KeepUP™ Blog

3/27/15 11:08 AM

UPPO Recap: Unclaimed Property Today

by Greg VerMulm

UPPOMarketSphere was on hand at the recent UPPO conference in Orlando to meet with clients, teach sessions and absorb the general unsettled state of the industry. A number of important issues rose to the surface. Here are two of the most hotly discussed topics:

Uniform Law Commission (ULC) continues honing revision of the law

No less than three ULC commissioners were on hand to bring us up to speed on their efforts to revise the 1995 Uniform Unclaimed Property Act, layout the issues they face and ask for help from the unclaimed property community to ensure the new iteration of the law is fair and viable. Three sessions were dedicated to discussions of reform. You can see the latest draft of the new law here.

As the discussions progressed, a few interesting ideas stood out.

  • It’s clear complete uniformity of the law isn’t likely, due to the specific nature of unclaimed property in different geographic areas. Oil and gas laws, for example, need special consideration in energy states.
  • Only 15 states have officially adopted the 1995 act! This probably reflects the need for laws that fit each state. Some states use bits and pieces of the 1995 act, and some use clauses from the previous act.
  • The ULC drafting committee consists of only four people. They are relying heavily on UPPO, NAUPA and others to respond to drafts and add weight and credibility to the debate. The commissioners appealed for staff and funds from unclaimed property organizations to help complete the revision process.
  • Some are saying the only way to arrive at fair laws, whether they are uniform or applicable to fewer than the entire 54 jurisdictions, is to hammer out the disputes in court. One example of this is the court case in California that limited the number of records a life insurance company had to produce for an audit. Legal precedents like this have a bearing on the way unclaimed property laws develop in other states.

MarketSphere will continue to watch this activity and share our insight with you—especially when developments affect the way holders process unclaimed property.

Stored value cards: unclaimed property’s next frontier

As the industry wrestles with the fairness of state unclaimed property laws, new sources of unclaimed property continue to pop up, along with new questions about the nature of unclaimed property and how to handle it fairly.

One of the most controversial new types of unclaimed property is stored value cards. This includes retail gift and promotional cards, as well as payroll, loyalty and incentive cards. Even new technologies, such as mobile wallets, could fall into this category. The unused amount on a card is called breakage. One debate is who the breakage belongs to…the buyer, issuer or recipient?

Another question is how much responsibility the issuing company has to return (and escheat) unused balances. Everyone’s asking whether it is possible to track down the actual buyer of a card, since cards are often given as gifts and contact information isn’t usually captured at the time of sale or transfer to the recipient/holder. For companies with hundreds of thousands of customers, such as large retailers, capturing this information at time of purchase and conducting due diligence efforts could be cost prohibitive. 

Some states’ unclaimed property laws cover stored value cards, but the jury is still out for many states. A number of court cases have shaped the law in this area, and more litigation is expected before state laws settle into a more uniform pattern. 

Keeping an eye on unclaimed property

These are only two of many issues holders and others were talking about at this year’s UPPO conference. There are also hot issues in specific industries, such as oil and gas and insurance. The industry continues to debate audit fairness—a couple of states have undertaken their own reforms in this area. Some laws expose holders to fraud. New technologies, such as virtual currency, are creating new categories of unclaimed property. 

One thing remains clear: the debates are not expected to subside anytime soon, and it’s critical for holders to keep on top of changes in the law to ensure penalty-free compliance. Stay tuned to MarketSphere’s KeepUP Blog for ongoing reports. We provide regular reports here and consult with our clients on specific issues that affect their businesses. If you have questions that need immediate resolution, call one of our advisors at 844-357-1099.

Topics: ULC