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6/22/21 9:12 AM

USPS Possible Changes Could Impact Unclaimed Property Due Diligence.

by Amy Blickhan

DUE DILIGENCEIf they haven’t already, holders of unclaimed property should be preparing to send due diligence mailings in advance of the Fall 2021 reporting cycle. Statutory due diligence takes the form of written outreach to the owner at the owner’s last known address, according to the holder’s books and records. The letter puts the owner on notice that his or her property will be reported (“escheated”) to the state as unclaimed property if the owner fails to respond within a specified timeframe, after which the holder will no longer be in possession of the property and the owner must file a claim with the state to reclaim his or her funds.

Due diligence value thresholds, the timing of the mailing, the language required in the notice, and even the method of delivery is determined by the states and vary widely, and in some cases even differ by property and/or holder type. In general, first-class mailings are required to be mailed 60 to 120 days before the filing of the report, but again timing and method of delivery vary.   Additionally, the requirements are ever-changing. The states that have recently enacted revised unclaimed property laws based on the 2016 Revised Uniform Unclaimed Property Act (RUUPA) have not uniformly adopted the 60–180 day timeframe or the requirement to send an email communication in addition to the first-class mailing, if the owner consented to electronic communications from the holder.It is noteworthy that the United States Postal Service is currently seeking to slow down the delivery of first-class mail and increase mailing rates, which could negatively impact holders, and by extension, owners of unclaimed property. Under Postmaster General Louis DeJoy’s Delivering for America Plan, which aims to increase revenues over a 10-year period, mail processing plants would be consolidated, resources focused on the package business, and the transportation of mail would move away from air carriers.   The length of time it would take to receive a first-class mailing would increase from 3 to 5 days, depending on where the mail originates and where it is going, with mail traveling the furthest distance (i.e., cross country) taking up to 5 days to deliver[1]. The USPS estimates that there would be an average 18% increase in delivery time nationally[2]. The 6.8% rate hike for first class mail, which was requested by the USPS at the end of May, would take effect on August 29, 2021.

Customers and businesses alike rely on first-class mail, even though mail volumes have decreased over time as a result of electronic mail. While the USPS estimates that 70% of first-class mail would receive a standard 1-3 day delivery, 30% of the mail will take longer to be delivered, with the justification for the increase to up to 5 days being that this will ensure a 95% on-time delivery rate. For holders of unclaimed property, these delays will likely impact both the outbound delivery of the due diligence mailings sent via first-class mail as well as incoming responses, and the rate increase could be costly, especially for smaller businesses. The longer delivery timeframes could also shorten the window for some owners to respond to the due diligence letters.

It remains to be seen whether these new standards will be put into place.   There is opposition to the plan and there are open seats on the USPS’s governing board which could potentially vote DeJoy out. Further, the USPS has requested an advisory opinion from the Postal Regulatory Commission, and while their recommendations would not be binding, it could affect the way the Plan is rolled out.

Because each reporting jurisdiction has its own unique set of due diligence requirements and standards, holders should actively monitor state legislative and regulatory activity to ensure that all requirements are met. In addition, the possibility of USPS delays in mail delivery should be factored into a holder’s reporting timeline as the failure to perform timely due diligence can subject the holder to fines or penalties, raise an audit red flag, and may even prevent the holder from obtaining a release of liability for property that is escheated to the state.

MarketSphere encourages holders to consider implementing early owner reunification programs into their compliance program. A proactive approach will help holders improve results of locating customers, reestablishing contact, and reducing escheat liability. Contact Us to learn more about services available for effective early owner outreach and due diligence programs.

[1] United States Postal Service. “Delivering for America” Fact Sheet. USPS, Delivering for America Service Standard Change Fact Sheet (usps.com).

[2] Heckman, Jory. “USPS Defends Slower Mail to Achieve More Reliable Delivery.” Federal News Network, 9 Jun. 2021, USPS defends slower mail to achieve more reliable delivery | Federal News Network.

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

 

Topics: Compliance, Due Diligence, Reporting, Recordkeeping, Best Practices