Brad Benson during Super Bowl XXI

Here's a proposition you don't hear every day: Buy a new car, put no money down, and walk out of the dealership with a check for $5,000. Is it possible? Yes. It is a good idea? Almost certainly not.

There's a dirty little secret of the new car sales business -- one that helps dealers but can really get drivers into financial hot water. Dealer-friendly lenders will allow consumers to take out new car loans that actually exceed the value of the loan -- in some cases by up to 20 percent. That means when you buy a $25,000 car, a friendly lender might loan you up to $30,000.

These are called negative equity loans, and they are a necessary evil in a world where consumers often drive onto new car lots with old cars that are "upside down" -– meaning they owe more on their current loan than their old car is worth. They also don't have the means to make up the difference with a cash payment. It's a widespread problem. J.D. Power and Associates estimated in 2009 that one in four new car buyers with a trade-in were upside down.

How can a dealer sell a new car to a person who can't pay off their old car loan? The dealer finds a way to roll the payoff amount into the new loan. Such negative equity car loans came into vogue during the go-go lending days before the financial crisis.

While in rare cases this can be a practical alternative for a buyer, it's easy to see how this could lead to a long-term pattern of bad financial behavior.

A recent financing deal being heavily advertised by the largest Hyundai dealer in the United States takes the idea of a negative equity loan one large step forward:

"You can put no money down and we'll send you home with a check for $5,000," say the radio ads, which blanketed the New York metropolitan area recently.  "No money down, no payments for a year, or a check for $5,000, only at Brad Benson Hyundai."

Famous athlete, famous ad man
Brad Benson played on the offensive line for the New York Giants for 10 years during the 1980s, winning a Super Bowl as a key part of their 1986 team. Like many athletes, he turned his football fame into a successful business career. His radio and television advertisements, which he narrates himself, poke fun at current events and have developed a mild cult following. In one ad last fall, he offered controversial Pastor Terry Jones a free car if the pastor ended his plan to burn a Quran on Sept. 11. In another, he promised to stay celibate until his dealership became the largest in the country.

Brad Benson today/BradBensonHyundai.net

 The promise of getting a $5,000 check for buying a new car might be his boldest yet. And while it is possible to get what is essentially a small, unsecured loan and a new car at the same time, personal finance experts say it's probably a terrible idea.

"These 'deals' really target people who aren't very sophisticated about money," warned Liz Weston, author of "The 10 Commandments of Money." "They'll wind up overpaying for the car and paying too much for the loan as well,"

A closer listen to the ad's fine print gives some explanation how the deal works. Here's the critical line.

"All offers based on customers paying posted dealer price and may result in financing being greater than vehicle," the ad says.

There are two obvious problems with that fine print. Experienced car buyers know that most consumers don't pay full MSRP when they buy a new car -- there's almost always room for negotiation. Some dealers, however, have learned to really take advantage of inexperienced buyers by adding what's sometimes called a "second sticker" to their cars, jacking up the price a few thousand dollars above the sticker price. These often come with a vague explanation like "local market conditions," but rarely do consumers need to pay these higher prices. 

But consumers who want Brad Benson's $5,000 do.  Anyone who wants one of these $5,000 checks forfeits their right to negotiate the price, according to the ad.

The perils of being upside down
Problem No. 2 is the "financing greater than vehicle" part. That line describes a negative equity arrangement.

"Being upside down on a loan is a miserable place to be," said Weston, who also is MSN Money's financial columnist. "If the car's stolen or totaled, you won't get enough from insurance to pay off the loan. Instead, you'll have to cough up the difference between the car's value and the loan balance, unless you bought insurance to cover the difference."

Benson told msnbc.com that most car buyers don't actually take him up on the $5,000 check offer -- they apply the money to a down payment on the car. (That's the right move, personal finance experts say). He also said the ad is chiefly designed to get attention.

"Our ads are usually wacky, to cut through the clutter," he said. "The car business is a tough business. … It's tough right now and we want to try to come up with the best deal to give people alternatives."

The dealership's general manager, David Canton, estimated that one out of 25 customers opted for the cash-back arrangement.

Hyundai of America spokesman Jim Trainor said dealerships operate independently, and directed all questions to Benson's firm. He said he was unaware whether if any of Hyundai's other 800 dealers around the country had similar offers. Hyundai's financing arm, Hyundai Capital America, does made loans to Benson's customers, but Trainor was unsure if it was involved in any of the $5,000 check loans.

Jeff Bartlett, deputy online auto editor for Consumers Union, said this isn't the first cash-and-car deal for purchasers, but it's probably the most aggressive offer he's heard. 

"Every now and then you hear some dealer trying something innovative to stand out," he said. "In a down economy, people are susceptible to these tactics. ... It might mark the emergence of a new trend involving innovative deals."

While Bartlett wasn't a fan of the Benson offer, he wasn't as down on it as others. He said he could imagine a scenario where the $5,000 loan comes with cheaper terms than any other loan a consumer could obtain -- car loans to credit-worthy buyers generally come with interest rates that are about half as expensive as unsecured personal loans.

"At first it sounds silly, but it would depend on the specifics of the interest rate and the loan," he said. "People are increasingly finding themselves in precarious positions and this might be the answer some people need. But for most people this is a bad idea."

Cheaper than a home equity loan?
But Benson argued that a $5,000 loan attached to the car purchase could be a sound financial choice; buyers with good credit can borrow the money for an interest rate that's much lower than a home equity loan, he said.  Good candidates for the loan might be someone who has just gotten married , has medical bills, or is receiving a structured settlement and would be able to pay off the loan in a short time, he said.

There is another problem with the offer, however. Generally, consumers who are attracted to such loans have poor credit, so they don't qualify for the best loan terms.  

"Negative equity financing typically isn't cheap," Weston warned.  "You'll almost certainly be paying a higher rate for a loan when you make no down payment or take money out."

Interest rates, for example, could jump from 5 percent to 10 percent for a consumer with bad credit.  A buyer who walks out of a dealership paying for an extra $5,000 loan at 10 percent interest is a boon for the dealer -- which earns commissions on loans it brokers -- but a terrible deal for the driver.

Edmunds.com analyst Jessica Caldwell shares the concern about high interest rates. She offered one theory for the new tack taken by Benson's dealership. Generally, the credit worthiness of Hyundai buyers is below industry standard, she said, so the firm may have trouble moving inventory with standard "0 percent financing" campaigns -- many Hyundai buyers simply don't qualify for such loans. Cash-and-car promises may appeal to buyers who are struggling with other kinds of expensive, short-term financing such as credit cards, she speculated.

Benson defended his method of advertising from critics, something he's done before with other dramatic ads.

"I would question how (critics) think I should advertise…It's easy to sit back and take the philanthropic view of automobile business, but on the dealer level, the competition is tough," he said.  "I think most people are sophisticated enough to understand it, and we fully disclose it… If people understand it, why do they think it's a bad idea?"

As a general rule, when a dealer offers an upfront cash rebate or a special financing arrangement, consumers should apply that rebate to the down payment, Caldwell said. A smaller loan is almost always better than a bigger one.

"At the end of the day, a customer has to calculate whether the $5,000 check is better than obtaining a lower interest loan (somewhere else)," Caldwell said.  Edmunds has a series of online calculators that help consumers do the math, including the "Low APR vs. Cash Back" calculator on this page.

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Gun rights supporters won a major legal victory last week when a California judge struck down as unconstitutional a law that they say would have effectively banned online sales of handgun ammunition just days before it was to have taken effect.

Given the sheer size of the California market, the law would have had a major impact on national online ammunition sales, and some online ammo sites had already suspended sales to California.

While gun rights advocates cheered the decision, which came amid heightened focus on gun control issues in the wake of the Arizona shooting spree, supporters of the law say ammo sales are dangerously unregulated. And they say they have evidence that millions of rounds of ammunition are illegally sold to convicted felons every year.

The California Handgun Ammunition Registration Bill was signed into law by Gov. Arnold Schwarzenegger in October 2009 and would have taken effect on Feb. 1. The law would have required that all ammunition sales in California involve a face-to-face transaction and fingerprint registration of the purchasers. Gun owners who wished to use online sites or catalogs would have been forced to have their ammunition shipped to a local gun dealer so the transaction could be performed in person, a requirement that opponents say would have effectively ended online sales.

Dealers who failed to obtain fingerprints during a purchase would have been guilty of a misdemeanor crime. While the law would have applied only to handgun ammunition, dealers said it would have effectively ended all online ammo sales in California, as rounds that can be used in handguns can often be used in rifles.

Fresno County Superior Court Judge Jeffrey Hamilton struck down the law last Tuesday, saying the definition of handgun ammunition used in the legislation was so vague as to be unconstitutional.  California's Attorney General Kamela Harris said she might appeal the ruling.

The lawsuit was filed by the California Rifle and Pistol Association, among other groups, and backed by the National Rifle Association, which quickly declared victory.

The ruling was "an important victory for California gun owners," the NRA said in a statement on its Web site. "For now, at least, mail order ammunition sales to California residents can continue, and ammunition sales need not be registered under the law." NRA officials did not immediately respond to msnbc.com's request for comment.

Research: Felons can buy bullets now
The law's sponsor, Democratic State Sen. Kevin De Leon of Los Angeles, said the decision was outrageous.

"I'm disappointed because the NRA went shopping for the right court and the right judge and it looks like they found him," he said. "It was a politicized decision. ... In light of what just took place in Tucson as well as a string of shootings that took place last week in Los Angeles ... it's disappointing. What we're trying to do is to protect families and children, not trying to prevent anyone from lawfully getting ammunition."

De Leon pointed to research that found 10,000 rounds of ammunition were purchased by felons during one three-month stretch in Los Angeles -- 2.5 percent of all purchases -- after that city passed a face-to-face requirement in 1998. A similar study in Sacramento conducted in 2008 after that city's law was implemented found a 3 percent felony purchaser rate.  In each case, police discovered the felons during spot checks done after the purchases; the infrastructure is not yet in place to conduct real-time background checks on ammunition purchases.

Extrapolated nationwide, he said, millions of bullets have likely been purchased by convicted criminals.

"In Sacramento, they found 150 felons had purchased handgun ammunition. Three were murderers. They went to their homes and found thousands of rounds of ammunition, rifles, and automatic weapons," De Leon said.  "Quite a few of them were on probation."

Criminals soon wised up, he said, and began purchasing ammunition in other towns, leading De Leon to believe California needed a statewide law.

The technicality used to throw out the law -- the vagueness of the definition of handgun ammunition -- might impact other California regulations, De Leon said. The definition has been used in state laws for three decades, including laws banning so-called "Cop Killer" bullets that can pierce body armor and a ban on ammunition sales to minors, he said.

Gun advocates pointed out that alleged Tucson shooter Jared Loughner purchased his ammunition legally in a face-to-face transaction, and an online ban wouldn't have hindered his shooting spree.

And the California Rifle and Pistol Association Foundation said the new regulations would have been ineffective.

"This was just going to cost police and shell ammunition sellers money. It really wasn't going to stop violent crime or criminals from getting ammunition," the organization's attorney, Chuck Michel, told the Associated Press. "All this was going to do was impose a tremendous and expensive burden on law enforcement."

1 in 10 states restrict online sales
It's unclear how much of an impact an online ammunition ban would have had on the sporting gun market. Major e-tailers like Amazon have shied away from online ammunition sales, and Walmart doesn't sell bullets at Walmart.com. The National Shooting Sports Foundation suggests online sales is a small but significant market segment.  The organization estimated that California dealers would have lost about $35 million in online and mail-order sales annually if the law had taken effect. The advocacy group estimates that sporting firearms is roughly a $2.3 billion annual business, with about one-third of that revenue coming from ammunition sales.

Firearms cannot legally be purchased and delivered through mail-order services or websites. They can be purchased online, but must be shipped to a local gun dealer who can complete the transaction in person.  De Leon has argued that the new regulations merely extend gun-purchase rules to ammunition sales, complaining that currently, anyone can sell bullets – including gas stations, tackle stores and private sellers.

"In California right now, we have no idea who sells ammunition and who buys it," De Leon said.

While the state ban in California has been struck down, municipal bans in cities like Sacramento and Los Angeles remain in effect.  A patchwork of laws nationwide have the practical impact of limiting online sales in many locations, according to Kevin Crane, who operates LuckyGunner.com, an online ammunitions sales site based on Knoxville, Tenn.

"Purchasing ammo online ... in one out of every 10 states in the U.S. is somewhat restricted," he said.

For example, licensing rules in Massachusetts essentially prevent online dealers outside the state from shipping to Massachusetts residents.  Cook County, Ill., specifically bans mail order and online purchases. Paperwork requirements in the rest of Illinois and in New Jersey create significant obstacles for online sales.   Meanwhile, added shipping expenses and restrictions involved in air-based shipping of ammunition make online sales to Hawaii and Alaska impractical, he said. (For more details, click here.)

Crane said he thought the California law was misguided and would have added an undue burden on local dealers to obtain and maintain copious records on purchasers.

"It would have criminalized something that is completely legal," he said.

Californians were reacting dramatically to the impending Feb. 1 law, he said, with nearly half of his site's revenue in January involving sales to California residents, he said, up from 20 percent normally. "We have a tremendous amount of visitors from California who did not want to be fingerprinted or have their IDs scanned by a local gun shop," he said.

But De Leon argued that currently inconvenience is a small price to pay for measures that would make California safer.

"I don't think it's asking too much to be slightly inconvenienced to go pick up your handgun ammunition at the store as opposed to in your robe and slippers," he said. 

Cash, credit or gadget?

For years, payment geeks have promised that cell phones would soon replace the jingle of pocket change, ushering in a utopian world where consumers could buy candy bars from a vending machine with a phone call. Just dial a number on the machine, and -- BANG --  your Juicy Fruits or Fritos drop into the tray.

Those promises never materialized, but worse yet, the value proposition never materialized.  More than one analyst has called mobile phone payments a solution in search of a problem. After all, when would dialing a phone number be easier than pulling out a piece of plastic?

All that may have changed this week, as Starbucks announced that it had begun accepting payments made with iPhones and BlackBerrys at most stores. A major retailer leaping into this world with both feet could send a 120-amp charge into electronic wallets -- particularly because the Starbucks "Mobile Card" e-payments is fun, easy, relatively safe and gives consumers a reason to whip out their gadget instead of their wallet.

First, I'll tell you why I was pleasantly surprised with the Starbucks experience. Then I'll tell you why the credit card industry has a lot to fear from mobile payments, and most specifically from Apple.

Regular readers of this column know I like to try everything, but I'm often unimpressed and concerned that gadget-makers regularly ignore practical consumer needs and security issues. I've tried mobile airplane boarding passes, for example, then been embarrassed as haggard TSA agents tried in vain to scan my iPod Touch at the airport security line, causing substantial backups. I expected much the same experience at Starbucks on Wednesday morning, when I took my iPod Touch into a store just hours after the announcement.  I fully anticipated I'd be late for work while untrained employees argued with each other about how to use the system.

I was wrong. It was simple.

I downloaded the Starbucks app in about a minute using the store's free Wi-Fi. The app told me immediately that I needed to link it to a Starbucks gift card, so I bought one of those for $10.  I sat down, entered the card number into the app, waited about 30 seconds, and my app registered my new $10 balance.  I then went back to the counter and ordered my coffee and a small vanilla bean scone.  The cashier pointed to the bar-code reader on the counter and asked me to wave my iPod Touch under it.  I pressed the "touch to pay" button on the screen, a bar code image appeared, and my purchase registered instantly. My app immediately indicated I had $7.41 cents left in my account.

Right away, I see the value.  One of the grand mysteries of life as a U.S. consumer is: What's the balance on my gift cards? Starbucks had solved this problem for us.

In the end, the technology consumers see is very low-tech. Starbucks merely places a static bar code image on the users' handset that replaces the physical gift card. It even looks like the old gift card.  But there's another benefit -- one fewer pieces of plastic in your wallet. 

So there are at least two rational reasons to whip out a gadget instead of a credit card to buy something at a store that you actually want. This is big news.

The not-so-good features
There are a few other bells and whistles on the app; these I found weren't worth much. You can find nearby stores if you give the app permission to know where you are, but my search pointed me toward Starbucks stores that were miles away and missed much closer stores. You can also link the app to a credit card so it automatically recharges the balance. And you can use the app to earn "stars," the chain's version of loyalty points. I had a bad experience with both features, as I was unable to complete the registration process and gave up after several tries.

No matter; I already see a benefit for mobile payment that I'd never seen before, and I used the system in the exact same amount of time it would have taken to whip out a $5 bill.

"This is a very viable form of payment," agreed Avivah Litan, a banking analyst with consulting firm Gartner. "This could get people used to a new way of paying for things."

Other techno-skeptics might rightly worry about the security of using their cell phones as money. What if the gadget is lost or stolen? Yes, a criminal could run up a huge coffee bill in your name, particularly if you have linked your credit card to the app. The terms of use clearly say Starbucks won't be responsible for any fraud that might occur on your account, though consumers would be able to dispute such charges with their credit card issuers. 

At any rate, no smart phone user should be walking around without password-protecting their handset, and I was pleased to see that Starbucks added an additional feature that lets users password-protect the Mobile Card app separately. A small pop-up even recommends turning on that security feature.

My security concerns about the Starbucks app revolve around data collection.  If I had managed to fully register, Starbucks would know my birthday, my address and, most important, when and where I buy my coffee all the time. The firm might even know where I am at other times, too, such as whenever I chose to search for a nearby store.  I wish the company would promise not to store that data, or to delete it after a certain reasonable amount of time. Of course, users of Starbucks' free wi-fi already surrender some of this information to the company, but Mobile App has the potential to collect a lot more.

It's easy to imagine additional uses for Mobile Card. Already Starbucks' app allows customers to pay at Target department stores. too. I'd be delighted to have a set of supermarket cards and gift cards loaded into my iPhone or iPod Touch, so my wallet would have more room for pictures of my 1-year-old niece.

Who needs credit cards?
But cell phone companies have much bigger dreams for mobile payments. The Holy Grail, Litan says, is creating an entirely new payment system that cuts out middle men like Visa and MasterCard. 

To do that, they are eyeing a more complex upgrade to gadgets, using a technology called NFC -- near field communications.  New radio chips will be added to cell phones that can beam signals to specially designed receivers that will sit on checkout counters. The system will work like Mobile's Pre-Pass, or touchless credit card readers, similar to those recently installed in New York City's subway system.

Bar codes are simple, and work neatly with existing technology at most major retailers. But as I shared earlier with my airport story, they can also be kludgey (TIP:  Turn your screen to its brightest setting before you get to the front of the TSA line. That'll help the reader pick up your bar code).

Supporters of NFC chips say they are much more reliable and robust than bar codes.  They will require storeowners to spring for new machines, however, and such upgrades have a checkered past. Chip-enabled credit cards like American Express Blue have been around for more than a decade, but stores never bothered to buy the necessary readers to make those cards worth something.

Litan doesn't see that as a barrier this time. The RFC readers cost only about $50, she said, and she believes cell phone payment firms like Apple will be able to offer deep discounts on the fees merchants pay for accepting payments.

Already, Nokia has promised to add NFC chips to Android phones this year, and there is speculation that Apple will do so with the iPhone 5. There were even rumors that a dormant NFC chip is already in the iPhone 4.

"This will be a big year for mobile payments, when the chips get in those phones," Litan said.

Secretive Apple patents
Visa and MasterCard aren't standing idly by. They have their own consortium that is trying to steer cell phone firms to route transactions through their networks, so they still get their cut. Banks are getting in on the action, too. Bank of America recently announced it had success last year during limited testing of an NFC-chip based purchasing system.

"We have liked what we learned," B of A's Michael Upton told the American Banker last week. "It does … give us some of the market differentiation in terms of consumer adoption, behavior, preferences (and) perceptions by moving to some of the other markets."

But Apple's intriguing leap into the mobile payment space should concern the credit card associations, Litan said.  This summer, the firm hired Benjamin Digier from a mobile payments company named mFoundry.  That firm designed both Starbucks' new system and a similar system for PayPal.  Meanwhile, Apple has applied for several patents that suggest it has big plans for iPhone payments, perhaps turning iTunes into a new kind of stored-value payment system that could rival both PayPal and the credit card associations.

"The thing about Apple is they could do a system like PayPal, but they also have a physical device in people's hands," Litan said.  They also have millions of loyal customers who already trust the firm with dozens of small payments every month. "They have a big advantage," she said.

The timing might be just right for gadget money, mainly because consumers are rapidly abandoning plain, old cell phones for their sophisticated counterparts.  Growth in smart phone sales has exploded -- 42 percent of all consumer handsets sold in the U.S. during the second quarter of 2010 were smart phones, according to NPD Group Inc. While NFC chips can be installed in simple handset phones, the Android and iPhone operating systems enable far more features.

Still, don't give up on cash just yet. Gadget payments are currently much more popular outside the U.S., where 100 million people have used some kind of mobile payment system, according to research by Gartner.   Only 3.5 million U.S. phone users are expected to take the plunge this year, said Gartner researcher Sandy Shen.

Meanwhile, at an American Banker conference in May that focused on mobile payments, most analysts threw cold water on mobile payments based on near field communications, particularly in light of the infrastructure changes that will be required.

"Hasn't history shown that any type of new payment technology that focuses on the merchant never takes off?" said Thomas C. McCrohan, an analyst with Janney Montgomery Scott, according to a transcript. "Unless you focus on the consumer, these technologies never take off. ... I don't think it's going to happen." 

The meeting also produced much discussion about the inherent fraud problems that arrive with any new payment system, and skepticism that mobile payment providers are ready for that challenge.

That said, competition in payments is a welcome development -- just ask any merchant who forks over 1 percent to 2 percent of their profits to banks every month.  Consumers could benefit from lower prices, or at least simpler wallets and the full knowledge of their gift card balances.

When is a grace period not really a grace period? When you have to pay a $6 fee for using it.

Some Bank of America mortgage customers will receive an unwelcome Valentine's Day gift when the bank's policy for grace period mortgage payments changes on Feb. 14. Essentially, it means those customers will have six fewer days to pay their mortgage each month without facing additional fees.

Consumers who use the bank's online payment tool, Mortgage Pay, will risk a $6 fee if they fund payments using another bank's checking account and the payment falls during the final six days of the traditional 15-day grace period. Consumers who make payments from Bank of America accounts are not subject to the fee.

"Let me get this straight. They tell you that you have a grace period, (then) they say, 'Oops, you only have half of it if you don't bank with us,'" said Gail Hillebrand, a lawyer for Consumers Union who specializes in banking issues.  "That doesn't seem fair. ... This looks like a new 'gotcha,' and we have enough of those already."

Notice of the subtle adjustment, titled "Upcoming Change to Fees," was sent to customers recently. 

"If your payment is due on the first of the month and you have a 15-day grace period, you can schedule your payment to be drafted prior to and including the ninth of that same month to avoid a service fee," it reads. "If you schedule your payment to be drafted on or between the 10th and 16th of the month, you will be charged a $6 service fee that will be included in your total deducted amount."

"They intend to penalize non-checking customers if they possibly can," complained homeowner Karen Conavatti, who has been paying her mortgage using another bank's checking account.

Bank of America (which responded after initial publication of this story) said the firm has in the past assessed grace period late charges ranging from $3-$6, and the notices went to consumers to clarify a new policy that raises fees on some customers but eliminates them on others.

The move comes as banks continue to crank up new fee opportunities in reaction to regulatory changes that have cost them billions in overdraft fee revenue. In early January, for example, Bank of America announced a new four-tiered fee structure for checking accounts with fees ranging from $6 to $25 per month.

A copy of the notice sent to consumers.

Conavatti complained that the mortgage grace period change is unfair because there are no local Bank of America branches near her home in Minnesota.

Some consumers who are being hit with the change didn't apply for a mortgage with Bank of America. Instead, the bank inherited their mortgage later by acquiring it as part of an investment portfolio purchase.

That's what happened to Siddharth Dalal, who recently refinanced with EverHome Mortgage Co., which in turn sold his mortgage to Bank of America.  His beef involves service, rather than fees, however. 

"My bigger complaint is that you cannot schedule recurring payments (at Bank of America's Web site) unless you have a Bank of America checking account," Dalal said. 

Hillebrand, the Consumers Union lawyer, said the changes are steering customers toward opening Bank of America accounts at a time when the bank is adding fees to those accounts, creating a damned-if-you-do, damned-if-you-don't situation for consumers.

"If you are offering good service, you should not have to force consumers to come to you. That's not a good sign," she said.

Most mortgages include a grace period of 10 to 15 days – meaning payments made during those times do not incur late fees.  Many consumers pay at the end of the grace period in an attempt to hold onto their money as long as possible. Hillebrand doesn't recommend that, as it can put the account holder at risk for late payments and fees.  In rare cases, when homeowners hold simple interest mortgages, paying during the grace period incurs additional interest charges.

There is a sure-fire way to avoid the grace period fee: Pay your mortgage a day or two before the grace period even starts, which Hillebrand recommends.

Still, the bank is creating two tiers of service, and giving advantages to mortgage consumers who switch their bank accounts to Bank of America. If the idea catches on, that could lead to a maddening situation for homeowners who are already frustrated by the number of times their home loans are bought and sold by banks.

"You don't want to have to go around changing your checking account every time someone buys your mortgage," Hillebrand said. "This is just one more way to extract money out of you that you don't expect to have to pay."

Taxpayers eager to get their refunds as early as possible have one fewer option this season -- and consumer advocates are saying "good riddance."

Tax preparation firm H&R Block won't be offering oft-criticized high-interest Refund Anticipation Loans (RALs) this season after government regulators essentially chased them out of the business. But H&R Block Chief Executive Alan Bennett has vowed to create "other financial products" to fill the void -- speculation has centered on other high-cost, short-term loan products. And chief competitor Jackson Hewitt is still offering RALs, albeit at a higher cost and with stricter standards that will lead to more rejected applicants.

Tax refund loans, which typically cost $50 to $100, have always been a bad deal -- consumers who electronically file can get their refunds free in about a week. Viewed as short-term loans, they carry an annual percentage rate that could be 250 percent or more. Still, they have been attractive to certain segments of the population, and the Consumer Federation of America estimates that 7.2 million consumers received RALs last year. It's also a lucrative business: H&R Block earned $146 million in loan-related fees last year.

But consumers groups have piled on the products for much of the last decade, pointing out the high cost and studies that show the loans are generally used by low-income consumers who can't afford the fees and might not understand the terms.

This ad still appears on JacksonHewitt.com.

"For a long time, banks have diverted money to their own coffers from the tax filing process. Hopefully, by next year, there won't be banks inserting themselves into the process to make money from the working poor," said Jean Ann Fox, director of consumer protection for the Consumer Federation of America. "Hopefully, this is the last year consumers will be sold these high-cost loans."

RALs were dealt a body blow in August, when the IRS announced that it would no longer provide tax prep companies with "debt indicator" data, which signaled to lenders the likelihood that all or part of a refund might be seized for unpaid taxes or other debts. Without the debt indicator, which essentially served as a credit check, banks became extremely reluctant to participate in RAL lending. HSBC, H&R Block's longtime refund loan partner, expressed its intention to discontinue the relationship. Then last month, the Office of the Comptroller of the Currency told HSBC it was no longer allowed to issue the loans, citing consumer protection concerns.

Last year, Jackson Hewitt's lending partner, Santa Barbara Bank and Trust, pulled out of the business, leaving the firm scrambling for another bank. It now has a new partner, Louisville, Ky.-based Republic Bank and Trust, but the firm has already said it can't support the level of RAL lending from earlier years and will be capping the loans at $1,500.

A typical $1,500 refund loan from Republic will result in $62.22 in loan charges, according to the Consumer Federation of America.

Other tax preparers also offer RALs, but the number of lending partners available to them has dwindled to three, all in Louisville -- Republic, River City Bank and Ohio Valley Bank -- owing in part to increased regulatory scrutiny.

"They are not dead, but they are on life support," said Chi Chi Wu, an attorney at the National Consumer Law Center who writes an extensive report on tax refund loans every year.

Despite the high cost, many consumers found RALs attractive because firms like H&R Block were willing to roll the cost of tax preparation into the loans, meaning the taxpayer didn't have to pay anything up front for tax preparation.

Next, Refund Anticipation Checks
Tax preparation firms will fill that void with a relatively new product that already has a foothold among low-income customers — the Refund Anticipation Check, or RAC. Designed to provide taxpayers without checking accounts a landing place for refund checks, RACs are basically disposable, onetime-use bank accounts set up by tax preparation firms. A typical fee is $30. Taxpayers can receive their money in a paper check, which usually costs additional fees to cash, or on a prepaid debit card, which can also incur more fees.

Because the tax prep company controls the RAC payout, it can pull out tax preparation fees from the refund that comes from the IRS -- giving consumers the option to avoid paying for the service up front. While that might sound attractive, Wu points out that taxpayers are essentially using a short-term loan to fund their fee, meaning they might spend $30 to finance a $100 fee for two weeks -- an astronomical APR.

"There are plenty of low- or no-cost alternatives for bank accounts," Fox said. "People don't need to use Refund Anticipation Checks."

Despite the cost, RACs were even more popular than RALs last year, with 13 million consumers signing up.

Meanwhile, a new IRS pilot program make cut RAC sales off at the knees. This spring, the IRS is offering about 600,000 families the chance to receive their refunds on pre-paid debit cards (Thanks, Life Inc. Click for more details). The program is aimed at helping the estimated 9 million U.S. families who currently hold no bank accounts, If it works, it would remove one major reason consumers opt for fee-based refund anticipation checks -- though the IRS debit car program would come with its own, yet-to-be-disclosed fees.

'We've got them'

Jackson Hewitt, because it is still offering refund-backed loans, would appear to have a competitive advantage over H&R Block, and its Web site hints at that.

"Refund Anticipation Loans Available," says an ad about halfway down its home page. "We've got them. The money you need in as little as a day." While the ad also indicates that "terms, conditions and fees apply," there is no link describing the fees or conditions. A search of the site came up empty.

H&R Block has warned investors that revenue will be down this year because of its inability to make RAL loans -- some analysts say the hit could be as big as 7 percent -- but it's possible some of the lost income will be replaced by new short-term loan offerings. Trainees who attend H&R Block employment sessions are being instructed to upsell short-term loans called "Emerald Loans" offered by H&R Block Bank, according to people familiar with the training. The unsecured loans will not be backed by refunds but will be offered coincidental to tax preparation. Applicants will have to pass a normal credit check. The loans will have a term of 30 days, and will carry an APR of 36 percent on a loan of $1,000, similar to the highest rates that currently apply to other short-term loans, like credit card cash advances.

Adam Rust, who writes a blog called Bank Talk, offered a much more detailed glimpse of these Emerald Loans in a recent blog post, where he wondered if the product was "just an RAL in a green cape."

H&R Block would not discuss the possibility of a new short-term loan product.

"We continue to research and develop potential products to implement this tax season. But, at this point, we're not at a place where we can discuss publicly," said company spokeswoman Kate O'Neill Rauber in an e-mail.

RED TAPE WRESTLING TIPS
Fox says consumers should steer clear of refund-based loans by tax preparation companies.

"Bottom line is this is an unnecessary credit product," she said. "You don't get money much faster than you do if you just do direct deposit." Improvements to IRS computer systems mean some refunds arrive in less than a week now, she said.

Refund Anticipation Checks, while less onerous, are still a bad deal, she said.

"If you're going to pay $30 for a onetime-use checking account, why not just open up a bank account you can use all year long?" she said. While larger institutions like Bank of America are clamping down on free checking accounts, plenty of small banks and credit unions still offer them.

Also, consumers with other kinds of prepaid debit cards, such as payroll cards or unemployment benefit cards, can have the funds deposited on those cards without the need to set up and pay for a RAC account.

In normal times, the Internet is a vicious rumor mill. Just today, a tall-tale that Facebook.com was shutting down in March successfully made the rounds.

But after a national tragedy like this weekend's shooting in Tucson, it can feel like pursuit of simple facts has been overrun by a something like a computer virus that spreads exaggerations, lies and distortions. Even as the national media was trying to determine if Rep. Gabrielle Giffords was alive or dead, politically motivated misinformation that suited nearly every agenda imaginable began spreading fast and furious.

There were claims that Sarah Palin had deleted her controversial "Don't Retreat -- Instead RELOAD!" Tweet from last March. She hadn't.  An apparent fake Facebook page attributed to alleged shooter Jared Lee Loughner emerged, claiming President Barack Obama was one of his heroes.  Another profile identified him as a Tea Party member -- but it misspelled his name.  There were also images of a voter registration record claiming he was a Republican; but the record misspelled Tucson. In fact, he is a registered independent.

In hindsight, misspellings or other obvious errors should make Internet users quickly discount these information sources as false.  But as anyone who runs a quick Twitter search can quickly see, there's a new Internet rumor fool born seemingly every nanosecond. And during times of crisis, debunking sites like Snopes.com or FactCheck.org -- which act a bit like truth anti-virus products-- can't possibly keep up with the exponential virus-like spread of rumors. People often mindlessly pass on e-mails or Tweets that fit their political world-view or the reality they root for. 

"The Internet is clearly a much more dangerous avenue for spreading rumors and deceptive information," said Brooks Jackson, spokesman for FactCheck.org. "Like-minded people pass them on because it sounds right to them...It vastly improves on old whispering campaigns." 

In the past, political operatives often whispered to others about a candidate's drinking problem or an affair, but that rumor had to spread in a linear fashion, from one person to another person. Also, the rumor would degrade because of the "telephone effect," as it was continually altered each time it was passed along. But on the Web, rumors are spread with "100 percent fidelity," Jackson said, which lends a lot to their credibility.

And of course, the virus metaphor holds neatly when you think about how quickly inaccurate information can spread exponentially online.

Also, many readers consider the sender, rather than the source, when they encounter rumors.  A Tweet sent by a trusted co-worker might bring with it an overly generous air of credibility, and the reader might not carefully assess the original source of the information.

"Your crazy Uncle Harry is going to forward you all sorts of things," Jackson said.  "You might believe the person who sent it to you because you know them, but often, the ultimate source is not identified."

Jackson, whose site is devoted to carefully debunking false political statements with careful, time-consuming research, has advice for readers who might encounter rumors about the Arizona shooting in the coming days.

"If the ultimate source is not identified, you can delete these things without reading them, and you will be better informed than if you open them," he said.  "In our experience, well more than 90 percent of them turn out to be false or so completely distorted that they leave a false impression."

The sleepy suburban neighborhood in Bogota, N.J., looked safe when Michael pulled up to meet the man who had offered to buy his MacBook after seeing an ad on Craigslist. And everything seemed perfectly normal when the buyer walked up to his car and began counting out cash.

But then a second man appeared seemingly out of nowhere and shoved a shotgun in Michael's face.

"It was pretty terrifying," said Michael, who let the pair take the computer from his trunk, then watched them run off into the night. "I thought they were going to take the car."

The robbery is just one example of a disturbing new kind of theft that blends cybercrime with the physical dangers of real crime.  Across the country, Craigslist users who agree to meetings in seemingly safe places are being robbed at gunpoint, pistol-whipped and, in at least one case, murdered.  In Chicago, police call it "robbery by appointment."

 Just last week, the city of Oakland, Calif., issued a wide-ranging warning about Craigslist-related car sales. A gang there has progressed from one theft per week to one per day, stealing thousands of dollars from victims using ads on Craigslist to lure them into meetings. The police now have an entire investigative team dedicated to tracking them down.

"They are getting more blatant and violent," said Oakland police spokeswoman Holly Joshi. "The last (victim) got pretty beat up.  Right now it's a top priority for us."

Craigslist robbers appear to be much more sophisticated than the criminals that Web users routinely encounter. Their ads are indistinguishable from normal for sale items, Joshi said. They return phone calls using local phone numbers; they offer to meet in public places, foiling much of the "safe surfing" advice that's been given for years.

Among the more disturbing elements of the crimes: Many are taking place in broad daylight or early evening hours, and in what seem to be safe neighborhoods.

"Meeting in a public place really is not good enough," Joshi warned. She said most crimes there are occurring between 2 and 6 p.m. "Residential areas can be relatively isolated during the day."

That's what happened to Michael, who asked that his last name be withheld.  He met his suspects in a nice neighborhood in Bogata, about 10 miles west of New York City, only a few blocks from the police station -- but the block itself was quiet and empty during the incident.

Nothing seemed unusual about the transaction until the gun appeared, Michael said. But in retrospect, he thinks he should have been surprised that the buyers didn't make any attempts to negotiate the price with him.

"They were just very concerned with setting up a meeting," he said.  "That was the only thing that was strange."

Michael got off easy, losing only his used computer.  A scan of incidents around the country show much more dire consequences for some other Craigslist users.

In Raleigh, N.C., a man's car was sprayed with bullets by Craigslist robbers earlier last year, while a woman in Newport Beach, Calif., was pistol whipped during an alleged bicycle sale. There have been a string of dirt-bike related Craigslist robberies in Ohio, and just before Christmas, an Ohio man was shot in the jaw during one incident. In Stafford, Va., criminals allegedly selling deep-discounted iPhones brazenly invited consumers to meet them on the steps of the county courthouse. And in Sarasota, Fla., police issued a warning on New Year's Eve after a similar string of iPhone-related armed robberies.

The most dramatic Craigslist appointment robbery occurred last year in rural Pierce County in Washington state, when four suspects allegedly  went to a home with robbery plans in response to a diamond ring offered for sale on the site. After a violent exchange, police say, homeowner James Sanders was shot and killed while his wife and child looked on.  All four suspects are now in custody awaiting trial.

Craigslist robberies are so common that Trench Reynolds, who hosts an anti-Craigslist site named CraigsCrimeList.org, chronicles them in a "robbery" category.

Reynolds said robberies that originate with a Craigslist contact have remained fairly constant during the past several years, but are only now attracting media attention.

"They don't always result in someone getting shot in the face like in Ohio, but they are fairly frequent," he said.

The Perfect Crime?
In some ways, a robbery arranged on Craigslist is the perfect crime. Whether the mark is buying or selling the item, he or she arrives at a meeting with either a wad of cash or something valuable. Such meetings often involve the disclosure of much personal information, including phone numbers and home addresses. A clever robber may even persuade the potential victim  to disclose tidbits like work schedules or number of adults in the household at a given time.  And while most consumers are now appropriately skeptical of e-mail from criminals, many let their guard down when a person-to-person meeting is arranged, experts said. 

In addition, many users mistakenly believe it's safe to meet buyers or sellers in their homes -- which provide no safety if three or four thugs arrive armed with weapons.

"I tell people, invite them to meet you at the police station. We're open 24 hours. If they won't do that, then don't bother with them," said Bogota police Sgt. Robert Piterski, who is investigating the robbery of Michael's MacBook. "But many people just don't get it, don't realize how dangerous this can be."

Increased use of Craigslist for robberies may simply represent the coming-of-age of a generation of criminals who grew up using the Internet, so-called "Digital Natives" using familiar tools to commit crimes.  After a string of incidents in Chicago, police Detective Joseph McGuire said the crime occurs "where a thug meets a white-collar education."

Digital trails, but little risk
You might think the crime would be risky for the criminals. After all, many leave behind a digital trail of e-mails, Craigslist posts and telephone calls that could be traced by law enforcement.  While that's true, such cybersleuthing is rarely done by local police, said Mark Rasch, former head of the Justice Department's Computer Crime Unit.  The word is out, at least in some towns, that criminals don't have to worry about being tracked through cyberspace.

"A lot of these towns don't have the training or the manpower to do that kind of work," said Rasch, now head of privacy at security firm CSC.  And while clever criminals could hide their Internet tracks, they usually don't bother. "They rely on the fact that police lack subpoena power and technological sophistication," Rasch added.

 Also, getting a subpoena from the local district attorney is usually a bridge too far in small-ticket property crimes, he said.

Officials at Craigslist sent an e-mail in response to questions about the incidents.

"The overwhelming majority of Craigslist users are trustworthy and well-intentioned," said spokeswoman Susan MacTavish in the note.  "With billions of human interactions facilitated through Craigslist, the incidence of violent crime has been extremely low."

Rasch also said  consumers "can't really blame the Internet," for these kinds of crimes. Suspects could just as easily post or browse similar ads in newspaper classified ads section, he noted.

RED TAPE WRESTLING TIPS
Craigslist has posted a list of tips available to consumers who engage in transactions. It includes typical advice, such as meeting in a public place and letting family or friends know about the transaction.

Rasch has additional ideas for consumers, though he cautions: "None of these is  fool-proof."

"The trick is to get as much information from the other party as you can without giving up much on yourself," he said.  He recommends getting multiple e-mail addresses, Twitter accounts, Facebook pages and phone numbers. Then, spend some time on Google backgrounding the person.  Take the first part of an e-mail address -- such as the "bob1234" part of bob1234@gmail.com -- and Google that, which will often unearth alternate e-mail addresses.

"Anything to establish their identity," he said.  "You can corroborate that this is a real, legitimate person that way. Real, legitimate people have online personas, they have a history. Or you can tell if an e-mail address was just created yesterday to facilitate a crime."

Once contact is made, conduct as much business as possible online, he recommends, to create a digital trail and leave evidence in case something goes wrong.

"That will enhance your security," he said.  The more elaborate and firm your requests, the more likely a criminal will simply move on to another mark, he pointed out.

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The next time you're in California, you might not want to bring your cell phone with you. The California Supreme Court ruled Monday that police can search the cell phone of a person who's been arrested -- including text messages -- without obtaining a warrant, and use that data as evidence. 

The ruling opens up disturbing possibilities, such as broad, warrantless searches of e-mails, documents and contacts on smart phones, tablet computers, and perhaps even laptop computers, according to legal expert Mark Rasch.

The ruling handed down by California's top court involves the 2007 arrest of Gregory Diaz, who purchased drugs from a police informant. Investigators later looked through Diaz's phone and found text messages that implicated him in a drug deal.  Diaz appealed his conviction, saying the evidence was gathered in violation of the Fourth Amendment, which prohibits unreasonable searches and seizures. The court disagreed, comparing Diaz cell phone to personal effects like clothing, which can be searched by arresting officers.

"The cell phone was an item (of personal property) on (Diaz's) person at the time of his arrest and during the administrative processing at the police station," the justices wrote. "Because the cell phone was immediately associated with defendant's person, (police were) entitled to inspect its contents without a warrant."  

In fact, the ruling goes further, saying essentially that the Diaz case didn't involve an exception -- such as a need to search the phone to stop a "crime in progress." In other words, this case was not an exception, but rather the rule.

Rasch, former head of the Justice Department's computer crime unit, pulled no punches in his reaction to the ruling.

"This ruling isn't just wrong, it's dangerous," said Rasch, now director of cybersecurity and privacy at computer security firm CSC in Virginia. "It's remarkable, because it simply misunderstands the nature of these devices."

The door is open for police to search the entire contents of iPhones or other smart phones that people routinely carry, he said.

"In fact, I would be shocked if police weren't getting instructions right now to do just that," he said.

By applying the "personal property on the defendant's person" standard, Rasch said, the ruling could logically extend to tablets or even laptop computers, he said.

It also flies in the face of established law, which prohibits the warrantless search of briefcases by police, other than a quick search for weapons, Rasch said.

In its ruling, the majority likened cell phone inspection to police inspection of a cigarette pack taken from a suspect, which was ruled a legal search in a prior case.  A second ruling was cited involving the search of clothing removed from a suspect.

Rasch said the analogies don't hold, however, as modern phones that can store years' worth of personal information are a far cry from drugs hidden in a cigarette case or clothes pockets.

"There is a process for looking at data inside devices," he said. "It's called a warrant."

Grants police 'carte blanche'
The California ruling was not unanimous. Dissenting Justice Kathryn Werdegar raised similar concerns in her opinion.

"The majority's holding ... (grants) police carte blanche, with no showing of exigency, to rummage at leisure through the wealth of personal and business information that can be carried on a mobile phone or handheld computer merely because the device was taken from an arrestee's person," she wrote. "The majority thus sanctions a highly intrusive and unjustified type of search, one meeting neither the warrant requirement nor the reasonableness requirement of the Fourth Amendment to the United States Constitution."

Jonathan Turley, a Constitutional law expert at George Washington University, took to his blog to raise his concerns about the ruling.

"The Court has left the Fourth Amendment in tatters and this ruling is the natural extension of that trend," he wrote. "While the Framers wanted to require warrants for searches and seizures, the Court now allows the vast majority of searches and seizures to occur without warrants. As a result, the California Supreme Court would allow police to open cell phone files — the modern equivalent of letter and personal messages."

Diaz's lawyer, Lyn A. Woodward, has said she plans to appeal the decision to the U.S. Supreme Court. In the meantime, warrantless searches of cell phones are essentially the law of the land in California. 

Password-protection of smart phones might be a useful tool to ward off a warrantless search -- it's not clear that an arrested suspect could be compelled to divulge his or her password to police -- but that legal argument has not yet been made.

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