BILL ANALYSIS
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
1291 (Niello)
Hearing Date: 08/17/2009 Amended: 07/06/2009
Consultant: Mark McKenzie Policy Vote: Jud 5-0
_________________________________________________________________
____
BILL SUMMARY: AB 1291 would make the following changes to the
Unclaimed Property Law in the interest of consumer protection
and accountability:
Authorize holders of unclaimed property to provide required
due diligence notices electronically, if the account owner has
consented to electronic notification.
Prescribe certain language and format requirements for due
diligence notices.
Require holders to provide a telephone number or other
electronic means to enable the owner to contact the holder in
lieu of filing a form declaring the owner's intent.
Authorize holders to provide additional notice beyond the due
diligence requirements in existing law at any time prior to a
transfer to the State Controller (SCO).
Require holders to provide a notice when an account or safe
deposit box is opened that warns the owner that their property
could escheat due to inactivity.
Requires that a holder comply with all due diligence notice
requirements of the unclaimed property law in order to be
relieved of all liability for the property.
Specify that all escheat requirements that apply to the
contents of a safe deposit box would also apply to proceeds
from the sale of those contents.
Precludes the escheatment of the contents of a safe deposit
box when an owner has other accounts or activity with the
holder, as specified.
Requires the SCO to hold safe deposit box contents with no
commercial value for seven years rather than the 18-month
requirement under existing law.
Authorize the SCO to postpone the date of escheat or the date
for required reports upon written request of the holder of the
property or upon the SCO's own motion.
Cap an interest penalty for failure to file a specified report
at $10,000 if the escheated property was delivered to the SCO
on time.
_________________________________________________________________
____
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
SCO administrative costs $125
$202General
_________________________________________________________________
____
STAFF COMMENTS: This bill meets the criteria for referral to the
Suspense File.
Existing law generally requires financial institutions to
transfer account balances to the State Controller if the account
has had no activity for three years. Other "holders" (such as
insurance companies holding policies, publicly-traded companies
holding stock and employers holding wages) are subject to
similar transfer rules. After they are transferred, the
accounts are managed by the SCO, and the account owners may
apply to the state for return of their property or money. The
transfers are often referred to as "escheats." The Controller
receives approximately $600 million annually as escheated
property, and currently maintains accounts of approximately $5.3
billion in
Page 2
AB 1291 (Niello)
approximately 8.7 million accounts for monies that have been
remitted to the Controller and transferred to the General Fund.
Claims on escheated property are processed within 180 days, and
valid claims are paid from the General Fund. In FY 2006-07,
there were a total of 276,512 claims filed, and an average claim
payment of $1,217. The SCO manages the escheated properties at
a cost of about $7 million per year.
SCO estimates a need for 2.6 PY of permanent staff to manage the
retaining of escheated property with no apparent commercial
value for seven years, rather than the 18 months required in
existing law. This would result in administrative costs of
$125,000 in 2010-11 and ongoing costs of $202,000.
Staff notes that this bill contains provisions that were
included in SB 1319 (Machado), which was vetoed by the Governor
last year. However, SB 1319 also contained provisions requiring
additional notices to owners and the payment of interest on
escheated property when it is claimed by an owner, as well as
establishing penalties on noncompliant holders of property. The
veto message stated the following:
This bill would impose additional reporting requirements on
holders of unclaimed property and increase the penalties
for not reporting unclaimed property to the State
Controller.
While I share the goal of returning unclaimed properties to
their rightful owners, I cannot support increased reporting
requirements and penalties at this time. In 2007, the
budget bill I signed included numerous reforms to the
Unclaimed Property Law and established better notification
procedures. These changes should the chance to be properly
implemented and examined prior to any further changes to
the law.
AB 1291 does not contain the objectionable provisions noted in
the veto message.