Monday, August 4, 2014

Unclaimed Property Postcard Scams Abound

Unclaimed property administrators in a number of states are warning about an identity theft scheme where the thieves send "Unclaimed Property Notifications" to the public to solicit personal information.  The postcards contain a toll-free number and ask the caller to provide identification information in order to claim the property.  This scam has shown up in Delaware, Kansas, Nebraska, West Virginia, Maine, Kentucky and probably a number of other states.

While these potential scams come in a number of different varieties, here are some tips to (try to) avoid scams relating to unclaimed property:

  • Don't Pay to Search -- States do not charge a fee for allowing you to search for unclaimed funds, or in most cases, even to collect unclaimed funds.
  • Don't Trust Links -- If you receive an email purporting to be from your state unclaimed property office with a link, go to the site directly.  A link to every states' unclaimed property office can be found on the website of the Nat'l Association of Unclaimed Property Administrators.
  • Don't Trust Phone Numbers -- Similarly, don't call the number provided to you in an unsolicited email or voicemail.  Look up (using NAUPA or some other source) the phone number for your state unclaimed property office yourself, and call them directly.  Some scams seek to trick victims into calling an international phone number and incurring high fees for those calls.
  • Don't Provide Financial Information -- You do not have to provide any financial or bank account information to perform a search or to learn if a state is holding unclaimed funds on your behalf. 

Monday, July 21, 2014

Pennsylvania Reduces Dormancy Periods

On July 10, Pennsylvania House Bill 278 was approved by the Governor.  The 112 page budget bill makes a number of legislative changes, but for purposes of this blog the most notable is the reduction in dormancy period for most property types from 5 years to 3 years.

What's behind the Pennsylvania push for shorter dormancy periods?  As usual, it appears to be a response to a nearly $1 billion budget deficit.  According to a Fiscal Study by the Pennsylvania House Appropriations Committee, "it is estimated that the reduction in holding period for the newly identified classes of unclaimed property will generate $150,000,000 in revenue for the General Fund in 2014."

There are a number of problems, however, with this statement:
  • First, with the exception of a clarification regarding IRA accounts, the new legislation does not contain any "newly identified classes of property"; rather, it simply shortens the dormancy period for the classes of property already covered by the Act. 
  • Second, if the legislative purpose of state unclaimed property laws is to effect only a change in "custody" of unclaimed property (i.e., from the holder corporation to the state) allegedly because the state is a better guardian of the funds, than the characterization of these amounts as Commonwealth "revenue" is misleading.  Assuming that the Commonwealth will make all reasonable efforts to reunite its citizens with their unclaimed money (an assumption we won't challenge for purposes of this post) than the "revenue" received by the Commonwealth is temporary at best.

  • Finally, it should be reasonably clear that the shortening of dormancy period itself does not "generate" any unclaimed property.  Instead, it essentially requires holders to triple the years reported next April 15.  That is, instead of reporting all property that is 5 years old, each will report all property that is 5 years old, 4 years old and 3 years old.  The upshot is that the $150 million increase cited is a one time only event, due not to any change in the structure of the Act, but simply because holders next year will be required to essentially report three years worth of property. 
This is yet another example of dormancy periods being modified to produce a short-term, artificial increase in governmental revenue. 


There are a few other notable provisions of the law that we will get to later in the week. 

Friday, April 25, 2014

Delaware to Consider Banning Contingent Fee Auditors?

Corporations and financial institutions that are subjected to an unclaimed property audit often come away from the process with a number of complaints.  The process is usually (very) lengthy, disruptive to ongoing operations, and more often than not, bears precious little resemblance to a process designed to uncover property that will actually go to a rightful owner.  Of all holder complaints about audits, however, the most pervasive and significant is skepticism regarding the states' use of contingent fee auditing firms to carry out the process.  In most instances, instead of conducting an audit through its own unclaimed property department, bank examiner, or other regulator, most states use private auditing firms that collect a percentage of the unclaimed property that they "find."

Many holders question whether an auditor who is given a direct financial stake in the outcome of the audit has the objectivity and independence necessary to conduct a fair examination.  Notwithstanding these objections, the vast majority of states have ignored this critique, claiming that they don't have the resources to enforce compliance any other way. 

Now, a recent announcement from the Delaware State Senate suggests that at least some legislators have noticed.  The Republican Caucus has announced its plan "introduce legislation intended to disallow commission-based contracting for escheat."  The attached press release goes into more detail, and contains some startling (or not, depending on your view) statistics.  According to Senate Republicans, during Fiscal Year 2013 "the state paid Kelmar Associates, a firm that provides government auditing services, $53.4 million, according to the State of Delaware Online Checkbook." 

That's a lot of money, and whether the auditing firms are overly-aggressive or not, it suggests a potential misalignment of state priorities.  If, on the one hand, this huge amount is a product of overly-aggressive auditing (a question upon which this blog takes no position for purposes of this article) this represents a significant amount that companies have paid, but potentially should not have been required to pay, to settle these audits.  If, on the other hand, these amounts are all truly unclaimed property belonging to owners (or failing that, the state) then this seems like a tremendous amount of money that is being diverted from the state and its citizens.

Only time will tell whether this press release represents a huge shift in the way unclaimed property law enforcement is handled or just a PR move to be announced and just as quickly forgotten.  Remember, until the legislative process is complete, this is Just A Bill.

Monday, April 21, 2014

Missouri Considers "Holder-Friendly" Unclaimed Property Legislation

Last week, a unclaimed property bill was introduced in the Missouri House of Representatives that would make significant, and holder friendly, changes to the Missouri Unclaimed Property Act. According to the El Dorado Springs Sun, which recently posted an article about the proposed legislation, the Missouri Chamber of Commerce & Industry is backing the bill, claiming that it "would take Missouri from the bottom four states in the rankings to one of the top 10 states for fair treatment of business unclaimed property.”  

The proposed bill addresses three issues frequently requested on holder wish-lists for unclaimed property administration.  In particular, the proposed legislation would provide the following features:
  • Business-to-Business Exemption -- Bill 1075 would create a business-to-business exemption for items between business associations that have an ongoing customer relationship.  Specifically, the proposed exemption provides that items "issued to a business entity or association as part of a commercial transaction in the ordinary course of a holder's business shall not be presumed abandoned if the holder and such business entity or association have an ongoing business relationship."
  • Three Year Statute of Limitations -- One of the most frequent holder complaints about state unclaimed property laws is the fact that the audit period can go back many years, if not decades.  The proposed Missouri legislation, by contrast, would limit the enforcement statute of limitations, in most cases, to three years from the date of filing the report.
  • Appeals Process -- Finally, the bill would create an appeals process to allow holders to challenge adverse determinations made by the Administrator.
 The bill is still in the very early stages of consideration.  We will continue to follow its progress as updates are warranted.

Thursday, April 17, 2014

Miss the UPPO Annual Conference? Get the Top 5 Takeaways at April 22 Webinar

The Unclaimed Property Professionals' Organization recently held its annual conference in Grapevine, Texas.  Bringing together hundreds of holders, service providers, and other industry professionals, the UPPO conference is a great place for continuing education, networking, and learning the most recent trends and issues in unclaimed property compliance.  If you couldn't make it to Texas, the UPPO is hosting a webinar on April 22 to go over the "Top 5 Takeways" from the conference.  The presentation will cover
  • Latest UPPO organizational developments;
  • A presentation seeking to clarify a number of the ambiguities of unclaimed property compliance;
  • The special compliance issues arising from unclaimed property law in the insurance industry;
  • Recent unclaimed property developments in Canada;
  • Potential future amendments to the Uniform Unclaimed Property Act.
Registration information can be found here.