BILL ANALYSIS
AB 1291
Page 1
ASSEMBLY THIRD READING
AB 1291 (Niello)
As Amended June 1, 2009
Majority vote
JUDICIARY 10-0 APPROPRIATIONS 17-0
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|Ayes:|Feuer, Tran, Brownley, |Ayes:|De Leon, Nielsen, Ammiano, |
| |Evans, Jones, Knight, | | |
| |Krekorian, Lieu, Monning, | |Charles Calderon, Davis, |
| |Nielsen | |Duvall, Fuentes, Hall, |
| | | |Harkey, Miller, |
| | | |John A. Perez, Price, |
| | | |Skinner, Solorio, Audra |
| | | |Strickland, Torlakson, |
| | | |Krekorian |
|-----+--------------------------+-----+---------------------------|
| | | | |
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SUMMARY : Seeks various reforms of the Unclaimed Property Law
(UPL) intended to strengthen property owners' rights and ensure
that property holders reasonably inform their customers about
risks associated with leaving accounts dormant and about the law
that causes unclaimed property to escheat to the state after a
period of inactivity. Specifically, this bill :
1)Requires the escheat of specified property held or owing by a
business association to the state when the owner, for more
than three years, has not received tax reports or regular
statements by mail from the banking organization regarding the
funds or deposit. Provides that receipt of a report or
statement by the owner is presumed if the banking organization
sent the report to the owner by first-class mail and the
report was not returned.
2)Permits banking and financial organizations, as defined, to
make reasonable efforts to notify owners of certain property
electronically when the owner has consented to electronic
notifications, that the customer's deposit, account, shares,
or other interest in the banking or financial organization
will escheat to the state pursuant to specified provisions of
law.
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3)Codifies specific language and format requirements for the due
diligence letter sent to owners by holders to consistently
require holders to describe the escheat process to include the
necessity of filing a claim for the return of the property and
other required notice information, such as the time for the
last account activity.
a) Specifically, the face of the notice shall contain a
heading centered at the top that reads as follows: "THE
STATE OF CALIFORNIA REQUIRES US TO NOTIFY YOU THAT YOUR
UNCLAIMED PROPERTY MAY BE TRANSFERRED TO THE STATE IF YOU
DO NOT CONTACT US."
b) Permits the holder to provide additional due diligence
letters complying with these specifications at any time.
4)Provides that, at the time a new account is opened with any
banking organization, financial organization or business
association, as defined, the organization or association must
provide a written notice to the person opening the account
informing the person that his or her property may escheat to
the state if no activity occurs on the account for more than
three years.
5)Requires the State Controller (Controller), for property
delivered to the Controller that has no apparent commercial
value, to retain such property for a period of not less than
seven years from the date of delivery.
6)Requires that in order for a holder to be relieved of
liability for the property escheated to the Controller, the
holder must have complied with requirements for sending due
diligence letters to the owner.
7)Makes clarifying and technical changes to correct minor
problems relating to timing of notices, problems that stem
from enactment of SB 86, the omnibus budget trailer bill for
2007. Specifically:
a) Authorizes the Controller to postpone the delivery of
unclaimed property and the remit report required under law;
b) Clarifies that interest applies when a holder fails to
file a Notice Report on time or in the manner required by
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law; and,
c) Clarifies that the timeframe for sending due diligence
letters is based on when the property is reportable instead
of transferable, thus ensuring consistency with other
provisions that reflect the fact that due diligence letters
are sent by the holder before the property is reported to
the Controller's Office.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, ongoing General Fund costs of $125,000 in 2009-10 and
$200,000 annually thereafter for additional workload related to
increasing the holding period for property with no commercial
value.
COMMENTS : This bill, sponsored by the Controller's Office,
proposes various reforms of the Unclaimed Property Law that are
intended to strengthen property owners' rights and ensure that
property holders reasonably inform their customers about risks
associated with leaving accounts dormant, and to inform them
about the law that causes unclaimed property to escheat to the
state after a period of inactivity.
Existing law only requires holders to send a single due
diligence letter at a specified time to owners. If the owner
fails to receive the letter or mistakes the letter for junk
mail, they may fail to realize that the property soon becomes
reportable and escheatable to the Controller. This bill seeks
to provide clearer notification to owners that their property is
in danger of escheat, with the optimal goal of reuniting more
owners with their property, prior to reporting to the
Controller's Office.
In addition, this bill seeks to notify owners about the
possibility under state law that their property may escheat to
the state if no activity occurs on a new bank account for more
than three years. Consumers should benefit from dissemination
of information about the state's escheat law so they can take
steps to prevent their property from escheating to the
Controller. Requiring the business association or bank to
provide this notification whenever a new account is opened is a
sensible time to provide such information.
Recent amendments remove provisions relating to the escheat of
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property in safe deposit box accounts and the payment of
interest by the Controller when returning funds to claimants
under the Unclaimed Property Law.
Importantly, this bill does not impose additional reporting
requirements or penalty increases for failing to report
unclaimed property that were the Governor's stated basis for
vetoing last year's SB 1319 (Machado), a similar but not
identical predecessor to this bill.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0001299