BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 212|
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THIRD READING
Bill No: AB 212
Author: Lowenthal (D)
Amended: 6/24/13 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 4-2, 7/2/13
AYES: Corbett, Jackson, Leno, Monning
NOES: Walters, Anderson
NO VOTE RECORDED: Evans
SENATE APPROPRIATIONS COMMITTEE : 7-0, 8/30/13
AYES: De León, Walters, Gaines, Hill, Lara, Padilla, Steinberg
ASSEMBLY FLOOR : 54-22, 5/29/13 - See last page for vote
SUBJECT : Unclaimed property
SOURCE : State Controller John Chiang
DIGEST : This bill, beginning July 1, 2014, requires a person
holding escheated property to include in his or her report to
the State Controller (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 allows the holder to report information regarding escheated
items worth less than $25 in aggregate. This bill authorizes a
banking or financial institution to impose a service charge for
notice if the deposit, account, shares, or other interest has a
value greater than $2.
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ANALYSIS :
Existing law:
1.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
Controller and turn over that property to the state.
2.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 $50 or more, the
holder shall make reasonable 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 six nor more
than 12 months before the time when the owner's property would
escheat and become reportable to the Controller.
3.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 $2.
4.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 $50.
5.Permits escheated items of value under $50 each to be reported
by the holder to the Controller in aggregate.
6.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.
7.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.
This bill:
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1.Requires, beginning July 1, 2014, 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.
2.Clarifies 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.
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
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 Controller. 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
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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.
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
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, Chapter 522, Statutes of 2009) made various
reforms to the 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, Chapter 304, Statutes of 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, Chapter 813, Statutes of 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
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property had escheated to the state. This bill was held in the
Assembly Committee on Appropriations.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
The State Controller's Office (SCO) costs of approximately
$120,000 annually, beginning in 2014-15, to provide additional
notices to owners of lower-valued property escheated to the
state that was formerly included in the aggregate reporting
without owner contact information (General Fund).
The SCO estimates revenue losses of $12,544 in 2015-16,
$92,544 in 2016-17, and $143,744 in 2017-18, with moderate
ongoing growth, as a result of increased claims by owners of
lower-valued property escheated to the state that was formerly
included in the aggregate reporting without owner contact
information (General Fund). Actual losses could be higher,
depending on how much of the current aggregate property
transferred to the state is valued over $25, and the claim
rate for lower valued property. For example, if half of the
aggregate property currently transferred to the state in a
year has a value of $25 to $50, and the claim rate is one
fourth of the overall first year claim rate for escheated
property, the first year impact would be $30,400 (based on
$12.8 million in aggregate property transferred to the state
in 2011-12, and average overall first year claim rate of 1.9%)
SUPPORT : (Verified 8/30/13)
State Controller John Chiang (source)
ARGUMENTS IN SUPPORT : According to the author, the UPL was
created in 1959 to ensure "property owners [are] reunited with
their property." 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
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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 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 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.
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."
ASSEMBLY FLOOR : 54-22, 5/29/13
AYES: Achadjian, Alejo, Ammiano, Atkins, Bloom, Blumenfield,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chesbro, Cooley, Daly, Dickinson,
Eggman, Fong, Fox, Frazier, Garcia, Gatto, Gomez, Gonzalez,
Gordon, Gray, Hall, Roger Hernández, Jones-Sawyer, Levine,
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Lowenthal, Medina, Mitchell, Mullin, Muratsuchi, Nazarian,
Pan, Perea, V. Manuel Pérez, Quirk, Quirk-Silva, Rendon,
Salas, Skinner, Stone, Ting, Weber, Wieckowski, Williams,
Yamada, John A. Pérez
NOES: Allen, Bigelow, Chávez, Conway, Dahle, Donnelly, Beth
Gaines, Grove, Hagman, Harkey, Jones, Logue, Maienschein,
Mansoor, Melendez, Morrell, Nestande, Olsen, Patterson,
Wagner, Waldron, Wilk
NO VOTE RECORDED: Gorell, Holden, Linder, Vacancy
AL:nl 8/30/13 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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