BILL ANALYSIS                                                                                                                                                                                                    Ó




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          |SENATE RULES COMMITTEE            |                       AB 2258|
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                                       CONSENT


          Bill No:  AB 2258
          Author:   Eggman (D)
          Amended:  6/20/16 in Senate
          Vote:     21  

           SENATE JUDICIARY COMMITTEE:  7-0, 6/14/16
           AYES:  Jackson, Moorlach, Anderson, Hertzberg, Leno, Monning,  
            Wieckowski

          SENATE APPROPRIATIONS COMMITTEE:  Senate Rule 28.8

           ASSEMBLY FLOOR:  78-0, 5/12/16 (Consent) - See last page for  
            vote

           SUBJECT:   Unclaimed property


          SOURCE:    California State Controller
          
          DIGEST:   This bill provides that specified transactions  
          initiated through an electronic funds transfer that are  
          reflected in the books and records of a banking or financial  
          organization shall constitute account activity for purposes of  
          determining whether property is unclaimed and subject to escheat  
          to the state.


          ANALYSIS:  


          Existing law:


          1)Requires, under the Unclaimed Property Law (UPL), that  
            property held or owing by a business association that is  








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            unclaimed for more than three years, as specified, shall be  
            reported to the State Controller and turned over to the state.  
             (Code Civ. Proc. Secs. 1513, 1513.5, 1530-1532.)


          2)States that a demand, savings, or matured time deposit,  
            matured investment certificate, or account subject to a  
            negotiable order of withdrawal, made with a banking or  
            financial organization, as specified, is subject to escheat  
            when the owner, for more than three years, has not done any of  
            the following:


                 Increased or decreased the amount of the funds or  
               deposit, cashed an interest check, or presented the  
               passbook or other similar evidence of the deposit or  
               account for the crediting of interest;


                 Corresponded electronically or in writing with the  
               banking or financial organization concerning the funds or  
               deposit; or


                 Otherwise indicated an interest in the funds or deposit  
               as evidenced by a memorandum or other record on file with  
               the banking or financial organization.  (Code Civ. Proc.  
               Sec. 1513 (a).)


          1)Provides that, except as specified, when the holder of  
            unclaimed property 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.  (Code Civ.  
            Proc. Sec. 1520.)


          2)Provides that within one year after payment or delivery of  








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            escheated property, the Controller shall cause a notice to be  
            published, in a newspaper of general circulation which the  
            Controller determines is most likely to give notice to the  
            apparent owner of the property, that information concerning  
            the amount or description of the property may be obtained by  
            any persons possessing an interest in the property by  
            addressing an inquiry to the Controller.  (Code Civ. Proc.  
            Sec. 1531.)


          3)Provides that the Controller shall also mail a notice to each  
            person having an address listed in the report from the holder  
            who appears to be entitled to property of the value of $50 or  
            more that has escheated under the UPL.  The Controller shall  
            mail the notice to the apparent owner for whom a current  
            address is obtained if the address is different from the  
            address previously reported to the Controller.  (Code Civ.  
            Proc. Sec. 1531.)


          4)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:


          1)States, for purposes of the above provisions, that the terms  
            "increased or decreased the amount of the deposit" and  
            "increased or decreased the amount of the funds or deposit"  
            includes the following transactions that are initiated through  
            an electronic fund transfer and are reflected in the books and  
            records of the banking or financial organization, as  
            specified:


                 A single or recurring debit transaction authorized by  
               the owner;


                 A single or recurring credit transaction authorized by  








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               the owner;


                 Recurring transactions authorized by the owner that  
               represent payroll deposits or deductions; and


                 Recurring credits authorized by the owner or a  
               responsible party that represent the deposit of any federal  
               benefits, including social security benefits, veterans'  
               benefits, and pension payments.


          1)Makes other technical and conforming changes to existing law.


          Background


          The UPL, enacted in 1958, establishes procedures for the escheat  
          of unclaimed personal property held by business associations.   
          Under the UPL, property that remains unclaimed for a set period  
          of time "escheats" to the state, which means the state gains  
          custody and control over the property in perpetuity until it is  
          claimed by the owner.  The UPL assigns various rights and  
          responsibilities to the owners and holders of unclaimed  
          property, as well as to the state.  The "owner" is the person to  
          whom the property actually belongs.  The "holder" is the person  
          who has possession of the property.  A holder might be a bank or  
          other money depositary (e.g., one that holds deposits of an  
          owner's money or holds property in a safe deposit box), a  
          business that has issued a check to an individual or other  
          business, or the issuer of a life insurance policy or an  
          annuity.  The holders of unclaimed property have no interest in  
          that property.  (See Bank of America v. Cory (1985) 164  
          Cal.App.3d 66, 74.)  A holder acts rather as a trustee of the  
          property while it is in the holder's possession.


          The UPL has dual objectives:  (1) to reunite owners with  
          unclaimed funds or property; and (2) to give the state, rather  
          than the holder, the benefit of the use of unclaimed funds or  








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          property.  (Bank of America v. Cory, 164 Cal.App.3d at 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 at 74.)


          The UPL establishes procedures to be followed when property goes  
          unclaimed, generally for a period of three years, and escheats  
          to the state.  Under existing law, the holder must annually  
          report on unclaimed property and turn the property over to the  
          Controller.  (Code Civ. Proc. Secs. 1530, 1532.)  The Controller  
          is then required to mail a notice to each person who appears to  
          be entitled to unclaimed property according to the report filed  
          by the holder, and must publish notice to apparent owners of the  
          property in newspapers of general circulation.  (Code Civ. Proc.  
          Secs. 1531, 1531.5.)  The UPL also delineates the procedure by  
          which a person with an interest in escheated property may file a  
          claim to recover the property from the state.  The Controller  
          maintains a public Web site where individuals may discover  
          whether or not the state is holding any of their funds or  
          property, as well as a portal to submit claims to recover the  
          funds or property.  (See https://ucpi.sco.ca.gov/ucp/)


          Generally speaking, unclaimed property is subject to escheat  
          when the owner of the property, such as an account holder at a  
          bank, fails to conduct any activity with respect to the property  
          or otherwise indicate an interest in it for a period of three  
          years.  This bill provides that electronic funds transfers  
          constitute activity for purposes of determining whether activity  
          has occurred with respect to such property.


          Comments


          The author writes:


            This bill clarifies that transactions made through electronic  
            fund transfers (EFTs) shall constitute activity on an account  
            for the purpose of determining whether the state's unclaimed  








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            property law requires escheat of the funds after a specified  
            period of inactivity.  AB 2258 will allow all [EFT]  
            transactions to count as a person's "live" contact with their  
            account if their financial institution has communicated  
            electronically or in writing with the owner of the account  
            during the preceding three years.  As a result, "live"  
            accounts will not unnecessarily escheat to the State  
            Controller's Office and account holders will not receive  
            notices requiring them to contact their financial institution  
            to affirm they are still using their account.


          The sponsor, the California State Controller, writes:


            Under current law, when a person does not have any "live"  
            contact with accounts at a single financial institution (FI)  
            for three years, the FI is required to contact the account  
            owner.  If the FI cannot successfully contact the owner, then  
            SCO [the State Controller's Office] must attempt to contact  
            the owner.  If SCO cannot locate the owner, then the account  
            escheats to SCO.  Live contact includes things such as  
            automated teller machine or in-person deposits or withdrawals,  
            checks being written, and individual online banking  
            transactions known as Automated Clearing House (ACH) payments.  
             However, recurring automated ACH payments and deposits do not  
            count as live contact.


            As a result, thousands of people who have active accounts are  
            unnecessarily sent letters each year warning that failure to  
            contact their FI will result in escheatment to SCO.  In cases  
            where the owner does not respond, the account does escheat . .  
            .  By allowing all ACH transactions to count as a person's  
            live contact with their bank account, AB 2258 will ensure  
            account holders will not receive unnecessary notices requiring  
            contact with an FI to affirm active status, and live accounts  
            will not unnecessarily escheat to SCO.


          Related/Prior Legislation









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          SB 1115 (Leno, 2016) eliminates an existing requirement that the  
          Controller have a reason to believe a person has failed to  
          report unclaimed property prior to examining that person's  
          records, and would instead state that the Controller may examine  
          records under the UPL even if the holder of those records does  
          not believe that he or she has failed to report property under  
          the law.  The bill requires a court to award the Controller its  
          costs and attorney fees if he or she prevails on an action to  
          enforce the UPL.  The bill is pending in the Senate Judiciary  
          Committee.


          AB 355 (Garcia, Chapter 297, Statutes of 2015) authorized the  
          State Controller to mail a separate notice to an apparent owner  
          of a United States savings bond, war bond, or military award  
          inside a safe deposit box or other safekeeping repository whose  
          name is shown on or can be associated with the contents of a  
          safe deposit box or other safekeeping repository and is  
          different from the name of the reported owner.


          AB 1275 (Chau, Chapter 128, Statutes of 2013) revised the UPL to  
          only allow an owner of, instead of a person with an interest in,  
          property to file a claim with the Controller's Office for  
          recovery of property that has escheated to the state.  The bill  
          also revised the definition of "owner" to remove a personal  
          representative and include an estate representative,  
          conservator, or guardian.


          AB 1011 (Salas, 2013) would have required the Controller to add  
          interest, at specified rates, to the amount of any claim paid by  
          the Controller to an owner under the UPL.  The bill died in the  
          Assembly Appropriations Committee.


          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  








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          escheatment period for most types of unclaimed property from  
          three years to five years.  This bill failed passage in the  
          Assembly Judiciary Committee.


          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.   
          The bill was vetoed by Governor Schwarzenegger.


          SB 86 (Committee on Budget and Fiscal Review, Chapter 179,  
          Statutes of 2007) modified the procedures governing the  
          disposition of unclaimed property by, among other things,  
          requiring the Controller to mail a notice, as specified, to each  
          person having an address listed for property reported to the  
          Controller under the UPL who appears to be entitled to escheated  
          property valued at $50 or more.  The bill requires the  
          Controller to establish and conduct a notification program  
          designed to inform owners about the possible existence of  
          unclaimed property received pursuant to the UPL, and made  
          specified changes regarding the duties of a holder of property  
          that has escheated and the duties of the Controller after  
          receiving the property, including a requirement that the  
          Controller retain the property for 18 months from specified  
          dates.


          AB 378 (Steinberg, Chapter 304, Statutes of 2003) reduced the  
          escheatment period from five years to three years for unclaimed  
          bank checks and deposit accounts, and from three years to one  
          year for unclaimed wages and salaries.









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          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 to be given 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.  The bill was held in the  
          Assembly Appropriations Committee.




          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          SUPPORT:   (Verified8/2/16)


          California State Controller (source)
          California and Nevada Credit Union Leagues
          California Bankers Association 
          California Community Banking Network
          California Credit Union League


          OPPOSITION:   (Verified8/2/16)


          None received


           ASSEMBLY FLOOR:  78-0, 5/12/16
           AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,  








                                                                    AB 2258  
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            Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,  
            Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,  
            Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,  
            Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,  
            Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,  
            Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,  
            Wilk, Williams, Wood, Rendon
           NO VOTE RECORDED: Burke, Jones-Sawyer



          Prepared by:  Tobias Halvarson / JUD. / (916) 651-4113
          8/3/16 19:31:25


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