Lure of Escheat Too Much for 87 Alleged Criminals

Never underestimate the draw of unclaimed property . . .

According to a report by the Patriot-News of Central Pennsylvania, Dauphin County, PA law enforcement officials arrested 87 people who had outstanding warrants by asking them to report to a county agency to obtain unclaimed property.  According to the article, police enticed the wanted men to round themselves up by sending suspects a letter from the "fictitious" Department of Unclaimed Property and arrested them when they came to collect.

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from California:

This is our new jungle gym.  It's made entirely out of gold, jewels and empty safe deposit boxes.

Pursuant to California law, the Director of Parks and Recreation may "examine any tangible personal property" delivered to the Controller as unclaimed property to determine whether such property would be "useful" to the Parks Department.

Source:  Cal. Code Civ. Proc. Section 1567.

Guidance on Vermont's Limitation of Lookback Provision

The State of Vermont is currently soliciting proposals from vendors to perform unclaimed property auditing services for both in-state and out of state holders.  While the RFP itself is not readily available, the State Treasurer's Office did issue some guidance concerning the state's "limitation of lookback period" in response to a question from a prospective applicant.  As many holders of unclaimed property know, there is no statute of limitations on the state's right to take custody of unclaimed property.  Most states' unclaimed property laws, however, have so-called "limitation of lookback" provisions that place restrictions on the state's right to audit a holder.  For example, the relevant provision of the Vermont Unclaimed Property Act provides that

"An action or proceeding may not be maintained by the treasurer to enforce this chapter in regard to the reporting, delivery, or payment of property more than 10 years after the holder specifically identified the property in a report filed with the treasurer or gave notice to the treasurer of a dispute regarding the property."

One of the Vermont RFP applicants sought clarification regarding the state's interpretation of this provision, and asked: 

Under Vermont Statute (Vt. Stat. Ann. Title 27 § 1259(b)), there is a ten year statutory limitation on the Treasurer’s right to bring an action or proceeding to enforce the Unclaimed Property Law. How is the examination’s reach back period treated for Vermont? Is it ten years based on this statute? If so, does this include the dormancy period(s)? Also, if holder failed to file reports, how far back is the reach back period for this scenario?

The State's response was as follows:

The examination look back period is ten reporting years. The ten years does not include the dormancy period. For all property it would be 10 years plus the dormancy period. For example, a payroll check issued in 1999, becoming dormant in 2000 and reportable in 2001, would be included on the examination. If a holder has failed to file reports, the reach back period would be determined on a case by case basis, but usually is ten reporting years.

Thus, holders subject to audit by the State of Vermont should expect the scope of that audit to be thirteen years for most property types (i.g., the 10 year lookback plus the 3 year dormancy period for most property types).  A copy of the question, and Treasury's response, can be found here.

Ding! You Have Money!

While unclaimed property holders all over the country are busily preparing annual unclaimed property reports
for the 40+ states with fall/winter deadlines, other states are likewise busy trying to return property to owners.  For example, Missouri has just announced an E-mail notification program for unclaimed property whereby Show-Me-Staters (or former Show-Me-Staters) can provide the State Treasurer's office with their current and former Missouri addresses and they will receive email notification when the state comes into custody of unclaimed property owed to that person.

Separately, in Pennsylvania, the State Treasurer issued a press release to highlight nearly $600,000 in unclaimed property owed to Police, Fire Departments and EMS agencies. 

As states continue to expand their escheat laws to funnel an ever-increasing scope and volume of unclaimed property into state coffers, its nice to see other states similarly expanding their owner reunification programs.

More NJ Gift Card Legislation

Over the past week, the New Jersey State Legislature has continued its activity in the area of stored-value cards and unclaimed property:

Assembly Bill 3330 - This bill would require a gift certificate or gift card to be redeemable at full face value in perpetuity.  The bill also creates a definition for a "store gift card" (generally, a "closed loop" card that is redeemable at a single establishment or group of establishments) and provides that the issuers of such cards must (1) on request, disclose to the consumer the full remaining value of the card; and (2) permit a transaction for less than the full amount outstanding.  (As a practical matter, it is unclear if there are any retail establishments that currently fail to perform these functions).

The bill was introduced on October 7, and is currently pending before the Assembly Consumer Affairs Committee.

Assembly Bill 3372 - This bill creates a definition of a "merchandise credit" for purposes of the New Jersey Consumer Protection Law, as something distinct from a gift certificate or gift card.  The legislation defines "merchandise credit" as "any credit provided to a consumer, upon the return of a previously purchased item, of a specified amount which may be spent at the retail mercantile establishment in lieu of returning payment in the form in which it was originally made."

The bill further provides that such credits shall not be permitted to expire within 2 years after issuance and that no fees may be assessed against such credits during that 2 year period.

The bill was also introduced on October 7, and is pending before the Assembly Consumer Affairs Committee.

Did You Know?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Kentucky.

Does it take four of them to make a whole horse?

Funds representing winning tickets from quarter horse racetracks are subject to the Kentucky Unclaimed Property Act.

Source:  Ky. Rev. Stat. 393.095

UPPO to Host Stored Value Card Seminar

The application of the unclaimed property laws to stored value cards, such as gift cards, is one of the most complex and rapidly changing areas of the law.  It seems that there is a new development every week that adds or changes the legal obligations of stored value card issuers (for evidence, see here, here, here, and here). 

Against this rapidly changing landscape, the Unclaimed Property Professionals' Organization is hosting a webinar called "Cards, Cards, Cards" on November 9th.  During this webinar, the panelists will explain the basic types and uses of stored value cards, how (and which) state unclaimed property laws apply to gift card programs, and address the recent federal developments in this area.  Registration information is available at http://www.uppo.org/.

Unclaimed Property Inferno Comes to Corporate Paradisio: Cayman Islands and the Dormant Accounts Law

Earlier this summer, the government of the Cayman Islands passed "A Law to Provide for the Monies in Dormant Accounts to be Transferred to the General Revenue of the Islands" -- in other words, an unclaimed property law (Law 28 of 2010).   Generally, accounts held in financial institutions that have been dormant for 6 years, are to be reported and remitted to the government, where they are thereafter held for the "general revenue of the Islands."  (Dormant Accounts Law, Sections 4(1) and 7(1).  As with most U.S. unclaimed property laws, once the financial institution has turned over the funds, the owner no longer has a claim against the financial institution, but rather, must try to claim the funds from the government.  (Dormant Accounts Law, Section 9(1)(a) & (b)). 

Another regular feature of U.S. escheat laws that appears in its Cayman counterpart is due diligence requirements -- i.e., attempts by the holder to contact the owner before turning over seemingly unclaimed money.  The Cayman law, however, has a unique feature.  In those instances where "the financial institution has been instructed by the dormant account holder not to correspond with or contact the dormant account holder" the financial institution is required to publish notice of the "nature and type of such dormant accounts" in "one or more daily newspapers circulating in the Islands . . . [and] any other media as the financial institution deems necessary."  (Dormant Accounts Law, Section 6(1)).

Unsurprisingly, some financial institutions and others are none too happy about the new law, including the publication requirement.  According to one legislative committee, the requirement of publishing account details “would be a great cause of consternation for most banks and trust companies involved in private wealth management and would be a deterrent to any clients of the licensees wanting to have their affairs managed through the Cayman Islands . . . ."

Also interesting is the legislative committee's response to breadth of the new law (which is actually narrower than many U.S. states' laws), wherein the committee opined that because the law “could cover any type of asset or property held by a financial institution ... the logistics of monitoring such assets for the purposes of dormancy are inconceivable . . . ."  Accordingly, the committee intends to suggest a new law that will be designed to cover "truly dormant" property, but not affect long-term investment vehicles.  We will review the new law when it's enacted.  In the meantime, the Cayman kerfuffle is a valuable reminder to those who deal with unclaimed property that the scope and requirements of the express terms of the law are generally surprising to those who don't come across them on a regular basis. 

NJ Issues Money Order Reporting Instructions

A less-discussed provision  of New Jersey's recent unclaimed property amendments (perhaps because it is the only one the state is not currently being sued over) is the state's decision to shorten the dormancy period of money orders and similar written instruments from 7 years to 3 years.

The NJ Treasury Department issued additional guidance on the reporting of money orders last week, which can be found here.  As noted, all unredeemed money orders issued prior to July 1, 2007 are due in this year's report, and there are certain additional reporting requirements for instruments that have been subject to dormancy fees (basically, a copy of the contract authorizing the fee, and a representation from the company that such charges are not reversed or otherwise canceled).

Did You Know? - Seriously?

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from Mississippi.

Maybe They Thought The Claim Process Would Take Too Long

You may recall that a few weeks ago, we noted - with some surprise - the fact that the California Controller's Office was holding unclaimed property owed to various agencies of the State of California.  It seems we were too hard on the Golden State.  According to a recent search, the Mississippi Unclaimed Property Division is holding property owed to . . . (yes, you know what's coming) . . . the Mississippi Unclaimed Property Division.

Michigan Unclaimed Property Changes Become Law

As widely expected, the Governor of Michigan signed into law House Bill 6421, which enacts sweeping changes to the Michigan unclaimed property act.  Most significantly, this law changes the dormancy period for most property types from 5 years to 3 years.  Michigan - which is required by state constitution to pass a balanced budget - hopes that this reduction in dormancy period will increase state revenue by tens of millions of dollars.

In addition to the dormancy period changes, HB 6421 makes changes with regard to holder reporting.  Generally, Michigan requires an unclaimed property report to be filed and property delivered by November 1 for the year ending June 30.  HB 6421 leaves that deadline in place, but adds the following reporting dates:

• In 2011, a report shall be filed on or before July 1, 2011 for the 9-month period ending on March 31, 2011. 
• For years ending after 12/31/2011, the report shall be filed on or before July 1 of each year for the 12 month period ending on the immediately preceding March 31.

Interestingly, the one change made by the Senate to the bill as it proceeded through the state legislature was to delete that portion of the bill that would have shortened the dormancy period for travelers' checks from 15 years to 3 years.  (The Senate markup is available here).  It is likely that had such a provision passed, American Express might have sued Michigan in addition to New Jersey.

NJRMA v. New Jersey - Overview of the New Jersey Gift Card Litigation

As promised, we now have some additional information relating to the NJ Retail Merchants Association's lawsuit against New Jersey in response to that state's new unclaimed property laws relating to gift cards.  As we covered earlier, the new legislation (the "Bill") requires gift card issuers to obtain at least the zip code of all gift card purchasers (the "Zip Code Requirement") and requires that issuers turn over the full face value of cards inactive for 2 years (the "Face Value Requirement").  In addition, the legislation was expressly deemed to be retroactive - meaning that the new laws applied to cards that were issued years before the bill was enacted.

The full complaint, filed last Thursday, is worth a read for gift card issuers (or those otherwise interested), but a few of the allegations jump out. 

In challenging the Zip Code Requirement, the NJRMA notes that "[b]ecause Gift Cards are given away by the purchaser, there is no way for the issuer to know, or keep a record of, who the bearer, or rightful owner of a Gift Card is."  (Compl. at 15 - footnote omitted).  In other words, the NJRMA is challenging the utility of requiring issuers to obtain the zip code of a purchaser (as a purported proxy for the owners last known address), where experience shows that the owner and the purchaser of a gift cards are not necessarily (or even usually) the same.

In setting up their challenge to the Face Value Requirement, the NJRMA notes that their members' gift cards "generally do not expire and there is no fee associated with purchasing a gift card."  (Compl. at 19).  Accordingly, the NJRMA alleges, most retailers do not recognize any profit until the time that the gift card is actually used, but that it has a property right to the profit it would eventually receive if the gift card is used.

Taking a page from the Hollenbach litigation (in which American Express successfully challenged Kentucky's shorening of the dormancy period for travelers' checks), the NJRMA also alleges that, despite the stated purposes of the legislation (to protect the funds of gift card owners) ,"there was a clear revenue objective" to the legislation.  (Compl. at 36).  Specifically, the NJRMA noted a report by the Office of Legislative Services stating that the "fiscal impact" of  the legislation to be nearly $80 million in FY 2011.  In Hollenbach, a federal court ruled that "[s]hortening the presumptive abandonment period [for traveler's checks] . . . is not rationally related to raising revenue for the state, even if revenue raising were a legitimate state purpose or objective." 

As to the specific claims, NJRMA alleges that the Zip Code Requirement is preempted by the Supreme Court's decision in Texas v. New Jersey, in which the Supreme Court held that unclaimed property owed to owners with unknown addresses are escheatable to the holder's state of incorporation.

The second count of NJRMA's complaint alleges that the Bill violates the "due process" rights of the gift card issuer.  In particular, NJRMA alleges that although the gift card issuer makes no profit at the time of sale, it nonetheless "receive[s] a vested interest in the money tendered by the purchaser" at that time, and the State's taking of that property violates those property rights. 

The third count of the complaint alleges that the Bill violates the Contract Clause of the federal and New Jersey constitutions because of its retroactive application to gift cards sold prior to enactment of the Bill.

The final count of the complaint alleges that the Bill violates the Constitution's takings clause by requiring retailers to turn over the full dollar value of an unused gift card without accounting for the lost profits of the retailer. 

In light of these arguments, the Complaint asks the court to deem the Zip Code Requirement, the Face Value Requirement, and the Bill's retroactivity as "void, unconstitutional and unenforceable as a matter of law."

Tomorrow, we will review the allegations of the American Express lawsuit against New Jersey regarding the changes to the travelers' check dormancy period.

Breaking News: New Jersey Sued Over Unclaimed Property Legislation

According to the Bergen Record, American Express and the New Jersey Retail Merchants Association have separately filed lawsuits against the State of New Jersey seeking to invalidate parts of New Jersey's recently enacted changes to the state unclaimed property act.  As Escheatable covered earlier, New Jersey's unclaimed property changes reduced the dormancy period for traveler's checks from 15 years to 3 years and applied the terms of the unclaimed property act to gift cards for the first time (applying a 2 year dormancy period).


According to the Record, the Amex lawsuit challenges the reduction of the dormancy period for traveler's checks, while the NJ Retailers' Association lawsuit seeks to invalidate the law's requirement that gift card purchasers obtain the owners' name and address.  Both lawsuits challenge the New Jersey law on the grounds that the new law allegedly violates the Constitution's "due process" clause.  We will post additional information concerning the lawsuit after we review a copy of the complaint. 

Pennsylvania Unclaimed Property Webinar on Thursday

As part of its holder education efforts, the Pennsylvania Bureau of Unclaimed Property is hosting a one-hour webinar this Thursday, October 7th at 2:00 pm.  The event, hosted by the Philadelphia Legal Intelligencer, is titled "Unclaimed Property Compliance: Managing Your Risk & Responsibility", and is recommended for attorney, accountants, CFOs, holders compliance professionals, and, of course, those responsible for unclaimed property reporting.

Also, as a reminder, Pennsylvania is offering an amnesty program until October 31 for holders that missed the April 15 reporting deadline, or those who have never reported unclaimed property at all.  Additional information can be found at the website of the Pennsylvania Treasury Bureau of Unclaimed Property.

Did You Know? - No Abandoned Milk Money

It's time again for Did You Know?  On Fridays here at Escheatable, we provide you with interesting information regarding the unclaimed property laws to amaze your friends and frighten your enemies.  Today's entry is from New York:

You say you'd like to buy milk?  Can I see your license?

The New York Abandoned Property Law does not apply to abandoned interests in the Milk Producers Security Program, which protects milk sellers from defaults by "licensed" "milk dealers."  Presumably, amounts received from unlicensed street milk dealers are subject to the APL.

Source:  N.Y. Agriculture & Markets Law, Sec. 258-b.