BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2258|
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THIRD READING
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
unclaimed for more than three years, as specified, shall be
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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
escheated property, the Controller shall cause a notice to be
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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
the owner;
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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
property. (Bank of America v. Cory, 164 Cal.App.3d at 74;
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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
property law requires escheat of the funds after a specified
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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
escheatment period for most types of unclaimed property from
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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,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
AB 2258
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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
8/9/16 10:00:40
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