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8/16/21 9:29 AM

Unclaimed Property Due Diligence: The Move Toward Electronic Delivery

by Heather Gabell

DUE DILIGENCEStatutory due diligence is required by most states as the final attempt by the holder to reunite the owner with his or her dormant funds before the holder is required by law to report such funds to the state as unclaimed property. Due diligence timeframes, dollar thresholds and methods of delivery vary by state and/or property type. The Revised Uniform Unclaimed Property Act (RUUPA) was introduced by the Uniform Law Commission in 2016 as a model act for the states to utilize when updating their unclaimed property laws. Section 501(b) of the RUUPA contains language that requires holder to send a due diligence notice to the owner via electronic mail as well as by first-class mail, 60 to 180 days before the report date, if the owner has consented to receive electronic mail delivery from the holder.While many states that have enacted RUUPA-like laws have adopted similar due diligence provisions requiring both first class mail and electronic mail (Kentucky, North Dakota, and Tennessee), they have not equally adopted timeframes, and some even permit the holder to send the notice electronically in lieu of first-class mail (Colorado and Indiana). States that have not adopted RUUPA have also enacted, or are considering, similar provisions that address electronic due diligence. Texas, for example, recently enacted HB 1514, which allows holders to send the notice via first-class mail or email. In Ohio, pending House Bill 348 would, among other things, permit holders to send notices electronically for funds valued at $50 to $1000, so long as the holder sends the email with “read receipt requested.” The requirement to send notices via certified mail, return receipt requested, for property valued at $1000 or more would remain unchanged.

Requiring electronic notice and a first-class mail mailing, or in lieu of the first-class mailing presents both opportunities as well as challenges for holders. The efficiency and effectiveness of email in today’s modern age is self-evident.  Recent data presented by the Statistica Research Department indicates that as of 2020, over 90% of internet users maintain an email account for business or private use, and portable devices account for over 40% of all emails that are opened. [1] Owners who have already opted into electronic delivery of notices, statements, etc. are more likely to recognize, open and (hopefully) respond to a notice from the holder regarding his or her unclaimed funds.

Electronic due diligence also eliminates dealing with the ongoing service disruptions from the postal service, which have only worsened during the COVID-19 pandemic. Unfortunately, for some, mail delivery delays may soon become permanent, and holders may need to adjust current due diligence practices to accommodate a longer mail delivery standard. The United States Postal Service (USPS) recently indicated that Postmaster DeJoy’s plan to “slow down” the delivery of first-class mail by increasing the current 1–3-day delivery standard to a 1–5-day standard for some mail will become effective on October 1, 2021. [2] This will likely be a pain point for all holders, as many states across the country still require first-class mail of the due diligence notice. Add to that the increase in US postage stamps from $0.55 to $0.58, that becomes effective on August 29, 2021. According to the USPS, 61% of first-class mail will remain at its current delivery standard, but for holders in the unclaimed property space, this slow-down coupled with postage increase will need to be factored into due diligence procedures for both outbound delivery of due diligence notices, as well as incoming responses. Email delivery of due diligence may become even more efficient and cost effective for some holders.

Holders will also face challenges with electronic mail delivery:

• Holders must first ensure that an owner has properly consented to electronic delivery of communications and that the holder has collected an email address and ensured that it is up to date.

• Holders will also need a backup plan to address email bounce-backs and should have procedures in place to accept any increases in call volumes that could result from the email notices.

• Procedures should also be in place to ensure that the email communications, and the responses received to such communications, are adequately documented, and retained for record retention purposes.

• Holders are also faced with issues related to sending bulk emails, which could lead to notices being caught up in a spam filter or never received, if the holder is blacklisted and the email is never sent.

Other factors to consider:

• Will the state (or international) privacy laws come into play or existing internal corporate policies affect letter content or electronic delivery of the notice. If restrictions are placed on sensitive information sent online and an owner receives a truncated due diligence notice containing limited information, the owner may consider the notice to be spam or even fraudulent. This could lead to either a non-response or possibly an increase in the amount of calls a holder would need to anticipate fielding.

• Also consider the possibility of the owner responding to both the email and hard copy of the due diligence notice. Procedures would need to be in place to prevent the potential for double payments.

Whether it is required in addition to a first-class mailing or whether it serves as an alternative method of delivery, email communication can serve as another method of contact to encourage a response by the owner prior to the due diligence period and can prevent accounts from ever becoming dormant and requiring a due diligence notice in the first place. Email addresses should be requested at the time an account is opened, and at every point of contact, confirmed by the owner (along with physical addresses and phone numbers), and properly documented and retained by the holder, to ensure that the holder has the most up to date contact information.

We recommend taking a proactive approach to capturing and documenting all owner activity, not only by building solid policies and procedures around the due diligence process, but around owner contact generally. And because unclaimed property legislation is ever-changing, be sure to incorporate the tracking and monitoring of such legislation into your processes. 

If you have questions Contact MarketSphere and speak with the subject matter experts who can assist you with your escheat compliance needs

[1] Statistica Research Department, “Statistics and Facts About E-Mail Usage in the United States,” Statistica.com, July 12, 2001, https://www.statista.com/topics/4295/e-mail-usage-in-the-united-states/.

[2] David Shepardson, “U.S. Postal Service Finalizes Plan to Slow Some Mail Deliveries,” Reuters.com, August 6, 2021, https://www.reuters.com/world/us/us-postal-service-finalizes-plan-slow-some-mail-deliveries-2021-08-06.

*Content contained in this article is considered accurate as of the publish date.

Topics: Compliance, Due Diligence, Best Practices