BILL ANALYSIS
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|SENATE RULES COMMITTEE | AB 1291|
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THIRD READING
Bill No: AB 1291
Author: Niello (R)
Amended: 9/4/09 in Senate
Vote: 21
SENATE JUDICIARY COMMITTEE : 5-0, 7/14/09
AYES: Corbett, Harman, Florez, Leno, Walters
SENATE APPROPRIATIONS COMMITTEE : 13-0, 8/27/09
AYES: Kehoe, Cox, Corbett, Denham, Hancock, Leno, Oropeza,
Price, Runner, Walters, Wolk, Wyland, Yee
ASSEMBLY FLOOR : 78-0, 6/3/09 - See last page for vote
SUBJECT : Unclaimed property
SOURCE : State Controller
DIGEST : This bill makes various changes to the Unclaimed
Property Law (UPL) intended to improve notification of
property owners when their property is about to escheat to
the state, alleviate some concerns of property holders that
have transferred escheated property to the State
Controller, and penalize holders that do not comply with
the notification and reporting requirements of the UPL.
Specifically, this bill authorize holders of unclaimed
property to provide required due diligence notices
electronically, if the account owner has consented to
electronic notification; prescribes certain language and
format requirements for due diligence notices; requires
CONTINUED
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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; authorizes
holders to provide additional notice beyond the due
diligence requirements in existing law at any time prior to
a transfer to the State Controller; requires 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; specifies 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 State Controller to hold
safe deposit box contents with no commercial value for
seven years rather than the 18-month requirement under
existing law; authorizes the State Controller to postpone
the date of escheat or the date for required reports upon
written request of the holder of the property or upon the
State Controller's own motion; caps an interest penalty for
failure to file a specified report at $10,000 if the
escheated property was delivered to the State Controller on
time; simplifies timing requirements for due diligence
notice requirements for consistency with other provisions;
clarifies when safe deposit box property becomes
reportable, and modifies requirements to check for other
active accounts to prevent escheating of deposit box
property; and makes several clarifying changes to clarify
applicability to safe deposit box property.
Senate Floor Amendments of 9/4/09 correct cross-references
due to previous amendments taken, and further refine
language dealing with safety deposit boxes.
ANALYSIS : Existing law provides that except as provided
in paragraph (6), any demand, savings, or matured time
deposit, or account subject to a negotiable order of
withdrawal, made with a banking organization, together with
any interest or dividends thereon, excluding, from demand
deposits and accounts subject to a negotiable order of
withdrawal only, any reasonable service charges that may
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lawfully be withheld and that do not (where made in this
state) exceed those set forth in scheduled filed by the
banking organization from time to time with the State
Controller, when the owner, for more than three years, has
not done any of the following:
1. Increased or decreased the amount of the deposit, cashed
an interest check, or presented the passbook or other
similar evidence of the deposit for the crediting of
interest.
2. Corresponded electronically or in writing with the
banking organization concerning the deposit.
3. Otherwise indicated an interest in the deposit as
evidenced by a memorandum or other record on file with
the banking organization.
This bill provides that a deposit or account shall not,
however, escheat to the state if, during the previous three
years, the owner has owned another deposit or account with
the banking organization or the owner has owned an
individual retirement account (IRA) or funds held by the
banking organization under a retirement plan for
self-employed individuals or a similar account or plan
established pursuant to the internal revenue laws of the
United States or the laws of this state as described in
paragraph (6), and, with respect to that deposit, account,
or plan, the owner has done any of the acts described in
clauses (i), (ii) or (iii) of subparagraph (A), of Section
1513 of the Code of Civil Procedure, and the banking
organization has communicated electronically or in writing
with the owner, at the address to which communications
regarding that deposit, account, or plan are regularly
sent, with regard to the deposit, account, or plan that
would otherwise escheat under subparagraph (A). For
purposes of this subparagraph, "communications" includes
account statements or statements required under the
internal revenue laws of the United States.
A deposit or account shall not, however, escheat to the
state if, during the previous three years, the owner has
owned another deposit or account with the financial
organization or the owner has owned an IRA or funds held by
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the financial organization under a retirement plan for
self-employed individuals or a similar account or plan
established pursuant to the internal revenue laws of the
United States or the laws of this state, as described in
paragraph (6), and, with respect to that deposit, account,
or plan, the owner has done any of the acts described in
clauses (i), (ii) or (iii) of subparagraph (A), and the
financial organization has communicated electronically or
in writing with the owner, at the address to which
communications regarding that deposit, account, or plan are
regularly sent, with regard to the deposit, account, or
plan that would otherwise escheat under subparagraph (A).
For purposes of this subparagraph, "communications"
includes account statements or statements required under
the internal revenue laws of the United States.
Funds held by a business association in an IRA or under a
retirement plan for self-employed individuals or a similar
account or plan created pursuant to the internal revenue
laws of the United States or the laws of this state shall
not escheat to the state if, during the previous three
years, the owner has owned another such account or plan
with the business association and, with respect to that
account or plan, the owner has done any of the acts
described in clause (i), (ii), or (iii) of subparagraph
(A), and the business association has communicated
electronically or in writing with the owner, at the address
to which communications regarding that account or plan are
regularly sent, with regard to the account or plan that
would otherwise escheat under subparagraph (A). For
purposes of this subparagraph, "communications" includes
account statements or statements required under the
internal revenue laws of the United States.
Existing law, the UPL, provides that an account, deposit,
demand, or savings or other intangible property held or
owing by a business association, banking or financial
organization, or other holder, escheats to the state when
the owner, for more than three years, (1) has not increased
or decreased the amount of the deposit, cashed a deposit,
or presented a passbook for crediting of interest, (2) has
not corresponded electronically or in writing with the
holder concerning the deposit, or (3) has not otherwise
indicated an interest in the deposit as evidenced by a
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memorandum or other record on file with the holder of the
property. (Section 1513 of the Code of Civil Procedure)
(All references are to the Code of Civil Procedure unless
otherwise indicated.)
Existing law requires a holder of property to make
reasonable efforts to provide the property owner a notice
by mail that the property may escheat to the state at one
of these times: (1) not less than two years nor more than
two and one-half years after the date of the last activity
by, or communication with, the record owner, or (2) not
less than six nor more than 12 months before the property
becomes reportable to the State Controller. (Sections
1513.5, 1514, 1516, and 1520)
This bill requires the holder of property to make
reasonable efforts to provide the required notice
electronically, if the owner has consented to electronic
notifications.
This bill specifies that, in addition to the current
requirements relating to the contents and format of the
written notice, the notice contain a heading centered at
the top that states: "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" or
substantially similar language.
This bill, in the case of a bank account, deposit, shares,
traveler's checks, bank drafts or certified checks, or
safety deposit boxes, permits the holder to give additional
notice at any time between the date of last activity by or
communication with the owner and the date the holder
transfers the property to the State Controller.
This bill requires a banking or financial organization to
provide a person opening a new account a written notice
that the person's property may be transferred to the
applicable state if there is no activity on the account
within a period specified by state law. This notice must
be given at the time the new account is opened.
Existing law provides that the contents of a safe deposit
box or other safekeeping repository, held by a business
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association in this state, escheats to the state if it
remains unclaimed for more than three years from the date
on which the lease or rental period on the box or other
repository expired, or from the date of termination of any
agreement by which the box or repository was furnished to
the owner. (Section 1514)
This bill extends this provision to the proceeds of the
sale of the contents of a safe deposit box or other
safekeeping repository.
Existing law requires a holder of property in a safe
deposit box or other safekeeping repository to provide the
owner notice that the property may escheat to the state at
one of these times: (1) not less than two years nor more
than two and one-half years after the date of the last
activity by, or communication with, the record owner, or
(2) not less than six nor more than 12 months before the
property becomes reportable to the State Controller.
(Section 1513.5)
This bill requires the notices to be in a specified form
containing the following heading: "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" or
substantially similar language, and to be sent by mail or
electronically, if the owner has consented to electronic
notification.
This bill requires the notice to also include the following
statements:
1. Specifying that since the date of last activity or for
the last two years, there has been no customer activity.
2. Identifying the safe deposit box or other safekeeping
repository by number or other identifier.
3. Indicating the safe deposit box or other safekeeping
repository is in danger of escheating to the state.
4. Specifying that the UPL requires business associations
to transfer safe deposit boxes or other safekeeping
repositories to the State Controller if it has been
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inactive for three years.
This bill requires the notice to include a form prescribed
by the State Controller, for the customer to use to declare
an intention to maintain the safe deposit box or other
safekeeping repository. If the form is filled out, signed,
and returned by the customer to the business association,
it would be considered a claim for the safe deposit box or
other safekeeping repository and the contents thereof would
not escheat to the state.
This bill permits the business association to give
additional notice, as specified above, at any time between
the date of the last activity or communication with the
owner and the date the business association transfers the
contents of the safe deposit box or other repository to the
State Controller.
This bill permits a business association to impose a
service charge on the deposits, accounts, shares, or other
interests for the notice required by this bill in an amount
not to exceed the administrative cost of mailing the notice
and form, not to exceed $2.
This bill provides that the contents of a safe deposit box
shall not escheat to the state if during the previous three
years the owner had owned any demand, savings or matured
time deposit accounts, or any account subject to a
negotiable order of withdrawal and has done specified acts
indicating activity on the account, and the financial
organization has communicated by mail or electronically
with the owner at the address to which communications with
the owner regarding that deposit or account are regularly
sent that would otherwise escheat to the state.
This bill provides that if the owner is in default under
the safe deposit box or other safekeeping repository
agreement, the banking organization may pay or deliver the
contents, or the proceeds of the sale of the contents, of
the safe deposit box or other safekeeping repository to the
customer after deducting any amount due and payable from
those proceeds, upon which the banking organization is
relieved of liability to the extent of the value of the
contents or proceeds of sale of the contents of the safe
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deposit box or other safekeeping repository.
This bill requires a business association, at the time a
customer opens a new account for a safety deposit box or
other safekeeping repository, to provide the customer with
a written notice informing the person that his/her property
may be transferred to the applicable state if no activity
occurs in the account within the time period specified by
state law.
This bill allows a banking organization to directly escheat
the contents of a safe deposit box or other safekeeping
repository without exercising its rights (to open the box,
make an inventory, attempt to return the contents to the
owner who is in default for a specified period) under the
Financial Code.
Existing law requires the State Controller to retain
delivered unclaimed property that has no apparent
commercial value for a period not less than 18 months.
Property may thereafter be destroyed or otherwise disposed
of, and no action against the State Controller or the
holder of the property may be brought or maintained.
(Section 1565)
This bill extends the State Controller's holding period for
property that has no apparent commercial value from not
less than 18 months to not less than seven years.
Existing law provides that every person or entity filing a
required report as a holder of escheated property shall, no
sooner than seven months and no later than seven months and
15 days after the final date for filing the report, pay or
deliver to the controller all escheated property specified
in the report. (Section 1532) If a person establishes a
right to the property before it is delivered to the State
Controller or it appears that the property may not be
subject to escheat, the holder shall not deliver the
property to the State Controller but shall instead file a
report concerning the property with the State Controller.
This bill authorizes the State Controller to postpone the
date for payment or delivery of the property or the date
for filing of a required report, on his/her own volition or
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upon request of the holder of property.
Existing law provides that, in addition to any damages,
penalties, or fines, a person who fails to file a report or
to deliver unclaimed property in the time and manner
prescribed shall pay to the State Controller interest at a
rate of 12 percent per annum on that property from the date
the report should have been filed or the property
delivered.
This bill makes the above penalties applicable only when
the holder of property fails to report or to deliver
escheated property in the time prescribed.
This bill adds, to the damages, penalties, or fines
assessable against a person who fails to report, pay, or
deliver unclaimed property shall pay interest payable to
the State Controller at the rate of 12 percent per annum on
the property or value thereof from the date the property
should have been reported, paid, or delivered, unless the
failure is due to good cause. If a holder pays or delivers
unclaimed property in a timely manner, but files a report
that is not in substantial compliance with the requirements
of Section 1530, the interest payable shall not exceed
$10,000. The holder shall not be subject to any interest
payment if the holder's failure to report in substantial
compliance with the requirements of Section 1530 is due to
reasonable cause.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
According to the Senate Appropriations Committee:
Fiscal Impact (in thousands)
Major Provisions 2009-10 2010-11 2011-12 Fund
SCO administrative costs $125
$202General
SUPPORT : (Verified 9/8/09)
State Controller (source)
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ARGUMENTS IN SUPPORT : The State Controller's Office
states that this bill is intended to strengthen property
owners' right to notice when their property is subject to
escheat and to ensure that property holders reasonably
inform their customers about risks associated with leaving
accounts dormant, and to inform property owners about the
law that causes unclaimed property to escheat to the state
following a period of inactivity.
ASSEMBLY FLOOR :
AYES: Adams, Ammiano, Anderson, Arambula, Beall, Bill
Berryhill, Tom Berryhill, Blakeslee, Blumenfield,
Brownley, Buchanan, Caballero, Charles Calderon, Carter,
Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon,
DeVore, Duvall, Emmerson, Eng, Evans, Feuer, Fletcher,
Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani,
Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi,
Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight,
Krekorian, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza,
Miller, Monning, Nava, Nestande, Niello, Nielsen, John A.
Perez, V. Manuel Perez, Portantino, Price, Ruskin, Salas,
Saldana, Silva, Skinner, Smyth, Solorio, Audra
Strickland, Swanson, Torlakson, Torres, Torrico, Tran,
Villines, Bass
NO VOTE RECORDED: Block, Yamada
RJG:mw 9/8/09 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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