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KeepUP™ Blog

9/16/20 8:34 AM

A Proactive Approach To Improve Unclaimed Property Due Diligence

by Heather Gabell

email people and mailThe 2016 Revised Uniform Unclaimed Property Act (“RUUPA”) is a model act designed to assist states in updating their unclaimed property laws, which for the most part, are outdated, since they are based on either a 1981 or 1995 version of the act.   Certain provisions of RUUPA address modern technology and have been incorporated into the laws of states that have recently enacted RUUPA-like laws.

For example, RUUPA requires that holders reach out to owners of retirement, securities or custodial accounts that have consented to receive electronic communications from the holder via email no later than 2 years after the owner’s last indication of interest in the property. This pre-due diligence requirement must be followed up promptly with first class mail if the holder lacks an email address for the owner or believes an email to be invalid, if the email bounces back, or if the owner does not respond within 30 days.

RUUPA also requires that if an owner consented to electronic communications, the due diligence notice must be sent via first class mail and email. Both the pre-due diligence outreach and the electronic due diligence requirements have been adopted in Tennessee, Utah, Illinois, Kentucky, Maine, and Colorado (email optional), Vermont (effective 1/1/2021), and Nevada. RUUPA-like bills have been introduced in the District of Columbia, Minnesota, Washington, and Wisconsin, and we expect additional states to also follow suit.

Statutory due diligence is required in most states as the last attempt to reach the owner/customer before property is escheated to the state. However, by the time the due diligence period comes around, the property has likely been dormant for several years.   The chances of reaching the owner are low, assuming the notice is received, and the owner responds in time.   Due diligence requirements vary by state and even by property type in terms of notice time frames, dollar thresholds, required verbiage and type of communication to be sent (regular mail and/or certified mail), therefore it is in the holders’ best interest to be PROACTIVE - provide outreach to the owner/customer BEFORE the property becomes dormant.

Pre-due diligence campaigns can be conducted via phone, mail, or email to prompt owner contact.

Review accounts 60-90 days after a period of inactivity. Start the outreach early!

Owner initiated activity should be accurately and properly documented by date and type of activity.

Account for all types of contact – to the owner and by the owner. Take advantage of technology! Interactive voice response (“IVR”) platforms allow customers to easily update information, as does a log-in into an account, provided the log-in is properly authenticated.

Comply with state and federal legislative and regulatory changes.

  • Noncompliance with state mandated due diligence can lead to fines. For example, per Iowa Code § 556.11(5), the Treasurer can charge a holder who fails to exercise due diligence $5 per name and address account reported if 35% or more of the accounts are claimed within 24 months after the filing the report.  
  • Moreover, the chances of a holder being indemnified by the state against future claims by an owner can be negatively impacted if the due diligence requirements are not followed.  
  • State laws have evolved surrounding electronic activity and owner interest.   RUUPA ( 210(5)) permits banking/financial organizations to consider automatic deposits or withdrawals previously authorized by an owner (other than automatic reinvestments of dividends or interest) as an indication of owner interest.
  • Some states that have not enacted RUUPA-like law have updated their statutes to permit electronic activity as well. For example, California (CCP 1513(c)) banking/financial organizations may consider single/recurring debit or credit transactions that are authorized by the owner as owner activity. Ohio (Administrative Code § 1301:10-1-01(P)) permits owner-initiated transactions or authenticated, account owner-initiated administrative activity, including loan payments, ATM/debit card transactions, and ACH deposits or withdrawls as owner-generated activity. However, owner-generated activity does not include activity where the holder credits dividends, posts account fees, or automatic financial or administrative transactions or activity, such as automatic payments. 

Track RPOs (mail returned to the post office) as well as the lack thereof.   While an RPO represents an opportunity for owner outreach via phone or email, the non-return of a 1099 or other statement regarding the account, is considered owner activity in some states. For example:

  • Alabama (banking institutions; AL Code § 35-12-72(d)(3)) – the mailing of a statement or report of interest paid or credited that is not returned to the holder for non-delivery is considered owner interest in the property.
  • Minnesota (MN Stat § 345.32(b)(4) - received tax reports or regular statements of the deposit or accounting by mail from the financial organization or business association regarding the deposit is considered owner interest in the property. Receipt of the statement by the owner should be presumed if the statement is mailed first class by the financial organization or business association and not returned.

Institute policies and procedures, and review these annually. Standardize processes and procedures surrounding inactivity outreach, documenting responses, and data retention.

Verify the type of outreach and response received and remember, all accounts should be associated with an owner name, address, phone number and email.

Educate your employees and your customers. Flag accounts with RPOs and prompt outreach to update address information. Remind your customers to be proactive - encourage them to cash checks, purchase shares, update addresses, make deposits, or to periodically log in to accounts.

Owner outreach can take many forms and we can help! Customized postcards, letter/email campaigns, IVR, heir and deep searches are all cost-effective ways to reduce time, expenses, resources, and ultimately the reportable population that will need to be escheated. Contact Us to learn more.Subscribe to our KeepUP!™ blog series to have timely unclaimed property articles delivered conveniently to your email inbox.

Topics: Due Diligence, Reporting, Best Practices