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.