FREQUENTLY ASKED QUESTIONS ABOUT OUR APPLICATION OF THE ESCHEAT LAWS
Below are frequently asked questions about the applicable escheat laws along with our systems for managing and applying these laws.
Q. Which governments regulate escheat and unclaimed property?
In the United States, each State has enacted an unclaimed property statute that regulates escheat. These statutes are the primary sources of escheat regulation. However, the state laws are impacted by rules set at the federal level including priority rules set by the U.S. Supreme Court and guidance released by the CFPB. In addition, some foreign governments have addressed escheat.
Q. Do your services address all of the state statues and federal rules?
Yes. We address the unclaimed property laws of all fifty states and six territories. We also address the priority rules set by the U.S. Supreme Court and CFPB guidance. And, our systems are internationally scalable.
Q. How do your systems determine which state’s escheat law applies?
Our systems apply the priority rules set by the U.S. Supreme Court. Depending upon client decisions, we also apply the custody rules set by the states in their unclaimed property statutes.
Q. Which escheat priority rules do you apply?
Our systems apply the first priority rule and second priority rule delineated by the U.S. Supreme Court. Depending upon client decisions, we also apply the third priority rule and/or certain other custody rules set by the states.
Q. What is the first priority rule?
Generally speaking the first priority rule confers the first right to escheat to the state of the item owner’s residence if and as shown in escheat holder’s records.
Q. What is the scope of your systems in applying the first priority rule?
Our capabilities include addressing anonymous cards, non-anonymous cards, name separation theories, and identity fragment management. Our proprietary processing systems process distinctions in state law regarding the types and quality of personally identifiable information required to trigger the first priority rule. They also filter fragments of personally identifiable information to determine if the rule applies.
Systems capabilities include handling multiple known users of a single item or purse; single known users of multiple purses; name and address changes; and lost and stolen card transfers. In the case of gift cards, the systems also can manage the distinctions between cards owners who are card purchasers and/or gift recipients. And, depending upon client decisions, these systems can also apply “deemed resident” state laws.
Q. Why does your system analyze fragments of personally identifiable information?
An escheat holder may collect full information on the name and address of an instrument owner. In that case the first priority rule applies. However, escheat holders may also collect fragments of such information. Questions arise regarding the quantum and quality of information required to trigger the first priority rule. Is the owner’s name sufficient alone to trigger the first priority rule? How about a single ZIP code? Is information sufficient for U.S. mail delivery required? Our systems address variations in state laws on the subject and the quality of fragments in applying the first priority rule.
Q. You mentioned a deemed resident rule. What is that?
Some states have enacted statutes that deem anonymous instruments to be owned by a resident of the state through the use of statutorily created legal fictions. For example, a Nevada statute fictitiously deems all anonymous gift cards to be owned by persons residing in Carson City even though not accurate. These rules artificially result in the first priority rule be applied in favor of the state even though the cards are not actually owned by a known resident of the state. Many practitioners believe these statutes are unenforceable as impermissible gaming of the U.S. Supreme Court’s priority rules.
Q. Do your systems address the deemed resident rules?
Yes. Clients are permitted to decide if the rules should be applied or not. Depending upon the decision, the items are escheated or not. The dollar value risk of electing not to apply the rule is also calculated by the systems and available for decision making.
Q. In our gift card program, we record the names and addresses of card holders on our books but we hold that data in a separate place from the transaction date. Can you apply the first priority rule in that situation?
Yes. We are capable of collecting and combining data from multiple sources to complete compliance efforts including combining personally identifiable information from one source with transaction data from another source.
Q. Does your system address anonymous instruments?
Yes. We regularly address anonymous instruments and apply the first and second priority rules in light of the nature of the anonymity.
Q. What is the scope of your abilities in addressing anonymous instruments?
We have robust capabilities. Some instruments are completely anonymous in that the escheat holder has no information on the item owner. Our systems process the first and second priority rules in that situation. In some cases, however, an escheat holder may have fragments of such information. Questions arise regarding the quantum and quality of information required to trigger the first priority rule. Our systems address the variations of state law on the subject and the quality of the fragments in applying the first and second priority rules.
Q. Why do some escheat systems not support anonymous instruments?
Some escheat support systems are not capable of doing so because they were designed to simply handle instruments that have known owners such as checking accounts. In our view, changes in electronic payments require the ability to address anonymous instruments
Q. Is personally identifiable information collected on gift cards, loyalty cards, awards cards, promotional cards and incentive cards?
Yes. Many gift card and LAP card programs are designed to have anonymous cards. However, names and address of the cards holders are collected in several situations: when desired in loyalty programs, if required by law, when collecting information for fulfilling internet sold cards, when collecting information for fraud controls, and during customer service.
Q. What happens to escheat when personally identifiable information is collected on gift cards, loyalty cards, awards cards, promotional cards and incentive cards?
The collection of the information can change the card’s escheat footprint. The first priority rule will be triggered, requiring escheat to the state of the residence of the card holder. This does not mean the collection of information itself causes escheat. It means the law of the state of the cardholder’s residence must be applied to determine if escheat applies under that law.
Q. What services do you apply when personally identifiable information is collected on gift cards, loyalty cards, awards cards, promotional cards and incentive cards?
We have robust services. The client may elect to use separation theory, to use fragment management, or to escheat as required. We will follow the client’s decision and process the cards accordingly. If the client elects to escheat as required, our systems will do so and apply all exemptions and deductions available for the cards to return the escheat footprint of the program as close as possible to an anonymous card escheat footprint.
Q. You mentioned that your systems will return the cards to as close as possible to an anonymous card escheat footprint. What does that mean?
Anonymous gift cards are escheated under the second priority rule to the second priority state. If that state is a non-escheat state, most practitioners believe the gift card program will be escheat-free.
When names and addresses are collected the first priority rule is triggered. Use of separation theories or fragment management might return the cards to their anonymous status for escheat. However, some clients may not desire to use those methods. In that case the cards will be subjected to the escheat laws of the various states per the first priority rule.
Our processing systems will lessen the resultant problem, however, by applying the exemptions and deductions for gift cards in those states. We estimate that as much as 80% of the U.S population live in non-escheat environments for certain gift card programs. Depending upon the geographic scope of a gift card program, our processing efforts will maintain the non-escheat status of large portions of the gift cards even if names and addresses are collected.
Q. What is the second priority rule?
Generally speaking the second priority rule bestows the second priority to escheat to the state of domicile of the escheat holder in the event the cards are anonymous or in the event the first priority state does not provide for escheat.
Q. What is the scope of your services regarding the second priority rule?
We have robust second priority services. We support the determination and management of the holder’s domicile. And our systems process the secondary rule when applicable.
Q. How do you handle the part of the second priority rule which addresses first priority states that do not provide for escheat?
A first priority state may not provide for escheat in several situations. The state may not have a statute addressing escheat. It may have a statute that addressed escheat but it elected to exempt an item by removing it by amendment so that the statute does not mention the item. It may have a statute that addresses escheat and specifically exempts an item from escheat on the face of the statute. Practitioners take varying positions on the scenarios. Our processing systems are capable of applying the second priority rules in light of the situations. Client decisions are used to select the settings.
Q. What is the third priority rule?
Generally speaking the rule bestows a third priority to escheat to the state where the transaction giving rise to the instrument occurred – in the event that the first priority rule does not apply and the second priority state does not provide for escheat. This rule was not set by the U.S. Supreme Court. It has been set by state law usually in the custody sections of a state’s unclaimed property statute. Many practitioners believe the third priority rule is unenforceable.
Q. Do your systems address the third priority rules?
Yes. Clients are permitted to decide if the third priority rule should be applied or not. Depending upon the decision, the processing systems will process the rule. In that event, the systems will not apply the rule unless it was adopted by a state. The dollar value risk of electing not to apply the rule is also calculated and available for decision making.
Q. Do you apply any other escheat priority rules?
Yes. The federal government has enacted a statute permitting the states to apply different priority rules for certain instrument such as travelers checks or money orders. For those instruments, the federal statute overrides the priority rules set by the U.S. Supreme Court. Our processing systems will apply the different priority rules for those instruments as applicable per each state’s law.
Q. You have mentioned historical versions of the state laws. What are historical versions?
The states amend their unclaimed property statues from time to time. Each amendment results in a historical version of the state’s statute.
Q. How do your systems address historical versions of the state laws?
Our systems apply rules on retroactive versus prospective application of statutory amendments and then position each item in the correct historical version for escheat processing.
Q. What components of each state law do you address?
We track 35+ topics per each historical version of state law. The tracked subjects include the state law’s position on the priority rules, holder status, items subject to escheat, escheat timing, presumed abandonment periods, escheat timing triggers, retriggering, escheat amounts, exemptions, deductions, state fiscal years, state escheat years, escheat notice requirements, escheat notice types, escheat notice timing, escheat notice content, escheat notice timing, state report deadlines, state report content, filing methods, and payment methods.
Q. How do you manage the complexities of variables in the state and federal laws?
We developed our proprietary systems to address and tackle the legal variables. We let the systems unravel the complexities.
Q. How do you apply the matrix of laws to large volumes of instruments and cards?
We developed our proprietary systems to address large volumes of instruments. We let those systems deal with the volumes.