BILL ANALYSIS Ó
SENATE JUDICIARY COMMITTEE
Senator Noreen Evans, Chair
2013-2014 Regular Session
AB 212 (Lowenthal)
As Amended June 24, 2013
Hearing Date: July 2, 2013
Fiscal: Yes
Urgency: No
TH
SUBJECT
Unclaimed Property
DESCRIPTION
This bill would lower the threshold from $50 to $25 in the
Unclaimed Property Law at which a person holding escheated
property must include in his or her annual report to the State
Controller the name and last known address of the owner of any
escheated property. This bill would also clarify that banks and
financial organizations may impose a service charge up to $2 to
cover the cost of providing required notices to owners warning
them that their unclaimed property may escheat to the state only
if the property has a value greater than $2.
BACKGROUND
The Unclaimed Property Law (UPL), as revised in 1968, provides
for the "escheat" of unclaimed personal property. Escheat is
the reversion of property to the state by reason of the failure
of the owner to inherit or claim it.
The UPL specifies conditions when unclaimed property held by a
third party may escheat to the state. For banks and financial
organizations, unclaimed property may escheat to the state when
an owner fails to act on an account for more than three years
after the date the funds became distributable or payable.
Existing law requires these entities to send owners of unclaimed
property valued at $50 or more specified notices that identify
the property and warn the owner that their property may escheat
to the state unless they take certain specified actions to
reclaim the property. The law permits banks and financial
(more)
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organizations to impose a service charge of up to $2 to cover
the cost of providing such notices.
The UPL also establishes procedures to be followed when, after
the above notices have been sent, the property goes unclaimed
and reverts to the state. Under existing law, the holder must
annually report on unclaimed property and turn the property over
to the State Controller. (See Code Civ. Proc. Secs. 1530-1533.)
Banks and financial organizations are required to submit an
annual report to the Controller that identifies all property
that has escheated to the state, and, for property valued at $50
or more, to identify the name, if known, and the last known
address of the property owner. Escheated unclaimed property
valued under $50 may be reported in the aggregate, and reporting
entities need not provide the name and address of the property
owner in their annual report even if they have such information.
The UPL also sets forth the procedure for any person who claims
an interest in the property to file a claim to recover the
property from the state. (Code Civ. Proc. Secs. 1540-1542.)
This bill, sponsored by the State Controller, would lower the
threshold from $50 to $25 in the Unclaimed Property Law at which
a person holding escheated property must include in his or her
annual report to the State Controller the name and last known
address of the owner of any escheated property. This bill would
also clarify that banks and financial organizations may impose a
service charge of up to $2 to cover the cost of providing
required notices to owners only if the unclaimed property at
issue has a value greater than $2. The bill would leave
unchanged the $50 threshold amount at which banks and financial
organizations must send notices to owners of unclaimed property
warning them that their property will escheat to the state
unless reclaimed.
CHANGES TO EXISTING LAW
Existing law , the Unclaimed Property Law (UPL), requires
property held or owing by a business association that is
unclaimed for more than three years, as specified, to file a
report with the State Controller and turn over that property to
the state. (Code Civ. Proc. Secs. 1513, 1513.5, 1530-1532.)
Existing law provides that if a banking or financial
organization is the holder of unclaimed property and has in its
records an address for the apparent owner of property valued at
fifty dollars ($50) or more, the holder shall make reasonable
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efforts to notify the owner that the owner's property will
escheat to the state on a specified date. The notice shall be
mailed not less than 6 nor more than 12 months before the time
when the owner's property would escheat and become reportable to
the Controller. (Code Civ. Proc. Sec. 1513.5.)
Existing law permits a banking or financial organization to
impose a service charge on the deposit, account, shares, or
other interest for the above notice in an amount not to exceed
the administrative cost of mailing or electronically sending the
notice and form, and in no case to exceed two dollars ($2).
(Code Civ. Proc. Sec. 1513.5(b).)
Existing law requires, except with respect to traveler's checks
and money orders, a person holding funds or other property that
has escheated to the state to report the name, if known, and
last known address, if any, of each person appearing from the
records of the holder to be the owner of any property of value
of at least fifty dollars ($50). (Code Civ. Proc. Sec. 1530(b).)
Existing law permits escheated items of value under fifty
dollars ($50) each to be reported by the holder to the State
Controller in aggregate. (Code Civ. Proc. Sec. 1530(b).)
Existing law authorizes the Controller to bring an action to
enforce provisions of the UPL and provides for the imposition of
penalties and interest against holders who willfully fail to
comply with its provisions. (Code Civ. Proc. Sec. 1576.)
Existing law authorizes any person, except another state, who
claims an interest in property paid or delivered to the
Controller to file a claim to the property. (Code Civ. Proc.
Sec. 1540(a).)
This bill would, beginning July 1, 2014, require a person
holding escheated property to include in his or her report to
the Controller the name and last known address of the apparent
owner of any escheated property, except travelers checks and
money orders, worth at least $25.
This bill would clarify that banks and financial organizations
may impose a service charge of up to $2 to cover the cost of
providing required notices to owners only if the unclaimed
property has a value greater than $2.
COMMENT
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1. Stated need for the bill
The author writes:
The Unclaimed Property Law (UPL) was created in 1959 to ensure
"property owners [are] reunited with their property." (Code
of Civil Procedure [Section] 1501.5(c)). Aggregate reporting
makes it at best difficult and inefficient, and at worst,
impossible, for the State's Unclaimed Property Program to
fulfill its mission in regard to these properties.
Aggregate holder reporting of unclaimed property allows for
several small properties to be added together as one amount
without the reporting of the actual property owner's
individual owner information even when the holder is in
possession of this information. This includes important
information that could otherwise be reported such as [an]
owner name, address, account number, and social security
number. Without this information, the State Controller's
Office [SCO] task of reuniting this property with its rightful
owner is a nearly impossible task.
Aggregate reporting presents many challenges for the Unclaimed
Property Program in achieving its mission to reunite lost and
abandoned property with the rightful owner. Since current
statute does not require holders to report owner information
on accounts valued at less than $50, aggregate properties are
not itemized within the unclaimed property database or
displayed on the website for owners to search via the SCO
public website and claim their properties. If by chance an
owner does learn that they have an aggregate property, many
complexities ensue for both holders and the SCO in researching
these properties and proving entitlement when a claim is made.
Often times when a customer calls to make an inquiry
regarding an aggregate property, the State will refer them
back to the holder and conversely, the holder will refer them
back to the State. This back and forth creates a great deal
of frustration for the property owner and inspires very little
public confidence [in] the Unclaimed Property Program or the
holder.
In 2011-12, the State Controller had over $12.8 million
transferred to the state in aggregate, without any property
owner information at all. Over the past five years, the total
is over $68 million.
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This bill would greatly reduce the problem by requiring
holders to submit detailed owner information, when available,
for all [unclaimed] properties valued at $25 or more. Having
the detailed owner information will significantly increase the
likelihood that these properties will be returned to the
rightful owner.
2. Returning unclaimed property
The UPL has two parallel objectives: (1) to reunite owners with
unclaimed funds or property, and (2) to give the state, rather
than the holder, the beneficial use of unclaimed funds or
property. (Bank of America v. Cory (1985) 164 Cal.App.3d 66,
74; Douglas Aircraft Co. v. Cranston (1962) 58 Cal.2d 462, 463.)
The State, through the Controller, acts as the protector of the
rights of the true owner. (Bank of America, supra, 164
Cal.App.3d at p. 74.) This bill arguably advances the UPL's
first objective of reuniting owners with their unclaimed
property by requiring banks and financial organizations to give
the State Controller's Office more information about the
identity of the owner of escheated property.
As the Controller reasonably asserts, it is difficult to reunite
owners with their lost property when unclaimed property is
reported in the aggregate. Lowering the threshold for aggregate
reporting from $50 to $25 will help the controller return
unclaimed property to its rightful owner by requiring banks and
financial organizations to provide any ownership and address
data they have when they report the property to the state.
While it is likely that this change would increase the volume of
detail property holders will be required to submit in connection
with unclaimed property reports, the Committee has not received
any indication from the regulated community that this change
would be overly burdensome to implement. Staff notes further
that the bill delays implementation of this change by six months
to July 1, 2014, giving banks and financial institutions extra
time to adjust their reporting procedures in accordance with the
new threshold.
The second provision in this bill - that a service charge of up
to $2 can only be assessed if the property is worth more than $2
- will also further the objectives of the UPL by helping to
ensure that unclaimed property is not extinguished due to the
levying of service charges.
3. Prior opposition
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Staff notes that this bill, as introduced, would have required
banks and financial organizations to send due diligence letters
with respect to unclaimed property valued at less than $50.
This departure from existing law arguably would have helped more
owners locate and claim their property, thus furthering the
objective of the UPL, but it would have come at an additional
cost to the entities required to send these notices. AB 212 was
amended to remove this requirement and, as amended, the bill
reverts to existing law concerning due diligence letters, which
requires that they only be sent to the apparent owner of
unclaimed property valued at fifty dollars ($50) or more.
Following this amendment, those banks and financial institutions
that were opposed to the bill removed their opposition.
Support : None Known
Opposition : None Known
HISTORY
Source : California State Controller
Related Pending Legislation :
AB 1275 (Chau) would revise the Unclaimed Property Law to only
allow an owner of, instead of a person with an interest in,
property to file a claim with the State Controller's Office for
recovery of property that has escheated to the state. This bill
would also revise the definition of "owner" to remove a personal
representative and include an estate representative,
conservator, or guardian. This bill is currently on the Senate
Floor.
AB 1011 (Salas) would require the Controller to add interest, at
specified rates, to the amount of any claim paid by the
Controller to an owner under the Unclaimed Property Law. This
bill is currently in the Assembly Committee on Appropriations.
Prior Legislation :
AB 2117 (Niello, 2010) would have eliminated the regular
transfer of unclaimed property funds from the Abandoned Property
Fund to the General Fund, would have required the Controller to
add an interest payment to any claim for unclaimed property that
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the Controller pays to an owner, and would have extended the
escheatment period for most types of unclaimed property from
three years to five years. This bill failed passage in the
Assembly Committee on Judiciary.
AB 1291 (Niello, Ch. 522, Stats. 2009) made various reforms to
the Unclaimed Property Law (UPL) to strengthen property owners'
rights and ensure that property holders reasonably inform
customers about risks associated with leaving accounts dormant
and the potential for escheatment of property after a period of
inactivity.
SB 1319 (Machado, 2008) would have relieved a holder of
escheated property of liability if the holder complied with
notification requirements, would have increased civil penalties
for non-compliance with the UPL, and would have revised
notification requirements for holders of unclaimed property.
This bill was vetoed by Governor Schwarzenegger.
AB 378 (Steinberg, Ch. 304, Stats. 2003) reduced the escheatment
period from five years to three years for bank checks and
deposit accounts, and from three years to one year for wages and
salaries.
AB 1772 (Harman, Ch. 813, Stats. 2002) prescribed the notice and
information that a bank or financial institution must give to
owners of financial accounts that are about to escheat to the
state, and required the same notice by other holders of tangible
and intangible property subject to the UPL.
SB 673 (Speier, 2001) would have provided for notices to be sent
by mail from the Controller to apparent owners of unclaimed
property, and for the Controller to take further steps,
including searches of other governmental records and outreach to
the general public, to alert owners that their unclaimed
property had escheated to the state. This bill was held in the
Assembly Committee on Appropriations.
Prior Vote :
Assembly Judiciary Committee (Ayes 7, Noes 2)
Assembly Appropriations Committee (Ayes 12, Noes 5)
Assembly Floor (Ayes 54, Noes 22)
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