BILL ANALYSIS
AB 1291
Page 1
CONCURRENCE IN SENATE AMENDMENTS
AB 1291 (Niello)
As Amended September 4, 2009
Majority vote
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|ASSEMBLY: |78-0 |(June 3, 2009) |SENATE: |40-0 |(September 10, |
| | | | | |2009) |
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Original Committee Reference: JUD.
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)Provides that certain banking and financial accounts held by a
business association escheat to the state if, during the
previous three years, there has been no activity on the
account and no communication between the banking organization
and account owner, either electronically or in writing.
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.
3)Codifies specific language and format requirements for the due
diligence notice sent by business associations holding safe
deposit boxes to the owners of the property in safekeeping.
In the notice, the business association (holder) must provide
a description of the escheat process, including 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. Specifically:
a) 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
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BE TRANSFERRED TO THE STATE IF YOU DO NOT CONTACT US;" and,
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 that in order for a holder to be relieved of
liability for the property escheated to the California State
Controller (Controller), the holder must have complied with
requirements for sending due diligence letters to the owner.
6)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
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.
The Senate amendments:
1)Provide that a deposit or account held or owing by a business
association to the state shall not escheat to the state if,
during the previous three years, the owner has also maintained
an active individual retirement account (IRA) or other
retirement plan or account with the same business association,
as specified.
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2)Provide that contents of safety deposit boxes will not escheat
to the state if the owner has maintained other active
accounts, as specified, with the business association holding
the safety deposit box.
3)Establish a $10,000 limit on the amount of interest the
Controller may collect from a holder of unclaimed property
escheated to the state when that holder paid or delivered the
unclaimed property to the state in timely manner but filed a
report not in substantial compliance with Code of Civil
Procedure Section 1530 (requiring an accounting report of
escheated property).
4)Make technical changes to correct certain cross-references.
AS PASSED BY THE ASSEMBLY , this bill was substantially similar
to the version approved by the Senate.
FISCAL EFFECT : According to the Senate Appropriations
Committee, the Controller 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.
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.
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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
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 predecessor to this
bill.
Analysis Prepared by : Anthony Lew / JUD. / (916) 319-2334
FN: 0003069