Here at Keane Unclaimed Property, our main objective is to provide corporate compliance and risk management solutions to corporations, mutual funds and financial institutions. However, we’re also dedicated to helping consumers who are the customers, shareholders and employees of those firms.

In a recent Kansas City Star article titled “States Have Millions in Unclaimed Property”, Debbie Zumoff, Vice President and Chief Compliance Officer at Keane Unclaimed Property, mentions that “consumers need to understand the importance of demonstrating activity in their accounts.”

According to the National Association of Unclaimed Property Administrators,

nearly $33 billion in unclaimed property is being held in 117 million accounts nationwide and that includes over $200 million in Kansas and $600 million in Missouri. For consumers living in these states, this money comes in the form of bank accounts, stocks and bonds, uncashed checks, life insurance policies, and gold coins and security box contents. The typical dormancy period on these accounts is usually 3 to 5 years and after that period of time, money becomes subject to the state.

However, by keeping a record and staying active on all accounts, consumers can significantly decrease the chances that their money becomes escheated to the state. Even more so, if consumers can make unclaimed property a regular on their financial to do list, they may have an even better chance of holding onto their property.

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In July, the Cayman Islands passed a law called the Dormant Accounts Law of 2010 that would allow for funds in dormant accounts to be transferred to the general revenue of the islands. Many of the characteristics of the law, such as dormancy periods and due diligence requirements, are similar to that of America’s unclaimed property laws. The general dormancy period for the Dormant Accounts Law is six years and applies to all monies including savings deposits, certified checks, intangible assets and safe deposit boxes in an account held by a financial institution that has been inactive for that period. Also, in addition to the standard due diligence requirement of mailing notices to owners, the Dormant Accounts Law would also require businesses to publish ads in the newspaper when the bank has been instructed not to send correspondence to the account holder.

Recently, however, The Financial Services Legislative Committee of the Cayman Islands (the Committee) sent a memo to the government stating that the law was “fundamentally flawed” as it has potentially dangerous consequences for the financial services industry.

In the eyes of the Committee, neither the financial industry nor the Committee were properly consulted before passage of the bill and the law itself is ambiguous in language. In fact, the scope of the types of accounts that could be seized is almost boundless and could make the Cayman Islands less attractive for financial institutions.

The memo, which included a list of suggested changes and even a rewritten version of the law, is currently in the hands of The Legislative Assembly and will hopefully be reviewed during November’s meeting.

Be sure to check back to see what changes, if any, will be made to the existing law.

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So just what does the law say? On July 1, 2010, New Jersey passed a revision to the Uniform Unclaimed Property law stating that gift cards – which were not previously covered by the unclaimed property act – are presumed abandoned after two years. This includes paper gift certificates and rebates cards. The law also reduces the time to redeem travelers’ checks and money orders from 15 years to three years and seven years to three years, respectively. Finally, the law forbids fees charged on stored value cards and limits the amount of dormancy fees businesses can charge on travelers’ checks.

The lawsuits involve American Express Travel Related Services Company, the New Jersey Retailers Association and the New Jersey Food Council, and are all seeking a preliminary injunction against enforcement of the law.

American Express

Having sued on September 23, American Express argues that New Jersey is the only state to change the abandonment period on travelers’ checks from 15 years to three years. It complains this law in no way benefits owners of travelers’ checks.

New Jersey Retail Merchants Association

The NJ Retail Merchants Association, on the other hand, states that the revised law does not align with New Jersey Superior Court, Appellate Division ruling, Matter of November 8, 1996 Determination of the State of New Jersey, Dept. of Treasury, 309 N.J. Super. 272, which holds that gift cards are not subject to escheatment.

New Jersey Food Council

The Food Council believes another portion of the revised law, which applies only to retailers selling more than $250,000 worth of gift cards a year, is unfair since individually owned businesses operating under a common trade name are treated as a single issuer.

In the eyes of some members of New Jersey Legislature, the revised law will protect consumers from dormancy fees and bring order to the state’s unclaimed property laws. However, Assemblymen Patrick Diegnan Jr. and Paul Moriarty are in disagreement. On September 20, they introduced A-3250 in an effort to reverse the new law, as they believe that it has caused uncertainty for both businesses and consumers. Stay tuned to see how this all unfolds.

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• General dormancy period from 5 to 3 years.
• Money orders from 7 years to 3 years.
• Any sum payable on a check, draft, or similar instrument from 5 years to 3 years.
• Demand, savings, matured time deposits including any automatically renewable deposits, from 5 to 3 years.
• Trust accounts and accounts under the Gifts to Minors Act, from 15 years to 3 years.
• Funds owed under any life or endowment insurance policy, from 5 to 3 years.
• Gift Cards, from 5 years to 3 years.

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New Jersey state treasurer, Andrew P. Sidamon-Eristoff, has been hit with two law suits concerning a measure approved back in June of 2010 which was part of the budget recommended by Governor Christie. The budget called for changes to when a travelers check or gift card could be considered as abandoned, resulting in an estimated $80 million for the state. Gift cards alone are estimated to generate $33-55 million.

The recent amendment included gift cards for the first time ever in the New Jersey Uniform Unclaimed Property Act. The adjustment declares cards that have been unused for two years as unclaimed property.

The same amendment addressed travelers checks, stating that the previous 15 year period would be reduced to 3 years concerning when a check may be “presumed abandoned”. This cleared the treasury to seize proceeds from as far back as 1994 according to the American Expresss suit which also openly identifies New Jersey as the only state that does not adhere to the standard, 15-year period.

American Express believes that the amendment interferes with the power of Congress to regulate trade amongst states, which is granted through the Constitution’s commerce clause. Mainly, American Express views the new 3 year period as a threat to their business in the state because they typically generate a return by investing the unused money until the check holder spends or cashes the balance. As a result of a September 13th hearing of the Assembly Consumer Affairs committee where merchants expressed concern, two Democratic Assemblymen introduced a bill on September 20th that would revert the amendment as it applies to travelers checks.

John Holub, president of the NJ Retail Merchants Association, said “We recognize the challenges New Jersey faces in achieving a balanced budget.” But the amendments “are in conflict with the federal system, which is binding on all states,” he added.

The NJRMA also disagrees with the section of the amendment requiring record keeping by retailers for the names and addresses of the “purchaser or owner” of every card. The intent was for there to be proof that a purchase took place within borders of New Jersey.

A clarification document was released from the NJ treasurer stating that only the zip codes of the purchaser must be recorded and that the recent amendment does not prevent a holder from reclaiming their money back from the state.

This article was inspired by this article in The Record concerning NJ Gift Cards and Travelers Checks.

Contact a Keane Unclaimed Property for more information

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For most states, these new regulations give consumers five years as opposed to one year to use the balance on most gift cards, but they will still have to pay fees for not using them. One major key improvement is that card issuers must wait a year before charging an inactivity fee. However, in a recent Associated Press interview, Laura Lane, vice president of unclaimed property services here at Keane Unclaimed Property, indicated that this could be both good and bad for consumers.

“It could be good for consumers in that they have a year before fees are charged,” she says. “However once that year is up, who knows how good for consumers that will be.”

In addition, the new rules don’t apply to all gift cards and this includes reloadable prepaid cards from MasterCard, Visa, American Express and other lenders, and reward cards or rebates. In fact, Lane says that more and more companies—such as phone companies—are giving rebates in the form of electronic cards because it’s easier for them to track how much is yet to be used.

Some states, however, do not follow this five-year standard. Take for instance New Jersey where Assembly Bill 3002, which was signed into law and went into effect on July 1, 2010, (but has recently been extended to October 1, 2010), requires that gift certificates, gift cards, and stored values cards be turned over to the state after just two years of dormancy. Legislation is on the table, however, to reverse these changes and eliminate the state’s claim on unused store values and eliminate the requirement that businesses gather contact information from customers buying gift cards. Michigan, as well, is expected to pass legislation this month that will reduce dormancy periods across the board – including gift cards – to 3 years of inactivity.

Moving forward, companies will soon be required to print expiration dates on gift cards. However, this new gift card escheatment law does not take effect until January 31, 2011 meaning that consumers must pay attention this holiday season. If they receive gift cards, they should use them as soon as possible in order to avoid escheatment or complications with the state.

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• General dormancy period from 5 to 3 years.
• Travelers checks from 15 years to 3 years.
• Money orders from 7 years to 3 years.
• Any sum payable on a check, draft, or similar instrument from 5 years to 3 years.
• Demand, savings, matured time deposits including any automatically renewable deposits, from 5 to 3 years.
• Trust accounts and accounts under the Gifts to Minors Act, from 15 years to 3 years.
• Funds owed under any life or endowment insurance policy, from 5 to 3 years.
• Gift cards, from 5 years to 3 years.

The bill also proposes to change the filing deadline for unclaimed property reports. Starting in 2011, the report shall be filed on or before July 1 for the 9-month period ending on March 31, 2011. For years ending after December 31, 2011, the report shall be filed on or before July 1 of each year for the 12-month period ending on the immediately preceding March 31.

In order to have your opinion heard at this point in this legislative process, please direct your calls directly to the Michigan Governor’s office.

Governor Jennifer M. Granholm
P.O. Box 30013
Lansing, Michigan 48909
PHONE: (517) 335-7858 – Constituent Services

Also, you can submit your comments through the Governor’s office website:

http://www.michigan.gov/gov/0,1607,7-168-21995-65331–,00.html

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