Monday, April 2, 2012

What California's Unclaimed Property Statistics Mean

Recently, the California State Controller's Office (the CA government entity responsible for administering that state's unclaimed property program) released a variety of charts and statistics relating to property returned by California to owners from 1997-98 to 2010-11.  While the amounts of cash returned, securities returned, and notices mailed to owners seem impressive (and frankly, are impressive), the huge uptick in each of these items doesn't tell the whole story: 

The huge uptick appears to begin in 2007.  As you may recall, in 2007, the California Unclaimed Property Department was shut down by a federal court for what the court determined was a violation of owners' due process rights by the state.  As a result of that injunction, the state passed new legislation that, among other things, required both the holder and the State to make attempts to notify the owner. In other words, while holders in California -- as elsewhere -- send due diligence notices to owners prior to remitting property to the State, California's revised law requires the State to make those efforts as well.  State due diligence notices are arguably more effective from holder notices for at least two reasons:

First, the State generally has access to more and better address databases in order to locate the owners of property.  While the holder generally has only its own records, the state has that information as well as numerous public databases such as drivers' license records, franchise tax reports, personal income tax reports and the like.  The sheer number of contacts between the owner and the state make it more likely that (at least one) state agency will have the right address. 

Second, and more practically, an owner is just more likely to open a letter from the state than from a private company.  Many individuals are inundated with mail from the firms with which they do business in the form of advertising, rebates, promotional material, privacy notices, monthly statements, general correspondence, and product or service offers.  Especially in light of the prevalence of online and electronic bill payment, some people probably don't even open mail from their bank or broker.

Ultimately, what California's statistics seem to show is that state due diligence letters work.  Accordingly, while several states are working hard to increase the scope of property they take and the speed with which they take it (all in the name of protecting owners), there is more they can do if the real goal is to reunite money with its rightful owners.

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