25.99, had a credit score of 780, and was never late with a payment and always paid the minimum-I also was not sent an ‘opt out’ notice. Greed is greed, and Alter is the worst. This clown builds a palace for himself, pays millions to have Sir Elton sing to him, and you defend him as a ‘businessman’-well, your hero hurt thousands of true ‘businessmen’.

  • diane

    I was an emoployee of Advanta for 3 years and I am wanting to defend the bad reputation they are getting in this article.I have never worked for a company before that cared so much about the employee.I do not blame being unemployed on Dennis Alter.He is a business man and needed to make business decisions that he felt were right weather we agree or disagree.None of us had billions of dollars on the line that possibly would not be repaid.It is not a fact that all Advanta customers rates were raised to 40%.It is not mentioned in the article that Advanta sent out letters letting customers know rate would change.These customers also had the chance to say they did not agree with the new rate.Oh and if the customers neglected to read the mail which most did then you also had the opportunity to call when you got the bill and saw the new higher rate to opt out(in credit card terms this means the account would be closed but the customer would have the opportunity to pay the bill off at the old

  • vicki

    I worked for Advanta for almost 10 years. We were told in January when an article came out about the default rate that it was incorrect and we had nothing to worry about. Two weeks later I was notified that my job was being out soured to India via e-mail. I understand how these cardholders feel. Believe me as a former employee we disliked telling people hey your rate is going to nearly 40%. I was always a cheerleader for Advanta for the most part we as employees cared and tried to do everything we could to help our cardholders. Most of us went to great lengths to try and “do the right thing” for them. I feel for everyone, cardholders and my former co-workers. We were all screwed by bad business choices. But hey on the lighter side at least Elton got paid from Dennis. I’m sure its hard being rich and may get depressing making choices to ruin other peoples lives. You need a legend to come and make you feel better. I wonder if he had him give him warm milk and cookies afterwa

  • Bwca

    Instead of charitable donation are the wealthiest Americans to
    bail out the less fortunate? It seems to me that it would be most
    constructive for everyone to deal with own fall from the bubble and
    not point fingers in arbitrary directions.

  • Bwca

    This feature article was birthed to aimlessly compromise the
    reputation of a preeminent man of vast benevolence. Dennis Alter is
    not the man responsible for the delinquency of an entire industry. The
    entire world is embroiled in the same meltdown. When a company or bank
    enters upon a credit agreement with a client, there is legal room and
    a great reality that debt could go sour. Logistically, is it the
    lender or the most irresponsible recipient that is to suffer? (In a
    perfect utopia nothing bad would happen and everyone who chose to
    spend 10,000 dollars on their credit card companys tab would be
    forgiven) Lessons of a great diversity are being learned by
    millionaires and small businesses alike. If someone called you and
    said that you could spend 5,000 dollars that you didnt have just
    because, would you? By a general rule, irresponsible decisions dont
    equate absolution. Regardless of fiscal worth, everyone rode the same
    bubble. Instead of charitable donation are the we

  • Kathy

    I hope the small business owners refuse to pay your outrageous rates and put you out of business. I hope you sink fast! How would you like to pay 34.99% interest?