NPR reported this week on a troubling trend. Bank of America in Idaho and in other states is suing people who lost their homes to foreclosure to attempt to recover the difference between the mortgage and the current value of the home in today’s market. This is called a deficiency judgement. In the case of Ben Jensen and his wife, Bank of America sued them for $140,000. Unfortunately for the Jensens, Idaho is one of about 40 states that allow banks to pursue deficiency judgements. Even though the Jensens had lost their home and damaged their credit rating, the bank thought it was worth the effort to squeeze them for more money. They had at best $5,000 in savings, so there was no way the bank would get the amount they sought, and instead would merely have pushed the couple into bankruptcy. They managed to settle by will have to pay the bank $75 a month for three years.

According to NPR, “The National Consumer Law Center, a nonprofit consumer advocacy group, confirms deficiency judgments appear to be going up across the country. How that plays out depends on state law. Geoff Walsh is a staff attorney with the organization. He says approximately 40 states, including Idaho, allow lenders to sue former homeowners for the amount of the mortgage that remains after a foreclosure.”

Anti Deficiency Laws

As a form of relief from some aspects of foreclosure, some states have “anti-deficiency” laws, which protect purchasers of residential real property used as primary residence.Anti-deficiency laws typically provide no protection for second mortgages or home equity lines. Also, there is no protection when the property is not used as the primary residence of the purchaser.

In a typical foreclosure, if the purchaser fails to make the mortgage payment the property is foreclosed and title is obtained by the lender through a legal procedure. The property is then typically sold to pay the mortgage, and a deficiency between the sale price and the outstanding balance of the mortgage usually exists. Under anti-deficiency laws, if the mortgage is for the purchase of a dwelling occupied by the purchaser, the purchaser will not be held responsible for any deficiency. The lender can only recover the property and the proceeds of a subsequent sale. The purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance. This allows the purchaser to walk away from a property without owing a deficiency judgment amount.

States that have statutes in place to prevent banks from going after a deficiency include:

Alaska
Arizona
California
Connecticut
Florida
Idaho
Minnesota
North Carolina
North Dakota
Texas
Utah
Washington

In some states, banks are only allowed to file a single lawsuit to collect a mortgage debt. How this plays out varies by state. In New York, for example, a lender must choose between the actions of foreclosing on the property or suing to collect the debt. The following states have some type of one action statute:

California
Idaho
Montana
Nevada
New York
Utah

How to Avoid a Deficiency

It pays to contact your bank as soon as you can’t make a mortgage payment. Try to get a loan modification, or a reduction in the principle. As long as you continue to make payments, you may qualify for the new federal program propose d by the Obama administration to make it easier to refinance a mortgage, provided you have stayed current on payments for more than six months. Talking to the bank can be painful, and the bank will continue to call you for status updates, but it’s better to try to do a short sale (selling your home for less than you paid for it) with the bank’s approval, than simply walking away and letting the foreclosure go through. You may be able to work out a deed in lieu of foreclosure. This type of mortgage default requires the cooperation of both the lender and the borrower. It is fast and inexpensive because both parties agree to transfer the property to lender, avoiding the time and expense of foreclosure. Another way to avoid a deficiency is to declare bankruptcy. Even the threat of declaring bankruptcy can get the bank to cave in and reach some sort of settlement, as in the case of the Jensens. The earlier you settle, the lower the settlement is likely to be.

In the end, losing one’s home is perhaps one of the most stressful things that can happen in life. On top of this stress, the last thing anyone needs is to have the threat of the bank that gave you the mortgage come after you, even years later.

Payday loans are a bad idea that unfortunately is a huge business in America. When people live paycheck to paycheck, and run out of cash before their next pay period, they are often tempted to get a payday loan. These are short-term, high-interest loan sas an advance against your next paycheck. Perhaps your car breaks down, and now you have have an unexpected expense. With no credit, and no friends or family to loan them the money, a payday loan seems like a a good option.

The problem is that people seldom borrow the money for one month and pay it all back the next month. Typically, they roll over the loan, and try to keep up with the high interest rate. What happens is a harsh cycle of constant payment of interest owed, and taking out a new loan to get you through to the next pay period. After a year of this, you wind up having paid far more in interest than your original first payday loan.

Because payday loan places are considered predatory lenders, taking advantage of low income people, many states have banned them outright or severely restricted what they can do. Thus, many payday loan companies with physical locations have closed up shop and went online instead. They have also gotten around new laws, by rebranding themselves and “micro loan” companies along the lines of quite legitimate nonprofits such as Kiva.org. They also try to get through a loophole in the law to say that their loan is an “auto loan” when in reality, they aren’t selling you a car directly, and aren’t requiring proof that you are actually using the loan to by a car.

Now, apparently, the FTC is going after the worst offenders. A recent post on the FTC’s web page describes a District Court case brought by the FTC against Payday Financial, LLC, doing business as Lakota Cash and Big Sky Cash, who allegedly send documents to their borrowers’ employers that mimic a garnishment by the Federal government. The FTC alleges that these lenders illegally revealed consumers’ unproven debts to their employers and deprived consumers of their right to dispute the debts or make payment arrangements. The complaint further alleges that lender “…misrepresented to employers that the defendants are legally authorized to garnish an employee’s wages, without first obtaining a court order.”

While not as bad as payday lenders, banks are also getting in on sucking in high profits on the backs of people who are tempted to get quick cash for short term needs at high interest. One typical method is to offer a payday loan if you keep a minimum deposit of say $200 with the bank. Of course, if you don’t pay it back right away, the interest compounds so that the annual interest is quite high. Similarly, credit card holders are no doubt used to getting something that looks like blank checks from their credit card company. The credit card company encourages you to “use the checks” like cash, hoping that you do not read the fine print about the interest rate being the “cash advance” rate, which is usually much higher than the interest rate for purchases. For example, your purchases interest rate might be 12% but your cash advance rate 24%!

So, the bottom line is if you feel you need quick cash, start budgeting like a mad man. If your car breaks down, take the bus for a while until you can save enough for another car.

Bank of America raise a flurry of criticism this week when it announced that it was going to start charging its customers a $5 month fee for use of the debit cards that are issued with checking accounts. Bank of America and other banks have initiated these new monthly fees in response to the new lower transaction fees that retailers pay banks when accepting debit cards for consumer transactions. These so called “swipe fees” used to average 44 cents a transaction and now they are half that. Retailers will benefit the most from the lower swipe fees, and all it takes is a few of them to pass on the savings to consumers for everyone else to benefit. Banks, however, aren’t taking the change sitting down, because they got used to making huge profits from high swipe fees.

According to the Washington Post:

Perhaps the bank’s decision simply reminded us all over again that we are living increasingly in a fee-littered world, where companies continually seek out new ways to nibble away at our wallets by charging for the smallest of once-free services, leaving many customers feeling nickel-and-dimed.

“The proliferation of a la carte fees has inundated the economy,” said Ed Mierzwinski, consumer program director for the U.S. Public Interest Research Group. Companies “are inventing new fees; they are making it harder to avoid fees; they are increasing the fees. . . . It’s much more complicated to be a consumer”

Banks like Bank of America got used to racking up big profits from the debit card swipe fees, and rather than accept less (some would argue reasonable) profits, they are looking for ways to profit through customer fees.

Many people are fed up with fees for everything. They especially hate sudden large price increases like Netflix announced. And people notice when something was once free, like luggage on airlines, are suddenly seen by businesses as new areas for profits.

After announcing the debit card fees, Bank of America saw its stock drop 9%. It is threatening to lay off thousands of its employees. It calculated that some of its customers would leave the bank and find a new bank that does not charge a monthly fee for debit card use. However, prepaid cards are a good alternative for them.

Prepaid Cards Offer an Alternative

While prepaid cards have always had monthly fees, those fees are straightforward and perceived as necessary to cover the business costs of the prepaid card companies. They are not on top of other fees, like minimum balance fees on checking accounts, or overdraft fees.

More and more people are getting rid of their checking accounts, to avoid annual fees, and minimum balances, and the risk of overdrafts, and the costs of printed checks. These people like prepaid cards, because they can still pay with plastic, manage their finances without going into credit card debt, and get cash when they need it from ATMs, or cash back on purchases.

With the holiday shopping season fast approaching, both online retailers and bricks and mortar stores are hoping consumers are finally ready to buy. Amazon continues to grow at a fast clip by taking sales away from the Big Box stores. Indeed, Borders finally went bankrupt, because the chain just couldn’t compete. Stores like Best Buy are counting on people wanting to browse physical items and perhaps get help in their buying decision from a store clerk. Yet, some shoppers will visit a store, get help from a clerk, look at all the items on the shelf, do their research, and then go home and order from Amazon.

Some retailers are fighting back by pushing for legislation requiring Amazon to collect sales tax. They have successfully had laws passed in Illinois and New York State that online retailers must collect sales tax on purchases for customers who live in those states. Walmart’s executive vice president of global e-commerce said in the Wall Street Journal: “The rules today don’t allow brick-and-mortar retailers to compete evenly with online retailers, and that needs to be addressed.” Historically Amazon hasn’t had to collect sales tax unless it had physical operations in the state trying to collect the tax. California recently passed a law to collect sales tax from Amazon due to the thousands of bloggers who get a small percentage of every sale that they pass via a link onto Amazon. Amazon decided to end its affiliate program in California rather than pay the tax.

Walmart and other large retailers such as Target, Best Buy, Home Depot and Sears are backing the Alliance for Main Street Fairness, a Virginia-based organization that is helping to lobby in all states for the collection of sales tax by online retailers.

Big Box stores if they want to survive can’t continue to do business as they have always done and expect to compete against Amazon. Amazon can stock far many more items than any physical retailer. Thus, big box stores have to make sure they have the right products at the right time and at the right price. They have to get better at managing their supply chains, to reduce inventory so that they do not get stuck with obsolete product. They also have to make sure their price is close to Amazon’s price.

Chains like Target have long understood the value of having a pleasant shopping environment, with spacious aisles. Target is also fighting back by pushing its own store brands like Archer Farms. Sears for years benefited from having a strong brand in Craftsman tools. People would come to Sears just to get a Craftsman wrench. Similarly, Best Buy, Barnes and Noble, and other Big Box stores will have exclusive deals with manufacturers to have a ton of low priced hot products from a brand that is not the top tier but perhaps second tier. Think Vizio LCD tvs, not Sony, stacked up in the front of the store.

It still pays to visit your Big Box store for your holiday shopping, to get a sense of the trends, and price points. Then you can either buy while you are at the store, or whip out your smart phone and price check Amazon. There are bar code scanning apps that make it effortless to check the price of any product with a bar code on Amazon. Just take a photo of the bar code with your phone, and let the app call up the Amazon price.

Some day, we may buy everything on Amazon, but then, what will happen to all those retailing jobs?

Preparing meals at home has always been more cost effective than eating out. And in this economy, eating in a sit down restaurant may seem like a splurge. That’s why it’s important to feel like you are getting your money’s worth when you do eat out. Here are some ways to save money on your next restaurant meal.

#1 Avoid the specials

Have you noticed that when wait staff tell you the day’s specials they fail to mention their price. That’s because specials are usually priced higher than the menu items. Often, they are 50% higher. The wait staff is encouraged to “push the specials.” They are meant to entice you with special ingredients–”reduction of this” and “compote of that.” The wait staff is counting on the natural response of not wanting to sound like a cheapskate by asking about the price.

#2 Ask for extra bread

Most restaurants try to fill you up with baskets of bread before your first course arrives. Don’t be shy about asking the wait staff to bring you more bread so you can eat copious quantities of it while eating your soup or salad or main entree. Sometime restaurants can be stingy about the complimentary bread.

#3 Go easy on the appetizers

Some waiters trick you into ordering too many appetizers by prompting you to order more than one appetizer. You might order one appetizer, and they raise their eyebrow and ask, “Is that all?” Or they say that another appetizer is also good, implying that each person at the table should eat their own appetizer. Some restaurants also offer appetizer samplers which combine two or more appetizers on the menu, but these samplers inevitably are priced higher, sometimes three times higher than any one appetizer. Unless you are making a meal of just appetizers, save room for the main course.

#4 Or make it a meal of appetizers

It’s perfectly acceptable to just order from the soup, salad, and appetizer sections of a menu and not get a main entree. Don’t let the wait staff make you feel bad. It’s your meal, not theirs. Spanish tapas restaurants, which give you a bunch of small appetizer plates by design, are paving the way for this trend.

#5 Split plates with a friend

Again, don’t be shy about asking to split a salad before the main course, or to split a main course. Just tell the waiter with a straight face, “we’re grazing.”

#6 Skip dessert

Do you really need that $7 piece of pie or scoop of ice cream on a brownie? Hold off on desert until you get home, where if you want to splurge, split a pint of Ben and Jerry’s with your date.

#7 Drink water

Drinks are pure profit for restaurants. Often, you can be perfectly content having a fine meal, and washing everything down with ice water, instead of iced tea. Ordering a bottle of wine or beer can increase your restaurant tab by 30%-40%, so don’t do it unless you want to. Waiters hate it when everyone around a table orders water instead of iced tea, cokes, or beer, because they just see a lower bill and a smaller tip.

#8 Order the cheapest bottle of wine

OK, let’s say you see five bottles of white wine starting at $18 and ending up at $60. Somewhere in the mix is a $27 bottle of wine which is the most popular seller, because the restaurant knows that you won’t splurge on the $60 bottle unless you are trying to impress someone, and you won’t order the $18 for not wanting to look cheap. Don’t worry about it. Get the $18, because it’s really a $9 if you were to get it at the grocery store.

#9 Eat at a restaurant that lets you bring your own bottle of wine

Often, new ethnic restaurants that don’t have a liquor license, like that cute Vietnamese place off the main drag, encourage you to bring your own bottle of wine. Find those places and frequent those places.

#10 Wash dishes

As crazy as this sounds, sometimes you can set up a deal ahead of time with a restaurant owner to trade a meal for a service. If you literally don’t want to wash dishes, and you have a skill like marketing, you might offer to design a flyer for the restaurant or set up a Facebook page in exchange for a meal.

#11 Complain about anything that was wrong with the meal.

Meal too salty? Let the waiter know and odds are the chef will want to make you happy so you will come back. Sometimes you can get a complimentary dessert out of it.

#12 Ask for a take out box for any leftovers

If you can’t finish your meal, sometimes you can eat the leftovers for lunch, saving money by not buying that lunch.

So there are 12 money saving tips to consider the next time you eat out. Know that MiCash MaserCard is accepted at any restaurant that accepts MasterCard debit cards. Just look for the MasterCard logo.

If you really want to save money, try to recreate your favorite restaurant meal at home.

Do you have too many credit cards including department store cards? If you want to cut up a credit card, make sure you understand how to cancel a credit card without hurting your credit score. Just follow these steps.

Step 1: Pay off the card in full. This means you bring your balance down to zero.

Step 2: Check to make sure the balance is zero by calling Customer Service or checking your account a balance online. Call Customer Service to make sure the balance is really zero. Interest may have still been accumulating.

Step 3: Cancel the account over the phone—not by email or online—once you confirm that the balance is zero. At this point, the credit card company may try to entice you to stay by offering you some special deals like a lower interest rate. Funny how they don’t offer these deals to you even if you ask for them, until you announce that you want to close your account

Step 4: Confirm that the account is closed by writing the company and asking for written confirmation that the account is closed. Be sure to keep a copy of whatever communication the card company sends you. File it away, because you never know when you might need it.

Step 5: Check your credit report after a few weeks to be sure that the account is really closed. It can take a while which is why you should wait a few weeks. You can check your credit report for free, by law, once a year. Be wary of companies that want to overcharge you to get your credit report from one of the three credit reporting agencies. Experian, Equifax, and Trans Untion. The Fair Credit Reporting Act (FCRA) requires each of the nationwide consumer reporting companies — Equifax, Experian, and TransUnion — to provide you with a free copy of your credit report, at your request, once every 12 months. The FCRA promotes the accuracy and privacy of information in the files of the nation’s consumer reporting companies. The Federal Trade Commission (FTC), the nation’s consumer protection agency, enforces the FCRA with respect to consumer reporting companies.

It’s a pervasive myth that closing a credit card account will automatically lower your credit score (also known as a FICO score). This is not necessarily true. It’s only true if your credit utilization ration is affected. This ratio is calculated by taking your total used credit and comparing it to your total available credit; the higher this ratio is, the more it can negatively affect your FICO score. Essentially, by closing an old or unused card, you are eliminating some of your available credit thus increasing your credit utilization ratio.

“To close card accounts and not affect your credit score, you need to only have zero balances on your credit report for all of your active credit cards. If you have zero balances your credit utilization rate is zero, and you can’t raise it — and potentially hurt your score — by closing one or more of the active card accounts.

But you may be asking yourself: if I can bring the card to $0 balance what would I really gain from closing it? It’s not like the credit card company will charge interest on a $0 balance card. Also, one barrier to keeping a card active without a balance is the annual fee. So, if you want to avoid an annual fee, then go ahead and close it. Finally, in closing, let me say that having 1-20% of credit utilization ratio is the best. So simply make sure that after closing the card you don’t want, your credit utilization ratio is still between 1-20% should do the trick.

There are literally millions of plastic credit cards and debit cards produced each year in America, and most all of them end up in a landfill (unless you burn them). Currently most credit cards are made from polyvinyl chloride (PVC) which is a petroleum-based plastic, currently non-recyclable. The Association of Post Consumer Plastics Recyclers declared efforts to recycle PVC a failure and labeled it a contaminant in 1998

If you are a die-hard environmentalist, there are a few cards out there made of PET, which is recyclable. You have to look for the PET recyclable logo on the back of the card.

The type of plastic made of corn starch will break down after 84 days, but only if left out in the sunlight. It doesn’t do any good to make credit cards or debit cards out of this plastic because they will wind up in a landfill and not break down.

The future of money is digital, and eventually, we won’t have to carry around plastic cards to make purchases. Instead, our account information will be in a computer chip than can reside in a cell phone, or perhaps our wallets. We will just wave and pay instead of swiping plastic. However, it may be another 20 years before this is universal.

In the meantime take comfort in the fact that the card in your pocket uses very little plastic relative to all the other products you buy made of plastic. As oil becomes more expensive, perhaps card manufacturers will switch to a more eco-friendly plastic.