Aggregate Reporting Under the Microscope in California

Under most state unclaimed property laws, there exists a mechanism called "aggregate reporting" whereby the holder of the funds is permitted (or in some states, required) to report and remit items under a specific dollar amount (usually $50) in one lump sum, without providing owner name and address information.  As we've discussed previously in this space, while aggregate reporting reduces administrative burden on the holder and on the state, that process is arguably inconsistent with the primary purpose of the unclaimed property laws -- to try and reunite owners with their missing funds.  Obviously, to the extent that the state does not have identification information for the owner of the funds, the state cannot search for that owner or take any action to return the funds.

A recent situation in California demonstrates this problem.  According to a report by CBS 13 Sacramento, a fifteen year old California resident learned that his $30 savings account was turned over to the state by his bank because of a lack of activity.  When he and his family went to search for the funds, however, they state was unable to locate the account.  They eventually contacted CBS 13 consumer investigation reporter Kurtis Ming, who learned that since 2007 California brought in more than $68 million in funds without owner name and address.  Ultimately, the bank - not the state - gave the money back to its customer, but the story isn't over yet.

California Assemblymember Bonnie Lowenthal has authored a bill to close this unclaimed property "loophole" and would require holders to report owner-identification information for all amounts, regardless of size.  Assembly Bill 212 would remove the provisions of California unclaimed property law that permit balances of less than $50 to be reported in the aggregate, and would also require holders to send notice to all owners of unclaimed property -- regardless of the balance.  The bill is currently before the Assembly Judiciary Committee.
 

Unclaimed Life Insurance Updates

A few items of note concerning the long running regulatory investigation into the unclaimed property practices of life insurers, and their use of the Death Master File to determine whether policies are eligible to be paid.  Earlier this week, NBC's The Today Show posted an article estimating the value of unclaimed insurance policies at over $1 billion.  The story provides a good summary of the issues, and the history of the investigations to date.

Of course, wherever there is a giant pot of money reported, people seeking a share of it will not be far behind.  According to a report by Arthur Postal on LifeHealthPro, at least one plaintiffs' lawyer has commenced a class action against insurer John Hancock seeking damages for delayed notification of life insurance benefits.  For its part, John Hancock has already been investigated -- and reached a settlement -- with a variety of states concerning this particular issue.  Thus, it appears that the insurers' fears of having the state investigations being used to fuel private class action lawsuits is coming to pass.  It is doubtful that this will be the last such case.

Delaware Extends Temporary VDA Program

As we've mentioned a few times, Delaware has a temporary Voluntary Disclosure Program that is being run out of the Secretary of State's office - complete with a detailed website.  The Secretary of State's program operates separately from the VDA program run by the Division of Finance -- the latter a program oft-criticized for being more stick than carrot. 

Early reviews of the Secretary of State program have been favorable (though it should be noted that such work is still in the very preliminary stages) and the program has just been extended by the Delaware legislature.  Pursuant to House Bill No. 2, holders can still obtain a VDA "look back" period starting in 1996 if the enter into the VDA program by 6/30/13 and make payment (or arrangements for payment) by 6/30/15.