Thursday, November 15, 2012

Delaware Launches New Voluntary Disclosure Agreement Website

Earlier this summer, Delaware created a new voluntary disclosure agreement ("VDA") process run by the Secretary of State's office, separate from the sometimes criticized program run by the Department of Finance.  Under the Secretary of State program (which is temporary) holders who come forward by June 2013 (and pay outstanding amounts by June 2014) will only have to review records back to 1996.  Holders who come forward by June 2014 (and pay by June 2015) will only have to review records back to 1993.  The VDA program run by the Department of Finance generally runs back to 1991.

Recently, the Secretary of State's office launched, which appears to be a one-stop resource for holders considering entering into the new amnesty program.  There is an impressive amount of information available on the site, from an extensive overview of the VDA process, links to the governing legislation, forms, FAQs, and a list of upcoming educational seminars. 

Putting extensive information concerning a state's unclaimed property amnesty program in one place, in a simple easy to use format should not be a novel concept, but it is.  Kudos to Delaware for taking this step.

Monday, November 12, 2012

Reminder: California Reports Due Tomorrow for Holders Impacted by Hurricane Sandy

As we mentioned last week, in the aftermath of Hurricane Sandy may states extended their unclaimed property reporting deadlines (which, in most states, fell on 10/31 or 11/1).  For those of you affected, just a reminder that California's extended deadline expires tomorrow. 

Friday, November 9, 2012

Lost & Found: PA Webinar, IA Auction, Australia Amendments

Pennsylvania to Host Unclaimed Property Webinar -- The Pennsylvania Treasury Department is hosting a free unclaimed property webinar on November 28th.  The Department will provide insight on identifying unclaimed property, reporting to the state, and how to develop effective policies and procedures.  There will also be a live Q&A session.  Registration information is available here.  The seminar also provides CLE credit for Pennsylvania attorneys.

Iowa to Auction Unclaimed Property -- Add Iowa to the list of states offering to sell unclaimed property via auction.  Yesterday, the Iowa State Treasurer's Office announced that it would run its first eBay unclaimed property auction from November 26th to December 3.  The auction is open to all US residents, and the items up for auction can be viewed here.

Australia Considers Unclaimed Property Law Changes -- The Australian Parliament is considering a bill that will shorten the dormancy period for property held by banks and other financial institutions under the Banking Act of 1959.  A summary of the proposed legislation can be foundhere.

Wednesday, November 7, 2012

Meet Your New Escheators! (Actually, say "Hello Again")

In case you missed it (owing, no doubt to the total lack of media coverage) yesterday was Election Day.  While most news focused upon the notable federal elections, there were also seven races to elect executive officials responsible for administering state unclaimed property programs.  In every case, the incumbent will continue on the job: 

Indiana -- Greg Zoeller was reelected as the Attorney General of the State of Indiana.  In Indiana, the AG's office is responsible for that state's unclaimed property program.

Missouri -- Clint Zweifel was reelected as Missouri State Treasurer.  Treasurer Zweifel is no stranger to these pages, as he was the subject of our first "Meet Your Escheator" interview.

North Carolina -- Janet Cowell was reelected State Treasurer.

Pennsylvania -- Rob McCord was reelected State Treasurer.

Utah -- Richard Ellis was reelected State Treasurer.

Vermont -- Beth Pearce was elected to her first full term as State Treasurer (though she was already serving as a result of an executive appointment).

West Virginia -- John Purdue was reelected State Treasurer.

Best of luck to all of them.

Tuesday, November 6, 2012

Kenya Finds Out that Administering Unclaimed Property Laws is Trickier Than it Seems

Kenya's attempt to implement a U.S.-style unclaimed property law is well into its second year.  Kenya began the process of becoming the first African country with a custodial unclaimed property act of general application in Spring, 2011.  After considering the concerns of citizens and holders, the law was passed in December of 2011.

Notwithstanding the passage of more than 10 months from the law's passage, Kenya's government is finding out that the devil is in the details.  Now, according to an article on, the Kenyan Finance Ministry is having trouble staffing the entity that will be charged with administering the act -- the Unclaimed Financial Assets Authority.  According to the article, the entity should be established soon.

Notably, the comments of Assistant Finance Minister Oburu Odinga make explicit something that most U.S. states try to downplay:  namely, that a significant rationale (if not the primary one) for unclaimed property laws is to raise money for the state.  The article quotes Odinga, as stating that the unclaimed property law "is a cheap way of raising money on our side rather than letting this money lie in the banks."  Though the implementation of the act has taken longer than anticipated, at least the Kenyan Finance Ministry gets points for honesty.

Monday, November 5, 2012

Fall Reporting Extension Information

We're back after a Hurricane Sandy induced hiatus; we hope that you and your families are safe, sound and warm. 

The fall unclaimed property reporting deadline in many states was on October 31 or November 1.  Obviously, the storm and its aftermath have interfered with that process. The National Association of Unclaimed Property Administrators has prepared a detailed matrix of information concerning Hurricane Sandy related extensions and how to request them.

Monday, October 22, 2012

Another Insurance Settlement Announced: $300 Million from AIG

The now long running audits of the life insurance industry continue to bear fruit for state governments.  According to CBS News, (which cites statements from the California State Controller's Office) AIG will pay approximately $300 million to state governments to settle claims that the company failed to pay death benefits in a timely manner.  According to the article, the $300 million will be divided among 30 states and the District of Columbia.

Thursday, October 18, 2012

Lost & Found: Escheat's Ancient Origins, (e-)Bay State Auction, Spooky Deadlines Approaching

Unclaimed Property's Ancient Origins Alive & Well - As we've mentioned before, modern unclaimed property laws in the United States derive, in part, from the ancient doctrine of bona vacantia by which "vacant goods" (i.e., ownerless property) would become property of the sovereign.  Recently the London Telegraph ran an article describing how unclaimed estates in the Duchy of Cornwall ultimately become the property of Prince Charles.  In the U.S., the sovereign powers formerly belonging to the British royals have largely become the powers of state governments.  No word on whether Prince Charles will be retaining a contingency fee auditing firm to make sure that he is getting his share of unclaimed funds in the Duchy.  (Hat Tip to LinkedIn's Unclaimed Property Holder Forum).

 Bay State Unclaimed Property Auction Set to Begin -- From the former mother country to the Cradle of the Revolution.  This Saturday, Massachusetts is set to commence an unclaimed property auction on eBay.  According to MassLive, over 2,000 lots of items, including coins, jewelry and collectibles will be put up for auction.  The Commonwealth hopes to earn $500,000 from the auction, which will  run until December 22nd.

Fall Reporting Deadline Fast Approaching -- Beware!  It's nearly October 31.  The spookiest time of the year (at least in most states).  That's right, the fall unclaimed property reporting deadline is approaching in several dozen states.  Be sure to get those long forgotten treats reported to the state, lest you receive a trick in the form of an audit.

Wednesday, October 10, 2012

Two Different Traveler's Check Stories, Same Ending

Two long-running judicial disputes over traveler's checks ended recently, both with the same result: shortened dormancy periods.

Travelers' checks have always been something of an outlier in the context of unclaimed property laws, as they generally have a relatively long dormancy period (about 15 years, as opposed to 3 or 5 years for most items) before they are eligible for reporting and delivery to state custodians.  These longer periods are arguably justified by the fact that travelers' checks are usually purchased by travelers for future use (hence, the name "traveler's check").  In recent years, states have begun to question the necessity for these longer dormancy periods, and have been amending their unclaimed property laws to bring the dormancy periods for traveler's check in line with those of other property types.  Two states where this was done recently are Kentucky and New Jersey.

In both instances, traveler's check issuers did not take the change lightly.  In both states, lawsuits were filed challenging the states' decision to shorten the dormancy period.  The suits originally garnered mixed results:  in New Jersey, a trial court upheld the state's amendments, but a trial court in Kentucky ruled in favor of check issuers and ordered that the dormancy period remain 15 years.  The issuers' success was fleeting, however, as a federal appellate court reversed that ruling last year.  In the New Jersey case, a federal appeals court affirmed the district court's decision upholding the New Jersey legislation.

Both of those stories are now (probably) concluded.  In Kentucky, after reversing the trial court's ruling, the U.S. Court of Appeals for the Sixth Circuit sent the case back to the trial court for further proceedings.  On September 12, the trial court issued an opinion granting Kentucky summary judgment  regarding the issuer's remaining claims, and dismissed the case.  Thus, absent further proceedings the Kentucky law will stand.

Separately, the Supreme Court of the United States denied American Express's request that the court review the New Jersey law.  Thus, the district court's decision upholding the shortened dormancy period will be allowed to stand.

Monday, October 1, 2012

West Virginia Treasurer Sues 10 Insurance Companies Over Unclaimed Property Compliance

When we last left the "Death Master File" controversy intersecting life insurance policies and the unclaimed property laws, it looked like things were winding down.  A variety of companies announced settlements, Congress got involved, and state insurance regulators were issuing revised standards for compliance.

Despite those settlements, West Virginia Treasurer John Purdue has now filed suit against many of the same insurance companies alleging that they failed to deliver unclaimed insurance policies to that state in accordance with the West Virginia Unclaimed Property Act.  

In most situations, either an heir or the administrator of the deceased's estate will notify the insurer that the policy has become triggered, and often there is no issue.  These lawsuits center upon what, if anything, the insurance companies are required to do to determine whether or not an insured has died in the absence of such notification.  According to the Charleston Gazette, the lawsuits allege that "a reasonable exercise in good faith and fair dealing statutorily imposed upon defendant includes an annual examination of life insurance policy holders to determine if they are deceased or three years past the applicable limiting age."  Again, because this topic may come up in our professional capacity, we are not going to analyze this question in any great detail except to say that the unclaimed property laws are generally silent as to how (or whether) the insurer has such an obligation. 

In any event, it seems the story isn't quite over.

Monday, September 24, 2012

Gold, Jewelry and . . . Sardines? A Look Inside California's Unclaimed Property Vault

Last week, we mentioned Illinois' auction of abandoned safe deposit box property (and similar auctions were held in Nebraska and Missouri.  Under most states' unclaimed property laws, property in safe deposit boxes is subject to being reported and turned over to the state 3 or 5 years after the rental period of the safe deposit box expires.

What do people keep in their safe deposit boxes?  Gold, jewelry, important papers, keepsakes and the like.  The Office of California State Controller has posted a photo album of some of the more *ahem* unusual items that have been delivered to the state for safekeeping.   Among the items is a sack of diamonds worth half a million dollars, baseball cards (including a Ken Griffey, Jr. rookie card), and a stack of gold and silver coins.

Of course, value is in the eye of the beholder.  While some people go through great lengths to protect cash, gold and memorabilia, other people stash other valuables like pictures of John Travolta or sardines.  Presumably, these items were left in different safe deposit boxes.  If not, then there is a 70s-TV loving tuna that should get its financial act together.

Thursday, September 20, 2012

No "Easy Button" for Delaware VDAs: Pricetag of Staples Settlement Disclosed -- $8.9 Million

In 2010, office supplies company Staples, Inc. got into a public dispute with the Delaware State Escheator, over the latter's attempts to collect unclaimed property allegedly due from Staples.  As recounted here by Business Week, the controversy started when Staples approached Delaware in connection with a "Voluntary Disclosure Agreement" or VDA.  Pursuant to the VDA program, a holder that is not under audit can voluntarily approach the state and disclose past liability.  The state, in turn, generally agrees to waive interest and penalties that might otherwise be assessed on the property.  Here, Staples ultimately admitted owing approximately $150,000 in past due liability.

As many in this industry know, however, doing a VDA with Delaware is not as simple as it seems.  Here, Delaware refused to accept the results of Staples' VDA, and commenced its own audit.  Ultimately, according to Business Week, the state presented Staples with an assessment of $3.9 million.  The litigation moved along for about two years in Delaware state court.

Earlier this summer, the parties jointly announced the settlement of the matter, and noted that the terms were "confidential."  Apparently, that did not sit well with the Associated Press, which challenged the parties' assertion of confidentiality.  The AP ultimately prevailed:  according to CBS News, among other sources, we now know the full pricetag:  $8.9 Million.  To put that number in context, here are some things you can buy with $8.9 million:

Monday, September 17, 2012

Illinois Unclaimed Property Auction Kicking Off Today

The vast majority of unclaimed property reported by companies and financial institutions to state governments is either money (in the form of uncashed checks, unredeemed payroll, unused credits) or "intangible" property -- things that represent a right to payment or the ownership of some financial asset (e.g., stocks, bonds, insurance policies, etc.).  However, banks also report items from abandoned safe deposit boxes under most states unclaimed property laws.  What do the states do with those items?  Many times, the property is auctioned off, and the funds kept by the state (for the benefit of the rightful owner).

In fact, starting today and running through Friday morning, Illinois State Treasurer Dan Rutherford's Office is hosting an unclaimed property auction.  Among the items up for online bidding are coins, jewelry, and other keepsakes.  The auction website can be found here.  Happy bidding!

Monday, September 10, 2012

Ohio on Offense and Defense

No, we're not talking about college football, or even pro football, we're talking about unclaimed property. 

First the offense:

According to the Cleveland Plain Dealer, the Ohio Attorney General's office is bringing criminal charges against a Columbus man who is accused of offering to help people file claims for unclaimed property, but failing to turn that property over.  If you believe that you were a victim of the scam, you can contact the Ohio Attorney General's Office here.

Next, the defense:

As we mentioned a long time ago, for several years, Ohio's unclaimed property program has been defending a class action lawsuit brought by consumers who say that the state should pay interest on unclaimed property amounts ultimately recovered by their rightful owners.  Ohio recently settled that litigation, and consumers who have reclaimed property from the state since August, 2000 are due an additional $9.5 million that the state has agreed to pay.  Information on the settlement, and on how you go about making a claim for interest (if you are a member of the settlement class) can be found here.

Friday, September 7, 2012

Lost & Found: Connecticut Records, UP Official Sentenced, Politics (but not really)

Connecticut Sets Unclaimed Property Record:  Add Connecticut to the list of states that have set unclaimed property collection or reunification records this year.  According to the Hartford Business Journal, the Nutmeg State returned more than $83.5 million to rightful owners this year, an increase of $30 million over last year.  A large part of the record came from a single claim for $32.8 million -- the largest claim in state history -- relating to stock held by the state for a single individual.

Former Oklahoma Unclaimed Property Auditor Sentenced:  A few months ago, we mentioned the story of LaTisha Reid, the former Oklahoma unclaimed property auditor charged with stealing unclaimed property from the state.  Reid ultimately pled guilty to some two dozen felonies and was recently sentenced to 12 years in prison.  Kids, crime doesn't pay. 

What Do Both Parties Have in Common?:  As you may know, the Democratic National Convention in Charlotte, NC ended last night, with a speech by the President.  The previous week, the Republican National Convention was held in Tampa, FL.  Now, we try to keep it bipartisan here at Escheatable, but what do the parties have in common?  Unclaimed property.  According to a search on Missing Money, both parties have funds held for them by the states. 

Wednesday, September 5, 2012

While We Were Out: Legislative Updates From Around the Country

It's after Labor Day, the kids are back at school, and everyone is back at work preparing for fall reporting deadlines.  Here are a few legislative changes from late summer that took place while we were at the beach:

Michigan Amends Administrative Provisions -- Earlier this year, Michigan passed a business-to-business exemption to remove certain amounts payable between business associations from the reporting and remittance requirements of that state's unclaimed property act.  More recently, Michigan House Bill 5577 was passed, which amends the act's record retention and limitation of action provisions to reflect the new exemption.  The new law reduces the period of time that a holder must keep records of property due and owing between business associations to 5 years (down from 10).

Changes to Hawaii Reporting -- Hawaii was formerly one of the few states that had different dates for the reporting and remittance of unclaimed property.  No longer.  Pursuant to Act 229, both the reporting and remittance are due on November 1.

Wednesday, August 29, 2012

5Ws: CFPB to Review State Gift Card Laws

As has been widely noted, the federal Consumer Financial Protection Bureau, which was set up as part of 2010's Dodd-Frank Act, is looking into State unclaimed property laws relating to get cards.  Here is the who, what, where, when and why:

Who?  The Consumer Financial Protection Bureau, which opened its doors in 2011, and was created by the 2010 Dodd-Frank Act.  The CFPB is a federal agency which is primarily responsible for (as the name suggests) consumer protection, financial education, and rulemaking relating to consumer finance activities.

What?  According to a press release issued by the agency, the CFPB wants to evaluate whether certain state unclaimed property laws relating to get cards are inconsistent with federal law. Specifically, pursuant to the Credit CARD Act of 2009, most gift and stored value cards are required to be free from expiration for at least 5 years.  In some states, however, the dormancy period for gift cards is a shorter period of 2 to 3 years (i.e., after 2 years, the issuer of the card is no longer obligated to honor it, so long as the amount is escheated to the state).

Where?  According to the CFPB's public notice of potential rule making, the agency is specifically concerned with the gift card provisions contained in the Maine and Tennessee Unclaimed Property Acts.  In each of these states, stored value cards are generally deemed abandoned (that is, are subject to being reported and remitted to the state) in two years.

When?  The CFPB is currently soliciting comments from the public before making its decision.  Interested parties can submit comments for consideration within 60 days from the publication of the CFPB's notice.

Why?  The CFPB's inquiry underscores the fundamentally different viewpoints of the state and federal agencies when it comes to determining what is in the consumer's best interests. The state unclaimed property agencies are primarily concerned with taking custody of apparently unused funds as quickly as possible, under the presumption that by taking custody of the property quickly, they increase the likelihood that the consumer will eventually reclaim the funds for the state.

The CFPB, on the other hand, is primarily concerned with making sure that the in the consumer's gift card funds remain valid in the first place. The federal agency would presumably contend that anything which keeps the card active for a longer period of time serves the consumer best.

Monday, August 27, 2012

Regulation is the Beginning, Not the End

We spend a tremendous amount of time on this blog talking about unclaimed property regulation -- the state and federal laws, agency rules, and office practices that make up the nuts and bolts of the unclaimed property reporting and remittance process.  This, of course, is understandable.  Most of this blog's (dozen or so) readers are involved in unclaimed property from the holder's side (or are my Mom).  Lest we forget, however, the whole point of unclaimed property legislation is (presumably) to get abandoned, unclaimed, or missing funds in the hands of the person to whom that money or property belongs.  The laws and rules regulating the holder community are important of course, but they are merely one step in reuniting owners with their funds.  That reporting and delivery process is, to quote Churchill, "not the end. It is not even the beginning of the end. but it is, perhaps, the end of the beginning."

In other words, whether it is done by old fashioned newspaper advertisement, state sponsored online listings, unclaimed property kiosks, or other outreach programs, once the unclaimed funds get to the government, the job is not finished; in fact, it may be that the real work is just starting.  Moreover, most governments do not proactively reach out to apparent owners (because of privacy concerns, staffing limitations, or just disinterest).  Accordingly, an important step in getting money to owners is educating the owners of their ability to look for the funds.  For example, late last year Kenya passed its first unclaimed property law.  That was not, however, the end of the matter.  According to an article in the Kenyan newspaper The Star, some don't anticipate that the law will have a significant impact on reconciling abandoned funds, either because the government will not contact the owners, or because the owners do not have or keep the records necessary to substantiate claims or inform their heirs about the existence of the funds. 

These problems don't have easy solutions, but they are no less important than tweaking the rules governing the holder community.

Monday, August 20, 2012

Lost & Found: WSJ on Life Insurers (Again), Unclaimed Property in Paradise (and Minnesota)

Wall St. Journal Feature on Unclaimed Life Insurance Policies -- For more than a year now, state regulators have been investigating the life insurance industry's unclaimed property practices, including whether those companies were doing enough to determine that life insurance policies had become payable.  That investigation led to a number of audits, settlements, and legislative inquiries.  As an update, Monday's Wall St. Journal had an updating article on state efforts to get more life insurance proceeds paid out.  The article notes that in the absence of a claim, some life insurers are permitted to hold onto death benefit funds until the insured reaches (or would have reached) the age of 95, and cites a state regulator's estimate that insurers are holding more than $1 billion in payable death benefits.  It also gives a great overview of how we got here.

Minnesota Governor Blogs on Unclaimed Property -- According to a blog post from the website of  Minnesota Governor Mark Dayton, the Minnesota Unclaimed Property program returned over $19 million in funds to residents in the past year, and over $163 million since 2005.  More information relating to Minnesota's unclaimed property program can be found here.

St. Thomas (U.S. Virgin Islands) Publishes Unclaimed Property List -- As we've noted many times, all 50 states have unclaimed property laws.  In addition, many U.S. territories and commonwealths (e.g., the District of Columbia, Puerto Rico) have also inherited such laws.  The U.S. Virgin Islands are no exception.  According to an article in the St. Thomas Source, the USVI has released its annual listing of unclaimed property, which can be found here.

Monday, August 13, 2012

States Continue To Set Reunification Records

We have seen a number of new and or reinvigorated efforts by state governments to return unclaimed property to the true owners of that property.  In fact, soon we will run our next installment of "Meet Your Escheator" with Kentucky State Treasurer Todd Hollenbach to talk about Kentucky's unique holder reunification programs.  In the interim, we have more states announcing record amounts returned to owners:

In Massachusetts, State Treasurer Steven Grossman announced that the Bay State has returned more than $84 million to residents during Fiscal Year 2012, a 10% increase over last year's return.

Out west in Nevada, State Treasurer Kate Marshall announced that her office has returned more than $33 million in the past fiscal year, a new record.

Monday, August 6, 2012

Here We Go Again

Just when you thought it was safe to escheat gift cards in New Jersey . . . .

As you may know, New Jersey recently revised its unclaimed property laws relating to gift cards.  In particular, the new legislation provides that retailers generally only have to escheat 60% of the face value of unclaimed gift cards, applies a dormancy period of five years for those items (up from two), and delays enactment of a requirement that card sellers obtain purchaser address information for five years.  That new law settled the long running legislative, judicial, and public relations battles concerning the Garden State's attempts to bring unused gift cards into the scope of the state unclaimed property act.

Or did it?  On July 30, New Jersey Assemblyman Paul D. Moriarty, chairman of the Assembly Consumer Affairs committee, introduced Assembly Bill 3189, which would completely remove stored value cards from the scope of the NJ Unclaimed Property Act.  As reported previously by NJ Biz, Assemblyman Moriarty was the original sponsor of the legislation that became the recently passed, Senate Bill 1928, but he voted against the legislation after changes significantly altered the form of the bill (the original version of the bill was more akin to the newly introduced AB 3189).  Inasmuch as Assemblyman Moriarty was the only legislator to vote against Senate Bill 1928, this legislation might be a long shot.  Either way, the story is not quite over yet.

Thursday, July 26, 2012

Private Corporations Are Not The Only Ones With Unclaimed Property: St. Louis Court Sitting on $7.6 Million

The fact that corporations, financial institutions, and the like often have unclaimed property that ultimately gets reported and remitted to state governments is (relatively) well known.  But it is not only private entities that have this issue.  If an entity has a significant amount of payment streams coming in and going out, it stands to reason that at least some percentage of those payments will be misplaced, uncashed, or otherwise not disposed of.

By way of example, the St, Louis Post-Dispatch is reporting that the St. Louis Circuit Court has more than $7.6 million in refunds, credits and other unreconciled payments.  According to the article, these funds have built up over more than 10 years, and consist of, among other things, bail deposits, court fees, and other payments that were supposed to be returned to citizens.  The article explains that the court is looking to retain a private contractor to sort through the applicable records, and determine what payments are to be made. 

Of course, one wonders why these amounts were allowed to accumulate over more than a decade.  According to the Missouri Unclaimed Property Act, property "held by any court" appears to be subject to the unclaimed property act if the property has not been claimed by the rightful owner after three years. Just like unclaimed property accumulates for private and public entities alike, most state unclaimed property laws do not distinguish (or equally apply) to both types of entities

Thursday, July 19, 2012

Breaking News: Delaware Secretary of State VDA Process Signed Into Law

Last week, we mentioned that Delaware was considering a second voluntary disclosure process, separate from the one run by the Department of Finance.  That legislation was approved, and was signed by the Governor yesterday.  A copy of the legislation can be found here, but the highlights are as follows:  holders who come forward by June 2013 (and pay outstanding amounts by June 2014) will only have to review records back to 1996.  Holders who come forward by June 2014 (and pay by June 2015) will only have to review records back to 1993. 

Tuesday, July 10, 2012

Illinois State Treasury Announces Launch of "I-Cash" Program

Illinois State Treasurer Dan Rutherford recently announced a relaunch of Illinois' unclaimed property outreach program, and the addition of more than 780,000 names to the state's unclaimed property database.  The new program, called I-Cash, aims to connect Illinois residents to the more than $1.5 billion (yes, with a "b") that the state is currently holding for its residents.

According to the program's marketing piece, 1 and 8 Illinois residents have property being held for them by the Treasurer's office.  In other reunification news, the unclaimed property administrations of MissouriArkansasIowa, and Pennsylvania all recently touted their successes in reuniting unclaimed funds with their rightful owners.

Monday, July 9, 2012

Mid-Atlantic Minute: Updates from New York, New Jersey & Delaware

There have been a variety of unclaimed property updates up and down the New Jersey Turnpike in the past week, from New York to Delaware.  From North to South:

New York Passes "Finder" Regulation:  Recently, we mentioned that Ohio sent a cease and desist order to an unclaimed property "finder" firm that was allegedly charging people for unclaimed property claim forms (that are available free from the Ohio Department of Commerce website).  As we mentioned, there is no fee to claim property from the state, but most individuals (and even some businesses) that are contacted by property "finder" firms are unaware of that fact.  New York, for its part, is trying to make sure that consumers are educated before entering into agreements with finder firms.  New York Senate Bill 7690 would require all contracts between consumers and finder firms to include contact information for the State Comptroller's office, as well as the following language in at least 12 point font:
The bill also reiterates that the maximum amount that can be charged by a finder firm is 15% of the value of the property.  The bill passed the Senate on 6/19 and is now pending in the State Assembly.

More Thoughts on the New Jersey Gift Card Law:  Last week, Governor Christie signed Senate Bill 1928 into law, which revised New Jersey's 2010 gift card legislation.  Briefly, the bill extended the dormancy period for gift cards from 2 years to 5 years, and delayed implementation of a requirement that retailers obtain zip code information at the point of sale for 4 years.  While many gift card issuers applauded the amendments, not everyone is happy.  According to an article by Andrew Kitchenman in NJBiz the New Jersey Retail Merchants Association (among, presumably, several others) is not happy with the amendments (or, more specifically, the amendments that were made to the amendments right before the bill was put up for a vote).  As we covered here previously (sadly, at great length) the original amendments considered by the State Assembly would have undone the 2010 legislation altogether, removing gift cards from the scope of the unclaimed property act and eliminating the zip code collection requirement.  As Mr. Kitchenman's article recounts, however, the repealing legislation got watered down to merely delaying legislation during negotiations on the State House floor. 

Opponents of the legislation are not giving up.  According to an article in NJBiz last week, the NJRMA is committed to having at least the zip code collection provisions repealed before they come into effect in 4 years.  Indeed, Assembly Bill 3189 has already been proposed in Trenton, which would (consistent with earlier proposals) completely remove gift cards from the scope of the NJ Unclaimed Property Act.

Delaware Considering Parallel VDA Process:  Delaware is one of many states that has a voluntary disclosure agreement (VDA) process for unclaimed property.  Under a VDA, a holder that is out of compliance with the unclaimed property law comes forward to the state, and agrees to perform an internal review of its own records (often on a relatively expedited basis) to turn over past due amounts.  In exchange for that self-identification and remediation, the state generally offers amnesty in the form of a waiver of interest and penalties that may otherwise be assessed on late reported amounts.  As many in the unclaimed property industry can attest, and as has been widely reported, VDA arrangements with the State of Delaware have historically been fraught with peril.  For starters, in order to perform a VDA with Delaware, the holder has to agree to review its own records for possible noncompliance back more than 20 years to 1991.  As if the prospect of reviewing a fifth of a century worth of records wasn't enough, the state was unique in its willingness to nonetheless audit a holder who came forward under a VDA.

Perhaps to remedy its reputation, Delaware is considering a one-time amnesty program run outside of normal audit staff in the Division of Revenue.  Specifically, the Delaware legislature unanimously passed Senate Bill 258, which would create a short-term amnesty program under the authority of the Secretary of State.  Under the proposed legislation, which has been sent to the Governor for signature, holders who come forward by June 2013 (and pay outstanding amounts by June 2014) will only have to review records back to 1996.  Holders who come forward by June 2014 (and pay by June 2015) will only have to review records back to 1993.  If the bill passes, interested holders are advised to act fast:  by the express terms of the legislation, holders that receive audit notices from the State Escheator are not eligible to participate in this amnesty program.

Monday, July 2, 2012

New Jersey Gift Card Legislation Passes

According to Escheatable's contacts in the New Jersey State Government (read: the Internet) Governor Christie signed Senate Bill 1928 into law.  While it did not go as far as many hoped it would (by, for example, repealing all references to gift cards in New Jersey's unclaimed property law) it does provide some regulatory relief for gift card issuers.  In particular, this bill:
  • extends the dormancy period for stored value cards to 5 years (up from the current 2);
  • restricts the application of expiration dates and dormancy fees; 
  •  provides that retail gift cards are escheatable at 60% of the face value (thereby giving retailers the benefit of some profit margin).  Note that this does not apply to "general purpose" cards as defined in the legislation;  and
  • requires issuers to redeem cards in cash if there is a balance of less than $5
The full text of the legislation can be found here.  While the gift card industry's response to the bill is yet to be seen, already gift card provider InComm has announced that it will return to New Jersey.  The issuer previously left the state in April, citing the requirements of the unclaimed property law.

Monday, June 25, 2012

Breaking News: New Jersey Legislature Passes Gift Card Bill, Legislation Headed to Governor (Updated)

We continue the seemingly never ending saga of New Jersey's 2010 gift card legislation.  A brief recap:  In July, 2010 New Jersey passed Assembly Bill 3002, which, among other things, applied the state's Unclaimed Property Act to gift cards (using a 2 year dormancy period), reduced the dormancy period for travelers' checks from 15 years to 3 years, and reduced the dormancy period for money orders from 7 years to 3 years.  In addition, the legislation provided that all gift cards, even those for the purchase of merchandise only, would escheat to the state at full face value (the "Face Value Requirement"), required all gift card issuers to collect at least zip code information from the gift card purchasers (the "Zip Code Requirement"), and provided that in the absence of such zip code information, it would be presumed that all gift cards sold in New Jersey were sold to New Jersey residents (the "Location Presumption").  Got all that?  Good.  Sadly, were not even close to being done with the summary.

Unhappy with several parts of the legislation, gift card issuers, money order transmitters, and travelers' check sellers sued the state to challenge the new law.  Specifically, opponents of the legislation challenged New Jersey's authority to shorten money order and travelers' check dormancy periods, to apply the Unclaimed Property Act to gift cards, and to enforce the Face Value Requirement, the Zip Code Requirement, and the Location Presumption (more details here).  Initially, a federal court in New Jersey entered an injunction temporarily prohibiting the state from retroactively enforcing the Face Value Requirement or the Location Presumption.  The court declined, however, to prevent application of the 2 year dormancy period for gift cards or the shortened dormancy periods for money orders and travelers' checks.  Still there?  Great.  Still not done.

Ultimately, the lower court's decision was appealed to the U.S. Court of Appeals for the Third Circuit in Philadelphia.  That court ultimately upheld most of the lower court's decision.  Specifically the Court of Appeals held that, as a preliminary matter, the gift card issuers challenging the law had shown that they are likely to succeed on their claim that the retroactive Face Value Requirement unconstitutionally interfered with the sellers' contract rights and reasonable expectation of making a profit (because generally retailers do not sell $50 worth of merchandise for $50; there is usually a profit margin). The Court also ruled that the Location Presumption was invalid (and thus could not be enforced) because of the Supreme Court's decision in Texas v. New Jersey.  Thus, cards sold in New Jersey without name and address (more on that later) are still escheatable to the holder's state of incorporation.  At the same time, the Court ruled in favor of New Jersey on two fronts.  First, the Court ruled that the 2 year dormancy period itself was permissible.  Moreover, the Court held that the law's requirement that sellers collect name and address information (or at least zip code info) from the purchaser is constitutional.  Hello?  Still getting the story up to speed.  We're almost at the new stuff.  Really.

While all this legal wrangling was going on, the legislature was also at work trying to improve, amend (or completely undo) the previous legislation.  Industry also got into the act.  In particular, several gift card issuers pulled their products from the shelves in New Jersey, citing an inability or unwillingness to comply with the challenged legislation (including particularly the requirement to collect zip code information for every transaction).

This, in turn, also fomented a public relations battle between the gift card industry and the state.  Basically, the state argued that the gift card retailers were greedy corporate oligarchs bent on stealing innocent citizens' funds with gift cards designed to suddenly dematerialze without warning.  For their part, the gift card retailers essentially argued that New Jersey wanted to outlaw gift cards entirely, through stiff criminal penalties, up to life imprisonment, for persons caught using, possessing, or even thinking about gift cards.  (Editor's note:  This is, perhaps, not a completely accurate recitation of each sides' respective position, though that seemed to be the gist of it).

ANYWAY:  Earlier this year, the New Jersey Assembly passed a bill that would effectively undo the 2010 legislation, by removing stored value cards from the scope of the New Jersey Unclaimed Property Act, and (re)extending the dormancy periods for money orders and travelers' checks back to 7 and 15 years, respectively.  That bill then went to the State Senate for consideration.  Earlier today, the State Senate took action with respect to the 2010 gift card legislation.  Given the twists and turns thus far, what do you think that the State Senate did?
A.  Passed the Assembly Legislation As Is
B.  Passed the Assembly Legislation With Some Minor Changes
C.  Voted Down the Assembly Legislation; Gift Card Laws to Remain As Is
D.  None of the above
Congratulate yourself if you chose "D."  According to the Newark Star-Ledger, the State Senate unanimously passed Senate Bill 1928.  This bill extends the dormancy period for stored value cards to 5 years (up from the current 2) and provides that retail gift cards are escheatable at 60% of the face value (thereby giving retailers the benefit of some profit margin).  The bill also requires issuers to redeem cards in cash if there is a balance of less than $5.  This bill will now (presumably) be considered by the State Assembly.

UPDATED 6/26/2012:  The Assembly passed the same bill later on the evening of June 25.  The bill now goes to the Governor for signature.

Finder's Fees and Unclaimed Property

Last week, a variety of news sources in Ohio reported that the Ohio Department of Commerce (the government entity responsible for the Buckeye State's unclaimed property program) issued a "cease and desist" order to a company that was allegedly charging Ohioans for unclaimed property claim forms.  In addition, the claim section of Ohio's "Treasure Hunt" website has been revised to display a prominent disclaimer at the top:
A Claimant may file a claim WITHOUT the assistance of a paid professional finder.
 The website has also been revised to bar unclaimed property "finder" firms from printing claim forms from the Department of Commerce's website.  Apparently, these finder firms operated by searching for and printing claim forms from Ohio's website (a free service provided by the Department) and then "selling" those (free) forms to the individuals identified. 

While the relevant section of the Ohio Unclaimed Property Act does not, strictly speaking prohibit private "finder" firms from charging a fee to assist private citizens with the recovery of unclaimed property from the Department of Commerce, it does strictly limit such activities.  For example, the Act provides that no agreement to assist with claiming property is valid within the first 2 years after the property has been reported to the state, and the "finder fee" must be registered with the state.  In addition, the law has a number of disclosure requirements that specify certain terms that must be in the finder contract.

While we often write about the state's interest in using "unclaimed funds" that it holds to balance budgets and make expenditures, it should perhaps come as no surprise that a number of private parties are also looking to grab a piece of the pie.  Agreements with so-called "finder firms" are allowed in many states, pursuant to which the finder agrees to assist a claimant with obtaining his or her money from the state in exchange for a percentage fee.  Indeed, in Escheatable's home state of New Jersey, the Unclaimed Property Act allows for a fee of up to 35% of the value of the property.  (see N.J.S.A. 46:30B-106).

Of course, states generally charge no fees for searching, claiming and receiving unclaimed property that they hold for the benefit of the rightful owner.  That does not mean that all finder firms are shady -- indeed, there are a variety of situations where most of us will gladly pay another to provide a service that we don't have the time, patience or expertise to do ourselves -- but it does mean that a consumer should only enter into such an agreement if he or she understands exactly what he or she is paying for.  In the case of unclaimed funds, a finder fee firms (might) provide you with expertise or time (i.e., the they will deal with the the claim process so you don't have to).  They are NOT, however, providing you with access to the money; the money is yours.  The finder is not "giving" you anything; the relationship is more akin to letting the finder firm mine for gold on land that you own; except, of course, in the case of unclaimed property there are two important caveats:

1.  First, if the finder is contacting you, there's money being held for you (in other words, there is likely something of value on your land in our mining example);

2.  Second, and more saliently, what is backbreaking and dangerous work in our mining example is usually just filling out a form and sending it to the state.

Everyone is free to spend their time and money how they wish, and everyone has their own individual balance.  Just know what you are paying for.  In the case of unclaimed funds and finder firms, it is (maybe) time and expertise, not access, that you are buying.

Tuesday, June 12, 2012

Michigan "B2B" Exemption Passes

More than a year ago we mentioned that Michigan was considering House Bill 4563, which would add a business-to-business exemption to the Michigan Unclaimed Property Act.  That legislation was finally enacted (effective immediately) about two weeks ago.  The text of the legislation provides, in relevant part, that:
Except with respect to property described in sections 7 and 17, this act does not apply to any credit balances, overpayments, deposits, refunds, discounts, rebates, credit memos, or unidentified remittances created on or after April 1, 2009 and issued, held, due, or owing in any transactions between 2 or more associations. This exemption does not apply to outstanding checks, drafts, or other similar instruments.
 The references to "sections 7 and 17" refers to those sections of the Michigan Unclaimed Property Act relating to bank deposits and safe deposit box items, respectively.  While the legislation is effective immediately, by its terms, the exemption only applies to items "created on or after April 1, 2009."  In other words, property that is reportable starting with next year's report.

Monday, June 11, 2012

Lost & Found: New Jersey Gift Card Editorials, Missouri Breaks Records, South Carolina Returns Money to Lawmakers, West Virginia Treasuer Honored

Editorial on New Jersey Gift Card Law -- Last week, we posted an update concerning the New Jersey legislature's efforts to repeal the Garden State's 2010 gift card legislation.  Recently, the Times of Trenton, NJ published an editorial strongly in favor of repealing New Jersey's gift card law.  While the Times editorial board commended the state's efforts to ban dormancy fees and expiration dates, it nonetheless argued that "[t]he state should not be poised like a vulture over these purchases, counting on a recipient’s forgetfulness to help patch budget holes."  The full editorial can be found at the Times of Trenton website here.

Even Some Lawmakers Unaware of Unclaimed Property Laws -- Charleston, SC NBC Affiliate WCBD recently reported that South Carolina State Treasurer Curtis Loftis (who was a recent participant in our "Meet Your Escheator" feature) announced that at least 23 South Carolina legislators were owed unclaimed money by the state.  Thanks to the efforts of Treasurer Loftis, that number is likely to get whittled down.  According to an article published on at least one legislator has already begun the reclaim process.

Missouri Breaks Unclaimed Property Reunification Record (Again) -- According to an article in the St. James Leader-Journal, Missouri State Treasurer Clint Zweifel recently announced that, for the third time in a row, the state has broken the record for the largest amount of money returned from the unclaimed property fund for the fiscal year (with a few weeks remaining).  This year, Missouri has returned more than $36.5 million.  Of course, as regular readers may recall that large amount was helped a great deal by the fact that just a few months ago, Missouri paid out the largest single unclaimed property claim ever (of more than $6 million).

West Virginia Treasurer Given Lifetime Achievement Award -- The National Association of Unclaimed Property Administrators, an organization representing the interests of state unclaimed property departments, recently honored West Virginia Treasurer John Purdue with a lifetime achievement award to recognize him for his efforts to return unclaimed property to West Virginians.  According to an article in the Charleston (WV) Gazette, Treasurer Pursue has overseen the return of more than $100 million since West Virginia's unclaimed property law was modernized in 1996.

Wednesday, May 30, 2012

New Jersey Gift Card Repeal Legislation Continues Progress

When we last left the New Jersey Gift Card Saga, the New Jersey State Assembly had passed a bill that would effectively undo the 2010 gift card legislation by removing "stored value cards" from the scope of New Jersey's Unclaimed Property Act.  In addition, the proposed legislation would (re)extend the dormancy periods for travelers' checks and money orders to 15 and 7 years, respectively. 

After passing the Assembly, the bill was forwarded to the State Senate, where it was referred to the budget committee.  Recently, the Senate Budget Committee likewise passed the bill.  Just in case you were wondering, it is unlikely that the Governor will support the bill (although that will not necessarily stop it from passing).  Earlier last month, the Governor told a group of reporters that if "If they [the gift card issuers] want to move out, move out. It’s their call."  We will continue to follow the legislation.

Monday, May 14, 2012

WSJ Article on "Inactivity" Standard for Brokerage Accounts

Today's Wall Street Journal has a good summary article (link at bottom) about the controversy surrounding the states' move to using an "inactivity" standard for brokerage accounts.

In many states, brokerage and other securities accounts are subject to abandonment on a "returned mail" basis, meaning that, regardless of owner activity, the dormancy period for such accounts did not begin to run unless the holder started receiving account statements or other correspondence returned as undeliverable by the post office. And with good reason: for years, a significant amount of financial press and advice has advocated a "buy and hold" strategy, which specifically contemplates significant periods of little to no activity by the account owner.

In their never ending quest to bring more funds under state control, however, the states have not remained dormant on the "returned mail" standard. Instead, Delaware and other states are trying to move to a standard based upon "activity.". Under this standard, an account will be deemed abandoned if the customer does not engage in a transaction during the 3 to 5 year dormancy period. Accordingly, investors using a buy-and-hold strategy should make sure to correspond frequently with her brokerage firms If they don't, they might find out that although they are doing the buying, the state is doing the holding.

Monday, May 7, 2012

Upcoming Events: UPPO Holders Seminar on July 16-17

The Unclaimed Property Professionals' Organization, the premiere trade group for holders of unclaimed property is holding its next Holders' Seminar on July 16-17 in Seattle, Washington.  The Holders' Seminar features a wealth of information on unclaimed property topics, and features both "beginner" and "intermediate" educational tracks.  More information can be found on the UPPO website, here.

Monday, April 30, 2012

Unclaimed Property 101 Part 2 ("Where") - Jurisdiction - What State Makes the Rules?

Today, we are going to continue our break from the New Jersey gift card saga and take a step back to first principles by continuing our new feature to the blog:  "Unclaimed Property 101."  In these articles, we will provide a primer on the basic unclaimed property laws and policies that govern an unclaimed property holder's (or owner's) rights and responsibilities.  While this represents a departure from our gift card discourses, it is not entirely unrelated.  Indeed, most of the ink spilled for and against New Jersey's gift card legislation relates to the law's requirement that gift card sellers collect the purchaser's name and address (or at least zip code) information at the time of purchase.  Why does the law do that?  Good question.  Here's the answer:

In the beginning . . . .

In the beginning, there were no set rules for determining which state had the primary right to take custody of unclaimed property.  In many situations -- for example, an insurance policy held by a NY-incorporated life insurer, located in NY, for the benefit of a NY resident -- these priority rules did not matter.  However, where multiple states had some "contact" with the transaction, there raised the possibility of dual claims.  In 1948, in the case of Connecticut Mut. Life Ins. v. Moore, the Supreme Court of the United States was faced with the question of whether New York could enforce its abandoned property law to take custody of life insurance policies belonging to NY residents where the insurance company was not a NY corporation.  The nine insurance companies who challenged the NY abandoned property law in Connecticut Mutual argued, among other things, that only their respective states of incorporation, not New York, had the power to escheat any dormant insurance policies that they held.

The Supreme Court rejected this argument.  In so doing, however, the Court (temporarily) ducked the question of competing state claims for the same property, explaining that "[t]he problem of what another state than New York may do is not before us.  That question is not passed upon."  The question presented, the Court explained, was simply whether New York had the constitutional power to escheat the policies.  The Court concluded that it did.  As to the claims of other states or former NY residents who moved to other states, the Court "reserve[d] any conclusion as to New York's power in such situations."

1961:  Mantle and Maris Chase Babe Ruth, Pennsylvania Chases Money Orders

The Supreme Court was again faced with the issue of escheat jurisdiction in 1961, in the case of Western Union v. Pennsylvania.  In that case, Pennsylvania sought to take custody of unclaimed telegraphic money orders purchased from Western Union (then a New York corporation) by Pennsylvania residents, to be transmitted to recipients in other states.  For its part, Western Union made clear that it did not have any intention of keeping the property, but was concerned about other states (particularly New York) suing Western Union for the same funds.  As the Supreme Court noted, Western Union's concern was not merely theoretical:  "The claims of New York are particularly aggressive, not merely potential, but actual, active and persistent -- best shown by the fact that New York has already escheated part of the very funds originally claimed by Pennsylvania."  Recognizing this potential dual liability, the Supreme Court reaffirmed what can be construed as the first rule of unclaimed property jurisdiction:

RULE "ZERO":  A holder cannot be liable to more than one state for the same property.

Or, as put somewhat more eloquently by the Court:
 [Our cases] have recognized that when a state['s] jurisdiction purports to be based, as here, on the presence of property within the State, the holder of such property is deprived of due process of law if he is compelled to relinquish it without assurance that he will not be held liable again in another jurisdiction or in a suit brought by a claimant who is not bound by the first judgment.
Western Union, 368 U.S. at 75.

In this case, despite having been seemingly confronted with a direct dispute between two states (Pennsylvania and New York) concerning the property in question, the Court again temporarily sidestepped the issue.  In particular, the Court explained that it didn't then have to "attempt to decide the difficult legal questions presented when many different States claim power to escheat intangibles involved in transactions taking place in part in many States" because it was clear that the state courts of Pennsylvania could not force other states to participate in the escheat proceedings against Western Union.  Accordingly, the Court ruled in favor of Western Union, and put off the inter-state conflict for another day.

1965:  Another Day Arrives

The modern jurisdictional rules for resolving conflicts among the states concerning power to escheat unclaimed property were established by the Supreme Court in the 1965 case of Texas v. New Jersey. In that case, the State of Texas brought a case in the Supreme Court's original jurisdiction against New Jersey, Pennsylvania, and the Sun Oil Company to resolve which state had the primary right to escheat certain small debts owed by Sun Oil.  Florida also ultimately joined the litigation.  For its part, Sun Oil simply wanted to be protected from liability to multiple states from the same property (see Rule One above).  The Supreme Court explained the problem as follows:
With respect to tangible property . . . it has always been the unquestioned rule . . . that only the State in which the property is located may escheat.  But intangible property, such as a debt which a person is entitled to collect, is not physical matter which can be located on a map. The creditor may live in one State, the debtor in another, and matters may be further complicated if, as in the case before us, the debtor is a corporation which has connections with many States and each creditor is a person who may have had connections with several others and whose present address in unknown. Since the States separately are without constitutional power to provide a rule to settle this interstate controversy, and since there is no applicable federal statute, it becomes our responsibility, in the exercise of our original jurisdiction, to adopt a rule which will settle the question of which State will be allowed to escheat this intangible property. 
 Not surprisingly, each of the states involved asked the Supreme Court to adopt a different rule as to which state had the best right to escheat the funds.  The rules proposed were:
The "Texas Rule":  Escheat to the state with the most "significant contacts;"
The "New Jersey Rule":  Escheat to the holder's state of incorporation (which, in a total coincidence, just happened to be in New Jersey);
The "Pennsylvania Rule":  Escheat to the state of the holder's "principal office" (guess where that was?); and
The "Florida Rule": the state of the owner's last known address as shown on the holder's books and records.
 After considering each of these proposals, the Court concluded that the "Florida Rule" -- escheat to the state of the owner's last know address, as shown on the holder's books and records -- was preferable to the other proposals.  Specifically, the Court noted that the question of the holder's last known address was easier to apply than the other proposals.  Thus, the Court adopted:

RULE ONE:  In the first instance, unclaimed property gets reported and remitted to the state of the owner's last-known address, as shown on the holder's records.

The court also recognized that, in at least some instances, the holder would not know the last known address of the owner.  For that situation, the Court considered and adopted the "New Jersey" rule -- escheat to the holder's state of incorporation.  Thus, the Court adopted:

RULE TWO:  In situations where (a) the last-known address of the owner is unknown; or (b) the last-known address is in a state that does not provide for escheat of the property, the holder's state of corporate domicile (i.e., incorporation) has the right to escheat the property.

These two rules were reconsidered, and readopted by the Supreme Court some 25 years later in Delaware v. New York.  In that case, the property at issue consisted of securities distributions held by intermediary banks, brokers, and financial agents who cannot be located (or, in some cases, even identified).  In readopting the Texas v. New Jersey rules, the Court made clear that:

RULE THREE:  The secondary rule (escheat to the corporate domicile) also applies to situations where the identity (not just address) of the owner is unknown.

Those priority rules continue to this day.  The only exception to these jurisdictional rules is with regard to travelers' checks, money orders and other similar written instruments (not checks).  For those items, pursuant to a federal law, the rules are somewhat different:

RULE FOUR:  If the property is a travelers' check, money order, or similar written instrument (not a check, or third-party bank check), the property escheats, in the first instance, to the place of purchase of the item.

RULE FIVE:  If the property is a travelers' check, money order, or similar written instrument and the state of purchase is unknown, or the laws of the state of purchase "lack the power" to take custody of the funds, the item escheats to the holder's principal place of business.

So, there you have it.  Nearly seventy years of escheat jurisprudence boiled down to 6 rules (really, 4 if you don't issue travelers' checks and money orders).  Now, to tie that back to the beginning, these rules are why New Jersey wants to require gift card issuers to obtain zip code information for cards sold in New Jersey.  In the event that the card issuers do not collect owner name and address information, the priority rules (particularly Rule 3 above) dictate that the property will be escheated to the card issuers' state of incorporation (probably not New Jersey).  In the event that the issuer collects the owner's zip code information at the time of sale, New Jersey will argue that the zip code information (which, for NJ gift card sales is likely to be a NJ zip code) is sufficient to demonstrate that the owner's last known address is in New Jersey and that, accordingly, New Jersey has the primary right to escheat the property.  Which begs a question:  is zip code information enough to demonstrate the owner's last known address?

Alas, that is a question for another day.


Tuesday, April 24, 2012

MetLife Announces Multi-State Examination Settlement

Today, we break from one long-running unclaimed property story (the New Jersey gift card legislation) and return to another (the multi-state examination of life insurers' death benefit settlement practices).  MetLife issued a press release yesterday, announcing that it was adopting "new processes" to govern the handling of claims that do not arise "in the normal course of business."  Note: the reference to "normal course of business" refers to the fact the policies that were the subject of the examination were those wherein the insured died, but no claim was made on the policy.  See here for a primer.

In any event, the press release announces that as part of these new processes, MetLife will:
  • "periodic[ally] match . . . administrative records against available external sources such as the Social Security Death Master File";
  •  attempt to contact many of its older (over age 90) policyholders; and
  • implement a new online system to make it easier for beneficiaries to find policies.
While the press release does not break down the specific financial terms of settlements with state agencies, it does provide that MetLife is taking a  "$52 million post-tax charge representing a multi-state examination payment . . . as well as the expected acceleration of benefit payments to policyholders under the settlement."

Thursday, April 19, 2012

NJ Legislative Research Office: Gift Cards Worth $20-$25 Million Per Year to State

In connection with NJ Assembly Bill 1871, which would reverse the changes made in 2010 to New Jersey's unclaimed property laws, the New Jersey Office of Legislative Services released its Fiscal Estimate Report on the proposed legislation.  While the OLS itself declined to estimate the lost revenue impact on New Jersey that would be a consequence of undoing the gift card legislation, it did recount testimony from the Unclaimed Property Division last summer wherein the Division estimated that the state would collect "$20 million and $25 million per fiscal year from the escheatment of stored value cards."

The entire report can be found here.

Tuesday, April 17, 2012

An Introduction to Unclaimed Property - Part I (Who)

Welcome to a new feature that we will roll out over the next few weeks on this blog:  An Introduction to Unclaimed Property.  For regular unclaimed property professionals, this is just a refresher.  Really, these posts are intended for you if you are:
  • An accounting or finance professional who has just been told that you will be responsible for unclaimed property compliance;
  • An in-house counsel who is dealing with a legal/compliance issue relating to your company's unclaimed property responsibilities;
  • The unlucky recipient of an audit notice from a state or private third-party auditing firm;
  • A reporter looking for an unclaimed property primer; or
  • Someone simply interested in learning more about unclaimed property (in which case, we'd suggest you get a hobby).
As a general rule, "unclaimed property law" refers to a statutory regime in every state (plus the District of Columbia, Puerto Rico, the U.S. Virgin Islands, and a number of foreign jurisdictions) whereby certain dormant intangible property owned by an owner, but held by a holder, is reported and remitted to the government for safekeeping.  The government, in turn, indemnifies the holder from further claims by the owner, and holds the property (generally, forever) until such time as it is claimed by the rightful owner.  From the holder's perspective, there are generally five steps of compliance:
  1.   Determine what state's law applies to a particular owner's property.
  2.   Determine what the appropriate dormancy period for the item in question.
  3.   Try to contact the owner, to let them know that the property is in danger of going to the state.
  4.   Fill out an unclaimed property report for the applicable state.
  5.   Remit (e.g., turn over) the property to the applicable state.
While the foregoing covers the essence of what one needs to know about unclaimed property laws, this set of articles will expand on these issues in a little more detail.  

As with any good story, we want to start by covering the Who, What, Where, When, and Why of unclaimed property law, regulation, and compliance.  Please be advised, that as with all articles on this blog, this is not intended to be legal advice.  You can (and should) consult with the unclaimed property lawyer of your choice with any questions about your particular situation.  Let's start with the "Who" -- Who has an obligation to report unclaimed property?  Who is a "holder"? 

While the specific definitions and scope of state unclaimed property laws vary from state to state, nearly every unclaimed property law regime applies to a wide variety of companies, banks, brokers, joint ventures, sole proprietorships, etc.  For example, under the Ohio Act, a "holder" is "any person that has possession, custody, or control of moneys, rights to moneys, or other intangible property, or that is indebted to another."  Notably, such broad definitions of holder would seem to encompass almost everyone and anyone.  So, generally, if your company or business is holding property for another (and no state-specific exemption applies), you're a holder.

Similarly, who is an "owner"?  Basically, anyone to whom money or property is owed.  For example, as California law explains, "owner" means "a depositor in the case of a deposit, a beneficiary in case of a trust, or creditor, claimant, or payee in case of other choses in action, or any person having a legal or equitable interest in property subject to this chapter, or his or her legal representative."

In the next installment - tentatively scheduled for next week - we'll cover the "What" of unclaimed property:  What gets reported under the laws?  Checks, abandoned warehouses, stocks, old issues of Sports Illustrated, foreclosed properties, gold teeth?  (Preview:  yes, probably not, definitely, depends on where you find them, probably not, and maybe).  

Monday, April 16, 2012

An Update on the Kenyan Unclaimed Property Act

Last fall, we mentioned that Kenya was considering passing an unclaimed property law that was very similar in scope and application to unclaimed property laws in the United States.  That law was passed and went into effect on December 16, 2011.  A copy of it can be found here.  As a review of the law makes clear, the provisions of the Kenyan act appears to be very similar to those of the 1981 Uniform Unclaimed Property Act, only with a 2 year dormancy period for most property types.

Although the Kenyan Act just recently came into effect, its application could be significant.  According to a recent editorial in Business Daily Africa, commercial banks in Kenya are holding approximately 7.4 billion Kenyan Shillings ($88.8M US) in dormant assets. Like its U.S. counterpart, the Kenyan act requires holders to send written notice to apparent owners of unclaimed property, and requires annual reporting.  As the editorial makes clear, however, the Act is decidedly silent on what (if any) obligation the government has to notify apparent owners of unclaimed property, or even what happens to the funds collected by the government.

In other non-U.S. unclaimed property news, the Northern Mariana Islands passed its proposed unclaimed assets legislation.  The final act, which passed on February 6th, can be found here.  Also, according to an article in Benefits Canada, the draft budget of Ontario (Canada's) minority government announced its intent to establish an official provincial unclaimed property program

Friday, April 13, 2012

Lost & Found: PA Reporting Deadline, OK Trial Set to Begin, Philly Sheriff Settles (. . . and Cookies!)

Some snippets from this week that don't relate to New Jersey and gift cards:

Pennsylvania Reporting Deadline Coming - Most state unclaimed property reports are due in the fall, but there are a handful of "Spring" reporting states.  In this press release, Pennsylvania State Treasurer Rob McCord reminds holder's that Pennsylvania's report deadline is on April 15th.  Holders with questions or who need assistance in advance of the deadline can contact the Treasurer's Office.

Trial Set to Begin For Former Unclaimed Property Auditor - Last September, we mentioned 
the story of a former Oklahoma unclaimed property auditor who was charged with stealing unclaimed property from the state.  Now, according to The Oklahoman, the trial of the former auditor, LaTisha Reid, is scheduled to begin next Wednesday.

Philly Sheriff Settles With State  In early 2011, we mentioned an unclaimed property investigation of the Philadelphia Sheriff's Office concerning the mishandling of unclaimed property.  According to a press release from the Pennsylvania State Treasury, the Sheriff's office has turned over in excess of $23 million to the state, all of which will now be made available for claims.  According to the Treasurer, the state has "already processed 167 claims and returned nearly $409,000 to rightful owners."

Bonus Fact:  Thin Mints (TM) have been elected as Oklahoma's official favorite Girl Scout cookie.

Wednesday, April 11, 2012

New Jersey Issues (Misleading) "Real Story" on Gift Cards; Trade Group Counters With (Somewhat Misleading) Response

. . . and so it continues.  Those of you hoping for a relatively genteel, thoughtful and well balanced discourse concerning the relative merits and risks of New Jersey's 2010 gift card laws are sure to be disappointed.

When we last left the saga of New Jersey's 2010 gift card laws, three gift card retailers had pulled out of the state, citing an inability or unwillingness to ensure that it could comply with New Jersey's gift card rules.  For its part, the state responded with a press release wherein it purports to provide the "Real Story" with regard to the legislation, and provides some FAQs to address concerns.   Unfortunately, while the state purports to provide the "real story," the canned FAQs provided are quite misleading.  The primary problems with the state's press release fall into two main categories:

1.  Complete Silence on the Federal CARD Act -- In several places, the state's press release contends that "after two years of inactivity" (the state's dormancy period) the gift card issuers take gift card funds as "windfall profits."  In fact, in the FAQ section of the release, the state explicitly states that "[e]xcept in pro-consumer states like New Jersey, gift card issuers take unused consumer balances as windfall profits after two years."  Elsewhere in the release, the state suggests that in the absence of New Jersey's law, gift card issuers are entitled to charge "exorbitant" dormancy fees.

The problem with these statements is that they are generally not true.  In May of 2009, President Obama signed The Credit Card Accountability Responsibility and Disclosure Act of 2009 (the "CARD Act") into law.  Among other things, that law prohibits most gift card issuers from imposing an expiration date of less than five years on cards covered by the Act.  The Act also limits card issuers ability to impose dormancy fees and provides that no such fees can be charged during the first 12 months from issuance.  A copy of the law can be found here.  The Act applies to nearly all open-loop (useable anywhere), closed-loop (affiliated merchant) and store gift cards (single stores).  See Pub. Law 111-24 at Section 401-403.  Accordingly, as a matter of federal law, nearly all of the gift cards that are subject to the NJ act must be valid for no less than five years.  Thus, an argument can be made that consumers are actually more inconvenienced by New Jersey's attempt to reduce the period of inactivity by more than half.

2.  (Purposeful) Ambiguity on Consumers' Ability to Recover Funds From the State -- A much more significant problem with New Jersey's press release, is the implication express statement that "every penny the State holds in unused gift cards can be reclaimed by consumers -- forever."  Again, this is simply not true.  While the law permits card issuers to collect full name and address information at the time of purchase, it only requires card issuers to collect zip code information.  New Jersey explicitly states as much in the release:  "[i]n many cases, all that is required to be collected is the zip code."  While that fact is offered by the state to demonstrate that the information collection burden on card issuers is light, it also removes the foundation on which New Jersey's house of cards is based.  Specifically, if the issuer does not collect name and address information, the state does not have name and address information.  Without that information, quite obviously, the state can not consider or honor consumer reclaim requests.  Thus, that vast majority of escheated funds cannot and will not ever be reclaimed by consumers -- much less the "every penny" touted by the state.  While the state is posturing this law as a consumer protection issue, it is really just a revenue generating device.

In response to the press release, a trade group calling itself Gift Card Users Unite! has issued a press release in response to the State's "Real Story."  While most of the information in the press release (particularly about the CARD Act and New Jersey's utter failure to recognize the issuer's reasonable expectation of making some profit from gift card sales) is completely accurate, GCUU is likewise guilty of some *ahem* rhetorical excess.  Specifically, the GCUU press release goes out of its way to imply that the New Jersey law somehow prevents the sale of gift cards in New Jersey.  Specifically, the press release claims that "the result of [the law's zip code] requirement is that consumers will not be able to buy cards in thousands of New Jersey stores."  The GCUU's website is even more alarmist, asking consumers to "PROTECT YOUR RIGHT TO BUY GIFT CARDS!"

Sorry, GCUU.  The law, for all of its faults, does not do anything to prevent, restrict or eliminate gift card sales in New Jersey.  It does create procedural requirements that make issuers unwilling to change their systems and/or policies to comply with the law.  No doubt there is an administrative burden:  some issuers will choose to comply, some won't.  The law does not, however, do anything to limit or restrict the sales themselves.