PAGENO="0001" BANK TREATMENT OF INACTIVE CHECKING AND SAYINGS ACCOUNTS HEARINGS BEFORE A SUBCOMMIITEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS HOUSE OF REPRESENTATIVES NINETY-SIXTH CONGRESS SECOND SESSION JULY 23 AND 24, 1980 Printed for the use of the Committee on Government Operations J ~ Ci U.S. GOVERNMENT PRINTING OFFICE 67~44OO WASHINGTON: 1980 PAGENO="0002" COMMITTEE ON GOVERNMENT OPERATIONS JACK BROOKS, Texas, Chairman L. H. FOUNTAIN, North Carolina DANTE B. FASCELL, Florida WILLIAM S. MOORHEAD, PennsylvanIa BENJAMIN S. ROSENTHAL, New York FERNAND J. ST GERMAIN, Rhode Island DON FUQUA, Florida JOHN CONYERS, Ja., Michigan CARDISS COLLINS, Illinois JOHN L. BURTON, California RICHARDSON PREYER, North Carolina ROBERT F. DRINAN, Massachusetts GLENN ENGLISH, Oklahoma ELLIOTT H. LEVITAS, Georgia DAVID W. EVANS, Indiana TOBY MOFFETT, Connecticut ANDREW MAGUIRE, New Jersey LES ASPIN, Wisconsin HENRY A. WAXMAN, California FLOYD J. FITHIAN, Indiana PETER H. KOSTMAYER, Pennsylvania TED WEISS, New York MIKE SYNAR, Oklahoma ROBERT P. MATStJI, California EUGENE V. ATKINSON, Pennsylvania WILLIAM M. JoNES, General Co1~n8el JOHN B. MOORE, Staff Administrator ELMERW. HENDERSON, Senior Coun8el JOHN M. DUNCAN, Minority Staff Director COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE BENJAMIN S. ROSENTHAL, New York, Chairman ROBERT T. MATSUI, California LYLE WILLIAMS, Ohio EUGENE V. ATKINSON, Pennsylvania JIM JEFFRIES, Kansas FERNAND J. ST GERMAIN, Rhode Island JOEL DECKARD, Indiana JOHN CONYERS, Ja., Michigan ELLIOTT H. LEVITAS, Georgia Ex OFFICIO FRANK HORTON, New York PETER S. BARASH, Staff Director DONALD P. TUCKER, UMeT Economist STEPHEN R. MCSPADDEN, Counsel BARBARA TIMMER, Counsel FRANK HORTON, New York JOHN N. ERLENBORN, Illinois JOHN W. WYDLER, New York CLARENCE J. BROWN, Ohio PAUL N. McCLOSKEY, JR., California THOMAS N. KINDNESS, Ohio* ROBERT S. WALKER, Pennsylvania ARLAN STANGELAND, Minnesota M. CALDWELL BUTLER, Virginia LYLE WILLIAMS, Ohio JIM JEFFRIES, Kansas OLYMPIA J. SNOWE, Maine WAYNE GRISHAM, California JOEL DECKARD, Indiana JACK BROOKS, Texas PAGENO="0003" / CONTENTS Hearings held on- Page July 23 1 July 24 263 Statement of- Barefoot, Jo Ann S., Deputy Comptroller for Customer and Corn- munitv Programs, Office of the Comptroller of the Currency 263 Epstein, David J., special counsel tb the National Association of Un- claimed Property Administrators 157 Goldberg, Frederick B., general counsel, District of Columbia Office of Consumer Protectjon~ 204 Herbert, Vivian E., unclaimed property administrator, State of Virginia - 152 Kelly, Thomas F., assistant treasurer, Commonwealth of Massa- chusetts 148 Lord, Jim, treasurer, State of Minnesota, and president, National Association of Unclaimed Property Administrators; accompanied by Keith Norbie, Duluth, Minn~__~ 2 Rosenthal, Hon. Benjamin S., a Representative in Congress from the State of New York, and chairman, Commerce, Consumer, and Monetar Affairs Subcommittee: Opening statement 1 Schnaitman, W. K., Baltimore, Md.. 143 Zito, Edmund G., Chief National Bank Examiner, Office of the Comp- troller of the Currency -- 263 Letters, statements, etc., submitted for the record by- Barefoot, J0 Ann S., Deputy Comptroller for Customer and Corn- munitv Programs, Office of the Comptroller of the Currency: Pre- pared statement 278-304 Epstein, David J., special counsel to the National Association of Un- claimed Property Administrators: Prepared statement with attach- ments -- 162-203 Goldberg, Fredrick B., general counsel, District of Columbia Office of Consumer Protection: Material relative to the hearings - 256-259 District of Columbia unclaimed property bill 205-251 Herbert, Vivian E., unclaimed property administrator, State of Vir- ginia: Survey of dormant account policies of banks in Richmond, Va 155-156 Kelly, Thomas F., assistant treasurer, Commonwealth of Massa- chusetts: Letters concerning abandoned property 150-151 Lord, Jim, treasurer, State of Minnesota, and president, National Association of Unclaimed Property Administrators: March 1, 1979, memorandum to Mr. Farmer, Office of the Vice Pres- ident, from Paul H. Taylor,~ Department of the Treasury, re comments on legislative proposal by State treasurer of Minne- sota to permit recognition of State entitlement to unclaimed property held by the Federal Government 10-12 Prepared statement 14-26 Appendix A.-Famous people reported as "unknown" 27 Appendix B.-Minnesota unclaimed property law.. 29 Appendix C.-Advertiseménts listing owners of unclaimed property~. 45 Appendix E.-Memorandum concerning percentage of funds returned to owners 48 Appendix F.-Examples of signature cards 49 Appendix G.-Service charges reported by individual banks 56 Appendix H.-Passbooks for school children's accounts....__ -- 105 Appendix 1.-Letter from Keith Norbie's mother to State treasurer Lord 115 (III) PAGENO="0004" Iv Letters, statements, etc., submitted for the record by-Continued Lord, Jim, treasurer, State of Minnesota-Continued Prepared statement-Continued Appendix J.-News report of Comptroller's pilot project for Page national banks 116 Appendix K.-Proposed examination procedures for Comp- troller's pilot project for national banks_ -- 117 Appendix L.-Comptroller's assertion of exclusive visitorial powers for national banks 125 Appendix M.-1962 Wall Street Journal article 126 Appendix N.-Proposed bill for Federal agency reporting of unclaimed property to individual States.._ 128 Appendix 0.-Paul Taylor memorandum to Office of the Vice President concerning unclaimed property held by U.S. Treasury 140 Rosenthal, Hon. Benjamin S., a Representative in Congress from the State of New York, and chairman, Commerce, Consumer, and Mone- tary Affairs Subcommittee: Sundry articles 261-262 Schnaitman, W. K., Baltimore, Md.: July 11, 1980, letter to Chairman Rosenthal concerning mother's savings account at the Maryland National Bank 147 Zito, Edmund G., Chief National Bank Examiner, Officer of the Comp- troller of the Currency: Prepared statement 278-304 APPENDIXES Appendix 1.-Correspondence 305 Congressman Eugene V. Atkinson 305 Individual depositors' complaints 310 American Bankers Association 337 Individual financial institution comments 339 Roll & Kolody, Inc., letter regarding locator service 345 Appendix 2.-Federal agency materials 346 Comptroller of the Currency 346 Letters to State authorities concerning visitorial powers over national banks 346 Subcommittee letter of inquiry concerning dormant account serv- ice charges by national banks 352 Letter to subcommittee concerning dormant account service charges by national banks, December 4, 1979~ 354 Subcommittee request for testimony..- 356 Banking circular concerning dormant account service charges, September 25, 1980 360 Questionnaire to State authorities concerning State laws appli- cable to national banks 361 Federal Home Loan Bank Board: Letter to subcommittee concerning Federal regulation of dormant accounts at savings and loan as- sociations, September 11, 1980 365 National Credit Union Administration: Letter td subcommittee concerning Federal regulation of dormant accounts at credit unions, August 1980 386 Internal Revenue Service: Subcommittee inquiry and IRS response concerning tax treatment of reinstated interest accruals in dormant accounts 389 Appendix 3.-Reference and background materials 392 "Escheat of Unclaimed Deposits in Financial Institutions," by Henry Cohen, Congressional Research Service, Library of Congress, July 16, 1980 392 Memorandum opinion in Bank of American v. Kenneth Cory, June 20, 1976, enunciating "chutzpa principle" 410 Statement of intended decision in Bank of America v. Kenneth Cory, July 17, 1980 413 Joe J. Roby, Jr., memorandum to David Epstein concerning visitorial powers over national banks, March 21, 1979 444 "Inactive or Dormant Accounts," from Savings Accounts, by William C.Prather PAGENO="0005" V Page Appendix 4.-State responses to unclaimed property questionnaire 457 Questionnaire text 457 Arizona 466 Questionnaire response 466 Advertisements 474 Unclaimed property law 480 Regulations Arkansas 504 California 511 Questionnaire response 511 Audit program 517 Internal control questionnaire 537 Unclaimed property law - 550 Regulations 583 Colorado 588 Connecticut 592 Questionnaire response 592 Advertisements 606 Delaware 615 Florida 619 Questionnaire response 619 Unclaimed property law and rules 627 Examination forms 638 Georgia 640 Questionnaire response 640 Unclaimed property act and rules 649 Hawaii 666 Questionnaire response 666 Advertisements 676 Illinois.. 677 Questionnaire response 677 Advertisement 681 Examination procedures for banks 687 Kansas~. 704 Maine 707 Maryland 711 Questionnaire response 711 Advertisement 718 Rules and regulations 719 Massachusetts 720 Questionnaire response 720 Advertisements 738 Unclaimed property law 740 Internal control questionnaire for banks 751 Examination report-Haverhifi National Bank 760 Examination report-Blue Hill Credit Union 771 Michigan 780 Questionnaire response 780 Consent judgment in National Bank of Detroit v. State of Michigan. 799 Opinion of the court 805 Minnesota 820 Questionnaire response 820 Advertisements (bee p. 45 of hearings) Unclaimed property law (see p. 30 of hearings) Service charges, Marquette National Bank 844 Interest reversal, Northwestern National Bank of Minneapolis - - 848 Missouri - 854 Questionnaire response ~____ 854 Unclaimed property law 857 Nebraska 864 Questionnaire response 864 Advertisements 870 Accounts wiped out by service charges 877 New Hampshire 881 New Mexico 883 Questionnaire response 883 A4vertisem~ts~.~. 889 PAGENO="0006" VI Appendix 4.-Continued Page New York - 891 North Carolina 922 North Dakota 931 Oregon Rhode Island 940 Questionnaire response 940 Advertisement 962 Service charge complaints 966 South Carolina 971 Tennessee Questionnaire response 977 Advertisement 981 Utah 984 Vermont 991 Questionnaire response 991 Advertisement 1000 Virginia 1001 Questionnaire response 1001 Advertisement - 1009 Proposed audit form for banks 1011 Survey of banks in Richmond, Va 1013 Washington (State) 1015 Wisconsin 1022 Questionnaire response 1022 Proposed rules 1043 Service charges, examples 1047 Appendix 5.-Surveys of District of Columbia financial institutions 1054 Comptroller of the Currency survey of District of Columbia banks 1054 Questions to and letters from four District of Columbia savings institutions 1065 Appendix 6.-Newspaper materials 1088 "States Step Up Efforts to Grab Mounting Pile of Abandoned Prop- erty," by Alfred L. Malabre, Jr., Wall Street Journal, January 22, 1962 1087 "Personal Finance: Forgotten Gains," by Richard Phalon, New York Times December 20, 1976 1089 "States Act To Move Unclaimed Property to Its Owners or to Their Own Treasuries," by Byron Kiapper, Wall Street Journal, June 1, 1978 1090 "U.S. To Ensure That Banks Don't Claim Money in Forgotten Ac- counts as Theirs," by Byron Kiapper, Wall Street Journal, August11, 1978 1091 "Cof C Plans NB Escheat Probe," by Lynn Conover, American Banker,August 15, 1978 1092 "Decade After Death, $11,000 Finds Heirs," by Joe Scales, Billings Gazette, July28, 1979 1093 "New York State Law Annually Tarnishes Banks' Astute Image," by Richard Janssen, Wall Street Journal, September 5, 1979 1094 "Bank Fees Nearly Eat Up Girl's $58 in Savings," by Robert Fair- banks, Los Angeles Times, November 3, 1979 1095 "Chasing the Great Bank `Robbers'," by Clemens P. Work, National LawJournal, March 17, 1980 1096 "Bank of America Told To Hand Over $20 Million to State," Wall StreetJournal, July 21, 1980 1100 "Calif. Now Aims at Crocker National," American Banker, July 23, 1980 1101 PAGENO="0007" BANK TREATMENT OF INACTIVE CHECKING AND SAVINGS ACCOUNTS WEDNESDAY,~ JULY 23, 1980 HOtTSE OF REPRESENTATIVES, COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITrEE or THE Co3r3rrrrER ON GOVERNMENT OPERATIONS, Washington, D.C. The subcommittee met, pursuant to notice, at 9:40 a.m., in room ~247. Rayburn House Office Building, Hon. Benjamin S. Rosenthal (chairman of the subcommittee) presiding. Present: Representatives Benjamin S. Rosenthal and Lyle Williams. Also present: Donald P. Tucker, chief economist; Doris Faye Bal- lard, clerk; and Jack Shaw, minority professional staff, Committee on Government Operations. OPENING STATEMENT O~ CHAIRMAN ROSENTHAL Mr. ROSENTHAL. The subcommittee will be in order. Today and to- morrow the Commerce, Consumer, and Monetary Affairs Subcommit- tee will hear testimony about how banks, and especially national banks, treat inactive savings and checking accounts, and we will con- sider whether, in some cases, the banks are abusing their responsibili- ties to their depositors. We will also consider what Federal regulatory steps should be taken to curtail any abuses and will examine in par- ticular the role of the Comptroller of the Currency in regulating the practices of national banks in this area. Inactive accounts are checking or savings accounts in which the depositors do not make regular transactions, sometimes leaving them untouched for periods of several years. We will consider, in particular, whether the banks are giving ade- quate notice to their inactive depositors about what is being done to their accounts, in terms of imposing service charges, stopping inter- est payments, suspending mailings of statements, and ultimately-in most states-turning the funds over to the State's unclaimed prop- erty office. We will also consider whether the service charges them- selves and other substantive bank practices are reasonable or need to be restricted by regulation. A closely related set of issues concerns compliance by the banks, and especially by the national banks, with the unclaimed property laws of the States. In certain States these laws are administered so as to return much of the dormant money to the owners, where the banks have failed to do so directly. National banks, in particular, are (~) PAGENO="0008" 2 alleged in some instances to be resisting State enforcement efforts in this area, with the cooperation and encouragement of the Office of the Comptroller of the Currency. In connection with this situation we shall also consider what is the responsibility of the Comptroller of the Currency for insuring national bank compliance with State laws that protect the dormant depositors. Our first two witnesses will be Mr. Jim Lord, treasurer of the State of Minnesota, and Keith Norbie of Duluth, Minn. We are delighted that both of you could join us. Mr. Lord, do you want to go first. ~ STATEMENT OP JIM LORD, TREASURER, STATE OP MINNESOTA, AND PRESIDENT, NATIONAL ASSOCIATION OP UNCLAIMED PROP. EItTY ADMINISTRATORS; ACCOMPANIED BY KEITH NORBIE, DULUTH~ MINN. Mr. Loiw. Thank you, Mr. Chairman and members of the subcom- mittee. In addition to being the treasurer of the State of' Minnesota, I am also the president of the National Association of Unclaimed Property Administrators. On behalf of the 35 States this organization represents, I want to thank you for giving us this opportunity to bring to your attention a little known situation where American consumers are losing mil- lions of dollars a year to the banks that they have trusted for so long. It is a situation where the consumer has made the understandable but wrong assumption about their bank accounts. The consumer has assumed that the bank is protecting the consumer's money he has de- posited .for safekeeping. But banks throughout the Nation are sys- tematically raiding their missing customers' dormant accounts. What I would like to do, Mr. Chairman, is briefly explain to you what the situation is and give you some very specific examples of what is going on around the country. Each year through deaths, inadvertence, or mistake, or just forget- fulness, thousands of people lose or forget their money they have on deposit in a bank. In many cases, Mr. Chairman, bank practices con- tribute to these oversights. It seems unlikely, but really many of us at some time have prob- ably forgotten about a savings or checking account or have forgotten to claim a utility deposit or cash a dividend check or been unaware of a department store overpayment. Some very important and intelligent people have done this. Henry Pillsbury of the `famous Pillsbury family in Minnesota forgot his savings account. Our last candidate for the U.S. Senate forgot a sav- ings account. In California, former Governor Pat Brown and State Comptroller Ken Corey, who is responsible for the unclaimed property program in California, forgot their saviugs accounts. What we are talking about just in the area of bank accounts, official checks, and trust department property runs in the millions of dollars each year. In later testimony, Mr. Chairman, we will document these amounts. PAGENO="0009" All but two States and the District of Columbia have laws designed to handle unclaimed funds. The purpose of these laws, the general pur- pose. is to protect the interest of the owners of these funds wHo often- times are the heirs of the deceased,~ senile or somehow infirmed. First of all, Mr. Chairman, I would like to give you just a brief re- view of how this State law is supposed to work. The State laws set up a procedure to handle the unclaimed funds by requiring the holders, which~ are usually banks, insurance com- panies and other corporations and businesses, to report to the State the names of the missing owners a~fter they have held this property for a period of generally 7 years. They report this property to the State administrator, who is often the State treasurer, then the State sets in motion a series of steps to return these funds to the rightful owners. For example. the State sends a first-class letter to the last known address and publishes names in local newspapers. The names in the newspaper ads are quite extensive, Mr. Chairman. A copy of recent ads in Minnesota has been submitted to the subcommittee. Mr. ROSENTHAL. Without obje~tion. this material will be inserted in the record at this point. [The material referred to is included at p. 45 as app. C to Mr. Lord's prepared statement.] Mr. Loim. It can be 10 pages long in some States. There is a lot of public attention to these ads and they work very well. If the owners have not yet been located by these efforts, several States undertake additional steps to find the rightful owner. For in- stance, in my State of Minnesota, my staff undertakes to use prObate court records, latest cit.y directories, vital statistics and whatever re- sources as are available to trace~ these rightful owners. If all these efforts are unsuccessful, all the names of people who have ever had money owing to them in Minnesota are put in a book. This book is broken down by county, and then, alphatically, and sent to every pub- lic library in the State of Minnesota and also to the county commis- sioners. As you know, county commissioners being political animals themselves, they love to go through the list in their county to try to locate their constituents and reunite them with their money. Most States with a 7-year abandonment period can return these millions of dollars to their owners to the tune of 30 or 50 percent re- ported to them. Last year, in the State of Minnesota, of all the people we published, we. returned 76.6 percent of the money owed to these grateful owners. - Mr. Chairman, the program works once the State is notified of this money. Let's assume we have not found the owner. The State never gains title to this property. It holds the property in trust. It is the custodian of the funds. The State taxpayers: get the benefit of it while holding it and the investments of it. So, it really works to the benefit of all the taxpayers of the State. Our problem, Mr. Chairman, with banks is specifically national banks who are not complying with this law and who are systematicall taking these funds as their own. We know this is occurring throng audits of national banks. In almost every instance where there has PAGENO="0010" - 4 been an audit of a national bank, we have found enormous abuses of State laws. Mr. ROSENTHAL. Why is that? Mr. Loiu. I believe that, first of all, the banks have a legal position that they think they have a right to other people's savings accounts. Also, no one is looking really closely over their shoulder who directly regulates them in this area. As an example, Northwestern National Bank of Minneapolis was examined by the State of Minnesota. During the course of the examination, the bank reported an additional $442,702 that it had not reported in the past and that should have been reported in the past of people's funds that they were holding and people's sav- ings accounts they were service charging out of existence. Even after they came up with this full disclosure, we found an addi- tional $50,000 that the bank had neglected to report to the State. In addition during the course of the examination, they came forward *and were forced to report another half a million dollars in unclaimed funds held in their trust department. Let me give you an example of how a bank takes someone's savings account. Say, for instance, you want to deposit $100 in a national bank, hoping to save it for a rainy day, your retirement, your grandchildren, or whatever. You take that $100 and you walk into a bank. You sit down with the bank employee and they give you various forms and so on. You give them the money, and then they give you a little card. They call it a signature card. Mr. Chairman, I always believed that that signature card was there to verify your signature. That is not the case. From the bank's point of view you have just entered into and signed a con- tract with the bank. What is written on that signature card I think is very interesting. Mr. ROSENTHAL. Is this true in every State in every bank? Mr. LORD. Yes, Mr. Chairman, it is. The wording of the signature card may vary slightly, but in general what this signature card says, and this is pretty much all it says that is relevant here is this. Let me quote one: The signature of each person authorized to sign on this account appears On the reverse side of this card and signifies agreement that the account is subject to all applicable rules of this hank now existing or hereinafter adopted. We have copies of these in the appendix of the statement. You sign the signature card, and you walk out of the bank. You have got the knowledge now that your money is safe in the bank and is going to grow and grow interest; right? Not so, Mr. Chairman. After a few years, if you have not made any withdrawals or any deposits, the bank starts doing some of the most curious things to your savings account. After a couple of years they will stop paying interest on your savings account. Mr. Chairman, they do not notify you that they are going to do this. Then, at the same time or a few years later, they start deducting this mysterious service charge on your savings account. Mr. ROSENTHAL. This is pursuant to the bank rules you agreed to abide by when you signed the signature card? Mr. Loim. Not necessarily, Mr. Chairman. Perhaps when you signed that signature card, if you are able to get hold of the bylaws, which PAGENO="0011" you can according to the rules, there may be no provision for service charging your savings account. The year after you open your account the banks says they are authorized to take a service charge out of your account because you agreed to abide by the laws "hereinafter adopted." So, at the time you opened your account there was no rule providing for a service charge, but they will adopt a rule a year later providing for anywhere from a dollar to hundreds of dollars a year for service charge. I have attached to my prepared statement copies of some of the reports the banks provide for the State of Minnesota signifying page after page, after page of service charges. These reports are just sam- ples. They range from $12 per year to a couple of hundred dollars per year on people's savings accounts. Mr. Chairman, if before the abandonment period runs out you become aware of the account and come in and claim it, the bank may do several different things. They say, "Mr. Depositor, we are sorry. `We will refund your entire account." However, I have been notified by the banking industry they are no longer going to do that. They may say, "You are out of luck, sir, because our rules and bylaws provide that we can service charge your account out of ex- istence and take it into income." Or, they may negotiate with you, Mr. Chairman, for your own savings account and say, "Yes; we may p~y you some interest but the service charges are going to stay." Or, they may say, "We will wipe out the service charges, but we are not going to pay you any interest." Let. me follow your account, Mr. Ohairman. Let's say it survived all the service charges and was reported to the State as legally pre- sumed abandoned funds. The State sets into motion those steps out- lined before to try and find you and notify you to come in and claim your funds. If you go to the bank to claim the funds, again, hopefully the bank would refund your entire account. However, the announced policy now is that they are not going to do~ that. Let me back up one step, Mr. Chairman. Before your name is even reported to the State, the bank is first of all supposed to try and notify you and tell you that you have this account and you should come in and reactivate it. Mr. Chairman, the national banks are not even doing that. They are not making a minimal effort there. They reported it to the State of Minnesota in Minneapolis that they could not find the Fniversitv of Minnesota, a major brokera.ge firm, or the city of Minneapolis itself. They make no effort to try and reactivate these accounts. Why should they? They have already taken them in as bank income. They have a motivation fOr not finding the owners. Once the account is reported to the State in the initial period you go to the bank to try to find your money. Later on, the money is re- mitted to the State. Then what happens is this. If you come forward later on or say you are an heir of someone and come in to claim on behalf of the estate, the State can only notify you of what was re- I)Orted to it. It can be a greatly diminished sum. In all of those accounts that were wiped out, Mr. Chairman, the bank claims are gone, there is no account left. It is bank property and none of those accounts that the bank has taken in as income is ever. PAGENO="0012" 6 reported to the State. They are never discovered until the State has the manpower to go in and examine that bank for unclaimed property. I would like to provide the committee with a few specific examples that are typical of what has been happening in Minnesota. Mr. ROSENTHAL. Are you also going to tell us about the number of people involved in this, both in your State and in the United States, and presumably the amount of money involved? Mr. Loiw. Yes. Mr. Chairman, I am going to give you a brief overview. Mr. Epstein, in later testimony, is going to get very specific in that area. In Minnesota a large savings and loan institution had a contract with a Minneapolis school system to solicit the school children to bring their nickels and dimes to school each week to learn how to save. The passbook given to these schoolchildren told them such things as: "He who saves when he is young may spend when he is old." "Thrift is the door of opportunity." "A small sum may serve a great purpose." And, "Thrift never despises small beginnings." Mr. ROSENTHAL. They left out a good one, "As you sow, so shall you reap." How did they ever miss that one? Mr. Loiw. Mr. Chairman, they took approximately 10,000 school children's savings accounts as bank income through their service charge policy. It represented about $80,000 that they took from school children's accounts. They made a report to the State of Minnesota sayin~they were holding about $55,000 in these unclaimed funds. We examin~d the bank. What we found was an additional one-quarter of a million dollars that this bank not only did not report as unclaimed funds, but they had taken it as bank income. That was their own depositors' savings accounts. With me today, Mr. Chairman, is a young Minnesotan who en- trusted his Savings to a national bank. With your permission, Mr. Chairman, I would like to call on Keith Norbie from Duluth, Minn., to let him give his story, which I want to emphasize to this committee is typical of a depositor's dealings with a national bank. Mr. ROSENTHAL. We are delighted, Mr. Norbie, to have you with us. Mr. Nomrn~. Thank you. As you may already know, my name is Keith Norbie, I live in Duluth, Minn. I am 12 years old. When I was about 1 year old my parents took me down to Northern City National Bank in Duluth, Minn., to open a junior banker savings account. As a junior banker I could get free ballons and suckers and other things like that at the bank. There would also be a junior banker party every year where they would give away a free bike. Boy, did I really want that bike. I went back to put a little more money in the bank. My parents were trying to teach me to save money. But I like to spend money on models and bikes, and I reall~ don't want to save money. I want to spend it. When I was about 10 years old I got a paper route. My parents said I had to save each week, so we went down to Northern City National Bank to change my account to Park State Bank in Morgan Park~ which is close to where I live. I handed my bankbook to the lady and she checked on it. She told my mom, not me, that it was all used up PAGENO="0013" by service charges. I called them robbers and I said that ain't fair. My mom tried to give me some money to keep me quiet. It didn't work. I wouldn't keep quiet. I wanted my money. I couldn't see how a big bank had taken my money. Never did Northern City National Bank' ever tell me there was a service charge or did they try to tell me or my parents that my account was gone. WTe are the only N-o-r-b-i-e in the phone book. We are not hard to find. When I went to Park State Bank my mom gave me more money to open an account, but I questioned them about stealing my money. I didn't. trust them, a.nd it is still hard for me to trust any bank. But. I still don't have my $5. Thank you. Mr. ROSENTHAL. Tha.nk you. That is a very, very poignant story. Mr. LoRD. Mr. Chairman, I would like to add that in Minnesota there are thousands of t.hese examples every year. Mr. Chairman, here is where we all come together. In order to stop these abuses, I went to the Comptroller of the Cur- iencv~s Office to solicit, their help. I met with John Heimann, and I met with Torn Taylor. Director of the Consumers' Division. I outlined the problem to Mr. Heirnann. who claimed that lie was sorry that he did not. have the wherewithal or the funds to examine for unclaimed prop- erty. I did not give up but went to meet with Mr. Taylor to convince him of the. importance of the pr~gram. Evidently I was successful. He. came to Minneapolis. Minn., to~ meet with our National Association of Inelaimed Property Administrators, to announce the program whereby the Comptroller of the Currency was going to examine na- tional banks for unclaimed property. I was thrilled. Let me quote from a newspaper article. I am quoting Mr. Taylor: Lord feels this could have a lot of b~neflt to Minnesota and the public. Talks with him convinced us to get the project started. This is a broadening of our examining process started 2 years ago in the area of consumer protection laws. We're gradually broadening the process to State laws as they apply to banks. We hope to extend the Minnesota project to other parts of the Nation. Mr. Chairman, we are au delighted by that announcement. That is the highlight of the story. The rest goes downhill. After continued delays in the regiona.l office, the Comptroller's Of- fice finally came up with a procedure where they were going to examine national banks for unclaimed property. They told us they came up with the procedures after they got the banks' approval to go ahead with these procedures. My staff examined the procedures and, Mr. Chair- man, it was really ridiculous. The procedure that the Comptroller's Office set up was to allow the natiçnal banks to keep all the funds they had already taken in as income and had not reported in the past. Their examination was going to be very sketchy at best, when they examined for unclaimed property. It was going to do nobody any good because they were not going to tell the States about it. Then, the real kicker is, once we learned that the Comptroller's Office had now set up an examination procedure that. was meaningless. we said, all right, we would go ahead with our examination process. The Comptroller's Office then wrote a. letter outlining their position on States examining national banks. Tom Taylor wrote a letter to the PAGENO="0014" 8 counsel for the Northwestern National Bank, who we just examined and had found that they had hundreds of thousands of dollars they were not reporting. He wrote this letter to Mr. Bohlen, counsel for Northwestern National Bank: Dear Mr. Bohlen: This is in response to your letter of October 6, 1978, con- cerning our enforcement of State unclaimed property laws and whether national banks will be subject to State audits. It remains our opinion that pursuant to 12 U.S.C. 484 this office has sole visitorial powers over national banks for the enforcement of substandard provisions of State laws which are applicable to natioiial banks. Mr. Chairman, our plight is basically this. The Comptroller's Office has stated that only the Comptroller's Office can examine national banks for unclaimed property, but the Comptroller's Office has refused to undertake any meaningful examination itself for unclaimed property. The result is that thousands of their depositors lose millions of dollars each year. Mr. Chairman, I am hopefulthat this committee and the Comptroller's Office can work together so that we can come up with somc-~---- Mr. ROSENTHAL. How do the banks justify these practices? Mr. Loiw. Here is what they have told me. I do not know if they are here to testify. Mr. ROSENTHAL. We have asked the American Bankers Association to testify, and they have not taken advantage of that opportunity. Mr. Loiw. Mr. Chairman, I don't think they could stand the scrutiny of this committee's questioning in this area. Here is what they have told me. They said that these dormant accounts are prime sources of employee embezzlement, so they must put all these costly controls on savings accounts so the employees won't embezzle the funds. But as it turns out, as a resu.lt, the bank in a sense, embezzles the money. They don't tell the customer they are going to do this. Mr. ROSENTHAL. Is there a representative of the American Bankers Association here? Do you folks want to testify? Mr. Bosco. No; we are not prepared to testify today.. Mr. ROSENTHAL. Why is that? Mr. Bosco. Just the decision that ire are not prepared today. Mr. ROSENTHAL. You don't think you can* add anything to the record? Mr. Bosco. In fact, I don't think I would be in a position to speak for the ABA on this matter. Mr. ROSENTHAL. But you are employed by them? Mr. Bosco. Yes; I am. I am Garry Bosco, assistant State legislative counsel. Mr. Loiw. I want to take one brief moment tO bring to your atten- tion all abuser of the unclaimed property law which is probably worse than the abuses by the national banks. Probably the single most largest violators of these laws, in not returning funds to the rightful owners, is the Federal Government itself. In 1962, the Wall Street Journal esti- mated the Federal Government was then holding $5 billion in un- claimedfunds. This would be in the form of income tax refund checks, wage checks, crop insurance, postal savings, savings bonds, and the like. I personally believe that the estimate in 1962, and this was just my hunch, was high for 1962. It may not be for today. PAGENO="0015" 9 But, Mr. Chairman, the Federal Government has no right to this money. There is no such thing as a Federal unclaimed property law or a Federal escheat law. It is our association's opinion that the States have jurisdiction to handle these unclaimed funds and to incorporate them into their own programs of returning funds to the rightful owners. To accomplish this, our association has drafted a bill which would set up a mechanism to have the Federal Government report the unclaimed funds it is holding to the appropriate States. As an example of the bureaucrats' attitude, which I keep running into all the time around here, toward these unclaimed funds, let me quote to you from a memorandum dated March 1, 1979, from Paul Taylor of the Department of the Treasury to the Vice President's office. The Vice President's office asked the Treasury Department to comment on this proposed legislation. I quote from page 2, I believe, of the letter: Mr. Lord also mentions that mi1lions~ of dollars of taxpayer refund checks go unclaimed or uncashed. There is another side to this matter which should also be focused upon. At any given time, th~re is an undetermined amount of taxes legally due to the Government which are never collected. A safe assumption is that the amount of uncollected and unpaid taxes far exceeds tax refunds which are unclaimed or unpaid. This assessment is reflected in the Internal Revenue Servic&s fiscal year 1977. Mr. ROSENTHAL. That is an outrageous statement, is it not? Mr. LORD. Yes; let me get to the worst part of the statement: * * unclaimed or unpaid tax refunds should not be considered as a windfall to the Government, but merely as an offset to losses in the total Federal tax collection process. They are taking these people's i~oney and just trying to offset it. Mr. ROSENTHAL. Without any legal authority to do that. Mr. LORD. I do not believe the Federal Government has such authority. Mr. ROSENTHAL. I am certain they don't have any authority to do that. Without objection, the memorandum to which you referred will be inserted in the record at this point. [The material follows:] PAGENO="0016" 10 DEPARTMENT OF THE TREASURY WASHINGTON. D.C. 20220 ~M. ASSSTAOT SECRETARY 0 MEMORANDUM TO: Mr. Farmer Office of the rice President FROM: Paul H. Tayl9r~-~-~ SUBJECT: Comments on legislative proposal by State Treasurer of Minnesota to permit recognition of State entitle- ment to unclaimed property held by the Federal Government. Your memorandum of February 1 requested our views on this subject. In an earlier telephone conversation, Mr. Spahr of my staff indicated that formal policy views from the Treasury on the proposal could be addressed only by our Office of the General Counsel, but that we would be glad to give you in- formal comments from our perspective as a fiscal operating entity of the Department. The purpose of the bill is to insure the prompt turnover to States of Federally-held unclaimed property, based primarily on the last-known address of the owner and the passing of a seven-year period of time during which no claim is made. For public debt securities, the seven-year period is to run from date of maturity or earlier call for redemption. The Minnesota State Treasurer, Mr. Jim Lord, stated in his memorandum that the right of the States to escheat money owing to its residents has been expressly recognized by the Congress in the case of the U.S. Postal Savings System. However, with respect to the postal savings funds there was special Federal legislation that permitted the distribution of the unclaimed amounts to the States. These were not public put private funds which were originally held outside of the Treasury by the Board of Trustees and deposited in local banks. The transfer of the remaining unliquidated funds to the Treasury did not change their character as private funds. Many categories of unliquidated liabilities owed by the Federal Government rest on an entirely different foundation than the Postal Savings System. For example, when Treasury checks are issued by Government disbursing officers they are PAGENO="0017" 11 rayable without limitation of time, thus racmiiring the Federal Government to meet its obligations whenever the checks are presented. Moreover, when checks are returned as undeliverable or are lost or stolen and therefore not received by the right- ful rayees, the Government has an obligation to remail the checks or to issue replacements. In all these instances the Federal Government, in effect, pledges its faith and honor on payment of its negotiable instruments which are contracts between the holders and the U.SL.Government. Another administrative complication of the proposal vis- ~-vis Treasury check-issuance and payment operations is that cur unpaid-check magnetic tape files are not broken out by States; nor do they show the name and address of the payee-- only the disbursing office symbol, check number, and amount of the payment. Any requirement to obtain the last-known address for potential claimants would therefore place incal- culable administrative burdens on our systems operations. Mr. Lord also mentions that millions of dollars of tax- raver refund checks go unclaimed or uncashed. There is another side to this matter which should also be focused upon. At any given time, there is an undetermined amount of taxes legally due the Government which are never collected. A safe assump- tion is that the amount oi uncollected and unpaid taxes far enceeds tax refunds which are unclaimed or unpaid. This assessment is reflected in the Internal Revenue Service's FT 1977 statement of financial Eondition, which showed $8.3 billion for accounts receivable from the public. Thus, un- claimed or unpaid tax refunds should not be considered as a windfall to the Government but merely as an offset to losses in the total Federal tax collec~ion process. Complexities with respect to the proposal can also be foreseen in another major fiscal operations area of the Depart- ment--the issuance and redemption of public debt securities. In the first analysis, Treasury~ securities are contracts be- tween the United States and the investors and there is no basis for recognizing a State's~ claim thereto unless it has succeeded to the contractual interests of suchin~bbtors. In this connection, most States have enacted statutes dealing with escheat; however, because of the need to satisfy the requirements of constitutional due process in connection with their utilization, the States have generally preferred to become custodians of unclaimed property rather than successors of title. (Also, the relatively small amounts usually involved militate against resorting to expensive legal proceedings.) 67-4'~O 0 - 81 - 2 PAGENO="0018" 12 As a matter of historical fact, our Bureau of the Public Debt has not stone-walled States where valid escheats have occurred pursuant to their own laws. What we have asked for, however, is an unconditional acquittance for any payments made, which means that the payees must legally stand in the shoes of the owners. A custodianship statute, such as that proposed, does not accomplish this. Unclaimed Series B savings bonds present a further problem: With their maturity extension periods, the addresses of record are not likely to provide any basis for establishing the owner's last residence. Noreover, under the savings bond con- tract there is an explicit right of survivorship where the securities are registered in the names of two individuals. Since the addresses of second co-owners and beneficiaries do not normally appear on the bonds, where they are unclaimed there is no way to establish the survivorship or residence of such parties. These are but a few of the administrative problems that would have to be addressed in dealing with the disposition of unclaimed property; they reflect those that I am immediately familiar with in the fiscal area. Other Treasury offices and other Federal agencies would no doubt have concerns that are not addressed here. Therefore, if the States intend to seek passage of escheat legislation, additional consultation with the agencies and Congressional committees would appear to be a prerequisite. PAGENO="0019" 13 Mr. WILLIAMS. Your position is that where States have the appro- priate legislation and policy established, that this money should be turned back to the State for proper disposal? Mr. LORD. That is correct. Mr. WILLIAMS. What happens to that money if the owners are never found. Do you continually invest it~so the taxpayers rea.p the benefit? Mr. LoRD. Yes; that is correct. The taxpayers, at least in their local State. get. the benefit-not the Fe~eral Government. But with the States' success in finding people, Mr. Chairman, it would be a very efficient way. Mr. WILLIAMS. You mentioned two States. Do you know which two States don't have the law? Mr. LORD. I believe they are Colorado and Missouri. Mr. ~SILLIAMS. But every other State has such a law? Mr. LoRD. That. is correct., in one~ form or another. The District of Columbia does not. I understand the committee is going to be looking into that. Mr. Chairman. of course I want to acknowledge that this is probably not the official establisl1ed policy of the Department of the Treasury to make such ridiculous statements. But it. is the attitude of every bureaucrat I have discussed this with. I hope this committee at some point will have the time to look into it.. Mr. WILLIAMS. You could apply this to everyone but national banks-your State law. Mr. Lone. That is correct. You have oversight responsibilities over the Federal Home Loan Bank Board and others which could also be of assistance. and t.he Securities and~ Exchange Commission has shown some interest, in assuring that corporations also comply with it. Mr. ROSENTHAL. Thank you both, very much. We appreciate your coming here. and we are very grateful for your appearance and your testimony. We want to promise tha.t we will pursue the matter with~ vigor and diligence. Mr. LORD. Thank you ve.ry much. Mr. N0RRTE. Thank you. Mr. ROSENTHAL. Without objecti~n. your entire statement will be made a. part of the record at. t.his point. [Mr. LOrd's prepared statement follows:] PAGENO="0020" 14 STATEMENT OF JIM LORD TO THE HOUSE COMMERCE, CONSUMER AND MOMETARY AFFAIRS `SUBCOMMITTEE QF THE COMMITTEE O~ GOvER:mENT O~ERATIO~S JULY 23, 1g80 MR. CHAIRMAN, MEMBERS OF THE SUBCOMMITTEE: MY NAME IS JIM LORD. I AM THE TREASURER OF THE STATE OF MINNESOTA. I AM ALSO PRESIDENT OF THE NATIONAL ASSOCIATION OF UNCLAIMED PROPERTY ADMINISTRATORS. ON BEHALF OF THE 35 STATES THIS ORGANIZATION REPRESENTS, I THANK YOU FOR GIVING US THIS OPPORTUNITY TO BRING TO YOUR ATTENTION A LITTLE KNOWN SITUATION WHERE AMERICAN CONSUMERS ARE LOSING MILLIONS OF DOLLARS A YEAR TO NATIONAL BANKS AND OTHER BANKING INSTITUTIONS, IT IS A SITUATION WHERE THE CONSUMER HAS MADE THE UNDERSTANDABLE BUT WRONG ASSUMPTION. THE CONSUMER HAS ASSUMED THAT THE BANK IS PROTECTING THE CONSUMER'S MONEY HE HAS DEPOSITED FOR SAFEKEEPING.- BUT BANKS THROUGHOUT THE COUNTRY ARE SYSTEMATICALLY RAIDING THEIR MISSING CUSTOMERS' DORMANT ACCOUNTS. HERE'S HOW IT HAPPENS. EACH YEAR THROUGH DEATHS, INADVERTENCE OR MISTAKE, HUNDREDS OF THOUSANDS OF PEOPLE LOSE OR FORGET THE MONEY THEY HAVE ON~DEPO~IT IN A BANK. IN MANY CASES, BANK PRACTICES CONTRIBUTE TO THESE OVERSIGHTS. PAGENO="0021" 15 MANY OF US SOME TIME HAVE PROBABLY FORGOTTEN ABOUT A SAVINGS OR CHECKING ACCOUNT OR HAVE FORGOTTEN TO CLAIM A UTILITY DEPOSIT OR CASH A DIVIDEND CHECK OR BEEN UMAWARE OF A DEPARTMENT STORE OVERPAYMENT. IN MINNESOTA, HENRY PILLSBURY OF THE FAMOUS PILLSBURY FAMILY AND ONE OF OUR CANDIDATES FOR THE U. S. SENATE FORGOT THEIR SAVINGS ACCOUNTS, (SEE UNCLAIMED PROPERTY REPORT ATTACHED AS APPENDIX A,) \\ IN CALIFORNIA, FORMER GOVERNOR PAT BROWN AND STATE CONTROLLER KEN COREY (wHo Is RE~PONSIBLE FOR THE UNCLAIMED PROPERTY PROGRAM IN CALIFORNIA)~LOST THEIR SAVINGS ACCOUNTS. WHAT WE ARE TALKING ABOUT JUST IN THE AREA OF BANK ACCOUNTS, OFFICIAL CHECKS AND T~UST DEPARTMENT PROPERTY RUNS IN THE MILLIONS OF DOLLARS~ EACH YEAR. I UNDERSTAND LATER TESTIMONY WILL DOCUMENT THE AMOUNTS. ALL BUT 2 STATES AND THE DISTRICT OF COLUMBIA HAVE LAWS REGULATING THESE FUNDS CALLED UNCLAIMED PROPERTY LAWS. WHILE THERE ARE VARIOUS VERSIONS OF STATE UNCLAIMED PROPERTY LAWS, THEY ARE GENERALLY THE SAME IN OPERATION, AND 31 STATES HAVE ADOPTED THE UNIFORM UNCLAIMED PROPERTY ACT. THE REST HAVE ENACTED SIMILAR LAWS. (A COPY OF MINNESOTA'S UNCLAIMED- PROPERTY ACT IS ATTACHED AS APPENDIX B.) THE PURPOSE OF THESE LAWS IS TO PROTECT THE INTEREST OF THE OWNERS OF THE FUNDS. *A BRIEF REVIEW OF THE UNCLAIMED PROPERTY LAW WILL BE HELPFUL IN UNDERSTANDING THE ABUSES WHICH ARE NOW TAKING PLACE. PAGENO="0022" 16 THE STATE LAWS SET UP A PROCEDURE TO HANDLE THE UNCLAIMED FUNDS BY REQUIRING THE HOLDER (BANKS, INSURANCE COMPANIES AND OTHER CORPORATIONS AND BUSINESSES) TO REPORT THE NAMES OF THE MISSING OWNERS TO THE STATE AFTER A PERIOD OF ABANDONMENT, WHICH IS GENERALLY 7 YEARS OR LONGER. THE STATE ADMINISTRATOR, WHO IS OFTEN THE STATE TREASURER, THEN SETS IN MOTION A SERIES OF STEPS TO NOTIFY THE OWNER OR HIS HEIRS OF THE EXISTENCE OF THESE FUNDS. FOR EXAMPLE, THE STATE SENDS A FIRST CLASS LETTER TO THE LAST KNOWN ADDRESS AND PUBLISHES ADS IN MAJOR NEWSP~~PERS. (A COPY OF RECENT ADS IN MINNESOTA IS ATTACHED AS APPENDIX C, LISTING THE NAMES OF THE OWNERS AND THEIR LAST KNOWN ADDRESSES.) IF THE OWNER HAS NOT YET BEEN LOCATED BY THESE EFFORTS, SEVERAL STATES UNDERTAKE ADDITIONAL STEPS TO FIND THE OWNER. IN MINNESOTA, MY STAFF USES TELEPHONE DIRECTORIES, PROBATE COURT RECORDS, VITAL STATISTICS, AND ANY OTHER AVAILABLE RESOURCES TO TRACE THE MISSING OWNER. THESE PROCEDJRES HAVE BEEN QUITE SUCCESSFUL. IF THE ACCOUNT STILL REMAINS UNCLAIMED BY THESE EFFORTS, MY OFFICE PUBLISHES A BOOK OF NAMES, ARRANGED ALPHABETICALLY AND BY COUNTY, OF THE LAST KNOWN ADDRESS. THE BOOKS ARE DISTRIBUTED TO EVERY PUBLIC LIBRARY IN THE STATE AND TO EVERY COUNTY COMMISSIONER. NOT SURPRISINGLY, THE COUNTY COMMISSIONERS USE THE OPPORTUNITY TO LOOK THROUGH PAGENO="0023" 17 THE NAMES IN THEIR COUNTY AND ATTEMPT TO ESTABLISH CONTACT WITH THEIR CONSTITUENTS. MOST STATES WITH A 7 YEAR ABANDONMENT PERIOD ARE ABLE TO RETURN 30 TO 50 PERCENT OF THE BANK ACCOUNTS THAT ARE ADVERTISED. IN MINNESOTA, OUR EFFORTS RESULTED IN RETURNING 76,6~ OF THE FUNDS ADVERTISED FOR 1979. (PERCENT CALCULATION ATTACHED AS APPENDIX E.) UNDER THE LAWS OF ALMOST EVERY STATE, THE MONEY IS HELD IN TRUST UNTIL THE OWNER OR HIS HEIRS ARE LOCATED. THE STATE KEEPS A PERMANENT RECORD OF THE NAMES OF THE OWNER AND THE AMOUNT OF MONEY. AGAIN, I WANT TO .EMPHASIZE THAT THE MONEY CAN BE CLAIMED AT ANY TIME, THERE IS NO STATU1~E OF LIMITATIONS. UNTIL CLAIMED, EVERYONE GETS THE ADVANTAGE OF THE USE OF THE MONEY, SINCE IN MOST STATES, IT IS KEPT IN THE GENERAL FUND. OUR PROBLEM IS THAT NATIONAL BANKS ARE NOT COMPLYING WITH THIS LAW, AND WE NAY BE HELPLESS TO DO MUCH ABOUT IT. AUDITS OF NATIONAL BANKS B~ MINNESOTA AND A FEW OTHER STATES HAVE CONFIRMED IN EVERY INSTANCE A UNIVERSAL BANKING PRACTICE OF TAKING IN AGGREGATE~MILLIONS OF DOLLAPS OUT OF THEIR CUSTOMERS' INACTIVE SAVINGS ACCOUNTS, CHECKING ACCOUNTS AND UNCASHED MONEY ORDERS AND CASHIER'S CHECKS. FOR EXAMPLEJ NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS WAS EXAMINED BY MINNESOTA. DURING THE EXAMINATION, THE PAGENO="0024" 18 BANK REPORTED AN ADDITIONAL $1442,702 OF SAVINGS AMD CHECKING ACCOUNTS THAT THE STATE MAINTAINS SHOULD HAVE BEEN REPORTED IN THE PAST. WE ALSO DISCOVERED AN ADDITIONAL $50,000 THE BANK STILL HAD NEGLECTED TO REPORT TO THE STATE. OUR EXAMINATION ALSO FORCED THE BANK TO REPORT ANOTHER HALF MILLION DOLLARS HELD BY THE BANK'S TRUST DEPARTMENT. LET ME EXPLAIN THROUGH AN ILLUSTRATION EXACTLY HOW A BANK TAKES SOMEONE'S SAVINGS ACCOUNT. SAY, FOR INSTANCE, YOU WANT TO DEPOSIT $100 IN A NATIONAL BANK) HOPING TO SAVE IT FOR A RAINY DAY, YOUR RETIREMENT, YOUR GRAIIDCHILDREN FOR WHATEVER REASON. YOU WALK INTO THE BANK, SIT DOWN WITH A BANK EMPLOYEE, OPEN YOUR ACCOUNT AND SIGN WHAT THE EMPLOYEE WILL TELL YOU IS THE SIGNATURE CARD. NOW, I ALWAYS THOUGHT THAT THE SIGNATURE CARD WAS TO VERIFY MY SIGNATURE. NOT ACCORDING TO THE BANK. THE BANK MAINTAINS THAT YOU HAVE JUST SIGNED A CONTRACT WITH THE BANK, AND YOU ARE BOUND TO THE WORDS ON THE SIGNATURE CARD, THE TYPICAL CARD READS SOMETHING LIKE THIS: "THE SIGNATURE OF EACH PERSON AUTHORIZED TO SIGN ON THIS ACCOUNT APPEARS ON THE REVERSE SIDE OF THIS * CARD AND SIGNIFIES AGREEMENT THAT THE ACCOUNT IS SUBJECT TO ALL APPLICABLE RULES OF THIS BANK NOW EXISTING OR HEREAFTER ADOPTED." (COPIES OF TYPICAL SIGNATURE CARDS ARE ATTACHED AS APPENDIX F.) PAGENO="0025" 19 IF YOU DO NOT MAKE AN ADDITIONAL DEPOSIT OR WITHDRAWAL IN A FEW YEARS, THE BANK WILL DECLARE YOUR SAVINGS ACCOUNT DORMANT OR IDLE. AT THAT POINT, THE BANK WI~LL CEASE ACCRUING INTEREST ON YOUR SAVINGS ACCOUNT. THEN AFTER A COUPLE OF YEARS, IF YOU MAKE NO MORE DEPOSITS OR WITHDRAWALS, THE BANK DOES THE MOST MYSTERIOUS THING TO YOUR SAVINGS ACCOUNT. IT STARTS APPLYING A SERVICE CHARGE TO YOUR SAVINGS ACCOUNT WHICH WE HAVE SEEN RANGES ANYWHERE FROM A DOLLAR A YEAR TO THREE HUNDRED DOLLARS A YEAR, UNTIL YOUR SAVINGS ACCOUNT IS COMPLETELY WIPED OUT, (EXAMPLES OF THE SERVICE CHARGES APPEARING ON UNCLAIMED PROPERTY REPORTS TO THE STATE OF MINNESOTA IS ATTACHED AS APPENDIX G.) A SMALL PERCENTAGE OF THE OWNERS WILL REMEMBER THEIR ACCOUNT AND WILL COME IN AND CLAIM IT, AND IF THAT SHOULD OCCUR, THE BANKS HAVE FOLLOWED VARYING PRACTICES. SOME BANKS WILL TELL YOU YOU'RE OUT OF LUCK, THAT YO~, NO LONGER CAN CLAIM YOUR ACCOUNT BECAUSE THERE IS NO ACCOUNT TO CLAIM, SINCE IT WAS DEVOURED BY THE BANK'S SERVICE CHARGES AND TAKEN AS INCOME. IN SOME CASES, WE HAVE SEEN THAT THE BANK WILL NEGOTIATE WITH THE DEPOSITOR, PERHAPS WAIVING THE SERVICE CHARGES, BUT NOT PAYING ANY INTEREST ON THE DEPOSIT. OTHER BANKS HAVE RECONSTRUCTED THE ENTIRE ACCOUNT AND PAID THE OWNER IN FULL. PAGENO="0026" 20 HOWEVER, THE VAST MAJORITY OF OWNERS OR THEIR HEIRS. WILL REMAIN IGNORANT OF THE EXISTENCE OF THE FUNDS, THE BANKS WILL SERVICE CHARGE THE ACCOUNT OUT OF EXISTENCE AND THE STATE WILL NEVER BE ADVISED TO ADVERTISE THE NAME OF THE OWNER, BECAUSE THERE IS NO ACCOUNT TO REPORT FROIl THE BANK'S POINT OF VIEWS CONTINUING TO FOLLOW THIS SAVINGS ACCOUNT, IF iT SURVIVES THE SERVICE CHARGES, THE BANK IS REQUIRED BY LAW. TO NOTIFY YOU AND ATTEMPT TO LOCATE YOU BEFORE THEY REPORT YOU AS A MISSING OWNER, HOWEVER, BANKS SELDOM FOLLOW THIS PRACTICES .. FOR INSTANCE, IN MINNEAPOLIS BANKS IIERE NOTABLE TO FIND THE UNIVERSITY OF MINNESOTA OR A MAJOR BORKERAGE FIRM, SUCH AS PIPER, JAFFRAY & HOPW000 OR THE CITY OF MINNEAPOLIS ITSELF, 50 EVEN IF YOU WERE AT YOUR SAME ADDRESS FOR THE PAST 20 YEARS, IT IS UNLIKELY THE BANK WILL NOTIFY YOU REGARDING YOUR ACCOUNT OF COURSE, THEY REALLY AREN'T TOO INTERESTED IN HAVING YOU COME FORWARD AND CLAIM AN ACCOUNT THAT THEY HAVE ALREADY TAKEN IN AS INCONE~ FOR THOSE OWNERS WHOSE ACCOUNTS ARE LARGE ENOUGH TO SURVIVE THE SERVICE CHARGE, THE STATE WILL SEND LETTERS TO THE LAST KNOWN ADDRESS AND ADVERTISE THE NAMES OF THE OWNERS AND THEN DIRECT THEM TO THE BANK TO CLAIM THEIR MONEY, PAGENO="0027" 21~ SINCE, HOWEVER, THE STATE IN MOST CASES IS ONLY NOTIFIED OF THE AMOUNT THAT REMAINS AFTER SERVICE CHARGING, THE STATE THEN UNWITTINGLY ASSISTS THE BANK IN TAKING YOUR PROPERTY, BECAUSE IT NOTIFIES THE OWNER OR HIS HEIRS ONLY OF THE DEMINISHED AMOUNT OF THE ACCOUNTS. IN ORDER TO AVOID THIS PROBLEM IN MINNESOTA, OVER THE BITTER OPPOSITION OF THE NATIONAL BANKS, WE ENACTED A REGULATION REOUIRING FULL DISCLOSURE OF THE ENTIRE BALANCE, MANY NATIONAL BANKS HAVE REFUSED TO MAKE THE DISCLOSURE, ARGUING THAT THE AMOUNTS THAT THEY TAKE OUT ~F AN ACCOUNT BEFORE THE 7 YEAR ABANDONMENT PERIOD HAS RUN OUT, ARE THEIR PROPERTY, AND THUS NEED NOT BE DISCLOSED. FOR THOSE ACCOUNTS STILL NOT CLAIMED, THE BANK THEN TURNS OVER TO THE STATE FOR SAFEKEEPING THE REMAINING BALANCE, WITHOUT INTEREST. IF THE OWNER LATER MAKES A CLAIM ON THE STATE ADMINISTRATOR, HE WILL ONLY BE PAID THAT PART OF THE ACCOUNT REMITTED BY~THE BANK TO THE STATE A"D THEREFORE AGAIN YOU ARE SHORTED~ OF COURSE, IF THE BANK HAD COMPLETELY WIPED OUT YOUR ACCOUNT, YOUR NAME WOULD NEVER HAVE BEEN PUBLISHED. - I WOULD LIKE TO PROVIDE THE COMMITTEE WITH A FEW SPECIFIC EXAMPLES TYPICAL OF WHAT HAS BEEN HAPPENING IN MINNESOTA. A LARGE SAVINGS AND LOAN INSTITUTION HAD A CONTRACT WITH A MINNESOTA SCHOOL SYSTEM TO SOLICIT THE SCHOOL CHILDREN TO BRING THEIR NICKLES AND DIMES TO SCHOOL PAGENO="0028" 22 EACH WEEK TO BEGIN LEARNING HOW TO SAVE IN 1977 THAT BANK REPORTED IT WAS HOLDING IN UNCLAIMED FUNDS ABOUT $55,000 IN SAVINGS ACCOUNTS. EXAMINERS FROM MY OFFICE WENT AND EXAMINED THE BANK AND FOUND THAT IS HAD TAKEN ALMOST $80,000 FROM SCHOOL CHILDREN'S SAVINGS ACCOUNTS. THEY WIPED OUT AN ESTIMATED 10,000 OF THESE .ACCOUNTS THROUGH THEIR SERVICE CHARGES. NEITHER THE CHILDREN, NOR THEIR PARENTS, WERE EVER NOTIFIED THAT THEY WERE GOING TO DO THIS. THE PASSBOOK GiVEN TO THE SCHOOL CHILDREN TOLD THEM SUCH THINGS AS: "HE WHO SAVES WHEN HE IS YOUNG MAY SPEND WHEN HE IS OLD." "THRIFT IS THE DOOR OF OPPORTUNITY." " A SMALL SUM MAY SERVE A GREAT PURPOSE." "THRIFT NEVER DESPISES SMALL BEGINNINGS." (COPY OF AN OLD FSM PASSBOOK ATTACHED AS APPENDIX H) WITH ME TODAY IS A YOUNG VINNESOTAN WHO ENTRUSTED HIS SAVINGS TO A NATIONAL BANK. WITH YOUR PERMISSION, MR. CHAIRMAN, I WOULD LIKE TO CALL ON KEITH NORBY FROM DULUTH, MINNESOTA, TO LETHIM GIVE HIS STORY, WHICH I MUST EMPHASIZE IS A TYPICAL STORY OF A DEPOSITOR'S DEALING WITH A NATIONAL BANK IN MINNESOTA. (KEITH NORBY'S MOTHER'S LETTER TO TREASURER LORD IS ATTACHED AS APPENDIX I.) (KEITH NORBY'S TESTIMONY) PAGENO="0029" 23 IN ORDER TO STOP THESE ABUSES,~ I MET WITH THE COMPTROLLER OF THE CURRENCY, JOHN HEIMAN, AND W~ITH TOM TAYLOR, WHO WAS THEN THE DIRECTOR OF THE CONSUMER AFFAIRS DIVISION OF THE COMPTROLLER'S OFFICE, IN THE COURSE OF THE MEETI~GJ THE COMPTROLLER'S OFFICE. INDICATED THAT THE STATE PROBABLY HAD NO RIGHT TO EXAMINE A NATIONAL BANK FOR UNCLAIMED FUNDS, WHEN ASKED IF THE COMPTROLLER WOULD UNDERTAKE SUCH EXAMINATIONS, MR. HEIMAN INDICATED HIS BUDSET WOULD NOT PERMIT ADDITIONAL EXTENSIVE EXAI1INATION~, SU3SEQUENTLYJ MR TAYLOR WAS PURSUADED TO UNDERTAKE A PILOT PROJECT IN THE MINNESOTA REGION OF IHE COMPTROLLER'S OFFICE TO EXP~I~E NATIONAL BANKS FOR UNCLAIMED PROPERTY. ON AUGUST 10, 1978, IN MINNEAPOLIS, M~ TAYLOR ANNOUNCED, AND I QUOTE) "LORD FEELS THIS COULD HAVE A LOT OF BENEFIT TO MINNESOTA AND THE PUBLIC, TALKS WITH HIM CONVINCED US TO GET THE PROJECT STARTED" HE SAID ~`THIS IS A BROADENING OF OUR EXAMINING PROCESS STARTED TWO YEARS AGO IN THE AREA OF C~DNSUMER PROTECTIONS LAWS, WE'RE GRADUALLY BROADENING THE~ PROCESS TO STATE LAWS AS THEY APPLY TO BANKS. WE HOPE rro EXTEND THE MINNESOTA PROJECT TO OTHER PARTS OF THE NATION," (A COPY OF THE NEWSPAPER REPORTS OF MR. TAYLOR'S STATEMENT ARE ATTACHED AS APPENDIX j) AFTER SUBSTANTIAL DELAYS, THE REGIONAL COUNSEL FINALLY PROPOSED THE PROCEDURES FOR THE EXAMINATION. C A COPY OF THESE PROCEDURES IS ATTACHED AS APPENDIX K~ PAGENO="0030" 24 MY STAFF WAS FINALLY ALLOWED TO REVIEW THE PROCEDURES SUBSTANTIALLY AFTER THE MINNESOTA BANKS HAS APPROVED THEM. MUCH TO MY SUPRISE, AND FRANKLY MY DISGUST, THE PROPOSAL WOULD HAVE RESULTED IN EXPRESSLY ALLOWING THE BANKS TO KEEP THEIR CUSTOMERS' MISSING ACCOUNTS. SPECIFICALLY, ALL PREVIOUSLY SERVICE CHARGED ACCOUNTS WOULD HA'/E BEEN LEFT WITH THE BANKS, AND ONLY LIMITED EXAMINATION WOULD HAVE BEEN MADE FOR FUTURE SERVICE CHARGING, WITH NO PROVISION FOR PROHIBITING THE CHARGES OR ADVISING MY OFFICE OF THE RESULTS OF THE COMPTROLLER'S EXAMINATION. OF COURSE, MY OFFICE REFUSED TO.GO AHEAD WITH THIS SCHEME TO TAKE MINNESOTANS MONEY AND BEGAN MEETING WITH YOUR COMMITTEE STAFF TO OUTLINE OUR PLIGHT. OUR PLIGHT IS BASICALLY THIS, THE COMPTROLLER'S OFFICE HAS STATED THAT ONLY THE COMPTROLLERS CAN EXAMINE NATIONAL BANKS FOR UNCLAIMED PROPERTY. (TOM TAYLOR'S LETTER TO CHARLES BOHLEN, COUNSEL FOR NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS IS ATTACHED AS APPENDIX L) AND THE COMPTROLLER HAS REFUSED TO UNDER- TAKE ANY MEANINGFUL EXAMINATION ITSELF FOR UNCLAIMED PROPERTY. THE RESULT THOUSANDS OF AMERICANS LOSING MILLIONS OF DOLLARS A YEAR BY NATIONAL BANKS. SO FAR I HAVE ATTEMPTED TO EXPLAIN TO THIS SUBCOMMITTEE HOW NATIONAL BANKS HAVE ABUSED THEIR TRUST WITH THEIR DEPOSITORS AND TAKEN AS BANK INCOME THE DEPOSITORS' SAVINGS ACCOUNTS BUT, THE LARGEST HOLDER OF UNCLAIMED FUNDS, THE BIGGEST VIOLATOR OF STATES UNCLAIMED PROPERTY LAWS APPEARS TO BE THE FEDERAL GOVERNMENT ITSELF. PAGENO="0031" 25 IN 1962 THE WALL STREET JOURNAL ESTIMATED THAT THE FEDEFAL GOVERNMENT WAS THEN HOLDING FIVE BILLION DOLLARS IN UNCLAIMED FUNDS. (co~v OF ARTICLE IS ATTACHED AS APPENDIX N) THESE FUNDS WOULD BE IN THE FORM OF INCOME TAX REFUND CHECKS, WAGE CHECKS, CROP INSURANCE, SAVINGS BONDS AND THE LIKE, I PERSONALLY BELIEVE THAT THE~ ESTIMATE IN 1962 WAS PROBABLY HIGH FOR 1962. WHATEVER THE EXACT AMOUNT IS, THE FEDERAL GOVERNMENT HAS NO LEGAL OR MORAL RIGHT TO KEEP THESE PEOPLE'S FUNDS. THERE IS NO SUCH THING AS A FEDERAL ESCHEAT LAW. THE MONEY BELONGS TO THOUSANDS OF AMERICANS OR THEIR FAMILIES. IT IS OUR ASSOCIATION'S POSITION THAT THE STATES HAVE JURISDICTION TO HANDLE THESE UNCLAIMED FUNDS AND TO INCORPORATE THEM INTO THEIR PROGRAMS OF RETURNING FUNDS TO THE RIGHTFUL OWNERS. TO ACCOMPLISH THIS, OUR ASSOCIATION HAS DRAFTED A BILL WHICH WOULD SET UP A MECHANISM TO HAVE THE FEDERAL GOVERNMENT REPORT THE UNCLAIMED FUNDS ITS OWING TO THE APPROPRIATE STATES. (A COPY OF THIS PROPOSED BILL IS ATTACHED AS APPENDIX N.) AS AN EXAMPLE OF THE BUREAUCRATS' ATTITUDE TOWARD THESE UN- CLAIMED FUNDS HELD BY THE FEDERAL GO'~ERNMENT, LET ME QUOTE YOU FROM A MEMORANDUM DATED NAY 1, 1979, FROM PAUL TAYLOR OF THE DEPARTMENT OF TREASURY TO THE VICE PRESIDENT'S OFFICE, COMMENTING ON THIS PROPOSED LEGISLATION. "MR. LORD ALSO MENTIONS THAT MILLIONS OF DOLLARS OF TAXPAYER REFUND CHECKS GO UNCLAIMEO OR UNCASHED. THERE IS ANOTHER SIDE TO THIS MATTER WHICH SHOULD ALSO BE FOCUSED UPON, AT ANY GIVEN TIME~ THERE IS AN UNDETERMINED AMOUNT PAGENO="0032" ____________ TT~~ ~ ~ DL ~CCAESS CITY STATE LIP St_h A~tt_FT 1FF CITE tUE lAY) ~ `I IA I `F 1 SOt ~ CICL1c.GT LEC?IICCC cIT CJ-I5t3)l2 2J~ (i O/vJi1~5 I ~~`D j~[~ ~ ~L L~ s 31 II~ I ~C I OCCCC cA-44.IUi) 13.15 U/Ui/Us LIisi U' -- - ~w~_t_~_LL~ -`-tt~it~°U~ iLit F Li) Ct_Ct_IC V2-ISCFI It .,~ tJ/IIi/lS 1i1U~/ tt L CCCLII 11 311 Cl C .1/ /7? /1 - -~ IF U C V U F St_thiS 1-52151) 13. 3, &.I 2s/ U 5/li (C 1) p i', C ii U St_A FTC 3 `CX 3(11 U/TUTU 553(1. 13-213535 12.32 u/id/U. I/lL/vC 7771 _~U~A-L~ ~ `U V P F `P. ALt_CL 51-312)1 `sQ.5~ A/i/It_i U/i/Cl ``Vt P1 `(`1 CCCLII cl-31Vt(57 lS.v2 d/I~/I', v/i s/Cl I _____L______.____~_.A...h?~ _.JL7,1~.~I..S-U SLLd~T.h ,L3IflCS -.. ~4h-~~~-tui, ~ ~` 33 133. 3 ~t. CCCLII 91-3t_C52? 13.23 H/ui/Is 5/.' It, -- - 2__-_--___!_.L~..~ u37 GUAIC1C. C CL. ALLL2LLI3/Hf/ TIP .`i2? CT/Fl /51 NC F1IUF?PAL is 555 1 .1')- 231521 15.10 8/01115 v/li/Ui `Ii `J P .`~ /L 1 iL/C U' SELL TEL E CC Gil/AC TuNES fliD NULl 17- 1St_li 1 1.51. ol~/Pt, 5/7/ U _~..LL5L ` CC ~ Lt__.UJ..U'L_J______ F F 1.35 SLY 5525 SI XE XI 1151121 15 551.11 83-13 UI 13. 13 tilt_illS ~/ Li At F I I F 3333 F 15 111 LYE'- I LANE/It_F IS 5 it 7 73 `(3 1 /1 1 ii it_I -- D _____ LI £ P 1 11CC FLANELE 115 ~ C I FtC I- F CUSS ci-',Lt131 17.1(7 v/it/IS 1./U/cs .L ~Ui ~ `FUCSILC ~ 2d4i//j~L_/1 3 .1 3 `1 F LIP? p105 CLI XE 11$ CF P II.NIAPCL IS 551.35 18-11,172 tv. 03 * .1 `i I LULlS? C F 3 1 1 It_C Clv 11 CF F MIITiE1CULIS 5cV5 I IL CS 31 Ill 1 /3 / -~`````~~ `U U U'S .U'3ST PA C NC, IS V **( t_.,L LI . (1. INS 5)2(1 ItT 157 /55 NC P FAUlt_I Iv VU' IC 11- 1 sII U. 1 `1. t_/p~ I l~. 5 Fit_il CS ILL 1 `1 1 l1'i40 S LCCT)PCC ST Nh itd!Ki 553C3 1,-lit_itt_I . 13.51 s/Oil 1.. -fl/I IF) - ~ U ~L ~l ST ~ ~ ~ ~4~Th 0105) 55-335111 l'.p', i/it/IA 12/is/i) -- ~TIC ii TEE lyE ..~.. ~ 1L~~ U' ~ C. * * *P~ F PlC P1/FL 1,11 201 (IC C MlIAS1F'(FL IS 50c21 1/- It 1111 0u.V2' 1/13' 7. 3/15/15 .1. ~~CPt ,~ts* F 1115/CF lUG PlAIt I 5 5 32 1 /38 51 2 11 1 /7 /1 fT -- _.. P. ._. ~ 1/3 1(1 10 -- - ,1 F ISL .. . ,, ,. ,... lIt~ 103 I ,... ~ I C.I'L3 J /II'FIN CCCr.C 12~F.S.1 12.35. "/21/IL s/li/TA ~` I'~ - V~H~ ~ C I I C CUlt_CC 151 s/LT Li I- ITT 3 1/1 1 F Ii 3 `1 5/ /7 / / -- ~____. t_~ ftL~. ~. 44,773 lIt_Il L,i_C5.LCP,._._..__1..il _.._..IL_.s,LLA____UI_i.3./ L._.....___ --~ ~`-*~ " U. L ~ ~ H2 *Ii `VS It_S F PIU'I.Cl 71,', 5, 57 F I'TANEP'PL.'L IS 5152C ~J-C1.371 1 Is.. 1" y/3u/15 L/uI/LV PAGENO="0033" 29 APPENDIX B.-MINNESOTA UNOLAIMED PROPERTY LAW STATE OF MINNESOTA Uniform Disposition of Unclaimed Property Act 1977 Issued by STATE TREASURER OF MINNESOTA UNCLAIMED PROPERTY DIVISION 303 ADMINISTRATION BUILDING ST. PAUL, MINNESOTA 55155 PAGENO="0034" 30 UNIFORM DISPOSITION OF UNCLAIMED PROPERTY ACT MiNNESOTA STATUTES 345.31 - 345.60 345.31 Definitions and Use of Terms. Subdivision 1. As used in sections 345.31 to 345.60, unless the context otherwise requires, the terms defined in this section shall have the meanings ascribed to them. Subd. 2. "Banking organization" means any bank, trust company, savings~ bank, safe deposit company or private banker engaged in business in this state. Subd. 3. "Business association" means any corporation, joint stock com- pany, business trust, partnership, cooperative, or any association for business purposes of two or more individuals. Subd. 4. "Financial organization" means any savings and loan association, building and loan association, credit union, industrial loan and thrift company or investment company engaged in business in this state. Subd. 5. "Holder" means any person in possession of property subject to sections 345.31 to 345.60 belonging to another, or who is trustee in case of a trust, or is indebted to another on an obligation subject to sections 345.31 to 345.60. Subd. 6. "Life insurance corporation" means any association :or corpora- tion, including a fraternal beneficiary association as defined in section 64A.02, transacting within this state the business of insurance on the lives of persons or insurance appertaining thereto, including, but not by way of limitation, endow- ments and annuities. Subd. 7. "Owner" means a depositor in case of a deposit, a beneficiary in case of a trust, a creditor, claimant or payee in case of other choses in action, or any person having a legal or equitable interest in property subject to sections 345.31 to 345.60 or his legal representative. Subd. 8. "Person" means any individual, business association, government or political subdivision, public corporation, public authority, estate, trust, two or more persons having a joint or common interest, or any other legal or commercial entity. Subd. 9. "Utility" means any person who owns or operates within this state, for public use, any plant, equipment, property, franchise or license for the transmission of communications or the production, storage, transmission, sale, delivery or furnishing of electricity, water, steam or gas. 345.32 Property Held by Banking or Financial Organizations or by Busi- ness Associations. The following property held or owing by a banking or financial organization or by a business association is presumed abandoned: (a) Any demand, savings, or matured time deposit made in this state with a banking organization, together with any interest or dividend thereon, excluding contracted service charges which may be deducted for a period not to exceed one year, unless the owner has, within seven years: (1) increased or decreased the amount of the deposit, or presented the pass- book or other similar evidence of the deposit for the crediting of interest; or PAGENO="0035" 31 (2) corresponded in writing with th~ banking organization concerning the deposit; or (3) otherwise indicated an interest in the deposit as evidenced by a memo- randum on file with the banking organization; or (4) received tax reports or regular statements of the deposit by mail from the banking or financial organization regarding the deposit. Receipt of the state- ment by the owner should be presumed if the statement is mailed first class by the banking or financial organization and not returned; or (5) acted as pro~'i~ed in paragraphs ~l), (2), (3) and (4) of this subsection in regard to another demand, savings or time deposit made with the banking or financial organization. (b) Any funds or dividends deposite~d or paid in this state toward the pur- chase of shares or other interest in a business association where the stock certificates or other evidence of interest in the business have not been issued, or in a financial organization. and any interest or dividends thereon, excluding contracted service charges which may be deducted for a period not to exceed one year. unless the owner has within seven years: (1) increased or decreased the amàunt of the deposit, or presented an appropriate record for the crediting of interest or dividends; or (2) corresponded in writing with the financial organization concerning the funds or deposit; or (3) otherwise indicated an interest in the funds or deposit as evidenced by a memorandum on flle with the financial organization; or (4) received tax reports or regular statements of the deposit or accounting by mail from the financial organization or business association regarding the deposit. Receipt of the statement by the owner should be presumed if the statement is mailed first class by the financial organization or business associa- tion and not returned. (c) Any sum, excluding contracted service charges which may be deduct~d for a period not to .exceed one year, jiayable on checks certified in this state or on written instruments issued in this state on which a banking or financial organization or business association is directly liable, including, by way of illustration but not of Iim~tation, drafts, money orders and traveler's checks, that has been outstanding for more than seven years from the date it was payable, or from the date of its issuance if payable on demand, or, in the case of traveler's checks, has been outstanding for more than 15 years from the date of its issuance, unless the owner has within seven years, or within 15 years in the case of traveler's checks, corresporided in writing with the banking or financial organization or business association concerning it, or otherwise indi- cated an interest as evidenced by a memorandum on' file with the banking or financial organization or business association (d) Any funds or other personal property, tangible or intangible, removed from a safe deposit box or any other safekeeping repository in this state on which the lease or rental period has expired due to nonpayment of rental charges or other reason. that have been unclaimed by the owner for more than seven years from the date on which the lease or rental period expired. (1) If the amount due for the use or rental of a safe deposit box has re-C mained unpaid for a period of six months, the bank, savings bank, trust -2- PAGENO="0036" 32 company, savings and loan, or safe deposit company shall, within 60 days of the expiration of that period, send by registered mail, addressed to the renter or lessee of the safe deposit box, directed to the address standing on its books, a written notice that, if the amount due for the use or rental of the safe deposit box is not paid within 60 days after the date of the mailing of the notice, it will cause the safe deposit box to be opened and its contents placed in one of its general safe deposit boxes. (2) Upon the expiration of 60 days from the date of mailing the notice, and in default of payment within the 60 days of the amount due for the use or rental of the safe deposit box, the bank, savings bank, trust company, savings and loan, or safe deposit company, in the presence of its president, vice-presi- dent, secretary, treasurer, assistant secretary, assistant treaturer or superin- tendent, or such other person as specifically designated by its board of direc- tors, and of a notary public not in its employ, shall cause the safe deposit box to be opened and the contents thereof, to be removed and sealed by the notary public in a package, upon which he shall mark the name of the renter or lessee and also the estimated value of the contents of the safe deposit box and, in the presence of one of the bank officers listed above, the notary public shall place the package in one of the bank's general safe deposit boxes and set out the pro- ceedings in a certificate under his official seal, which shall be delivered tc the bank, savings bank, trust company, savings and loan, or safe deposit company. (3) The bank, savings bank, trust company, savings and loan, or safe deposit company shall hold the contents of abandoned safe deposit boxes until they are claimed by the owner or the bank turns them over to the state treasurer pursuant to chapter 345. 345.33 Unclaimed Funds Held by Life Insurance Corporations. (a) Un- claimed funds, as defined in this section, held and owing by a life insurance corporation shall be presumed abandoned if the last known address, according to the records of the corporation, of the person entitled to the funds is within this state. If a person other than the insured or annuitant is entitled to the funds and no address of such person is known to the corporation or if it is not definite and certain from the records of the corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known address of the insured or annuitant according to the records of the corporation. (b) "Unclaimed funds," as used in this section, means all monies held and owing by any life insurance corporation unclaimed and unpaid for more than seven years after the monies became due and payable as established from the records of the corporation under any life or endowment insurance policy or annuity contract which has matured. A life insurance policy not matured by actual proof of the death of the insured is deemed to be matured and the proceeds thereof are deemed to be due and payable if such policy was in force when the insured attained the limiting age under the mortality table on which the reserve is based, unless the person appearing entitled thereto has within the preceding seven years, (1) assigned, readjusted or paid premiums on the policy, or subjected the policy to loan, or (2) corresponded in writing with the life insurance corporation concerning the policy. Monies or drafts otherwise payable according to the records of the corporation are deemed due and payable although the policy or contract has not been surrendered as required. 345.34 Deposits Held by Utilities. Any deposit held or owing by any utility made by a subscriber after January 1, 1960, to secure payment for, or -3- PAGENO="0037" 33 any sum paid in advance for, utility services to be furnished in this state, exclud- ing any charges that may lawfully be withheld, that has remained unclaimed by the person appearing on the records of the utility entitled thereto for more than seven years after the termination of the services fOr which the deposit or advance payment was made is presuin~"1 abandoned. 345.35 Undistributed Dividenu; ~d Distributions of Business Associations. Any stock or other certificate ~ot owi.crship, or any dividend, profit, distribu- tion, interest, payment on principal, or~ other sum held or owing by a business association for or to a shareholder, certificate holder, member, bondholder, or other security holder, or a participating patron of a cooperative, who. has not claimed it. or corresponded in writing with the business association concerning it. within, seven years after the date prescribed for payment or delivery, is pre- sumed abandoned if: (a) it is held or owing by a busines~ association organizeclunder the laws of or created in this state; or (b) it is held or owing by a business association doing business in this state, but not organized under the laws of or created in this state, and the records of the business association indicate that the last known address of the person entitled thereto is in this state. 345.36 Property of Business Associations and Banking or Financial Organi- zations Held in Course of Dissolution~ All intangible personal property dis- tributable in the course of a voluntary dissolution of a business association, banking organization or financial organization organized under the laws of or created in this state, that is unclaimed 1~y the owner within two years after the date for final distribution, is presumed abandoned. 345.37 Property Held by Fiduciaries. All intangible personal property and any income or increment thereon, held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has, within seven years after it becomes payable or distributable, increased or decreased the principal, accepted payment of printipal or incOme, corresponded in writing cOncerning the property, or otherwise indicated an interest as evid~nced by a memorandum on file with the fiduciary if: . . . (a) the property is held by a banking organization or a financial organiza- tion or by a business association organized under the laws of or created in this state; or (b) it is held by a business association, doing business ii:1 this state, but not organized under the laws of or created in this state, and the records of the business association indicate that the last known address of the person entitled thereto is in this state; or . . . . (c) it is held in this state by any other person. 345.38 Property Held by State Courts and Public Officers and Agenciés~ Subdivision 1. All intangible personalprOperty held for the Owner by.any court, public corporation, public authority or public officer of this state, or a ~oiitical subdivision thereof, that has remained Unclaimed by the owner for more.than se~en years is presumed abandoned except as provided in section 524 3 914 -4- PAGENO="0038" 34 Subd. 2. This section shall not apply to property held for persons while residing in public correctional or other institutions. As to such persons, said property shall be presumed abandoned if it has remained unclaimed by the owner for more than seven years after such residence ceases. 345.39 Miscellaneous Personal Property Held for Another Person. All intangible personal property, not otherwise covered by sections 345.31 to 345.60, including any income or increment thereon, but excluding any charges that may lawfully be withheld, that is held or owing in this state in the ordinary course of the holder's business and has remained unclaimed by the owner for more than seven years. after it became payable or distributable is presumed abandoned. Property covered by this seciton includes, but is not limited to: (a) unclaimed wages or worker's compensation; (b) deposits or payments for repair or purchase of goods or services; (c) credit checks or memos, or customer overpayments; (d) unidentified remittances, unrefunded overcharges; (e) unpaid claims, unpaid accounts payable or unpaid commissions; (f) unpaid mineral proceeds, royalties or vendor checks; and (g) credit balances, accounts receivable and miscellaneous outstanding checks. 345.40 Reciprocity for Property Presumed Abandoned or Excheated Under the Laws of Another State. If specific property which is subject to the provisions of sections 345.32, 345.35, 345.36, 345.37 and 345.39 is held for or owed by distributable to an owner whose last known address is in another state by a holder who is subjected to the jurisdiction of that state, the specific property is not presumed abandoned in this state and subject to sections 345.31 to 345.60 if: (a) it may be validly claimed as abandoned or escheated under the laws of such other state; and (b) the laws of such other state make reciprocal provision that similar specific property is not presumed abandoned or escheatable by such other state when held for or owed or distributable to an owner whose last known address is within this state by a holder who is subject to the jurisdiction of this state. 345.41 Report of Abandoned Property. (a) Every person holding funds or other property, intangible or intangible, presumed abandoned under sections 345.31 to 345.60 shall report annually to the state treasurer with respect to the property as hereinafter provided. (b) The report shall be verified and shall include: (1) except with respect to traveler's checks and money orders, the name, if known, and last known address, if any, of each person appearing from the records of the holder to be the owner of any property of the value of $10 or more presumed abandoned under sections 345.31 to 345.60; (2) in case of unclaimed funds of life insurance corporations, the full name of the policyholder, insured or annuitant and his last known address according to the life insurance corporation's records; (3) the nature and identifying number, if any, or description of the property and the amount appearing from the records to be due, except that items of value under $10 each may be reported in aggregate; (4) the date when the property became payable, demandable or returnable, and the date of the last transaction with the owner with respect to the property; and 5 PAGENO="0039" 35 (5) other lnfoen~at1on wblch the sta~e lreuwei prescribes by rule a~ neces ~ry foe the trtlon of sectlun 345.3110 345.60. (c) I~ the person holdln~ property pmwned abandoned is a successor to other person.~ who previously held the properly for the owner, or If the holder h~ changed his name while holdh~ the property, he shall file with his report afl prior knovm names and addresses of each holder of the property. (d) The report shall be filed before November 1 of each year as of June 30 next preceding, but the report of life insu~ancc corporations shall be filed before May 1 of each year as of December 31 next proceding. The state treasurer may postpone the reporting date upon written request by any person required to file a report. (e) If the holder of property presumed abandoned under sections 345.31 to 345.60 knows the whereabouts of the owner and if the owner's claim has not been barred by the statute of limitations, the holder shall, before filing the annual report, inform the owner of the steps necessary to prevent abandonment from being presumed. (f) Verification, if made by a partn~rthip. shall be executed by .a partner; if made by an unincorporated association or private corporation, by an officer, and if made by a public corporation. by its chief fiscal officer. (g) Holders of property described in section 345.32 shaH not impose any charges against property which is described in section 345.32, clauses (a), (b) or (c). (h) Any person who has possessio~ of property which he has reason to believe will be reportable in the future as unclaimed property may, with the per- mission of the state treasurer, report and deliver such property prior to the date required for reporting in accordance with this section. 345.42 Notice and Publication of Lists of Abandoned Property. Subdivi- sion 1. Within 120 days from the filing of the report required by section 345.41, the state treasurer shall cause notice to be published at least once each week for two successive weeks in an English language newspaper of general circulation in the county in this state in which is located the last known address of any person to be named in the notice. If no address is listed or if the address is outside this state, the notice shall be published in the county in which the holder of the abandoned property has his principal place of business within this state. Subd. 2. The published notice shall be entitled "notice of names of persons appearing to be owners of abandoned property," and shall contain: (a) the names in alphabetical order and last known addresses, if any, of persons listed in the report and entitled to notice within the county as herein~ before specified; (b) a statement that information concerning the amount or description of the property and the name and address of the holder may be obtained by any persons possessing an interest in the property by addressing an inquiry to the state treasurer; and (c) a statement that If proof of claim Is not presented by the owner to the holder and if the owner's right to receive the property Is not established to the ~6. PAGENO="0040" 36 ~dda7s astkfactlcii witbIm 65 days from the date of the second published aisle., the absadoried property wifi be placed not later than 85 days after a~h peb&atkm date In the ciatody of the stale treasurer to i~hom al further cla~ ast thereafter be directed. The stats treasurer Is not required to publish In such notice any Item of less than $25 unless he deems such publication to be in the public Interest. Subd. 3. Within 120 days from the receipt of the report required by section 345.41, the state treasurer shall mail a notice to each person having an address listed therein who appears to be entitled to property of the value of $25 or more presumed abandoned under sections 345.31 to 345.60. Said notice shall con~ tam: (a) a statement that, according to a report filed with the state treasurer, property is being held to which the addre~see appears entitled; (b) the name and address of the person holding the property and any necessary information regarding changes of name and address of the holder; and (c) a statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the published notice, the property will be placed in the custody of the state treasurer to whom all further claims must be directed. Subd. 4. This section is not applicable to sums payable on traveler's checks or money orders presumed abandoned under section 345.32. 345.43 Payment or Delivery of Abandoned Property. Subdivision 1. Every person who has filed a report under section 345.41, within 20 days after the time specified in section 345.42 for claiming the property from the holder, or in the case of sums payable on traveler's checks or money orders presumed abandoned under section 345.32 within 20 days after the filing of the report, shall pay or deliver to the state treasurer all abandoned property specified in the report, except that, if the owner establishes his right to receive the abandoned property to the satisfaction of the holder within the time specified in section 345.42, or if it appears that for some other reason the presumption of abandon- ment is erroneous, the holder need not pay or deliver the property, which will no longef be presumed abandoned, to the state treasurer, but in lieu thereof shall file a verified written explanation of the proof of claim or of the error in the presumption of abandonment. Subd. 2. The state treasurer may in his discretion determine that the pay.. ment of abandoned property presents a hardship for a cooperative. If the state treasurer determines that a hardship exists, he may permit the cooperative to provide payment in equal installments over a period of three years. (a) If legitimate claims to property reported by the cooperative to the state treasurer exceed the installments paid, the excess shall immediately be paid by the cooperative to the state treasurer and that amount shall be deducted from the subsequent Installments. (b) This subdivision shall apply only to abandoned property for which reports that were filed within 12 months after July 1, 1977. .7. PAGENO="0041" 37 345.44 Relief from Liability by Payment or Delivery. Upon the payment or delivery of abandoned property to the state treasurer, the state shall assume custody and shall be responsible for the iafekeeping thereof and for payment of any claim successfully brought against any holder on account of any abandoned property paid or delivered to the state treasurer. Any person who pays or delivers abandoned property to the state treasurer under sections 345.31 to 345.60 is relieved of all liability to the extent of the value of the property so paid or delivered for any claim which then exists or which thereafter may arise or be made in respect to the property by any claimant, including any state. The state indemnifies and holds harmless such person as against any such claim and any loss and damage related thereto, provided that such person shall notify the state treasurer of any legal proceedings against such person in relation to such claim within ten days after service of process upon such person and thus give the state an opportunity of defending such person in such proceeding. Any holder who has paid monies to the state treasurer pursuant to sections 345.31 to 345.60 may make payment to any person reasonably appearing to such holder to be entitled thereto, and upon proof of such payment and proof that the payee reasonably appeared entitled thereto, the state treasurer shall forthwith reim- burse the holder for the payment. 345.45 Income Accruing After Payment or Delivery. When property is paid or delivered to the state treasurer under sections 345.31 to 345.60, the owner is not entitled to receive income or other increments accruing thereafter. 345.46 Period of Limitation Not ~. Bar. The expiration of any period of time specified by statute or court order, during which an action or proceeding may be commenced or enforced to obtain payment of a claim for money or recovery of property. shall not prevent the money or property from being pre- sumed abandoned property; nor affect any duty to file a report required by sections 345.31 to 345.60 or to pay or deliver abandoned property to the state treasurer. 345.47 Sale of Abandoned Property. Subdivision 1. Except as provided in subdivision 3, all abandoned property other than money delivered to the state treasurer under sections 345.31 to 345.60 shall within one year after the delivery be sold by him to the highest bidder at public sale in whatever city in the state affords in his judgment the most favorable market for the property involved. The- state treasurer may decline the highest bid and reoffer the property for sale if he considers the price bid insufficient. He need not offer any property for sale if. in his opinion, the probable cost of sale exceeds the value of the property. Subd. 2. Any sale held under this section shall be preceded by a single publication of notice thereof, at least three weeks in advance of sale in an English language newspaper of general circulation in the county where the property is to be sold. Subd. 3. Securities listed on an established stock exchange shall be sold at the prevailing prices on the exchange. Other securities may be sold over the counter at prevailing prices or, with prior approval of the state board of invest- ment, by another method the state treasUrer determines advisable. United States government savings bonds and United States war bonds shall be presented to the United States for payment. Subd. 4. The purchaser at any sale conducted by the state treasurer pursuant to sections 345.31 to 345.60 shall receive title to the property puichased, free -8- PAGENO="0042" 38 from all claims of the owner or prior holder thereof and of all persons claiming through or under them. The state treasurer shall execute all documents neces- saw to complete the transfer of title. 345.48 Deposit of Funds. Subdivision 1. All funds received under sections 345.31 to 345.60, including the proceeds from the sale of abandoned property pursuant to section 345.47, shall forthwith be deposited by the state treasurer in the general fund of the state, except that he shall retain in a separate trust fund an amount not exceeding $25,000 from which he shall make prompt pay- ment of claims duly allowed by him as hereinafter provided. Before making the deposit he. shall record the name and last known address of each person appear- ing from the holders' reports to be entitled to the abandoned property and of the name and last known address of each policyholder, insured person or annuitant, and with respect to each policy or. contract listed in the report of a life insur- ance corporation, its number, the name of the corporation and the amount due. The record shall be available for public inspection at all reasonable business hours. : Subd. 2. Before making any deposit to the credit of the general fund, the state treasurer may deduct: (a) costs incurred in connection with any sale of abandoned property, (b) any costs of mailing and.publication in connection with any abandoned property, and (c) reasonable service charges. Any amounts so deducted shall be credited to a special account and areappropriated to pay costs required by the state treasurer for administration of this section. 345.49 Claim for Abandoned Property Paid or Delivered. . Any person claiming an interest in any property delivered to the state under section 345.31 to 345.60 may file a claim thereto or to the proceeds from the sale thereof on the form prescribed by the state treasurer. 345.50. Determination of Claims. Subdivision 1. The state treasurer shall consider any claim filed under sections 345.31 to 345.60 and may hold a hear- ing and receive evidence concerning it.. If a hearing is held, he shall prepare a finding and a decision in writing on each claim filed, stating the substance of any evidence heard by him and the reasons for his decision. The decision shall be a public record. Subd. 2. If the claim is allowed, the state~ treasurer shall make payment forthwith. The claim shall be paid without deduction for costs of notices or sale or for service charges. 345.51 Judicial Action Upon Determinations. Any person aggrieved by a decision of the state treasurer or as to whose claim the state treasurer has failed to act within 90 days after the filing of the claim, may commence an action in the district court to establish his claim. The proceeding shall be brought within 90 days after the decision of the state treasurer or within 180 days from the filing of the claim if the state treasurer fails to act. The action shall be tried de novo without a juiy. . 345.515 Agreements to Locate Reported Property. It is unlawful for a per- son to seek or receive from another person or contract with a person for a fee or compensation for locating property which he knows has been reported or paid or delivered to the state treasurer pursuant to chapter 345 prior to seven months after the date of delivery of the property by the holder to the state treasurer as required by section 345.43. -9- PAGENO="0043" 39 No agreement entered into after sev~n months from the date of delivery of the property by the holder to the state treasurer is valid if a person thereby undertakes to locate property included ih a report for a fee or other compensa- tion exceeding ten percent of the value of the recoverable property unless the agreement is in writing and signed by the owner and discloses the nature and value of the property and the name and address of the holder thereof as such facts have been reported. Nothing in this section shall be construed to prevent an owner from asserting at any time that an agreement to locate property is based upon an excessive or unjust consideration. 345.52 Election to Take Payment~ or Delivery. The state treasurer, after receiving reports of property deemed abandoned pursuant to sections 345.31 to 345.60, may decline to receive any property reported which he deems to have a value less than the cost of giving notice and holding sale, or he may, if he deems it desirable because of the small sum invplved, postpone taking possession until a sufficient sum accumulates. Unless the holder of the property is notified to the contrary within 120 days after filing the report required under section 345.41, the state treasurer shall be deemed to have elected to receive the custody of the property. 345.525 Property Having No Apparent Commercial Value. Property de- livered to the state treasurer pursuant to chapter 345 which has no apparent commercial value shall be made available for inspection by the Minnesota his- torical society to determine if the projerty has any historical value. If the societ judges any property to be of historical value, the state treasurer shall turn the property over to the society for safekeeping. If it is determined that property delivered to the state treasurer has no commercial or historical value he may thereafter destroy or otherwise dispose of the property, and in that event no action or proceeding shall be brought~ or maintained against the state or any officer thereof or against the holder for or on account of any action taken by the state treasurer pursuant to chapter 345 with respect to the property. The state treasurer shall keep a record of all items destroyed under this section including the name and address of the owner of the prop~rty and the person v'ho delivered the property to him, the date of delivery, a description of the Property destroyed and the date of destruction. 34533 Examination of Records. The state treasurer may at reasonable times and upon reasonable notice examine the records of any person if he has reason to believe that such person has failed to report property that should have been reported pursuant to sections 345.31 to 345.60. 345.54 Proceeding to Compel Delivery of Abandoned Property. If any per- son refuses to deliver property to the state treasurer as required under sections 345.31 to 345.60, the state treasurer may bring an actionin a court of appro- priate jurisdiction to enforce such delivery. 345.55 Penalties. Subdivision 1. Any person wl1o willfully fails to render any report or perform other duties required under sections 345.31 to 345.60, shailbe guilty ofamisdemeanor. Subd. 2. Any person who willfully refuses to pay or deliver abandoned property to the state treasurer as required under sections 345.31 to 345.60 shall be guilty of a gross misdemeanor. -Io~. PAGENO="0044" 40 345.56 Rules and Regulations. The state treasurer is hereby authorized to make necessary rules and regulations to carry out the provisions of sections 345.31 to 345.60. 345.57 Effect of Laws of Other States. Sections 345.31 to 345.60 ~hall not apply to any property that has been presumed abandoned or escheated under the laws of another state prior to July 1, 1969. 345.58 Cut Off Date. Except as to property required to be reported pur. suant to Minnesota Statutes 1967, Sections 48.521 to 48.528, sections 345.31 to 345.60 shall not apply to property otherwise subject to sections 345.3 1 to 345.60 which became due or payable or which was in the possession of the holder before January 1, 1944. 345.59 Uniformity of Interpretation. Sections 345.31 to 345.60 shall be so construed as to effectuate its general purpose to make uniform the la~~' of those states which enact it. 345.60 Citation. Sections 345.31 to 345.60 as enacted and here~fter amended, may be cited as the uniform disposition of unclaimed property act. If - 11 - PAGENO="0045" 41 M~NESOTA CODE OF AGENCY RULES OFFICE THE * STATE TREASURER UNCLAIMED PROPERTY RULES (AND 1978 STATUTORY A~ND1NTS) 1978 Edition * Published by * OFFICE OF THE STATE REGISTER * DEPARTMENT OF ADMINISTRATION Room 415 Hamm Bldg , 408 St Peter St eet St Paul, Minnesota 55102 Distributed by DOCUMENTS SECTION DEPARTMENT OF ADMINISTRATION Room 140, Centennial Building, St. Paul, Minnesota 55155 Cite the Rule as: (for example) 1 MCAR~ 3.001 PAGENO="0046" 42 State Treasurer's Office Rules Govcrrilng the Uniform Disposition of Unclaimed Property Act I MCAR §~ 3.001-3.015 Chapter One: General § 3.001 Purpose. The rules and regulations contained in this subchapter are for the purpose of implementing provisions of the Uniform Disposition of Unclaimed Property Act, Minn. Stat. §~ 345.3 1-345.60, as amended. § 3.002 Service charges. The term "service charges'~ meana any type of de- duction by a holder (as defined in Minn. Stat. § 345.31, subd. 5) from prop- erty presumed abandoned pursuant to the Uniform Disposition of Unclaimed Property Act, and also shall include: A. F~r the types of property described in Minn. Stat. § § 345.32, 345.33, 345.35 and 345.37, deductions by a holder from property prior to the pre- sumption of abandonment, which deductions are made by reason of the non- occurrence of the events or. acts that prevent the presumption of abandon- ment as described in those sections, or by reason of the inactivity, dormancy, or unclaimed status of the property; and B. For the types of property described in Minn. Stat. § § 345.34, 345.36, 345.38 and 345.39, deductions by a holder from property prior to the pre- sumption of abandonment, which deductions are made by reason of the inactivity, dormancy, or unclaimed status of the property. Chapter Two: Service Charges Lawfully Withheld § 3.009 Report of service charges. If service charges have been deducted, a holder shall include or attach as part of the report filed pursuant to Minn. Stat. § 345.41: - - A. The citation of the authority or a copy of the form of contract author- izing such service charges; B. The value or amount of each item of property before any service charges were deducted therefrom; C. The amount of service charges deducted from each item and the date or dates on which such service charges were deducted; and D. Such other information or documentation as the State Treasurer may reasonably require to explain the deduction of service charges. Such docu- ruentation may include records of comm ;nications or correspondence with PAGENO="0047" 43 the owner, passbook provisions, signature card, rules and regulations, by-laws. and any other documents concerning~ any agreement between the holder and the owner. This rule shall also require the reporting of service charges if the total of such charges deducted from an item of property equals or exceeds the value of the item. Chapter Three: Interest or Dividends § 3.011 Report of discontinuance. If payment of interest or dividends on property presumed abandoned pursuant to the Uniform Disposition cf Un- claimed Property Act was discontinued, before or after the property was pre- sumed abandoned, by reason of the inactivity. dormancy or unclaimed sza:us of the prop ertv. the holder shall include or attach as part of the re~ort pursuant t~ Minn. Stat. § 345.41: A. A copy of the form of contract which authorized such discontinuance of payment of interest or dividends; or B. The citation of the authority for such discontinuance of payment sf interest or dividends. Chapter Four: Miscellaneous § 3.013 Reporting period. The provisions of Mthn. Stat. § 345.32 (a) (4) and (5) and (b) (4) are~ effective as of July 1, 1977. Unless such sections are satis- fied subsequent to said date the prdperty shall be reportable to tha State Treasurer. § 3.0 14 Receipt of statement. For purposes of Minn. Stat. § 345.32 (a'~ (4) and (b) (4), a tax report of regular statement of deposit shall be deemed to be "the statement" referred to in said sections. § 3.0 15 Negative prOperty report. A~holder which has no property which is reportable pursuant to the Uniform Disposition of Unclaimed Property Act shall reo art that fact if so requested in writing by the State Treasurer. 67-440 0 - 81 - 4 PAGENO="0048" 44 i~79 UI~.7~TETC 1977 ST1~UTO~.Y Pn4rIILET The following Amendments to the Unclaimed Property ~`ere enacted by the >ijflflCSOtC Legislature in 1978: hir~n.St&t.345.3~ subd. 3. All intangible personal property hold ~or the owner by any government or political subdivision or. agancy, that has reraaincd unclaimed by the owner for more than seven years is presumed abandoned and is reportable pursuant to section 345.41, if: (a) the last known address as shown on the records of the holder of the apparent owner is in this state; or Cb) no address of the apparent owner appears on the records of Lhe holder; and (].) the last known address of the apparent owner is in this state; or (2) the holder is domiciledin this state and has rot previously transferred the property to the state of the last kno~r~ address of the apparent owner. `inn. Stat. 345.54. If any person~ refused to deliver property to the state trgasurer as required under section 345.31 to 345.62, cc ~ay the interest provided for by section 345.55, s~:~:v~sion 3, the state treasurer may bring an action in a court of appropriate jurisdiction to enforce such delivery or payment. - :~~nr. Stat. 345.55 subd. 3. In ad&jtion to any damages, ns-.aties, or Lines for which a person may be liable under other orovisions of law, any person whofails to pay or hciver unclaimed property with the time prescribed by chapter 345 after written demand thereof by the, state t~oasurer `~ade after the effective date of this act, shall pay to the state treasurer interest at the rate of 12 percent ~cr annum on the property or value thereof from the date of- the written demand. . * August 1979 0 PAGENO="0049" z z z ~2c z PAGENO="0050" ~sf7 * ~ *©~~** * *~~g -~ - - i~ - 4 ~ ~ --~:~. -~-~ -~-~` ~ * ~ ~fl .--~-: * ~ 0 46 PAGENO="0051" NOT[1CE:~ OF NA/M~S )~ APP~A~NG TO 1~ OW~ER~ 0 ABANDONED FUN~)S O~ PR(OP~1!1 Pursuant to the Minnesota Unclaimed Property Ad, the State Treasurer of Minnesota has rec~-v~q~ reports from various bètnks, corporations, insurance companies, and other companies whtch~ indicate that the following~persons are owners of~unclairned funds~or piopeity in the amount ~f $25 00 or more NAME LAST KNOWN ADDRESS NAIi.E LAST KNOWN ADDRESS NAME LAST KNOWN ADDRESS EAPD LAST KNOWN ADDRESS ILAMT LAST KNOWN ADDRESS NAME LAST KJ'OWU ADDRESS A k~ tV ~ K! J28I~d~ C b RI! dd C.IR J1RI~ddA I W~,J ~ W R~ C 000 CCI ~ I W C. ~, ~ C 0. ~4 C w ~C~N C R C w C W C / C. 0-0 00 00 A A 00 00 PAGENO="0052" 48 APPENDIX D [Appendix D Is Retained in Subcommittee Files] APPENDIX E.-MEMORANDUM CONCERNING PERCENTAGE OF FUNDS R1~TPURNED TO OWNERS ADMIN 1000 (RoY. 1/78) STATE O~ ~NNESOTA Office Memorandum TO : JIM LORD DATE: FROM ROBERT P. COMMODORE PHONE: 29-2-5-6-8 SUBJECT: Percentage of Funds Returned to Rightful Owners Pursuant to your request a study was conducted to determine this office's success rate in returning unclaimed funds to the rightful owner. It was decided for purposes of this study to use the latest year's reports that had completed our reporting cycle (reported, advertised and balance remitted). In this case, the latest year available was the 1978 report year (June 26, 1978 through June 25, 1979). This includes life insurance reports (report period ending December 31, 1978 and due May 1, 1979) and all remaining holder reports (report period ending June 30, 1978 and due November 1, 1978). Our records show that $5,543,002.86 was reprted in this report cycle. As a result of our advertising efforts, $3,180,153.05 was returned to the rightful owners per the UP-4's. During this same time period an additional amount of $245,254.42 was returned through in-office claims (after remittance by the holders). The overall return ratio is then computed as follows: TOTAL AMOUNT RETtJRNED(3,l80,l53.05 + 245,254.42) TOTAL AMOUNTED REPORTED $3,425,407.47 - $5,543,002.86 - .61.8% It stood to reason that the chances of returning funds that did not have a name and address associated with then were for all pratical purposes non-existent. Thus it was decided that in determining a more accurate picture of the return prograrrt,amounts without names and addresses would be removed from our population of amounts reported Using these new figures the return ratio becomes: TOTAL AMOUNT RETURNED (3,180,153.05 + 245,254.42) TOTAL AMOUNT POSSIBLE TO RETURN (5,543,002.86 less 1,073,680.01) $3,425,407.47 - $4,469,322.85 - 76.6~ - PAGENO="0053" APPENDIX F.-EXAMPLES OF SIUNATTJRE CARDS Account Account Of-.__~_~~~ No._________________ .Addre~ 7ip Phone No._______________ Social Security o Occupation Taxpayer dent. t~o.. or Employer DULUTH NATIONAL BANK DULUTH, MINNESOTA 0 Savirca 0 Special Savings 0 Checking 0 Special Checking 0 Commercial 0 Time Certificates 0 Corporation o Partnership 0 Uniform Gift to Minors 0 Individual o Society or Organization 0 Joint o Trustee o Multiple Trustee The signature of each person authorized to sign on this account appears on the reverse side of this card aid sgnfiea agreement that the account is subject to all applicable rules of this bank now existing or - hereafter adopted. I acknowledge receipt of a copy of the Bank's Rules and Regulations Governing Bank Accounts. (Signature) Of':ers lnitisT~ Z-2-IC? Account Title of Account No, ____________________________ SIgnature Signatures requl'red on all checks or withdrawals POWER OF ATTORNEY Agents Slgnatur.~ Batek Accounts, -. Date Depositor's Signature PAGENO="0054" 50 Acc't No. ACCOUNT OF SOCiAL SECURITY Ot Kind (check one) TAX IDENTIFICATION NO..._.~ J CHECKING 0 THE FIRST NATIONAL BANK OF ~OCHESTER OS 0 ROCHESTER, MINNESOTA / ECKING 0 Undersigned Depositor ~jereby makes applic~ion to open this account with the Ban , and agree that this account shall be subject to the Banks Rules and Regulations Governing Bonk Accounts as now poste publicly in its banking premises and to any amended Rules and Regulations the Bank may h re ter at any~time or ~ Postinyor ~ I ,,) (Only os~e Depositor's,signatilre permitted, except /n case o~ fiduclariesk..,e" (Ot\e or more agents' stgnatures permitted-see reverse side) I / I /__ Adclress-__------ ~\ / ~ Tel Business or / Occupation .~ \.1,, Tel. Bank Officer's Initials Dote Z2-94 (Rev. 12-70) (For Uce Only V/hen Depositor Wishes To Appoint Agent) POWER OF ATTORNEY Agents specimen 5;gnature -~ Address ~ No. Agent's specimen signature -~----------------- ---------------------------- Address_______________________________________________________ - Tel. No. Undersigned Depositor Whose bank account is describ d - specim~n signatere appears above, and each of th revrse side, hereby appoints the person whose respect to said bank account, sniffi the author't ~ moe tnors one, agent of the undersigned with hoes Governing Bank Accounts y p_ i in in tee Bank s posted General Rutes and Regula. Date__________________________________________ Depositor's Signature - ~.- ,. PAGENO="0055" 51 NAME OF ACCOUNT No. * Date Opened Ir.tfiaidael Account Jont a~2 Seie'a' Acco.int in the names of two signers, payable to either or the Survivor ~ ~`~e tg te bo~d by the rules arl.d.L.egujations 01 ~ 5 .c._E ci `~c ~T t ~ p ; o p trr- Or'-; both caste; and by copy avala1i~T eTey to any depositor on request, can ~e readily examined O~ `re (Cs; a~C' as they ray be a-rev;e from tire to time by the Bank's Board of Directors or Executiue Committee. Each a--e-;'rent sha;l te ettectiue 3D Cay; after posting copy thereof in the Savings Department, (we) hereby the Sauvs Department to open the dove account, Sp'ecigl Prcvisior~ Applicable to Joint Accourtts "-`c he'ehy v;ree, each with the other, av pursuant to fAiene'5ola Statutes Chapter 528.01 et seq., that, both as to the O'~;val deposit arid any subsequent deposits, we intend that such funds as may constitute the account balance upon t~e Crath of any party to this account, shall be the property of the surviving party or parties who shall take as a ;Jrnvn; ant tenant. It two or more persons shall be the survivors, their interest shall contiftue to be held as joint teants with rights of suevivorship. The Bank shall be authorized and hereby atrees to make payment to, or upon the c-Ocr of, any survivor. FOR DEPOSITOR FOR CO-DEPOSITOR, IF ANY Si;nature Signature Acureas Address Eir~hpace Birthdate (o~er) Birthplace Birthplace FOR DEPOSITOR ~OR CO-DEPOSITOR, IF ANY (Th Occupation - 1/'~~~- Employer 6&&~ ~- Occupatlo Employer - Wife's or Husband's Name Wife's or Husband's Name identified By Social Security Number Identified By Social Security Number Curency S Check $ on Date Previous Transferred from Account Number Transferred To Account Clcse~ Amount $ Number Address *. * - F~eason for Closing 81-~iu~ (e-i4) PAGENO="0056" 52 Account Account OL~~ ~ No Addreax~,-.~ Ct~~~State No.~ -Social Secunty or Occupation Taxpayer dent. No.. or Emptoyer~.. FIRST NATIONAL BANK IN WORTHINGTON WORTHINGTON, MINNESOTA OSavings DSpeciai Savings DChecking OSpeciat Checking DComrnercia; DTime Certificates 0 tndividuat 0 Society or Organization DJoTht 0 Trustee ~ Muteple Trustee The signature of each person authorized to sign on this account appears on tt'e reverse side of this card and signit;es agreement that the account is subject to a~l aaplicabte rutes of this bank now existing or hereafter adopted. I acknowledge receipt of a copy of the Bank's Rates and Regulations Governing Bank Accounts. (Signature) Date,- Account ___________________________________No.______________________ Officer's tnitials ,-- ,~, Z-2 -1 09 Title of A"" Signatures required on alt checks or withdrawals POWER OF ATTORNEY a _______________________________________________ The,Undersignsd depositor, whose bank account is described on reverse side, hereby appoints the person(s) whose specimen signature(s) appears above, agent(s) of the undersigned with respect to said tiank account with the authority specified in the Bank's posted General Rules and Regulations Governing Bank Accounts. - Depositor's Signature PAGENO="0057" Accoint 53 Account No Addresn~ City State No.__________ Saciat Security or " Occupation Taxoa,er dent. No. or Employer________-.---------------------------- FIRST EDINA NATIONAL BANK EDINA, MINNESOTA Savings D Specie! Savings E Checking ~ Speciat Checkina E Commercial fl Time Certificates D Corporahani ~ Partnership ~ Uniform Gift to Minors ~ Individual ~ Society or Organization ~ Jcint D Trustee ~ Multiple Trustee C! eanh parson authorized to sign on this account appears on the reverse side of this card -e a u t s sy~ect to all appl c ble es of th s barK o ex strg 0 a -araradooted. I acknowtedge receT~i9f a cop~~TTh dhRuIESiid GTatidn9~CoverniñI Gzr.'z AccounTs. (Signature) Oticers lniti2is________________________________ Date Z-2 -139 Account iit:e C! ,-~:ccsn! No. . Signature Signature Sigs store Signature Signature Signatures required on ati checks or withdrawats POWER O~ ATTORHEY The undersigned depositor, whose bank account is described on reverse side, hereby appoints thq1 person(s) whose specimen signature(s) appears above, agent(s) of the undersigned with respect to sal bank account with the authority specified in the Bank's posted General Rules and Regulations Governint Bank Accounts. PAGENO="0058" 54 0 REGULAP,SAVINGS 0 SAVINGS PLUS 0 GOLD~N PASSBOOK GENERAL (ACCOUNT NUMBER) FIRST BLOOMINGTON LAKE NATIONAL BANK - S~ecimen 5i~nature(s) of 0 Individual 0 Joint and Several Depositora: (Terms on reverse) SIGNATURE B CITY ADDRESS SOC. SEC. OR IDENTIFICATION RU. ZIP SOC. SEC. OR IDENTIFICATION 1(0. . CITY ZIP soc. SEC. OR IDERTIFICATION NO. BANE OFFICERS TERMS: The person(s) whose signature(s) appear on the reverse side hereof, hereby make(s) epplicatior~ to open this account with the Bank and agree(s). that this account shall be subject to the Bank's Rules end Reguletions Governing Bank Accounts as now posted publicly in its banking premises and to any amended Rules and Regula. tions the Bank may hereafter at any time or from time to time adopt upon like posting for thirty days. The person(s) whose signature(s) appears on the reverse side hereof further agree(s) that this account shtll bean individual account or a joint account as indicated on the reverse side hereof. and if a joint accounr is IndiCa&~d further agrees that this account shall be sub)ect to the Joint Account Terms stated below. JOINT ACCOUNT TERMS: This is a joint and several savings bank account, and the Joint Depositors whose signatares appear on the reverse side hereby agree, each with each other and with Bank: That each of said Joint Depositors during hiu or her life time shall have complete and absolute authority over tInTs account, aed may withdraw at any time or times any part or all of the funds now or hereafter to the credit of this a~couet, and Bank may pay at any time or times any part or all of such funds to or upon the sole order of either or any of them' that checks and other items in favor of any one or more of them may be endorsed by either or any of them and may be deposited to the credit of this account, placed for collection, or cashed by either or any of them; flint checks and other items in favor of any one or more of them received by Bank from any one whomsoever with or without instruction to deposit to the credit or account of any one or more of them may be deposited by Bank to the credit of this account: and that soon death of any of them, this account and the balance then to the credit thereof shall be the property and account of the survivors, if more than one, upon these Joint Account Terms, and, upon only one surviving, shall be the sole property and account of end payable to or upon the order of such survivor. `. ~% l",( " C F KTIF l( ~`I F .~ I I ( Fl f 5 1 5 I PAGENO="0059" _ e [~j sav~ngs department SAVINGS DEPARTMENT I. THIS BOOK MUST BE P H B S E N T B D WHEN MONEY IS DEPOSITED OR WITHDRAWN. 2. It is important that you no- tify us of any change in your address. 3. Please prepare your own deposit and withdrawal slips using pen and ink. 4. If pass book is lost or stolen, please notify the hank at once. AftC~ January 1, April 1 July 1, and October 1, of nrh year present or mail t~S 1)00k CO I flO 1)00k to ~ve interost entered. ~ last p:ge fur honking- v-mail instructuns. The depositor by opening or continuing an account in the Savings Department agrees to be governed by the Rules \ and Regulations of the bank applicable to savings accounts as such Rules and Regulations J now exist or may he hereafter / amended by the bank from~ / time to time, and assents that / his savings account shall be at / all times subject thereto. / A copy of the Rules and Regulations as amended from time to time is posted at all times in the Savings Depart- ment of the 1)00k. and is also available at. all times to the depositor on request. 55 FIRST NATiONAL BANK HOPKINS, MINNESOTA INSTRUCTIONS I PAGENO="0060" 56 APPENDIX G.-SERVIOE CHARGES REPORTED BY INDIVIDUAL BANKS STATE OF MINNESOTA OFFICE OF THE STATE TIIEASURER ST. PAUL. MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA N I B Sorthweatern Saticnal Bank of Owatonna Fe~ ci C d JUl 1, 1957 to 101 North Cedar Street page _~.L_ of ~_ Pages Cwatonna, Minnesota 55060 )iesc & I_nt Kteoa Addecs 4 Onttt~ Encficioy. ~ lAva AI2S,btt5ctly. Lao Scot Find 121 Enwn F,y,blt. R~dctocb!t fl.~~'ba 131 Aoo~ttD~n O'occ (41 LxM Chct~n )SnSt~~ T,acccc RaIn) (5) Antn~tRt~. Oat On el Dncciptiea ci Fopoty Idtatdyiag Naobtc II) ~ertified Check ;2532 artified Check 2426 ink Money Order .745 a Depsoit Box U~24 * nfe Lepsoi.t Box .352 :~rtified Check 2903 :cfe Depsoit Box 039 afe Deposit Box 3460 Briggs Transportation Co. Address Unk~covn Dakota Iron Address Ur.knevrn George P. Conahue Address Unkcwn Robert S. Henry Newport, Minnesota Clara or Ethel Sayers 805 East University Street Cwatorna, Sn. 5~O60 l:inreota Higliara;' Department Address Unknown Sr. or Mrs. Paul Mueller 615 S. E. 17th Street Owatonna, Minnesota 550(0 David S. Smith F. 0. Box 96 Sa~c~ pa, P.innesota 9-19-68 5-9-67 8-17-62 10-29-71 2-14-62 53.7l 7-3-59 3-22-69 `~ 132.71, 250.00 Contents o Contents o lOO.O0C Contents of box Contents of 72.00 72.00 72.00 0 I) 72.00 0 0 60.71 ~ 46.73~7 175.0Cc Contents Box Contents 2a.co Coolants - Box - Contents Box ~ TOTAL :3 PAGENO="0061" 57 ~OF MINNESOTA ~_-~ ,)FFICEOFThESTATETREASURER ST. PAUL, MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY -STATE OF MInnESOTA of Bus~nc s SLE1I~TIfl~T Period Covered_J38a30÷lfl2 Parjc I of_i ._ Pages ~tj'~ .2 D,crL~,, T~-~»= O»=~ P(ce~t? 5,-~ & a? O..~ Bn~a~ P~y~b!?, Ey-a,~wa - R,d,b~~s ~ A!a~~ssy. L.w Fi-si Rna~a~b~ -, ~a~-~sy ~fy; ?~ A~aeauOa~ Oaan . 1C5~ga (SeeSasa TsRat~) . Ae~easIR~ps" Da~ Oaa~ 01 (2) 0) 141 151 (61 Ca~pbeU, Guile Hilson 1630 Ed~ebrock Place 1n. 55424 Hill, Mason Ann 3829 Drew So. 551.10 S. 120 8l~t. St. Sold. Eata1.e of Frank A. Archer 16~i. Biackstcne .Sn-e~ 55416 Jonas, So. ).~. in trust for Steven Jones 7102. Gleason Sc). 55435 liitzvan, Mrs. So. 13 - 6th Ave. Hopkins 55343 Partur, Mr. or i:rs. Philip 1110 Hiawatha, Apt. 102 Hopkins, Mn. 55343 McDonald, Richard J. 2430 Clinton Ave. So. #9 55404 Woodhead, David 1820 H. 76th St. 55405 Tiffoid, Anne 5715 France Ave. So. 55410 Dobbins, Richard E.,Trustee P.. 2.. 1, Pox 128 Houkir.s, Mn. 55345 ALSMDED PLPCT)T 1~ LL61.5-L 23816-6 205.6-2 - 14280-5 22920-S 6573-0 5625-9 11944-6 22.864-1 1-3-67 6-21-65 1-12-70 1-5-71 2-5-71 11-9-70 8-fi-70 - 2-15-68 7-16-64 1-23-67 2-14-69 12-26-62 $ 41.55 253.48 164.26 46.29 73.99 43.19 73.31 96.70 38.91 73.01 61.75 54.04 520.00 20.00 20.00 20.00 20.00 20.80 20.00 20.00 20.00 20.00 20.00 20.CO $ 21.55 233.48- 144.26 - 26.29- 53.99- 23.19- 53.31- 76.70 18.91- 53.01- 41.75 34.04 TOTAL $ 780.48 HOlE: R~port)t?m:sfv~Tu~und?rS1O.OOintheaggre(ate. Fn~,UP-2 (R.e. 9177) PAGENO="0062" 58 STATE OF MINNESOTA OFFICE OF THE STATE TREASURER ST. PAUL,MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Name of Business vrss~ rrrruo uTTn~TAT. eo~nc Period Covef Page 2 of 10 Pages Address 1100 tJ0~+ 60i)t ~ - AMENDED REPORT ,$)4) ~ ~9 II - Dateef Left T~sot,at1on or O.t, Froporty E.oureFoy.bI,~ R.d.utobl.or Rtoro*blt . Ontoiption of Proo.rty I dontitying Nornb.r N.or. & Luot Knou.n Addr,tt of Oouur. B,onlioi.ry.o,Aooo,tont IArr.n. AIpIu~tief1Iy Lont Nunt Fire) A~otootD... Oontor LeeffoIcfof5es IS..Sntu Tm.etRul,t) A.oooot R.po DoeOort (if 121 13) (4) 15) (6) SAVINGS ACG1S. C0~ 7862-6 Goar, Fern K. or Kent K. 6-12-70 $ 143.01 $20.00 $ 123.01 500 Strollers Lane Wausau, Wi. 54401 25962-2 Oppegard,Syen G. or SusanHi L 3-27-70 28.13 20.00 28.13 4650 Fremont Ave. So. 55409 25181-9 Lee, Ivy in trust for 4-1-69 68.51 20.00 48.51 Heather Lee - 5713 Hanson Rd. 55436 25182-7 Lee, Ivy in trust for Holly 4-1-69 68.51 20.00 48.51 5713 Hanson Rd. 55436 19504-0 Henningsen, Debbie 9-3-68 105.67 20.00 85.67 5717 Melody Lane, Mpls. 2010-7 Neland, Susan . 6-4-62 52.39 20.00 32.35 4008 Wood Rod Drive Edina 4276-2 Dehaven, John 2-17-61 101.28 20.00 81.25 Box 9274, Phoenix, Arizona 1312-8 Robertson, Louise 6-20-58 325.82 20.00 305.8~ 9010 H. K. Lake Wash Blvd. Befleview, Washington 27765-7 fLarson, Dr. Steven in trust 8-7-70 92.81 20.00 72.8) for Mark Lawrence Larson 5518 W. Higb~ood Dr. 55436 7 items, each sssdar $10.00 14.14 14.11 CMECNTHG ACCOUNTS: 0021-071 Andarson, J. P~ 12-12-63 140.00 140.01 Unlasown 0563-569 Ashley, Toni 12-3-68 11.02 11.01 Address Unknown 0533-711 - Johnson, Ames K. 10-6-68 30.41 30.4: Address Unknown TOTAL $ Iozt;~ NOTE: Report it,rns of vo)uo under $10.00 in The zggr,gate. Form UP.3 )R~. 9,77) Tn PAGENO="0063" 59 STATEOFMIN~ESOTA OFFICE OF THE STATE TREASURER ST.PAUL.MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MI~NNESOTA of Bee ssTh,'~~t ic]. Period Covered 6-30-78 Page~ of 3 Pages ~-~-- 3~2 T~,,.-r?s Ra1~) Da (5) 161 $-17-6$ 7-$-66 1-7]. 6-17-70 12-!4-62 06.36 $103.13 $177.20 $1i~.O6 $9.32 81~S0. CC $10.59 09.65 $36.96 -~.79-- C-aj /i~,,& r2'.-c~ D. rlr alter S. ivlr:6t Creek, C2. 95692 1E2$~- . 2rd St. keluth, lie. $$6I6 2927 V. 3rt St. Duluth, Mn. 55807 1116 5. Ch~o~en St. Ely, lie. 55731 lire. Frank ii. Frees, $72 Cahaljese Dr. Colorado Sprirer, Ce. Dine Si. 5573' $6.36 $20.00 $20.00 $20.00 $111.06 69.32 $20.00 $10.59 09.65 $20.00 .83.1)3 *26.51).... ;157.20 $116o.6o $16.96.-. -`.-- ~OC ],C.~ 01611.211 `O-* i~7g/ $61).21~ 22 - . - ,-25-59 20.00 67-'40 0 - 81 - 5 PAGENO="0064" 60 STATE OF MINNESOTA OFFICE OF THE STATE TREASURER ST. PAUL MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA ~`N4me of Business_24Uth lia±!cnallionk Perioti Covered. Page...?~ of _.~......Pages - ____________ at. Duluth, gn. 55606 ________________ ~ `3~t ~ ___ I a:~ __ __ (II 121 . (31 141 (51 (6. Svga. 4 19736 8 Ga1es~ Duanois 3. (Deceased) 5-3-67 $67.53 $20.00 ~L7.53- 2201 13. Superior St. Duluth, ISo. 55806 Svga, 4 1~O7 3 Olalverson Kenneth C. by 8-13-62 $19.I~8 SIrs. Gunnar Halverson 2000 W. Superior St. * Duluth Rn. 55806 Svga. 4 214603 9 henderson Donna by 11-25-68 815.63 $15.63 SIrs. Barbara henderSon 611. Chaple St. Saupton. Virginia 23368 Svga. 4 3957 53 Johnson Ruby 13. 8-16-63 5313.01. 5313.01. 121. II. 22nd Ave. 13. Duluth, Rn. 55806 Svga. 4 16261. Keripas Otto P.. 810.93 810.93 1.26 iT. 20th Ave. 13. Duluth, SIn. 55806 -rgs. #15018 5 Larpi George (Deceased) 5-17-61 81550.03 820.00 Slopening, Rn. 55810 Svga. # 18018 2 SIiokst~d Gnnhild or 812.114 $12.11; Rrs. Raprice Strohsn 2013 172 Join Ave. Sneerior, 1Ti. 51.880 S-ego. 4 17919 2 Pfeiffer Sirs. Carol Custodian 7-23-62 $37.09 $20.00 17.09- Veterans Adninistration Katherine C. Hylleeted 9532 iSucris Ave. Arcadia, Ca; 91006 ~vgs. # 13702 6 Rascuosen harry 8-23-57 $69.26 $20.00 1.9.26- 6114 11. 14th St. Duluth, Rn. 555302 4 13179 0 Scderholm Paul $391.21 $20.00 ~37l.21~ - - Adolph, Rn. 4 219ie~ 1 Tills Ercest B. 9-30-66 $12119.72 $20.CO c1229.72. 1102 13. 1st St. Duluth, Ho. 55802 4 2029~ Nhite Alberta L. . 5-15-614 5320.00 521.01.~ Frederick K. \ehite, Son 331 5. SupcrSor St. Duluth, Rn. 59102 TOTAL ~ NOTE: Reps:t ii.va: ef ,cIae eed~~ S10.OO in the ~5ge53te. Fore UP-2(R".9!771 PAGENO="0065" A~kiress 2C~OD ~ert Sssorior St. Duluth, :12. ____________________ __________ (3) 3-1-68 S Lot e..- ______ (2) withers Las o~ Re~the 232i~ l~. 2~d St. Duluth, 1n. ~53o6 Tcunrbss~ Robin Laj~ Itu Ycun~rerg, Clanrsae, ~v-ther 2L26 Jean Duluth Ra. Duluth, Mn. 55Coi~ Ycungber& Rothy Jay by Gladys YounulSTg 21.24 Jean Duluth Rd.' D~l~th, Mn. ~5$D1j 3, STATE OF MII12IESOTA OFFICE OF THE STATE TREASURER ST. PAUL MIrItIESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Period Covered (-3')_78 Page _____~i~______ of _3 Pages 21°2 6 11.~E9 1 Asn*vtt D~, $18.37 811.1.9 $811.02 11-3-61 11~3-61 `:Ea.u: ~ó~u (See S~te ~ R,pe~ ~ R~I~( D~v Oe~e, 15) (CI 818.37 - 811.1.9 - $11.02 - TOTAL $ if .~ ?:DTE: R~,e.-t ef ~ eer)e~ SlOSh tEe an?egtre PAGENO="0066" October 27, 1978 :!4s. Edna E. Banke ~Personal Banking Officer Duluth National hank 2000 West Superior Street - Duluth, Minnesota 55S06 Dear Ms. I~anke:. We have received your 1978 Report of Unclaimed Property showing service charges deducted from the reported property. The State Treasurer~s Office cannot allow the deduction of these service charges un&?~ss this office 5,s supplied with the following items: * 1. The citation of the authority or a copy of the form of contract with the customer authorizing such service charges. 2. The date or dates on which the service charges were deducted. * Authority for these re~uirenents is found in fli~nn. Stat. ~ 345.32(a), 345.32(c) and in Teeasurer's Rule TEE 9. If you have any questions, please do not hesitate to contact this office at 6l2-296--2568. Sincerely. Joe 3. Roby, Jr. Director ~f In-office Compliance Unclaimed Property Division PAGENO="0067" 63 DULUTH NAUONAL BANK 2O~ VEST 3U?ERIOE STREET * DULUTH, MINNESOTA 55506 2181 723-2379 State of ~`:ir.~-~esota Jo~ J. Roby, Jr. Poam 303 State Adrninistration Bldg. St. Paul, ~n. S5i5~ ear Sir; / I, am enclosir~ a COPY of the following authority to deduct a service charge. 1. Rules & Regulations~ 2. Si~iature Card 3. Passbook h. Copy of our lo~by.posting The servicea charges that are shown on our rerort were deducted on June 27, 1978. Ver~ truly yours, Edna E. Hanka Personal Banking Officer forras supporting our June 30, 1978 9 PI?OPERTY DIV ::~-~-. 6, 1973 PAGENO="0068" . . ~u .Addres' City State_ ~_._..Zip ~......Phone No.. Occupation . or Emptoyer~ . Social Security or. Taxpa,er ldenl. No. DULUTH NATIONAL BANK DULUTH, MINNESOTA . o SavingS 0 Special Savings Q Checking 0 Special Checking 0 Commercial 0 TIme Certificates O Corporation 0 PartnershIp 0 Uniform Gift to Minors O Individual 0 Society or Organization o Joint 0 Trustee 0 Multiple Trustee The signature of each person authorized to sign on this account appears on the reverse side of this card and signifies agreement that the account is subject to alt applicable rules of this bank now existing or hereafter adopted. I acknowledg. receipt of a copy of the Bank's Rules end Regulations Governing Bank Accounts. Officers InitIals. Z-2-109 flat. Title of Account_.- SlgnatUrl__-_ Signature.- -~----- SIgnature.- SIgnature____-~-- ..No._....._~ . ~_____5Ignature$requI~ on all checks or withdrawals POWER OF ATTORNEY Agents SIgnatur3_~___~_- The undersigned deposllor. whose bank account is described on reverse side, hereby appoints the person(s) `whose spe,cimen signature(s) aopears above, agent(s) of the undersigned with respect to said bank account with the authority spacified.ig the Bank's posted General Rules end Regulations Governing Baitk AcCounts. -. 64 Account Account Of No_ (Signature) PAGENO="0069" t). DULUTH NATiONAL BANK DULUTH. MINNESOTA ALL DEPOSITS ARE MADE SL7E)JECT TO DY-LAWS AND REGULATIONS RELATING ~ro UAVINGS DEPOSITS. ALWAYS BRING THIS PASS BOO~( WITH YOU 65 IN ACCT. WITIL_.~~ DAff NV DEIOStT I7~TEREST OMJ?1CE TRA~S. PAGENO="0070" 66 ~`, ` T L~J DULUTH NAil. NAL BANK 2002 WEST SJPEEOT 520002 0~ 25010 35335 )-`` -i . Oc.tobee 27, 1977 iNTEREST PAiD ON REGULAR iNGS DEPOSiTS 5% es-t caejoed on ae~uOek Pa~s'sbooN- SavLnp6 dcpo'sOt's .e.S computed daOEej, ~aom - -:~ den o~ depo4-Lt to -t1~c day o~ so-0thd's.as'~aL, and pasted quanteaty on t{a~ch June 30, Septenbe& 30, and Vecembec 31,at the ca-ta o~ ~Lve peccant (5%) * annum. COhen LTOtC/Le4t 06 due and payeb-te, -U o~-cU ~e added to the depo6-Lt end n-LU theeea~tec ds.aw -`~nteioe6t the 6ame a's -tloe ocL~-Lnat accoar.t. -0.2 nat- ;oeea66cVs.~ to p's.esent the Pas~boo1z on any paat-Lcutae day ~oc ante's.- o~ .0;tece-st. Any SavLn~4 Account that doe's not onion ten cent's ($.10) * cay qous.c-teaEy ~s.n'oe'st pesLod a's. ~L's eTa-sad to a zeko baLance oeLU not- antot~~Ld to any On e's.e'st. ALL account's on wh'seE no depo'sLt's ois. toLthdcawaf_'s ~:Lt have been made Lois. two yea'-'s, othea than nteae's-t, nUt be put Onto an c:tve eate~oay, and a tea a en-Lad o tue t ace o .LnactLv-Lt `sIsaU be Doisjmant account's 6 ow-tn a baLance Lee's then ten a ak's S~.OO) IoaU ceaseta eais.n ne/s.e's . one doUac . `se-evace ea be a OO-tQ -- d -orient a a anna Tue 2~zu-s~!~±eaceout0~. ~ o~ `se-'s.v-Lce chac~es W en ~t ::-o-ant account L's .teaetLvated. INTEREST PAID ON TiME SAVINGS CERTiFICATES 5-hE 6% 6-~~% Th-s.ee ?lantls. !-fatue_ty lOne Yea's. MatuaLty fThLis.tof Month tlauUty Sav-Ln~~ Ceis.tLL.tcete's and `s.enewat oL paesent out's-tandng CectOLLcateS *~.: t& a-r.cunt o~ $100.00 cc mo7.e, -L's'sued cc aenewed a~tec JuLy 5, 1973, 5-~~% pee annum on CeatLLteatee n-Uk a th-oea-month matue-Oty, 6% pea an Cekt-LL-Leatec n-Uk a one-yea's. matue-Oty and 6-!s% on Ceet-LLLaatee *-.0h a thLoty-month natua-tty. The'se TOme SavOng's Ceis.tLLOcete's peas-Ode ~ois. -_torncs.t-Lc nenewaf_ o~ eucce's's-2-t'e pee-tad's o~ the `spee-01S-Led matue-Ot-Le's oL th's.ea -:-:th's, one yea's. 0's. th-Lety month pea-Lode. At -the holdee's opt-Lan, Lnte'oe'st .--0J-0 be paLd by check oe ceed-Lted to the Ce-s.tOL.Lcate by compound-Ong qaa's.tccty, p-s.ov-Lded -On the TOme Sav-Ln~'s Ceef-LL~Lccte. Cect-Lf-Lcate hotdee's oL az-Let- 5-hE, th,s.ee-month Ce's.tL~eete's, wOth the eutomat-La cenewat opt-Lan is.aque'st- the LonOec matuatty oL one yeac 0's. thLctij month's, ace eequLeed to pce'sent zma-0-s. CeetLLLeate cc CeetLLLcate-2 on the neat matueLty date Lee eachange. :~ the event oL a wLthd's.awat oL Lund's poe to the matue-Oty oL e Ces.tLLLeate, n-on non Fadeaaf_ is.e~uLatLon's, eLLeetLve June 5, 1973, is.equ-L's.e thet we F_tm-U pasjrnentc oL -Lnteeee-t to maxOroun peamLe's-Lb-Ee eate uThOck can be paLd on n;utec Sav~0ng's Account's, aLtec deduct-Ong a Lols.LoLteke oL thcee month's :-ozeaeeL at `such cate. FOUR YEAR ?-CATURITY CERTIFICATES 7% o !ouio yeae (4) `s-Lngte metue-Lty T-Lme Sat'-Ln~'s CectLL-Lcate pay-Lng a 7% pee noons cae, cequ-Lces a- mOn-Lmnm depo's-Ot oL $1,000.00 o-e nloee and cea'se's to oc-n Lnteeeet upon eeaeh-On~ the matuaLty date, and the hotde's. L's ae~uTeed peccant the Ceet-L6Leate Loc exehan~e a's a eenetcat os. La's. enea'shment. At enc hotdec's apt_ton, -Lnteee'st n-LU be pa-Od by cheek o's. ceed-Oted to the :n-ot-LL-Lcate by eonopound-Lng quacteety, a's pis.outded -On the 1-One SauLn~'s Cacti L-Lca SIX YEAR M~TURITY CERTIFICATES 7-hE Ta :~c~ (6) `sLn~Le matue-Lty TOme Sau-Ln~'s Ceio-tLLieate paqOng a 7-hE pee -- o-:um rate., eequLee's a mLnLmum depo's-Lt aL $1,000.00 c-s. mace end eea'se's to -La-ten act upon ioeech-Ong the matuc-Oty date, and the haldee L's aequLced peccant the Cei-t-LLLea-tc Las exchange as a eeneteat 0-s Lae encczshment. At 1:atdv'c opt-ten, tnte-s.ect n-LU be paH by check a's. ceod-Oted to the Ccc- -- LOcate by campound-Ong quaetccLy, a's peovOded On the TOme Say-Lug's Cer.t-LLLeate. 67-440 083 - - Es cLTS-rlm- - , PAGENO="0071" / 15 Cl ;~ i;;,~ ~e;* TI 15 15 ~~ivirr' r~' gr.'t' ~ ~ I I) ij ~ 4,,,.. ~ 1I 11 1 jl~ 4Y :i' og~ Ti ~ iS -1 15 fT :1 ii ~ ~ I; ~ d 51515 /515 15; a,, 1515 155 N `a 15. P "~ 0 n~ 0 2~ 0 ~ c PAGENO="0072" c ~ 0 ~ ~~r~LL9 d~::1~ 2 ~ `F -` 0 2: 8 1 2 ~~~q;d ~ ~:~v2 r r N a d a; ~ ? ~ 88 n ~ ;~-;r~r r :`J 3a PAGENO="0073" :lrth, lOs. 55°.Th -~ - - (2 6-29-79 Gustaf W. Su~~ St. St sThrt Eatel :~Tuth, Mn. 55302 Ellen BilisErco (Dec.) or Tilla Clark or Albin Erjcko 1201 N. 3rd St. ~/~o-?'9- `363 Duluth, Mn. 558o~ ~ Itsil Dah1'~0 Ray Norberg 6Th N. 25th Are. Du1~th, ik. 55305 0/ Richard 0. cr Patricia Gear 232 Iaanti St. Duluth, Mn. 55903 Kathleen Marie Johnson by Mr. or Era. Warren Johnson 14095 Getchsfl ILl. Duluth, Mn. 55611 Edward K. or Dorothy NcAullffe 3206 Restorcel St. Duluth, Mn. 556o6 Mark D. Niorichter by Geo~ge Cr B. Ninrich-ter 2.013 `1. Superior St. Duluth, Mn. 559)6 Eric Andrew Oteriehter by Ore. G~orgc Ilierichter 2012 N. Superior (it. iltiluth, Mn. 553n6 69 STATE OF MINNESOTA OFFICE OF THE STATE TREASURER Sr. PAUL WIlOESOrA 55115 REPORT OF UNCLAIMED PROPERTy STATE OP M!2M2ESOTA Period Cojarsd_~~0-~__._ p,5,l of _________ 335.77 323.09 56577d 21.78 20.00 1.78 1497.17 20.00 1477.17 65.1(14 20.03) 20.00 20.69 114.113 174.143 o 73.60 20.00 53.60 319.87 20.00 299.6 103.27 20.03 83.27 ~214l35-6 5162111-? 1116995 6-29-72 6-29-79 6-29-79 6-29-79 6-29-79 6-29-79 6-29-79 6-29-79 _______ TOTAL $10117 NOTE: Rpat tees of wIse aoder 510.00 lo tho elg"Mte. Fôuo UP? C, Eli) PAGENO="0074" 70 STATE OF MI~EEOTA OFFICE OFTIIE STATE TREASURER ST. PAUL. MINNESOTA S51SS REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA - ~u1uth Rat~cvu.1 Bank 2OOOW.Sr~e~iorSt. Duluth, No. 55806 Pe,iocI Co~ued__~29-i9-__---- Page _~__ of _~~_ Pages =27823-k ~25D96-0 Olson, Catherine 1925 ~. 3rd St 6-29-79 621.30 20.00 1.30 . c3° ~ Duluth, Bin. 55806 - f~6.8l-O Pardalos, ?~rris 1605 Vest Duluth, Mn. - Sunerior St. 55806 6-29-79 16.58 0 ~ ~2~72~1g Rinbardson, h3 Bronx River Donald ~ Rd. Apt. CF 1070k p6-29-79 9.13 9.13 0 - Yonkers, R. . Robinson, Rodne7 333 B. Suverior St. Duluth, Rn. 55802 6-29-79 7.05. ~ . 7.05 . 0 ~ -------- - TOTAL 2 S PAGENO="0075" 71 5(A) 101 ,t)FiiIOF,\ OiF iC;L OF iiiL I All l)lAFUiiEil * 11. `JuL. Ji))NLIUFA 111)1 IIEPOI) OF UNCLAIM[)D IiOFIIIiTY STAlE OF .~ElOtA 51115 (F) (Att4:,~t A'pS tt:tttly, Lttt Fit) (2) PcrOsi Coa~rcdll57tn6-3J)-7O Pi~1*t*-___*i_~_____ Of......J..~J55 ~T:;~,;~1::,) F:; (4) (5) (5) (Ott F~;'Fy (3) Foster, John E'duth, Daniel E~nscn by .rs. Olca Hanscn, Dothe Colt forrii~ 4-8-54 9-28-51 591. 05 514.86 ~ 222.Ou 369.05 10-31-77 25D.0D"~ 264.86 `101 AL ~ PAGENO="0076" 72 r~ci / HI / DULUTH NATIONAL BANK/ Oc.~obae 27, 1977 / INTEREST PAIP ON REGULAR SAVINGS VEPOSIT.SJ/ In.te~ett ea~ned on itegutat. Pc~ttbook Sav.Ln~t dCpO.5Ltt .Lt c,jmputed dattj, ~. the day 06 depotLt to tha day 06 thdeawat, and pa edAuae.te'zZy on Na.~ch 31, June 30, Septcmbee 30, and Vecemba/L 31, at the eatlo6 6tve peicent (5~ pee annum. tOken tLCt.t Ls due and payabte, .Lt wttIfba. added to the dapo~ account and wt~L theeea~ee deaw .tnteees.t the tame ~6' the oe.L~tna.t account. it Ct not neceataey to p~etent .the Faatbooh on any/pan..tLcuf_ae day be .Ln~ o~ ~nte.'Le4.t. Any Savtn~t Account .tha.t doet nflt eakn ten eent.t ($. 10) LOlL any qucte.taety .Lnte~et.t pee.Lod oc Cs ctc.sed ~ a ze'Lo betanme wttt not be entLtted to any .Lnteeett. ALt emmounto on 4Lch no depott.t.s oc shdaat thatt have bean made boiL two yeatt, otheiL thcyt .Lntetat.t, wttL be put .Lnto ,Lnaettve categoty, and a~el~ a pet.Lod ob £.Lv~ yeatt ob Lnact.LvJ..ty .shett be eont.Ldetad daernant. Votmant accountt tho~ig a batctisce Loot than ten dotiL J$l0_00) thoU macta to cc £ntETVTt~ A7kiiecloTtaL($)_ 001 ~e2v ~E~~L0T ~ ~ it1it~Theceuo a 0.6 theTLnacttv~ ttatut o$ tIhEEhunt. Th7J~Tth~hU 6~ ôOhCtiet o~ o~ eecha)igetw7CcJs a ~-INTEREST PAul ON TIME/SAViNGS CERTIFICATES 5-½1 6-½1 Thtee Month Matu.tLty lOne Yewt Ma.tut.Lty /Thtety Month 1.latutLttj TLme Sau.Ln~t Ca.xt.L~Leate~ and tenetoat ob ptatent outttandtng CeatL~cate~ tn the amount 06 $100.00 at mote,/Lttued oc tcnewed a~tat JuLy 5, 1973, eaem 5-½~ pet annum on Ceet.L6.Lcctet w.Lth a thaec-month matutCtrj, ai pet annum on CattLbLcatet wLth a ont-yeat matulLtfJ and 6-kb on Cett.L6Lcatet wtth a th.Ltty-month matuttty. /Thete T.Lme Sav.Lngt Cettibtcatet ptov.Lde boo automatic cenewat ob ouccett.L.zie pet.Lodt 06 the opec.Cbted matuetti_et 06 the montht, one geet at .th.Ltty m~énth peiciodo. At the hotdet't option, .Lntetet- wtLt be. paid by aheciz oIL cti.dLted to the Cett.LbLcaLe by compound.Lng. quatteo a~ ptovtded P_n the T.Lme 5af.Lngt Cett.Lbtcate. CelLtibteate hoLde~ct ob exttt tng 5-3~%, thaee-month Cetftbteatat, wtth the automatic tenewat option .tequ: .Ln~ the Lon~et matunity ~b one yeat ot th.Ltty montht, ate tequtted to peets theLt Cettib.Laate ot Ce/~iLtcatet on the next matuttty date Lot exchen~e. In the event ob a w.Lthdfawat ob Lundo pttot to the matut.LLtj 06 a Cetttbtca. the new Fedetat Jeegatef.J_ont, ebbecti_va June 5, 1973, tequtte that cue LCm.Lt the paymanto 06 .tntete/o.t to. mexLmum petmtto.Lbte tate wh.Lch man be paid on te~uLat Savtn~t Accou/ztt, abten. dadu.ctin~ a botbeP_tute ob thtee montkt tntatett at tuck taLL. /FOUR YEAR 1.1ATURJTV CERTIFICATES 70~ A Lout yeat (4) tt/jte raatuti_.ty T.Lme Sautngo.Cett.1_6LC.ate paytng a lb pet annum tate, tequL's/~o a mtn.Lmum dapottt ob $1,000.00 OIL moiLe and eeau~ to ccs/Ln ,Lntetett upofi teachtng the.matutCty dote, and the hotdat cit teç'uttcd to ptetent the c/ttibLcate Lot exehan~e as a oenec'.ctt ot LolL ancathment. A. the hotdet't opfion, tntatett LQJ..U b~ paid by cheek at mtedttc.d to the Ccttibteate by/compound.Ln~ qao.ttetty, ct.poovtdad .Ln the T.Lme Savtn0u Cett- / SiX YEAR MATURITY CERTIFiCATES 7-kb A 4P_x yea's ~Ø ain~Le matutity liP_ma Sav.Lngt Ceot.Lbtcate pacjtng a 7-kb pet annum tate, isequttet a mtn.Lmum depot-Ct 06 $1,000.00 OIL mote end cectoeu to eatn .Lnteaest upon taachJ_n~ the natut.Lty date, and the hotdat .C~ ice quted to poab ant the Ccttib.Lcate Lot exchan~a at a oeneccctt 0's Lot encatiznant. A. the hotde's'n option, cinteteut w.LU be paid by check on. cted.cited to the Cc/s tiLLcate by eompoundLn~ quantetty, a~s poo v.P_dad P_n Lice liP_tie .SavLn~t Ce/stiLt PAGENO="0077" *~c1ud~d in this tot~1 ire those accounts which *went inactive `after, 6-30-71 and were cloCed out prior to .6-30-78. The bank is advised, by its legal counsel that the one yeas limitation on service chargesdoes' not apPly to accounts being reported this year Period Civered 7l-77 to 6-30-78 Pagsl.Q_. of.JM_peges 73 .,-~ ~TATE0FMIci~ESOTA .0 EOFThESTATETREASURER ELPAUL. MINNESOTA 55i~ REPORT OF UNCLAIMED PROPERTY STATE OF MZNUESOTA : L.~T~ER~ CITY `ITIONAL tANK west Sucerior St. MN 55802 ~e-, ~ - ~ & L~~t K.-.~..-, ~ 0~ ~ ~ ~ ~ A~.w-~fr~ ~ Dr~ c4 ~eio'~ O,~: P~p,~ty B.~-., P,~, c~ * ~ D*~. . LMO~-~s (5~, St~ A'~t R,~-. :~ c~ CS] 0 (4) R~~I (5) D ~ -. Miscellanotis unclaimed funds prior to 1967.: Owners unknown. - Reported early and in ?ggregate. Various prior to 6-30-71 Prior to 1967 Various 3,227.27 3,502.24 0 Mote NONE NONE' 12,320.99 All servi charges taken qtr on: 3-31. 6-30 9-30- 12-31 of each y 9171-6/77 3,227.27 3,502.24 12,320:99 TOTAL S~72°~ REPORT TOTAL ~23,422.62 PAGENO="0078" STATE O~M:'~'4ESOTA OFFICE OF THE STATE TIEACURTR ST. FAUL. rvIra~sSoTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Address 306 West Superior Street theisith. Minnesota 55802 74 `fame of Business Northern City National Bank Period Covered 6-30-79 Page Two of Fifteen Pages O,t,o(Lait Tueae5oea of Pro;efy turri(yi~ Sober N~n & L,ir Knr.nr Addns, 1 O'er, Bn,fii,.-y. A~;,r (~~s'a Alphebetisay Lpt ;4~ First) Det~ Pepity Bienne P,y,be, Rrdre,,bI~ or Retroba Anrent Cit Osprir l~)a) Chu~ns (Set Suit T~tet', 0(u) Atntst Rein Dr Osor (1) (2) (3) (4) (5) (0) Savings 302701-8 61455-2 82019-1 54755-4 92346-6 5 4297-7 34169-2 22 645-6 Burke, Michael Trustee fdr Suzanne L. Burke 2629 Slest 5th Street Duluth, Minnesota 55806 SSN 374-50-4520 12-30-71 $26.31 $20.00 $6.31' Carison, Roger Route 132, Box 200A Duluth, Minnesota 55804 6-9-65 $63.94 $20.00 $43.94~ Curry, Mrs. P.R. Dec'd or Mrs. Kermit A. Ness 3517 Inner Drive Hibbing, Minnesota 55746 10-6-67 $74.18 $20.00 $54.18. Gierts~n, Hazel N. Dec'd 1312 East 4th Street Duluth, Minnesota 55805 9-15-71 $177.62 . $20.00 $157.62. Beikkinen, Henry Dec'd do Martin Hotel 219½ East 1st Street Duluth, Minnesota 55802 SSN 470-01-9920 2-4-72 ~ $137.37 $20.00 . $117.37. . Johnson. E. J. or Mrs. E.J. Johnson Dec'd 227 West 3rd Street Duluth, Hinnesota 55802 5-4-72 $36.94 $20.00 $16.94, * Kennedy, Gerald or Mary B. Kennedy 310 Johnson Parkway St. Paul, Minnesota 5510 8~3l-7i $163.76 $20~00 $143.76~ Moland, H. T. 262R Torrey Times Road La Jolla, Calif. 92037 8-22-63 $97.71 $20.00 $77.71, `SOTE: Repoel inn, of mine under SiROS (n-the e~;ee~Ue. TOTAL S $617.83 PAGENO="0079" 7~5 STATE OF MIHNESOrA OFFICE Ot THE STATE TREASURER ST. FAULMINLESOTA 55155 DEPORT OF UKCLA!MED PROPERTY t.luth, Minnesota 55802 STATE OF M)NNESOTA -: c' S :~_~r~t~I Cit. Laticual flank ~ 1]est Sunerior Street Pedod CCV rEd~ ~/9 Peg Three ~ Fifteen Pares y. Lo: Sr-j Fit) 12) Ce, Let To. Dee Pe~.ety fe, (3) (So' 5::e .0-on ~ T.er.,Rr& DrO.. (5) 0) Lanrtey, Judith K. 6-15-72 4935 London Road Duluth, ]innesoto 55604 SSL 47~-38-229O Nanod, Kelvin A. or Lynn 2-28-72 .J. Kanod 1293 Nartin Road Duluth, Minnesota 55803 ssz: 472-46-3692 576-44-2262 1]]~7-2 Ostron, Leonard H. or 9-21-71 Honora H. Ostron Route 1, Lox 1629 Apache. Junction, Arizona Peterson, Mrs. Axel J. o 9-1-64 Axel J. Peterson 4002 London Road Duluth, Minnesota 55804 ~*~59-8 Radice, Likki 12-29-7] 1121 Fart 6th Street Duluth, t]anrieroto 55805 - ~1 Shohet, Gharon, K. 3-14-67 4810 1);..: A K~n~e;je~ is, Hinnerota 554( 5?2-. Sinn, :-;. !]eh:c;) P. 10-5-71 for Ch.in~ ulle H. Sinn 1826 Laurel Avenue P. .5 :~ Report hem, of eoI~ uod.r S1O.Eo the oggoeget,. $13.76 $13.76 $12.12 $12.12 $74.28 $20.00 $53.70 $20.00 $14.61 $14.61 $83.41 $20.00 $139.27 $20.00 $0.00 $0.00~ $54. 28, 833.70, $0.00 f6 3 . 41 $119. 27, TOTAL S 270.66 67-~f~~0 0 - 81 - 6 PAGENO="0080" 76 STATE OF MINNESOTA OFFICE OF TIlE STATE TREASUCER ST. PAUL, MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Add~.~ 1116 TYese un-irn- RF~-~.e ccQn., es Strom, Ingrid Bloomington, Indiana 4740 Social Socurity number 469-24- 7732 Previous address 3801 East 3rd Street Duluth, Minnesota Martin, Scott Michael, or Mrs Audrey Martin Grand Rapids, Minnesota Social Security number 999-99-6157 Martin, William Russell J Or Mrs Audrey Martin Grand Rapids, Minnesota Social Security number 999-996-158 .)IE: Rep0~t it'~'~ ,.,I~, und~ FIStS in th, ~ss~ee'. Lost Contact 4-1-72 TOTAL ~`~57.7l arne of Buliness Northern City National Bank Period Covered_6~30 - 79 Page iiftuen. of_LG5gpPagss D,t, Cf L~sf of Popo~ty (Coneyng Nnb~o t),~n, S L~f Knn,n, Add~,, ~f On~, E)ki~y, lAnog, A!pI~bffio6Uy, Lj,, N~,, Fio) CCC Cf P,~b.. RCdofnfbS R,yn,b'~ A~onn~'t On~ Ooooe Ln~dn) Ch,ges (5~e 5t,to T~o,nn's On!,,) A~noot RCpoC On~ Onnne (1) (2) (3) (4) Is) (6) g~gp Certifica )569 )32 1 1322 $170.83 3-23-72 $173.44 .3-23-72 $173.44 $20.00 $20.00 $20.00 $150.83 $153.44. $153. 44~ PAGENO="0081" `1 (3 t_n.~? ~ 0 ~ C C> . C C C C3 C C 0 0 C 0. 0 0. 0 0. 4i~ (3 C . (3 0 1 0 -~01 C ~0..(3. -~0 0 3 0 r ri r * r- ~. -~ 1 r( (C 1 * . 0 2) r~ I ---- ~ ~ 3 23.:~ :4 ~. 3 ~ ~. 2. ~ N) N)- I (.4) 3 4(3..4(4) .C44C5~4 ~ 3) ; ;~ :2 3 -4 31 0 (C 4(3 -4 C o cr o Z C 3~ C) --C ~--~-- ~ -----~ ~ *1 -4 (3 .3 4.4j N) N)-~ ~~)O) -4(3 (.iCO(.J .3014(3 c~ ..~05-~.-~-~(31 (31 N) -* N) .J -~ -~ -~ CS J N) -4 N) N) -~ -( N) 05 44020 N) -* ~ 40 40 001 ~ N) ~ 20 N) (.401 ~ 0)0 N) -4(3504 ~-4 -~ ~ 40 ~ (C 3~\ \~ PAGENO="0082" 78 ,- -a ~ c ro- L CI D ~r ~ - ~ ~ 0 r ~" 0 B ~ t P h r ~ Cci t630 7 ~ . ;~ . - irust. Dc~artc~nt ~ *. ::T~- :~.- . * -~ ~ ~ ~ ~ ~ ~ ~ . .~:- A LJ1 _t__ - ____ iii~ ~ 1 Ae I - ~ &1g C 1 23 £9 i15 0O~ 20 o.i i'~ 2 C-~ 111 1 1.- B.e~ & TL t I C a~, C C c. 00 - 20 OJ _. * ~ ~5~6-G6 : ~°° ~20.0 4 Farm ngt a I I) t t I I~1 2 D t C nL 7 6~ ~ 00[_ 2 1 CC) 5 Fe~. 11- L ~ I 8 3187 4 2 -71 11-13-70 637 oJ 20 00 8 6. * Federal La~idBe~, 5 1/2% 7-20-70 - 1-20-6 63~ 20 DC ~ 7.-.. *Federal-Nationa3:::artgage ----~- * -. - - TAssocIatioa:d.3/'~9-1O-71 3-2169. 1A3.75Ijr~. 20.00 ~ 8. - ~Thternationc]..B-~sjeess ~- -- -~ -. *. Nah - ~_ 121068 4~I 0CC) ~)j)~75 9 1ev tr Dv I S rv ln~ 12-16-6B 15 00 20 00 2 C~) 10 N w k N J I 2 757 1 - 4-1-S9 7-1/ 6 01 25~ 20 CC 86 S 11 - I th rn St t P C 2-10 69 14 20 0 2t 7 12 C P tn r 12-3i 6tI 001 20 13 Re dC ty / - 1-1-79 1-9 68 2 20 00 1 2 14 S t C 367 2000 15. State Street Inv~steent * 1-2Z-64 -94,. 20.0) ]0~.Y 16. - - St. Paul Companica * 4-~7-68 200001: - 20-C.) .-i80.C-~ -- ~-__ PAGENO="0083" CO cr .0 2 ~ 2 0 ~- ..r ~ 0 ~o a~ o~ CO `.4.4.4 N `,. .. N ~ CO CO 0 0. 0 0 0 0 -~ 0 0 0 0 0 0 ~ d d N C~ N N N N N 0 -________________________ `~` a a 0 N CO CO CO N N N ~ `~ ~ ~. .4 CO 0 N CO CO (000 0 CO 0' 0' CO N N `0 `0(0 . .4 CN N CO N 0 N 0 N N ~ z 0 ~.r ~ - .r~ 0 .0 ~N ~ .`~ F ~ ~ `0 ~ ~. 2 o. ,~c. ~ . ~ `. ~ ~ r ~ ~ ~i,2~' .<~ ~ . 8".~ ~ ,`~ r;%~~; ~ ~ .Y'~ -~`~ ~2 ~F'~ ~ P~ONO V.-) -~~oo~: ~ ooCO o~ioo~ ~ `ai- ~ F. .~1 .~ 4-' 0 00 (4 . 44 (4.~4 0 ~ ~ N N 0 ~ .~ .~ PAGENO="0084" Minge, Leonard or Evelyn In Trust For Carob Lenz 476-01-5546 Route 1. Maple Plain, Mn. 5535 Montgomery, George F. Box 307 Isanti, Mn. 55040 Noo'e, Linda J. 474-56-5728 2425 Black Lake Road Mound, Mn. 55364. Morgan, Mr. or Mrs. Harold N. p. 0. Box 836 Merced, California 95340 Olson, Oscar E. Address ITnknovo Pearson. Barbara 3. 470-50-2585 6870 Meados'brook Blvd. Apt. 43 Minneapolis, Mn. 55426 Savage, Jeffrey 476-62-8445 1713 E. Superior St. Duluth, Mn. 55812 Smith, Mabel S. Mrs. 470-30-5697 16512 Excelsior Blvd. Hopkins, Minn. 55343 Steinbeck, Carol Ann 300-32- 07 16 2012 1,'. Excelsior Hopktns Mn. 55343 Tanner Madge Oak Terrace Hopkins, Mn. 55343 Name of Resicoss 80 STATEOFMINNESOTA OFFICE OF THE STATE TREASURER ST.PAUL,MINrJEIO'rA 55155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Period Covered..~__ , First National Bank of Address 16 Ninth iVP. -Me. Page TN0~_ of `~` Pages _____ ~;o'4 ~ 0c9 Doect~,t Ds,c~~p,ioo of Fxptsy Namt & L,,t Kseme AdOoss of Ooen, Orufieis~y, Aeuuit,ut DoeFnp,ny Onset Paysb~t, Rtdeee,b!e Amecut -.~ ~: .Lnch,I Chose, -4r~ Id~ustyiug NunS,, (1) (Austos AIph,he,icaIIy, Lan Note Fast) Cu) - Reeum,bfs -(0 Dee Onset (4) (See Stat, Tsescstas's Rate,) ,.-~-r (5) Axonut Rtpnn'e a, Dsx Oo,ue, -`~_~(6( th9i5-U 1437-6 :2l8362 3961-0 4206-9 16203-2 20383-6 12544-3 13250-5 $161.79' 161. 25, 32.480 162.89" 726.74" 101.26' 67.67' 26.18~ 29.93 20.00 20.00 20.00 20.00 20.00 20.00 - 20.00 20.00 9-27-67 4-28-70 9-22-70 4-26-60 -. 11-29-61 10-2-67 8-17-70 7-27-70 1-19-66 10-9 -63 ~~4l.79 *i.~149.25 -~I42.89 ~7O6.74 ...T~:8l.25 ~r47.67 6.18 9.13 27.C0 47.00' - 20.00 TOTAL 4l,325.1F NOTE: Repast items of ta)ae untIes 810.00 in tIne aggteçate. Fe'x UP.2 (ffn,.9/77) PAGENO="0085" 81 STATE OF MINNESOTA OFFICE OF THE STATE TREASURER ST.PAULM)NNESOTA 55155 REPORT OF UNCLAiMED PROPERTY STATE OF MINNESOTA of Busir.css__~T$ISt ik:~~nul E~-tnk ci lIerkins Period Covered__~ - Page THREE of __-__-~-_-__ Pages ~30~' 3QE) e!Pnriy -tn~ (1) E4niyArt.it 6,-n- A~e5itniiy Lit r:,- Fi,) 121 SPapity Rilbtin Ri~b~ 01 Anon) Oni O.n 141 ISioSeno Tiitiit Roe) 15) An tRipottid Di Otoit 161 $ 6.51- 12.68 43.86 44.96 -77-4 1-516 1.-2G5 -rs Certifier - ct Cheeks re-; Orders Ordes. VanSeest. Elerno- Ri-c. 443-26-0018 Ron-liar) Parli, Sc 214 Napkins i-is. 55343 Masses. Scoot lice 3313 Alcka-.a /sa. Rinne~a1ns Ri. 55416 Ardent ri. Ccoth~ 4. 3070 Vtah Ave. So. St. Lois Park, Mc. 55426 474-44-1720 Corstey. Martha Ms. 205 2nd St. k'ornh Hopkir.s. tks. 55143 Sidenux, lire 7. Gice. Stazette N. 470-35-0311 529 17th Are. Mo. Hopkins, Mn. 55343 EdIson. Pai-ler 473-20-4747 41301 iinnctcn!a 3l'id. Hopkins. Rn. 53343 h under $10.00 Money 5-27-68 12-19-62 5-42-69 3-19-09 3- 19-69 10-1- 69 6-26-61 3-26-62 0-16-64 6-23-64 5-l4-6~ 10-1-64 19-6-60 10-25-67 $20.00 20.00 20.00 20.00 None None Noise $ 26.51e 32.48w 63.86' 64.96' 12.50 1.25 $157.72 15.00 10.00 28.44 400.00 10.00 90.C0 85.00 100% * E: Rpont tie 6 .a)ci mdi, 110.03 in ehi ogytigate. UPS Rio. 9177) TOTAL $637.63 PAGENO="0086" 82 Z-Z.I'II R.~. ~ F TRST NAT TONAL BANK CF HOPK INS RULES AND REGULATIONS GOVERNING BANK ACCOUNTS J!~ 73 6'~ POSTED - ` 19__~ EFFECTIVE 30 DAYS THEREAFTER ~ ~ ADDmONAL RULES AND REGULATIONS APPLICABLE ps.t.d Rt~i.. RE R.gREtRE ~h!th B. t..k. tSith RE RE ~t~i TO REGULAR AND SPECL&L CHECKING ACCOIJN1'S GENERAL RULES AND REGULATIONS 1. TB. REB ~iU pty pp RE PIN. d.pt.ttst It APPLICABLE TO ALL BANK ACCOUNTS P TB. pRE.!tt~. ~dR~tI~ ~ PP ~ thth.d~pttItpp sO tstoo It It Pttith th IN gI It p oh Pt p 3. II Ph. dppttitpp .Isot.t~ t SStPPPt It.Stt tp th~ B3.pkbt' totS h~ P&1Pdttohto~sttpgpdy ftodtWsty.RP.kStlppt dSSttptltt Stlthdpo'.-tJ todso dtt.'tp sgtltst sty posdit tOSS it pt'.i.SSsI to I. gt'pg ttitt.t pptkg thtpgpf It tog INtO olthlp tt dty. Ott PS th~thdts : ~ ~ ~.. Itt p.35 bREItg toy. ADDITIONAL RULES AND REGULATIONS 5. Bosh ppdtto ttthtotsp th. BosS st &sy tIN. tO. BosS toy APPLICABLE TO SAYINGS ACCOUNTS ~::~ ~ :~ ~ ~ go t~d ~ Pt.d tt1 tot °RE tO R PS Ptth RE tINt thto.gttpotp..sosdtp ~ :~ ~ ~ PSStIPPBP tO ~dtt~tt PS Both P IN Pt ~t pP od TO th pt to .3S~$ tt pp.551.. s~t1ptty ptyt It .od.otssthp It PtttPlP tIPS pttt OttO, tO. BotS poy t.itOhtId ptppss.sstp spoIsts tOgs st .~PIIPSINPO ~ pith, soot Pt OtiS Pt Oh OPt B. to th ottO Ott PS TO gi Pt PP 01 PS ~ St ~ tPto~, Pt Pt It St BoB, Pt It to It Ott SdPt IN 3 555 PS 17R 0551 POgS St 55 55115 55 pP ~,, ~ IN ~ to Pt to tO. d.pt.Ittp Pttld ptPPtttllydt.TOSOSlthtPPtyPOtttSdOy 55150 sod tlto. sos 0. f~lltOt St .~TRE. &IOPP. ~ of PPtsS1sgd~pthtp,sspyghsflft ~ Pt TO Pt ~ E At Sttg.3 55 55 POSt Pt St th Pt TO Boo TIN tS~°*st to th Ott SodltIt.t. IN=st Pt Pt St it It A1)DmoNAL RULES AND REGULATIONS APPLICABLE TO sott.sttt thootith. SAYINGS CERTIFICATES AND CERTIFICATES OF DEPOSrrL~~ Pt pot PS Pt ttt Pt .dby th Pot Oo di it tt~G3t otI PAGENO="0087" 83 ~ N~ 4~~1 ~ RULES AND REGULATIONS G~OVERNING BANK ACCOUNTS POSTED October 1, 192.2.., EFFECTIVE 30 DAYS THEREAFrER ES P.s~k IiEh~E .iO~O le.S'~iE. r~S ADDITIONAL RIfLES AND REGULATIONS APPLICABLE TO SAVINGS ACCOUNTS GENERAL RIfLES AND REGULATIONS APPLICABLE TO ALL BANE ACCOUNTS sos.,, Os ~oos.., 0, OsS Tc, "5 `,~;,, *"R - ADDITIONAL RULES AND REGULATIONS APPLICABLE TO SA r'GS CERTIFICATES AND CERTIFICATES OF DEPOSIT ADDm0NAI. RULES AND REGULATIONS ,, APPLICABLE TO TIME OE OSIT 0 EN ACCOUNTS ADDITIONAL RULES ANT) REGULATIONS APPL1CABLE os'' ~,ss0os5 SOE!s5 4s,s5Ass,~E, ,fO.ossss0sIsO~e5,ths- TO REGULAR AND SPECIAL CHECXING ACCOUNTS ss'~ ~s,~sss'~.:,c', ~ ,,,c~, ,~ osc~,s, s,~ cs S,,~.s.m SId. PAGENO="0088" OFFICE OF THE STATE TREASURER ST. PAUL MINNESOTA 51155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Name of Business First National BanL of Saint Paul Address_~32 Minnesota Strcct St. Paul, MN 55109 jU~l S 1) 1979 Period Covered -~ Page ~ of IO& Pages N Lou Kuuouuuu Adamu, ~I Oouuu,. ts Cont'd.: Sullivan, Thomas S. flarjorie S Nest 5th St., St. Paul, 11W Thron, Gail Emma Norton Residence, 670 No. Robert St., St. Paul, MN Winter, Gladys G. - Guardian o Steven Lyle Winter Estate 906 Ilayard St., St. Paul, (.1W 55 102 Young Republican League 41B A. Lee Orcutt-Treasurer 1625 Ashland Ave., St. Paul, N 55104 24 Accounts, each cith balance less than $10 Total Demand Deposit TOTAL S 3,141.76 r:OTE: Repe~ Ise's Sf natoe dudel S1~.ll in the a53uogate. In.o UP.2 Hue. 9/711 84 Du,edpt/en Puopuuty (I) emand~~posit Accou T,,uuuetion 131 Anunnet Due' Oem I (41 ~nfnI Chnu~,~ (Se' Sue Te'ouee"s Rn/uu) (5) Unknown 32-59288 30-07718 60-86853 3-18-59 11-13-69 5-11-69 10-12-70 Anununul (lepe,. (I) 141.12. 255.45- 50.00- 52.26 29.23 3,341.76 161.12 275.45 70.00 72.26 311.44 4,603.97 20.00 20.00 20.00 20.00 282.21 762.21 PAGENO="0089" -~-~uu 332 Minnesota Street REPOIIT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Sr. Paul. Ni 11101 85 ci Su run First National Eank of Saint Paul JIM I ~ Period Covercd_______________ - . - Page _______ ot _______ O,t,ct Los DosPso~ssty - .-.rr.o- Prs'-~ (au-u & LoS Cssuuss n~ Ossns-* E-fescy~ 0, 8u-n ~ Renub, os . - Aeon,) Oct (Ae,~;., A esu.4"y Las bros Fuss) R,uossb!s Oes 1) (2) (3) (41 * : .5-:cc*:nts Ccnt Woolgar, Lucille S/or Charles J. Berens (126-14-60i4) Addre'ss Unknown 4-08-71 Lsus)u( Chu,u-s (SeeSuse em) I)- 20.00 1,263.60 1,283.60 Ilorthing, Mary K. 107 N. Sandhurst Dr., St. Paul MN 55117 Wyatt, Jams R. as Cust. for~ Jams N. Mary Marcella & Thoma Wyatt (393-16-2020) 1925 Sanders, St. Paul, i-L'l Young Christian Workers (410-64-3362) Address Unknown Zabawa, Donald E. 1308 Albany, St: Paul, MN Zewiske, Joseph Paul S/or Diane or John 14. (477-44-9459) 654 5th Ave. So., So. St. Paul Zicuna, Gene P. 654 Sticknoy St., St. Paul, MN 55107 L'nkroun Unknown Unknown Unknown 19 Items, Each Under $10 10-21-68 55.63 20.00 35.63- 8-27-69 121.74 20.00 101.74 11-09-65 52.66 20.00 32.66 - 12-13-68 37.68 20.00 17.680 12-27-63 80.04 20.00 60.04~ MN 5-27-71 38.14 20.00 18.14-' 8-24-65 66.04 20.00 46.04 7-05-66 56.51 20.00 36.51 12-06-66 43.31 20.00 23.31 10-10-67 19.46 20.00 79.46 5)19.67 380.00 129.67 S102,:s6. 13 $ 7,720.00 1~W.(66.l3 H TOTAL ~(~47l9i * : - - 7164-8 - - 1-iO-C osue usdc 5)0.53 In the a~-uat- PAGENO="0090" (lmn 3~2 86 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA Period Covered .iu: 3 0 1576 Page ___________ of ___________ Name of Business First National Bank of Saint Paul . O.t, nfLmt Omeilpeen n)P'np,uy ~,ntif~~ag Nenbe N~nv & mi Kison Addn,s a) O,ene, Blieuayai Anniun (Aec,;, Alph.bm~m5y. Loi 5mm Fuel 8~::~. Reiewbi, ni R,enub5 AnantOn Omnet L.oM Chegn (Sm Sun Tm,. Retail Amen ~ Oat Duo" (I) (21 (31 (41 (5) (6) wings Certificates 30656 30657 78235 78236 - 82244 59061 Cont'd. ~ii~T, Dr. David B., Trustee for Sandra Jo. Michael Todd 5 Steven (Continued) Zahariades, Dr. Gust J., Trustee for Jodeen Ann Zohariades (4S1-32-2697) 2031 Irene St., St. Paul, MN Zaarebinski, Rayuond Joseph or Dorothy Marjorie, Trustees for Donald N. Messerle (470-01-221 1770 Carl St., Lauderdale, MN 55113 Zweig, Barbara or Mrs. Richard (475-36-4801) 1247 Century. St. Paul, MN 551 Two iteras, each under $10 8-10-67 8-10-67 10-26-66 10-26-66 12-09-66 3-03-66 86. 35\ 86.3i 71.72 35.88' - 35.44, 37.05 - 58.45 20.00 20.00 20.00 20.00 239.05 87.60 15.44 17.05 9 40.00 18.45 92,401.03 ti~i448.23 , lOO.-O0~ 400.00 17,;3L73- TOTAL C S lOLl-tO.. NOTE: Report (ems of value under $10.00 the aSleegute. rem uP.2 (Art. 51771 PAGENO="0091" 87 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA ~ First katiosal flank of Saint Paul p&~ c~ee~ JUl 3 i978 Fag ii~t ofJ~2Lpages Minr.esota Strect St. P~u1, MN 55101 O~c~Y Ne~ & Ln~ K~c~n~ ~ uVO~r~, `.c~A'~~~t 8~s .b~. fln~-cn~t~n~ L~(1a1 Cha~e~ (S~Sut~ Aonatfl~1a~.. (A~. A!5~b~ta~5y. Ian F.o) R~t~b~ Oaa To~acns Ratni Da~ Onns (It (2) (3) (4) (5) (6) SL~ary Total 271 ,807.59 22,776.29 249,031.30 TOTAL1 S1,?~1O--~ PAGENO="0092" 88 November 7, 1978 *!~r. Michael T. Mishou Audit Officer :: First National Banh ;:.332 Minnesota St.. St. Pau1,M~PI 55101 Dear 14r Mishou: t~-. ~ have recei~eo ~o~r l°78 veport of Orc1arne~ Propertj showing ~ service charges deducted from the reported ~roperty. The State ~ Treasurer's Office cannot allow these deductions unless this offio'~ s supoliec. s _t1~ tue fc11o~ inc items 1 Please se'~d tre c_teflon of t~'e a t1~orit; or a cop ~ of the farm of contract with the customer authorizing such service charges. - . 2. If your service charce nolic', was chanced between the `-~ - . cete the property came into your possession and the - date of your current report, please send the citation or contract in effect when the property came into your ~ Possession and please erplain how the owner of the: propert_ s~ac not~fied of the chaige I 3. Please list the date or dates on which the servic~ charges were deducted. r Authority for these remuirenants is found in Mien. Stat. .~ 345~32r (a) 345 32 Cc) arc ~n 1 II C A ~ §~ 3 000 if yen hevc rrrr ~ucst!c.ns, please do not hesitate to contact this.~- office at (6l2)-296-2568. Sincerely, Joe J. Rohv, Jr. T)irector of In-Office Co~pliance Unclaimed Prcperty Divis-ion J~fl:jh - PAGENO="0093" liwi .h:1iII~V I!. THE FIRST NATIONAL BANK of Saint Paul 4c~* MEMOER FEDERAL DEPOSIT INS. CORP. Rules and Regulations Governing ACCOUNTS 11 d U ~I A U ~I yh PART vi ness 1.11 peoiuuIe he IICPOIiI,l, loIn 00dm0 . ADDITIONAL RULES AND REGULATIONS 5~Y'o°~' 00015, II(e5IIIIIIiCs oc disocepano . APPLICAIILE ONLY TO TIME DEPOSIT. OPEN ACCOUNTS 5~OiIISf IRs bunk. I. A Irne 1100051, Ellen OCTRuRI G1~ 110 MIsled ouIII 5 d~pnsiI oI ci least S20. AIldIlionsi depOlilt * PARTV iL RULER AND REGULATIONS PPLICAOLE ONLY TO . n.y he cads n ony encounf deny Urns, . 2. NoIlos of he CII Of inbred flyidull on lyle 11011011. Ollon5000unIs hell be pooled In the nan POOlE SAVINGS ACCOUNTS IlaIun~ eoorn ISkyoonik Dnnkin~ Conbol 01 the boW and noIse oI eeoh OlanOn thoIon will be `tI' rnallfpn apoognele CoUld ol po,led foe rot less han 30 days prior to the hcbank t~iiI gun If doTosIon jlC flInolos loIs of such cha,gn. . - he luonu ocepIbo eeohuulh. 3: Pcinyipul nay be ,ciIhd,a,',nI,onhtinnednOosiI.~ Or on tIle sf day of Januacy, Aped, july, oe . hf bunk shall bunnsh to An II, 11,11 only thy * oh sl.nlcrnooi .o ooal.llo. The 00105,, lend nine dM5 toilowing suoh doled, poo ui, Ihol he foods oIhduooe oonte on doposif I p0101 ho nest ynondn9 I,af day of .lnnuey, ApI, July ,,, Ooloben. .. - . . II shall b~ In duly ol 4 The AtnI, `oil nauw n lpp'OpliOIO oco'ols scorn coop kollo hsslilonpnt. one oI any enos, l,ecgulallbpc, or ho about t,uI no `a's hook nil ho issu,,I. Toe hank nil go, ho dbposiloe `coops foe each do. * , . . hen,,n, to Soc wIlson 00105 Iholeot poll, sod the deposiloe pOll sign end dolloen to the . MIRe 14 days torn the dole suoh named on ofherwse rnoln .noaiahin, lpjs corn ho lot nooon nec rnoled banke tooepf foe naoh s'cilhdea*aI. . 5. Poodoelly ho beck shell fuenish 0 elf dc . 10" my ul eunh 11111 nydu Apollo, Ihol cool, slobunllnt is aoailible. TIn . I bhl . PAGENO="0094" L~P- ~flt I I I 3. (torts for orhuh the book poys roAr or ifs tiruir or ohook orroy bo hurdled for colloohoro In if, If hOrS 4 boAr os to whether cIt or cry por. (hr score or rotor it core wooed for deposIt, cod Iron of cry cooour l's l:rrpooodtd by serum of tony be o(rorgrd book to ho toryosi(or's oroourrf yrorohorere, rnnohtrrtrr, cercormo, or other 0gb hi book s (ornololo ro 001ievo (he rem (trotess, he book moo srI os,do ord hold such roorf,oo of ohyonorfos is dorrrroded by sroch 4, Tho rook moy ducl,oo to poy cry chu'ok or procose rod roll hnue ro liotortify tO (ho dcposdor other or hdrovo~i orrior uoless (hote ate sronioroot for so bong. collectod fords ir (its 0000urt upon whrch A is dtoo'co to roy the (err, 12, TIre t~ork rooy or cry .me offset ogolnof soy I, Iroludrog s `riot .rooouo t, oil or wy port Gri,oelf rrorr(ot 51.0 Os urd subjrof to toter ooune of cry motored or ormotor.rd debt or tlbirgotiorl cod ueriilortron of items dcitoeiredt err0000us do' owodfothebsrkby ho ttrpotitot, or by coy of he poslf cob yrs suit be oorreo(ed by he book, depositors In (ire moor of a joint 0000urt, whether sooir drbt or ololigohon is diteof or tordorcof, cOrn' U. if o riritosifo reltots to mon Items e~ the book torte or oorllogeot, 0101 0 rseorr oi, heretofore or ho tots so of his oooo risk cod tire book' stood Os irrtee(ter 000(rct004 or toquited froen though the (ho dent ( ot soth Item 505 onrti,.oioe 00 (hr .3101 ot nttsct us moptrteed in the obii00rort dors by plooinrg thorn io one ot the (took's dtop.in boo to the h~vk by tire rtr'pos~tcr or by roy of he dopositorirs, toe dors so of his own risk rood the dtposttots 0 (he 0010 of o jOiof 0000vof, witether book' 5 rrtotds os to the for ipe of suoh items is such hobO do. hbi~gohno is drtect or irditect, cOrn. otirvy boo drynoooty no cry bcttk,,tg dcv oroy (torn t.trd ,rvrourtts or iorrg .rc s,.oit ,.rdrb(r'drtros RULES AND REGULATIONS .1 ., NI PART ft RULES AND RSuSULATfONS APPL1CAIILE ONLY TO COO ECK(NG ACCOUNTS P'rorot(rt:olly (ire honk thou futrith (hr drritnsrtor o.ellod vouchers, or sltcli entity (he depositor titct ((Oh 5(O(etottrt sod cortcelieduouchets coo ooa,ioble, The book sholf rot he ((stole for coy loss or clestruo' tOrn of tire sroiemeos sod vouohers in frooe,t, Is mir,ri( (or firs duty of hi' deposrtor to coro(uliy eg,lhrtlrte bre st;ttemoof sod o0000ilod vouchrrs, cod tire ooerrf of coy orlors, irtegAlstlrles cm dis' otu'yooores herein, ogros wt,f(eo relics thereot to tire Itottk oeiiltlr 14 bye from the dotr suoir store' root orrd corrtfllrd vouchers wore moiied or other. mo,tp oo,ol.rble or vvithro tO dcys (tom (Ire i(tt tirI,00tO, Norrdol,urey of such wrioo'o by fhe tfottcsitcr to tire book trs,ih,o so~dt~roeobolt toss oott boll ercoiuds the dcposifor from coserfiog 1. 11(1' tio.nk tO~ tOtO(O to (t0~ o~,y ohotk to (Ire tetcts ttesot,boof by book. PART i(f RoLES AND REGULAT(ONS APPLICAULE ONLY TO SAVINGS ACCOUNTS RULES AND REGULATIONS 1'. dv' rrodr( `to coon c(000trf (or orry `trot ely. (0. Tire fork mney oieoi,or to scoop t ctr'pcsite to it the oorof of sop oe,rtiift boiweto these GOVEiIN(NG ACCOUNTS iNiTiof `~otn ri orry 1,0 rhu'grd Otnruu .,qo,ntct hot .,o~ ou.t( trorrr, on rotor rtr"oi,v'obs yr .`r,thdrr,w,ti ord'rts vi, .,,:.`s "of rfre (erms Ot 00 0000uotos set ovt ,o orioy F((fST NATIONAL SANK OF SAINT PAUL l,ro',hrOt t woo ttrpocntod tot c3cnrsf crry o(iorr coy 5((Ootor'i.nottot wioocr cr00000 ot Ottorney 5 ,.,lt,'r o'o,,rorg trl.rrr,rg (hero 0, thu terms ot tippos~(er hos whO (he borrk( tf the cot no t('tposn (,`o,tlt ire I,ortk inc form 000rptobie i~tt'bi',it too(,Oi, seA rococo: ttonrk 5 u,roltle to collect ho item, to the (tOnrk. I chesk'r~orcouo 1; 0 fO~.t55 ore depot'r; opec coocuo r; n souiogs of dnoror,tnnnrdonryoihet ;rmoor by (tltt,C'o °`u"dS cro drpnronrr,i v',,ti, the ho aesoorts ,`s,(tt tire book se tl'bidct to tlrore O ord ooguisrnors cod to oil opitlrroble ico'rS cod otiore of hot booed Stairs of Amerimo, the o of Mrrret'rtc, rho Comptonlior ot the Cur. y, the 000td ot Gou.nro'rrt 00 tIre Fcdrroi (Ic. System, iou Federcl Dooroont i nrsor ,000rO Cot' (`00, cod cry othtr I0,'oOvf 001tror,fy to wOrroh e(trtt,oot ~3dootor"r Os, or upon the rop~r.ot.on ot 30 duos ot too' o iSkysoclk Osrk~og CmTreri ot ihe book. 1 A tso'Tgs rln'pOtrr moy ttr ro.d000ed by `I so tory `t r pass book, or (on) a resenp(. 2. Iotooro( 00 soulogs dopos,te wili be pod oseoc h oct00 cod upor such rooms or he bsois from fims to ,`,~libn prtstrrd no (Ore mcnrr hsokrrorl room lS(tyo'se'O' Tuokiog Cooreri 01 (no br"k cml motor or coy Ohcnrnjf thorero oo,Ii be so potted for ret leos boo throfy dcys poor to the ctlootnor dote of such chugs, 3. Tire bs.rk mob requ,re e dopoortor to glue It 00 `oteodmoO ro,thdooAoi eel `too rUtty dots boiorr fuoh u,Ohdoowcr 5 made, Peymeort made t,y the beok conohout suoh odo000t to the book shell toot c005t,t,o(e a ((the dtpnsntoo (oils to muke the wnihtttooeuoi orthin S doys otbet (Ire cep,10rioo the 313 doy rotnoe ADDITIONAL (bOLES AND i(EGULA1IONS APPLtCAGLE ONLY TO PASS DOOR SAVfNGS ACCOUNTS P-c `c PAGENO="0095" 91 THE FIRST NATIONAL BANK OF SAINT PAUL ST. PAUL, MINNESOTA 55101 A'JtIiTlO3 DEPARTMENT CAH5.I A. AHIL~A5, Came! 55Te - - - 251-DEN Novel.cr 22, 197S UL.HAL 1. !!CHOU. ad.t C2am - - - - 291-SITS ;cr;feCorpliance REC~!VED Roan 303 State Adninistration Building N~'~ 9 197 St. Paul, MN 55155 Dear Mr. Roby: Ui'1Q!~IMED PRO~ER1Y DiV. lIe are responding to your request for authority for service charge deducticas shoun on our 197S Report of Unclaimed Property. 1. Please send the cination of the authority or a copy of the forn of contract uizh the custorer authorizing such service charges. Pesronse: l~c deer the legal basis for ou~ abandorrnent service charges to ho a conbination ci the staterent on the signature card, which a custorer signs referring to the bank's rules and regulations, along ui:h tie Rules and Regulations themselves. -c ore enclosing sarples of actual signature cards used, all of J:ich certain a statenent (underlined on the card) whereby tic custcner agrees to be bound by the rules and regulations of tie Firs: National Bank of Saint Paul. We are also enclosing a cony of ban':: Rules and Regulations which were in effect prior to June 30, 1171. Please note Rule 9 of Part I: "The bank nay assess reasonable charges for services rendered on any account nay collect such charges by charging the account for which the services isere rendered or any other account maintained by the depositor with the bank.' Upon our review of the basis for service charges on official checks (cashier's checks, money order, etc.), we have concluded that there is a reasonable doubt that service charges have been contracted with all customers purchasing these instruments. Although valid contracts ma)' exist with certain customers. purchasing these official checks, we have decided to~etract f- service charges cade to these instruments for all eustor5rs. Consequently', ue will be sending you an amended report showing service charges for official checks being retracted. 67_4L10 0 - 81 - 7 PAGENO="0096" 92 ~AGE NO Two THE FIRST NATIONAL BANIE Or SMNT c'AUL DATE ro ~tr. Joe J. lIoby, Jr. November 22, 1078 2. If your service charge policy t:as changed botween the date the property cane into your possession and the date of your current report, please send the citation or contr;tct in effect when the property cane into your possession and please explain how the owner of the property was notified of the change. ~ponse: Ihen the property came into our possession we had the signature cards and bank rules and regulations noted in answer "1" in operation and effect. The bank rules and regulations provided for reasonable service charges on accounts. Changes in service charge rates do not require prior notice to account holders as long as they are reasonable, according to the language of the bank rules and regulations. However, the bank has provided to customers at various times, brochures listing various services available. Enclosed is a copy of our present brochure which is made available to custQaers, "How to Make the Most of 6~'hat You've Got." This booklet is handed t'~ all new customers and is placed on a rack in the main bank lobby for any customer to pick up. Please note that abandoned property service charges are discussed on page 19 where our present service charge is shown. 3. Please list the date or dates on which the service charges were deducte~i. Response: All service charges were deducted as of June 30, 1978. All charges were assessed during the last two weeks of June, 1976. Sincerely, * 7 ~iichael T. Mishou Audit Officer Mlii: en Enclosures (10) PAGENO="0097" ounts (Cont'd.) St. Paul 0 I C Inc. Safe Street Federal ATTN: Dennis Tho-pson 485 Carroll Avenue St. Paul, 55103 Spencer, Jares Ailen Address Unkno~rn 5 Accounts, each with balance less than $10 Total Da~snd Deposit Accoents ~93 ~ATE op~ Mw!csor,' -~ a1 Eu cc; Z!tO;d Caii of Sc fl Paul Addrc;;~~i ~ 5; Paul , M~ Tifl050ta 55 5; e-csd De~cnjt 20-24049 P3-33209 Pcri51 Co~,c~o&13O,lE79 Pa;e2 ol_~~ Pcics `S ~ O~.: 1 `icc ~iw5c) . 0 O~ _________________________ ________________ (3) (ci 5) 15) 12-20-71 240.02 20.00 220.02' 5-30-72 41.22 20.00 21.22 56.61 55.09 1.52 1,633.36 295.09 .1,338.27 1OTAL S 1,338.27 PAGENO="0098" 94 STATE OP MiriotsorA } National Bank of Saint aol Pcri~d Cr,vd._~ 30, 1979 Page ..~.JQ._ ol. ~..-_ Pains Address 332 Manncsota Street St. Paul, Plenncsotzr 55101 ~b - I ~ ~ 11 ~ avings Accounts: 277110 1 034555 1 278717 2 -041619 6 580960 1 * 606105 3 11-12-71 11-17-71 3-28-72 8-25-67 12-09-71 8-02-71 Tikalsky, Eugene A. (501-22-8521) Michigan, North Dakota Weiss, Earl or Marion ITF Lisa Ann Weiss (474-01-5852) Columbia HeightS; 18 Wengler, James J. and/or Janice Wengler (471-36-6476) Address Unknown Wilson, E. H. or ErdmonJ. 2613 Carnation Drive Fairchild, California Wittkoi-iski, Ann H. 472 Banfil St. Paul, MN .55102 Wright, Dennis or Patricia 1TF Douglas P. Wright 474-52-7978 1060 Bellecrest Drive St. Paul, MM 55109 5 Accounts, each with balance less than $10 Total Savings Accounts 39.73 20.00 19.73' 65.15 20.00 45.15' 44.48 20.00 24.48 272.81 20.00 * 252.81' 70.83 20.00 50.83' 71.38 20.00 51.38' 139.86 100.00 39.86 8,941.10 1,200.00 7,741.10 TOTAL 5 7,741.10 PAGENO="0099" 95 01 UNU1./\1~1I:t) `UfJl'Ltf I slAtE oi: MIrJr!tsorA ~ of Ousicss~'-~~~ ~1stioiia1 B.~nk of S;in 111 * Petiol Co,I..~!~.3QtJ7~. Poge_.J.?...~._ oI_..~__~Po~ss 332 fliesOta Street St. eel . mesote S~i3I ::~.... ~ ~ ,~. Q,:'~ t.'?~-~~ t.))~~/ i~ ~ S ~ r.... n%~.'~s~ i... ti.~c.s ~ .11 . 0 ~ 12) Cl (.1 151 10) Sev~r.gs :ort~1ficates (con 1 Account l:ith balance less than $10 29.77 20.00 9.77 Total Savings Certificates 3~S92.46 600,00 13,292.46 PAGENO="0100" St. Paul, ~1inncsota 5511)1 Period Covcred__ii~i~Q_1.~L2. Pafle ....~1........... ~ Pa;cs 96 I1EIO1IT OF UNCLA)I.SEI) IllOlEIIFY STATE OP M))~NESOTA -se of Busines~1~_rot National dal)t of Saint. Paul Address 332 Ninncsota Street ~b P t. A A 0 (S (11 (2) (31 (4) (5) (6) Total 35,620.64 2,095.09 33,525.55 PAGENO="0101" / ~97 STATE o; MINNESOTA OFFICE OF THE STATE TREASURER ST. PAUL MIOESOTA 51155 REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA First Mirnalinha National Bank * * Ad2~e~ 2716 East I~ke Street Minneapolis, NO 55405 July 1, 1957 :. thru Period Covered..jsepa3O. 197..1~L~ 13 Pego _._~__________. of _Peges 1 ~:.. T~en,c.c -~ . I; .:- ?.i:K~ee.,~,~fO. I ~l5, r-~-.. IC El; P~y~l, ~ Rv:., ~J AreC-It Oc~ L.fa(C)eçs : I1~? Suv : ~alcauRn. :~ .~:bo:,~ Me Fee) 12: .. Qe~ 14) Re::) (51 ~De, On': (6) 5292-S :~~e-.9.O 15047-4 .~iB72-3 - 201 .26835-9 Acians, Marvin, ITT Aiers, Janes Cabert 2539 - 11th Ave. So. Minneapolis, 50 55405 473-03-8568 Andersen, Ella Mrs. ITF Olsen, Eloise F.. 2915 25th Ave. So. Minneapolis, Mi 55406 Anierson, Jeanne, SI. 2725 Grand Ave. Sn. :::nnenyolis, 101 55409 Park Ave. J?t 147 N:nnrapolis, Mi 55204 Esreo2t, Joyce, Mrs ITF loneeds, Cnry, Allan 6332 14th Ave. So. Minneapolis, NO 55423 Eerendt, Joyce, Mrs. ITF Berendt, Cary, Allan 6332 14th Ave. So. Minneapolis, MN 55423 Bergland, David (Enr~~tro~, Dennis A. (3732 - 37th Ave. So. (Ilienecoolis, Mi 55406) (Mn.s534, Bonnie, N. (3117 - 32 Ave. So. (Minneapolis, MN 55406 (Bleed, David, 6. (Bleed, Merle, L. (4220 - 33 Ave. On 12-03-68 10-6-67 6~11_7O 11-2-70 12-02-60 12-02-60 2-4-71 10-24-69 7-2-65 10.00 200.82 66.47 10.00 11.00 11.00 15.18 10.00 12.50 10.00 20.00 20. 0o~ 11.30 11.00 11.00 15.18 10.00 12.50 0 180.8: `-43 o .0 0 0 *1 __--~ fMp±)el-M5~--55i:04-------~_- TOTAL S NOTE: :Rc~on ::ls:eein 120.03 a :he eç ~rcg a,. PAGENO="0102" 98 / StATED) MINNESOTA 1 OFFICE OF THE STATE TREASURER ST. PAUL. MINNESOTA 55155 * REPORT OF UNCLAIMED PROPERTY STATE OF MINNESOTA ~ BusinesL.!~t Minnehaha.National Bank -~ Address 2J16 East Lake Stteet July 1, 19~7: - thru Period Covered ~ Pagr~6 of. `~...........Pages N~o~ & Lee Karen Ad~au 5) (Acute ALtear lee 15 Lee: Nell F Ice) Tee u on Breese P~y.b!e, (3) Ores 4) 9.78 0 2000 14190 1~l81S-7 * `I Booth, Nary, Catherine 2600 So. 8th St. 10-01-68 )~t~ Minneapolis, MN 55454 23117-5 ~ (I rl n S v I ) (2425 26th Ave. So. 8 8 60 (Minneapolis, MN 55406) (Borren, Olivia, M. Mrs.) (2309 25th Ave. So~ (Minneapolis, MN 55406) ~~3.iO82-1 *~* - ~46075-8 . . .* Brown, Arena, Mrs. * Bx98A Glenscood, MI 54013 (Brown, Raymond, Jr. ) (Bijah, Chase . ) (2812 - 31st Ave. So. ) (Minneapolis, MM 55406 ) - - *r* 11-50-69 - * . 37202-9 Cook, Francis, John 683E. 79 St. Minneapolis, MN , 55420 4-17-67 49859-2 ~ Cornelius, Michael, Dale 4300 Linden Hills Blvd,1i3 5-27-71 *i'* - ~i Minneapolis, MN 55410 469-54-5589 :27600-2 Edenso, Judy 7-14-69 ..s~ 2327 27th Ave. So. Minneapolis, MN 55406 * ;50.031-4 ~ Effle, Robert, Wayne 3151 29th Ave. S. 7-13-70 -:~ * Minneapolis, MN 55406 ~46961 * ~). Flick, Earl - 3030 46th Ave. So. 12-3-67 :5 .. Ninneapo]is, MN 55405 475-54-2884 9.78 161.90 297.02 10.34 18.34 33.55 10.00 10.25 50.63 2O.0O~T 18.34 20.00 10.00 10.25 20.00 - `-?~7.* 02 0 13.5~ 0~ 30.6: .OTE: Repa~ a) aria: coder 410.03 in the aggre~eIe. UP-2 (Reet 5177) TOTAL S PAGENO="0103" (Frark, Arthur, R. (Frank, A.R., o:rs. ) (617 - 22nd So. (91innea~o1is, 211 55454) Frec-rn, Josephine, 9. 3322 43rd Ave. So. r:inxeapuli~, 121 55406 476- 24-1261 (Furber, Saruel, N. ) (Farber, Beverly (2903 36th Ave. So~ :* (Ilinneapolis, 192 55406) (Ganlev, Kathryn J. (Ganley, Guy ) (2023 - 32 Ave. 1.E. (Ihirneapalis, 192 55418 4331 45th Ave. So. Shinnrapalia, 22: 55406 262-69-3629 Gardner, Charles, E. 3226 1-finnehaha Ninneapolis, 292 -55406 Goben, Gary 3656 44th Ave. So. Ilinneapolis, 1121 55406 (Gould, J. ) (Gould, Janice, L. (lax 782, PT 5 (Stilloater, 12: 55022 Gr!ce Taberoocle - Sunday School Fund July 1, 1957 thru P~tiod ~ P~;a ._...1........... of 13 ~ ~b'c 99 -~ HhVUxi or OPLLMIOICLJ rouren, - :-- STATE OF M!kN000TA :~Ta ci ~ o~~--~ hi~r~~0-1 2716 East Lake Street -. ilinneapolis, 221 55406 L~e~MChu;e~ ArnotD~e Oaon Teauy, RaIa} 0) is) Ae~uoot R~. ~sDa,Oa-o (5) - -10225-5 29782-6 * 22236-4 237 10-7 ~192-5 39551-7 9-12-69 6~271 12-30-70 8-15-63 7-5-66 11-4-60 11-22-63 4-7-7 1 2-25-63 65.73 20.00 :j- 45.7: 13.78 13.78 96.73 20.00 m.~. 1087 1087 I- 11,88 11.88 --b 20.25 20.00 - : .2 10.39 10.39 - q 26.91 20.00 6.9 17.36 17.36 - 0 TOTAL S PAGENO="0104" 100 * - Z~~~L'~i7 I STATE OF MINNESOTA 7" OFFICE OF THE STATE TREASURER ,/ ST.FAULMINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY - STATE OF MINNESOTA - Business First Northwestern National Bank Perioti Covered 1957 1~hrt. )/30/71 P0 Box 329 * Page 1 of 1 Pages ~ Ely. MN ~73]. . Desut/p0oo of Property IdecOfyity Num~r - (1) Name & Last Ketont Addents of Onmer~ EeceflcionyteAeuruitart lArreege Atplrebetiua/y. LattNaete First) 121 DataofLan Teaesactiee on Date Fropenty Became Payable Redeemable or Returnable 13) Amooct Doe Otnnnr 14) I Lamful Cleengea Sea State Ameuta Reps Treesurefe Rates) as DueOwt (El (61 Savings a/c #850k . Fisher, W. C. or Helen 8219 Russell Lane Cleveland, Ohio k4l4lo 6/29/70 . $ 3.2.05 $6.00 ~ $ 6. Savings a/c #l07~4 . Checking a/c Elajer, Matt address unknown George Wegen Eitate C. T.Sootero, Ad.ant. Ely, NSf 55731 12/30/66 11113/61b . 325.15.. 147.46 $75.00 . a $85.05 250.l~ 62.Zi~ TOTAL $ 318.61 NOTE: Repent items ef talon under $10.00 in the agyce~.stn. ~dnm UPS (ltce 1/77) PAGENO="0105" 101 CTATEOFL111J~1SSOTA OFFICE OF THE STATE TREASURER ST. PAUL, MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY STATE OP MINNESOTA of Eusiness First Northweste~ National Bank A~re~s Box 329 Eay, i~ 55731 Page 1 of 1 Pages OTE: Ft %~t!~t t it 110 COn (lv, Period Covered 10/31/27 civeokLT; account Da:eof Let P:vv,tnt -; t.-~ & Let K-o'n AOA-tv 51 0antn OtvHnv,y eA~vv,tnn (Att* ~ Let 5,-vt Fnel RtvtPty~i.. R(devvsb'( Resnetbt, AteonetO. Oases Ls~.dWOseg~ (SeStsts Tenet', Rotet) AeosetRepone. One Oases (1) (2) (21 (4) (5) (0) Ne1~o~, Felix Ely, (ii) u/14/~5 $225.17°' $9~.90 $130.27 TOTAL $ 130.27 PAGENO="0106" ETAIF 0! !Aj0'!):S)) A OFF)C1. 0; TOE slAl 1 nE~'stJ2Efl Si. :AOL.M;(;:L:)))TA UEPO)IT OF UNCLA!MED P~OrE0TV STATE OF AFNESOTA N~rneof 600 t~est Oin Street Period CoveredZL.~_l~ .~:2:J2L__~. ~age._L.______ of._J...____~. Pages N~ &14st K~ Add~ ~ (A~~ ArCt3bt~aFy. L~4t o~ Fi~t) - (2) Bourossa, Ed;;ard or Lloyd Ilarshall, E~ 56253 Elks Charity Fund John Hirner, Tr. Narshall, :*;:i 56253 4015: lEper ri va), i:), E1O.UO `~ (1'))),. "11!) TOTAL S 102 /1 D:iptrvr)Pe)Pr'W Savings Account 23067 Checking Account Da'e a! Lart Baa~vr Pa,,b!r 10-24-55 2-23-56 Amer Dry 0.~vvr (4) Laaatr) CPrv~, Oa' 0 12.78 176.302 8.00 122.3: PAGENO="0107" NOTE: Repon items of value under $10.00 in th eaggregate. Fee, 012 (Rn.. 91771 TOTAL ~l,311.94 103 IE'cEI\IED STATE OF MINNESOTA ~ ~Z'~-? 41 NOV 151978 OFFICEOFTHESTATETFIEASIJRER - ST. PAUL, MINNESOTA 55155 NOV 1 UCLAIMED PROPERTY DIV. REPORT OF UNCLAIMED PROPEOPaTh' 0L4!MED PROPE~T1J STATE OF MINNESOTA DIV. of 67000 UlTIO~rvL Period Covered 7-1-77 thru 6-30-78 Pages I Se-eu) Len, C & Lens Keasas AdJro of Oas-u:, Se',fve'y, Aeeu~u,t ReO,eete:e a: Aeset Due Luoful Chegen IS., Sue Amuses Repers re-:,-3 -Cec IArva-., At5..s~sua~y. Last N,~, Fee) Retaee00:, One: Tre,uee's Re-es) as Due Occur II) 12) 13) 4) 15) 151 SAUZUOS ~cco~~Ts cvico.s 43-161 40-512 45-022 62-500 33-343 3 3-0 03 Rjerala, Coo Ocx 157, Fergus Falls, Mn. Ocx 157, Fercus Falls, Mn. 390 7th lye. S. ,Fargo 17. 17. :~og, Mnyzcod Olson, Mandos P.. Pin, Harold SiSnsene Christ U-Pan, Blake Ccleusn, Thcrus or Mary 321 E. 39th Street Hikbir.g, Minn. 55746 Gran, Ella Mrs. Isaac. Smith Colonial Hotel #38 Fargo, N. D. Hanson, A.B. Kastet, Doris Rothspy, Minn Loktu, Olga Route 3, Fergus Falls, IOu lroen, Odin Meruann, 0. F. Mclean, 7c3d Chil or Donald Fox 324 Ferevgs Falls, Ils. Oct. 1960 Oct. 1969 Dec. 1970 Dee. 1965 Jan. 1970 July 1968 June 1968 133.81 103.08 59.99 60.64 106.86 60.31 88.53 353,68 83.50 136.80 92.00 26.54 49.00 33.00 9.00 -5- -0-- -0- -0-- -0- -0- 38.00 46.00 38.00 46:00 46.00 46.00 46.00 46.00 9.00 84.81- 70.08~ 50.99.... 164. 83- 21.52 25.42- 163.02- 49.32... 34.09.... 22.64 60.86~ 22.31- 42.53- 307.68,... 37.50- 90.80- 46.00.... 17.54- PAGENO="0108" 104 ~ STATEOFM(NNESOTA OFF(CEOFTHESTATETREASURER -. ST.PAUL.MINNESOTA 55155 REPORT OF UNCLAIMED PROPERTY - STATE OF MINNESOTA Name of Business OGSWESTE~( NATIONAL BANK Period Covered ENDING JUNE 30 1977~ 128 WEST. LINCOLN AVENUE V~' Page 1 of 1 Pages Address FERCUS FALLS, MINNESOTA ~56537 . - - - - OtoefLa 0 to Fag, ty L~s K oat- ddea Data Ooatt. sy b Lomfo Cho ges Dant~tintt of Ptnp y4~' - Bettefi y~ett-Atttt~tg7vt~ -. .Redg,ttsb)s a- Agtatt Dta-~ - (S.. Safe Atttoatt Repomd (d,t9fytgNtbet-.ia(. 5 (Atfot~A/ph afia'l1,L tNoaFimb - Retottsb1o-~ - - Ooeta- ...: Taatatt.RoIss( aDaOmtta- --(I) ~ a:4 ~-:.-~af~s( ~ :~- L'. .~. (3) *.. - : -(4): (5) . (6) /~~~V( -~ -V...--- V ~ ~ SWINGS ACCOUNT ~ ~# ~ #2759 6 NELSON EDWIN 5' ~`$ 310 NOEL'S COUGS * FERGUS FALLS... MINNESOTA DEC 1956 306 46~ $ 43 00 $263 46 k K - V;VV~V~(~/f/ ~r;4 -: . ~ - . - - - . ~V ______________ ~ - . V. . `VI TOTAL~ ~ ~ V NOTE: Repay items of vstu* gnd*r S1O.00 its th. ag9mgate..~ Fgtm UPV2 (Rg, 9/77) - . . . PAGENO="0109" 2~.PPENI) IX I I .~~PA~4SII( )( ) IU- I~( ) R ~( 1 I( )OI ( ~I III 1) ItI~N'K A( ( ( )t JN'l'N Z~iE1jc j.fnvnter~ a u~ ~ii1cci)a1ttc.1~ ,~ .~ rT1Jtflç~L~flhI~ of ~lTtiun~ipu[i~ ~ - ~ HI SC) tOOL ~AVtN ~"1~ 5AI~ ~fl 1 1 ARI~u RS AND 1hiL~ CHANICS I ru opu~ oaf 11 :dt~1 01 ~ ~ ~ SAVINGS I~MU~ 1 II I of Li at ci II I Io~ r p 01 I\1N~F~Y)0LIS ` ble for ~ll rpoocy dclivarcd to it or to ic rcyrcicnt.' ,,~ * V VI AL * V itt ~` 115 4th Street South ` 2 After ~ pc p 1 1 Ii Ii I obtin cd ii r t A i~ n co t I a p o or ~c r h ~` b "V c net i~o tar Ad polttf yrot tb Ic 1, ,1l~ ~JT['$ 1 ho I b~ gwo 6 tho ~ r o rctr t liv f ~ ~ `~ ~ I Cnrpciitçr \Yni C) Northtip 4 ho ban; who will a OX to it otiini_i cc ru ot;ucnpc oqurci *` V . V ~. * V V V `V V U ` ` . : ~JQflt'V O~i)y . V ~M, A'. I ttOOUt'y *` V\ V 3 1 y N t r ii 00 II I I E) Luittrq F C V tnL)u~ I 1~c;1 ty ru I t r Na c t II I ~ ç `V 13 Jtirfc'y C C \V~hber 1 t 1 r It ~ I 11 ~ 0 I `C" ~, Lurp,clon C) ci \Vyrnctn in ii; i flu Fcc ~c AJ() tI cy in y b u'~ I I ( no ;I Y `1 F I `~"~ \`FJ' II ~ t'"' >/ iiullQUuiL to $ 0(1 they tutu ii! I be tn nffr rro l\.wult ti ~ \ pcO$ it ~i C ?``~ .4011 ten t'~ uu~1i ccc val tc~ ii to jut lii' interest iC.r.ocun t V V * `V V AVVV *, . V V V V V V V *V* V V V V ` V V V V* 4 - `3 Alt r it d pit r e t 1 p~ t t s 50 r ti, I~ flat cci icr $a 00 will ha ,nt~ Iv act Li ii ~tsnip cuan.1 `V h c 1 Ic cc cc y ill I cci) I t I i ç `~-" -~ - cli iu,nei,tud r I ti pe tuft 1 t~ 1 ly I c i I r F liii it b Y 1 i k c~ot "j, , I J)ct~".~I',y i" /`~rt~ ~ e.19..,,. I j~ V11t~~ ~ ~ u ~ ~ ~LJ tOOL ~J\VJNC~ s~ ~ CAR.~) LI tI~a ho cc pt ti ih 6 c I n / r ir~ 1 A 01_i ci ~ iii nJ wit) .Irc, acts to I c n~ it at hr Ic 11 r rioc ~` f VI ti r till pI p d r ng tb p 1 o~ i~ 14 ._~,;fVV4~' ~fj~ I t ii c I tli CV 1 in I tilt of F)c )p'Vft0~" ~ f' i <" t'r~'°~' `C... ~,,.." ~ ,V."V1'V~,, cii Ii Ii ci , t r~ / 1 it itt I inn by ~u f or V%\ 1:~ ~d `,~ tI e a and ;h1 ~ A~dreos ?~::`;( 1-. ~ ~ ,VV - ft r ci I t~to b tIc r petin6 ho) c-a mc', ~ jptto ccjo; rnlreguutorc~'oqtcabucsT. of Li titer tie c.ird nor thc etuumpo ottaclucci arc traos~ ,V,,,., ~Vl V V if Vt IV 1' "V. V V~ cor~ V V ,~Vtt V VV: V V* I `~ , .. V u ~iovc~i ~ b tct~ i~t~i~J ~ i~ tIi~ ~rc~ 3t tampa ~ 6 A ~ ~ PAGENO="0110" ThrEt is the * opportunity A ~hrifty man is ~ model to the world ~,l ~ * * *,. * e who *z~vo~ when h9 41 yOUfl4~ 14 ~f M)e~d 1 is cii / ~r~7~( ~-(r ~ ~ *` :.. Saving Is the teach&r :c°~' ~. /~i ~r~c-~~/a p~ndin~. `(, Thrift s carnlnw stU you can ~p nd i g W3 ely and &Av1ng all you aronbi * `.` A `,&nutll sum rrj~y s~rve `~ grant purpuso. V Th~i(t. ~n~o r ~ inusll buginnngs .4 ~ -.«= Ho tha~~ wi~nti i~enns and.con w~tbout three food friends,., i I, Thrift * *~ of every .;., carecr asici cornerstone rycry for. tune. `l'hq dollars you snve may * ~`. * * *.. be. ,~tepping.ston~s ~o ( I succs~ L * `.: (s~.. One muat be economical :~ ~ ~ ~. in or4or to be lihor4 * . PAGENO="0111" )no must ~. o~onomicol A~ imoil tp~r~ co~ lo ortor to ~. lsborsi ( `:; * ~ grot ho. *0 1 ~ ~ ~ ~ 1fl~,' ~ M y a ~ d ~ t Ti ft ~ r d ~ ~ b t ~ p r I r ii b ~ - ~ - ~ __________________ __________________ ~1I ~ N~ TI 31~ ~ 1~fllfUi11~,~ ~ / Y t t ~r k Ti ~ t~ I m I ~ `I p1 ~ ~ ~ 1 rp ft E ~ r 1 1 -~ _____ - ~1J~_ ____________ ____________ _____________ - v*~i~ 1~.1'~ ~ ~ A who moo I will mo~ 130. that. wnnto I L~1!c ~r 3 ~ th ~ ~ G Is $ ii ti ~L_ £ L ~ ___________________ C ___________ _______________ ~ 3~ °~ - 11 1 i Ti to L~ ~wr of I I 1\/Ii1p7Il~ J\J331J~)( r ly h p r A iii ~ ri 3 0 r~~-) ri I prt i~ 1 ~r tip -~ 0'0~0 _ j~ jj~~ I ________________________ `111th l-~' thor k 1 ~ I Ii1Ti1I~' ~ (3 -- :-~, :~;.. rt~o ~ ~: I ryir ~ L..i ~jt~ i~ I 1~ to * ¶}~ ~" mp'.' mu-it `I (itt nr r~ro 11' iimiid li r::nkrrrtl to `iii~ ir~irii'.'t itfC1liI III iII~ I~itI'q 10 (0 Ifl l~ -~ri - :1 ~ -~ .1~., If. ~`O' Wol~l brs ,t-iro ~iLIt ~:391-~~o lc~lnning * rl*ht, Iogio ~ to slivo. - *.._: **-~ ~_ :. 1 i,', - / :. I .~ C:- PAGENO="0112" ~-`-r ~ f I tri1t~rLI ~tu~I 1rnh~ t Tll~ ~AR~dE~S Ac~J fI~EC91~ ~ Utt~3~ ~lLttt1t ~ t~rntwa1.t~i1th ` I'.. - __. ..._._: .` ~ I . ,, . ~*_c J / - r r SCHOOL SAVINGS DEPARCMENT ./*~.I :. ~ `~ j . ~i It. ~ r ,~ii ~ IPULES 1 1 h 115 4th Stipet Soutic ~ \iIJ t.-~ I ç 1 1 1' r IL 1h~0b Ic l~ g I I ci f rr th ~ r ~ .~ ..o..... ....cl 1. c._'l T!~ b 1 b? I tIc [3d IJ~Lt ` `~ TRUSTEES r d t to I p i E J Carpenter V'm C N j1up I C 2 Al? I'PI I t~ lIOllic bi ~t~i it ~ 1 Jor~ Crohj A F Ptlt. I ~I ~ p 1 £ tO y c-c t ii ci I 1 ool by p g 1 j `~ ii DcL-utttc r C Vr'c)u ..o $ 1 e (II I k 0s~ wIt 1 t t P T B Janney C C. V/eL1 .r ii Ii . - .~.- ~ .14 . cord strycpc tituil rccinoont to bc drpucct. Ditccsiti will bc-~ . ,. I- . L ~ Lt.~... 1 ~ dl y N to c it C5 00 w iii C S Lartgdcn 0 C Wv .~ d ft p N 11 .01 I ~ Co , Thui F V/nil I ~ ymjI dbf LI y c-c ii 00 y lb ç ~ to or~50OwIlbar, Y I tic p ccct I friottli pet p~ il-i liii t __________________ ___________________ 3 \(t I I mp cu 1 1 50 Ic I ,~I t~r ~ I,~ct~ ``*~ p it I 1. ~ But 1 ii , Dci .,..,~ .,L~'_jJ .~_ __.. i°../ / r k All b tic I~ it~ L SCHOOL; SI~VpNG5 STI\ P C `B!) \ t1j ~I it I I001t,t~tL1bb111~1T1 I I (p~ li-cd tic ~t it 111 Qti I C ~` r~ ft d p ~ HI 1 1 11 1 D o 1 y ~ ~ To ic ~ p it Si 00 c. by 1 t I p 1 to I To it i ~a -Trartsfcr tI o tccoitnt for ~ ~ / C > I t I it I I I t t 4 4 lIre a .~I £ /i IL (- ~_ __~.-._~ ___~__ to a-c te cot -cccoutt ip Id ~ ,~ (ii I I ~t ~ 1~ ti -t~ ~ 1 1, c 1 ,~ I tic 1 t~ * . . . . ci c I~ Irpotly Polio for toot ilucopt. Ibocctote tic d-pcoiicr coot .. ~! ~ ~ CO C.. -____________ ~ k° p d ~ 1 t I .... ._. ~ clii ii C') P )I I vT liii ~A1 [1 - . I .. . .~bkLcA.ct.,ic4.O3.cii~c..o~O.o'C.iiJL.&lO ~ /~z/ p PAGENO="0113" c~. 0 ç'Th * ft V~(\t~P * I *çi)~ ~1~51. llc'mics ~ SCUOOL sa~V r'r~oMP C~fl1). RULES AND~i~t~TIONS, 1. For ho purpooem&~nc!ping ti~ schoni children of Mionripoo fin to coot the hqlit of 5ov~~f1. cod whJ the authority of Its f3oortf of Educotion, Th~'Io,rmotusAd M ln"4ics Sov,o,to limb of bfinno' opolio Iwo tohen oyer nod mdl nperoto\t.o hoof osn,nys system In the pnbho schools. Tb look ~ciocd~..f bq rr,yooodck for oil money dclivercd to it or to its roprc.aoro~ce. Noithor this cord nor Ii ostomps o~,ts ched thorotoro toooc~mobfo. 2. A drpcait ~ii°im~ynlo rt ~ho o'~.of or ststion osmed heocon by lnlivorin~ the no~°tt~b' rcpr~iritntioe of ho conk noho will ntteolt ctoot\ to this cccii eyu0t io Imuot to k0 fetnst. -Deposits nodl-bo rr.oei~d-in oo uthorn4sy V ~no 000 000(1 ii flied, he dr1n,oitor 0h~~hf c.~ (or ootther, Iho bn~\ roceovec thnrittht to rehire moon boo hzi:tC~5( ~ rociogaTri.? ny no doynitor. * 3~ M oney ooOjt~,tgiL1jlfrow0 by tbideyooit~tr only oyoo ho aoroeo for of kf'inorf at ti cg~p~p(~tino whe%' ho dryoo~t ionS main, No ot,~~1ro mdl he rndeoc~,.aocnless ottorpod to s rogilarfy i~ouod stool) CA11, Thçlr.nk ryny rn'b~ire one oncob's notice of iotrotioo to ooitluIdmoat,'~3n b3hk may ~loo repro ho signotura .1 o torot of the ,f.itoutor on coy rr~wn fopoots to bo with' ,Ioocoo rot the book or ot other 0t0i,~(os. 00000(0 periods or at other 10~t~l~ln times. No ccitfclrowlt'oilI he tornirtef oyoo any cord until ho otonys uttoohod thoroto enroot to at root flIty onion. 4, fn own of' the clootfo air fioubility if a Iryooitor who in a minor, the snow ot of his deposit cony be ~ithd ruwn hy his parents air guordiuo upon receipt of aotiolactorp enideoco of tlte eiitht to do S. Joterrot will not ha rnlluwaof ~~tlf a dcpouit Is transferred directly ito the aouiogo hook opoo a regular oooio~a bank pus bob, * 8, Eney fetoooit I, condo oublyct to the shuns end tutors colon and regul'tluoi of tIC bath rroyccting school icings. * DO NOT LOSE THIS CAflD. No.f~ 10.76 Tith FARMERS AND SAV1~GS `BA OP M1NN134r~ 1U 1otrtlt Slreoot I OFFIC9S: John f)eLaittoc, f°co'a°er.; 0 Thomos Lowry, Vicc"°rest.. 0. C. Wymoo~ 2yd V. P. ~ N. F'. Howloy Trraoc * °` *. Q,0Ff. Fiotuords, ,: F. `mccc ~_`~ lode * *... . `0~ BOARD OF TRUS H. C. Alicley, John DoLctittre, N. F. ffowlcy. : T. B. Jarroey, C. S. Lerigdon, 0 C. Wynoer QCI Date SCUOOL SAV~GS ~ O *V,pc:itor ~ Sublect to the rules cod DO NOT LO~3~ `T PAGENO="0114" 110 C ( r 70. * C. ~- ~tI PAGENO="0115" too- rr o- C~ r. Ifl~c1~i~ics ~ SCHOOL SAVi°i(~. fT.uMP CtlU). * RULES AN1~h~J~T1ONS, 1. For los pry ol of elyrno t~schonI çfrrlrfren of Mroeoopo- fin to form the fut~it ofotri6g. serf wtfIr tire outhority of ito I3nsrd * of Eofucntion, Tfr~ orovetp.o~d M- ~hl~s~ics Sorringo f.forrkof Mione spoli. hen token over serf tell nirepetcr~..o iron1 ovingosti tern in ho public acironla. The f3~~~k dune f h rre~ron etlrio for all money doiivororf to it or to its reyer 0rorr~\rre. Neither this cord nor tire stomps oitocirrd thrreto'ro tro,ru~~roirlo. 2. A deposit tutro'4n...j,merht cC 1,1,0 ~ or atfltino none hereon by de!iveric~* the ~ otPr? rrryrrn;r.r.totieo of the hook * who will nttoch otorrrt\ to Iris ctrrrj eyrro' io'~,,.,rrot to (fee tictmorrit. Deposits toill ftc recoir~J in en other wey. \Vfpmn eon cord is fllnrf, the depositor should rr~k trout thor. `The bnr~ reer.rvo S tiro'eight -to refute corn hero ~..bl odroof sovings frktgorry coo dciruaitcr. 3. Moooy co~j~,,.odJ1:ri coon by tir./Je1romrt'Jj only erpou tire * surroodor of itt teed ot tli~ThSrr1rr~t ~citrcn mirrrl ito riepocit woo node. No etsklr.n will ho rorloerr,~,hg,otoss ottrrr4od trot rogulsrly issuod steely cot~tl. Tkmjrenk pop ro'7iu~iro ooewccb's not ics of intetution to w~thd~oa~ T!jn ftr1oh may Ito rrttrrirr, the sigootors of a pereni of the rfr~yoTh'~r Otrri crop rcr~rire Jerrorrits to ho o~lth~ -. drown ci tire book or et rrtiror ott~ioomt Co voostion periods or et otltor srrituhio tiotes. No ooithrlreriolrf"rorli be pnrmirtcri upon coy cord until the etotc~ts oltocirod therote omoutti to st iro:rt lofty cento. 4. fo cose of tire dcotir or rlinohiiity of e rir'yrroitnr mitre it orinur, tire umurrot of hio rhtrooit rroy be witlrrirrro.'n try tie ,ntoOtO or guardian open rrrrccipt of aotiuferrtory ccrrl0000 of tire oit~irt to tire * 5. fetrreat will not Ire oilrrwerf urotit a tictrocit is trotrrriort-rrl directly into Ito coving, brrtrb upon s rcgrrior onoirrgs berth tars ~I. Every deposit ft tootle errhjgcf to it nehuve sot d future rerks sod orirgufotiooe of Its bettb reoyecliorf icfrrtoi onuiego. DO NOT LO$~ THIC CARD. * . ,~,,. **-.., I tI, ,..1.0,.O-.tJ.. e.,..'.~v.t'oet,.' ~tCttQQl - - ,,* ,- THE FARMERS AND MECHANICS * SAV1I'~GS BANK OP MINNE4POLIS * OFFI CEI1S; .lofort DeLnitlec, Prrsi `ct.: Tfooritvs t.oovry, Vlcc."ecat., ~, C. w toot.; 2nd V. 1°. So Assi. Trees,, * N. 1'. flrtrvley Treosurcr rind Secy., -C. 1'!. Rlcltords, 2nd Asol. Trees., o F. P~ Crrrckeo, Assi. Scrip., * * .. - Cfurrde 13. Leonard, Counsel.: BOARD OF TRUSTEES: H. C.-Akcfcy, *~`Tloomns Lowry, felon DcLoittee, * E. If. Prfouitoo, N. F. Ilurvfcy, ~Vm. C. Northup, T. B. Janocy, . A. F. Pillsbury, C. S. Langdon, Jolth Wusirburo, 0. C. Wyman. OC IL tbr,tr~ Dale .,~-............ 19 SChOOL SAVINGS STAMP CABJ.) ~ tQr.~ * if ddrus,...L ,~..1.o, *..~.,,,.. ~ * ,Stiblr.ct to the rules end ergttirrrions art Ire ltrick of its csrd. * DO NOT LOSC THIS CARD. PAGENO="0116" I. It PAGENO="0117" cj1 * * z ~ )~bi PAGENO="0118" ;ScHT3L sV yss S~~d SssHg. Ass~ 2 T~ sGt iNs ss,~ ~ s,d ~ ssssp Is SEFO~1T ENVELOPE ~d is Sssii b~,k sHy. I U 3 A SCHOOL D5FOSTT CARD ~,ifl yss, :5 gyss~sisss~~. 4 A .sys ~ this SCHOOL DEPOTS CARD I, ti's 55i'i ~sH ps is tssis dspssS U AAss! Ss.s'9s Dspsm-ss,,? Rsg~1stis~,~ s!tH~ Sthss! s6sgs Dsp s,si si THE FARMERS AND MECHANICS SAVINGS StANK OF MINNEAPOLiS `~ * L!?!TT~ AiPPTT~5yP~ ~TE~ RH~ ..t.s~.d ~ Ii ~ z ~ ~ - H' ~. 5-t'"s. st's 5sSSs sR .~`s..,b, 555 Ssst sS is*..s st ____~_:.___.__~__~,._*._.____ - `~- ~` ~ ~ ~ ~ 5. ssst'ss~ - .. s,ss.t'b.~ts55.J H' ht Rh 5, ~ss. 5'. ~`t's~s 5. 5,s ~ s *5 sss~ i'sss 55 ~st~ ~ .s Rh Es sss~ E,pE% S. ~ss.. ;,y, ,~, ,~ ~ ,~, ~ Th.~. 5-~ts..,. sEE) ~s.*4 55 -` 1 ~ S ~ ~ ~ ~`i ~ .5 5. Es~, .s,â ,ft~ t', 114 ~ ~5o .17.~R ,ss'st'E C PAGENO="0119" A Pi~ENL~LN I.---! 4I~"t"P1)1t I~!t( )\L 1'~1H'1~I I N( )ItR I 1~'S \I ( )`I~I I I~It `I'( ) 1'A'111 `I~llI4~A~'EJH1~1t 14( )ltl) Ca25~&4 ~ ~Q ~~L~QA $2-h~ -~ ~/~1i& (i~i ~ 2~o~1. ~ c~ 4?v-vuL - ~ G~ juu& - ~- ~± ~ U4~ ~ ~~-e~o &~-~- `P~L ~ ik~ ~ ~ ~1 ~ øc~) ~ ~1-&L~ C~. Li~J~ c~~* ~ ~ ~ ~ ~t~i: ~ ~L4 ~t W-~~ VL~* ~&Q~-& k)& ~ VI&i A~A4~~ ,`2~L~±~fr `~`~ 1) L~S~ ~ cY~Q~ - ~, ~ z~j1 (°~c~J'~;~. ~-Q-~1~ i~ &~-Q_L-~ ~ ~ ~ U~ J~s~k +&~ L(-~--~' YV~L~ e~tL~~- ~ ~ ~ ~ QA&AL ~ -~ ~t~- ~i- t~-Q-J2~ (V~ ,LLt~+O ~ ~ ~ ~ ~ 4 tYv~ ,t± ~cL~Q~ ~DLA~L~Q L~-CLL ~Ud~ (~Q~ ~tu~ cL~ *~ ~L~t ~ 6~- ~-QL~L. ,~LQ1 r~-~-~ ~8L~Vt~A~-(_L) PAGENO="0120" 116 APPENDIX J.-N1~WS REPORT OF COMPTROLLER'S PILOT PROJECT FOR NATIONAL BANKS ~1T ~ L'L L *Tp1-0 ~ ~ PRIT. A(L&~ ii jq7g ) ~i) 1z-~ff~~ `~ -.~ ~ ~1~i4Li~ I ~ ` ~ ~ ~ ~ ~ ~- ~" . ~ ~.. ~ .~. ~ .~ -2~ ;~:i~i :`.` ~: `a:: :~. :;.`:: .,.~ ;~:. ~:~:;: ~ ~ ~ ,~ ~ :~ ~ ~ ~ ~ ~ :~;1~ ~ ~ ~ ~ 2 ~ ~ i~~~::t$; ~ ~ ~ ~ .t ~ ~ ~ ~ ~c~:~:j~}i ~ ~ ~ ~gj:f ,N ~ 1;~: ~ I ~ (WPLS ~ ui~JE ~ ~ ~ FgL, ~ ~q7g ~ PAGENO="0121" 117 APPENDIX K.-PROPOSED EXAMINATION PROCEDURES FOR COMPTROLLER'S PILOT PROJECT FOR NATIONAL BANKS ~1V1!ON\L ~ .1 !.~t:~\;- j~'~:~: X;~C5)u~:) A~i) VE~tiFl CAT io~:~ 1. DL:rnine ~:-t1:er the bank has ustablinhud written policies and procccieres pertaining to compliance with applicab]e cscheat lzn.' which: - Assure that proper controls are in effect to rcgrcgate dorrant accounts or unclaimed property from active ar-counts - or property naintained ~y the bank for another individual; b. Are sutf!ci~ntIy conprohensive to assure the bank's cOmoliance with applicable escheat Jaw; and) c. Designate those bank personnel who have been assigned pri- - nary responsibility for assuring their bank's compliance with applicable esche~tla~ ~ROCEtWRg 1 - E~NIhEa ACTIONS a. If the bank ban established written policies and procedure~ which have been reviewed and found adequate as to the segregation of doriaiit accounts and property, cooprc1ten~iveaess, and employee designation, proceed to subsequent rn:anutst lea procedures. PAGENO="0122" 118 b. l~ t il ~h] ~:.l~Ol ~:: .iLLc.~ 1:1 1 c~.; and rocciurn el 1db have lees rev ss: aol found .iIadequato on to the segregation af dw.inot accoSts oroperty, CoSprclCnSlVefl5SO, and/or uaployce deSigatiol, sake o?poprIatc criticises of the bank's policies eni procedures. Proceed to subsequent exasination procedures. (NOTE: If the banks policies and procedures are inadequate as to the segregation of doroant accounts aed property~ the appropriate criticisu is prisarily that of having failed to establish adequate internal controls.) c. If the,hank has sot established written policies ana procedures per- taining to coaplianee with applicable escheat law, make appropriate critciern o~ such failure. Proceed to subsequent exasination procedures~ PRCCEDURE 2. Regardless of whether the bank has or has not established those written policies and procedures referred to in PROCEDURE 1 above, interview those personnel who have been foreally or infornally assigned the responsibility for assuring their bank's caspliarice PAGENO="0123" 119 a: t1.~. `~-a -. cl I Ic 1 i.l&.)11 :1 `-elI as thn'~e Innh p:Ccc :c'e, eaceti have he~~ n~~ure LhC 1t~'n cClIzecw. If the lan'-: cr~n tint have itcea polLc~es end procedure:; con- CCrnfag the C~ent lava, d cain Thaw chose persons uho have been given responsibility in thiti area fulfill such respoanihilities. Detrains ai:e:~sr the bank's internal o~c1 itor or sore other batik uployee revieva the york of those persons ifr.o have been given the prirviry responsibility for assuring their bank's coapliance with cscheat lays. Inquire as to the ~sener end scope of such reviev rrtivi:y. - PROCtLLRE 2 - EXANINER ACTIONS a. If designated eaployees are found to have adequate knowledge of cischeat laws and their bank's policies and procedures for coreplying with such laws, proceed to subsequent cxataiuation procedures. PAGENO="0124" 120 1. Ii d: ~ ~ yat zrc. £~:~ tr lit i -~ :1:1 l.nuu~ r li cliii laws Ci~!:Ot hunk poiic)a:. anti proce -rs for conplyt:g i:.ttii such Jun:a, cp~iropriatu critcios. roceed to subsoquimi exaninaiiuri procedures. P1hUCEDURE 3. For that ten-year period of tine precedinE a bank's initial examination for cerpliance with ap~i1icabIa escheat laws, detcr- tins whether the bank lies filet with the appropriate state authority tinely and complete reports of that abandoned property then in its possession. After a bauk has been initially examined for its compliance with applicable escheet )aws for a tee-year period of time, determine whether the bank has filed with the appropriate state authority in a timely and complete manner the most recently- required report of that abandoned property in its possession. If reports lava not been filed when due, obtain the bank'e explanation for such failure iron mana~enent. flatermina the din- posItion made of abandoned property durin~~ those periods for 2 ~ ~ u. PAGENO="0125" 121 0. 511 tZlblO .lOb:lcd `ih.ch~i' icr 1c~.ific~1iciui 01. that tt2~~ z.ulhority vith uhc.~t reports are ic be filed. b. "~ie 3' for those dale:-. cccurrins~ witlc5.n the preced!r.p tc::-year poriod by which reports of abandons! property should have been filed. Refer to the "Escheat." table for the date on which the cost recent report of abandoned ~TC?erty should have been filed. PtE~.T.E 3 - EX~tit:iR ~cTIo~;s a. If tha report(s) of abandoned proparty lu~ve been properly filed with the np:;ropriata slate authority, proceed to the itCxt exarnication procedure. b. If the report(s) of ab~ndc~ed property hbv~ not been properly filed with the appropriate state authority, recite the hank's explar~atioa for such failure in your written report to this office. Indicate icc in your report the chiupocition which was~ i:szci;~ by the bank of aboacluned property during thote period of ticue for whtch no reports were filed. Prac:ced to the ziext exa:niuati on procedure. PAGENO="0126" 122 4 . I_li. i:1::~., p.J )r IC' i 1 :.u1.'~ i.~. (1! :~ of a~C~n:.-.i s:o~nrty, zit. ~-;~pts to Xiifu~rn Lhu ownr~. ~ property in :a~uces utere the ouear's ~iercCbout5 is known to the bath 0 t~lOsC Steps rueC:3.ary to prevent abandonrartt from being prasuned. Moo determine whether records of such attcmpts.nre maintained by the bank. PROCSDURE~ 4 - EX~NI~ER ACTIONS a. If the bank does atteapt to inform the owners of property of those actions which must be taken to rebut the presumption of abandonment prior to the preparation of its report, proceed to the next exaaination procedure. . - b. If the bank does COt attempt to inform the owner.~ of property of those actions which must be taken to rebut tile presumption of abandonaen.t prior to the preparation of its report, make appropriate criticisns of such failure. Proceed to subsequent examination procedures. PAGENO="0127" 123 of 1~t;tn~J i~ `:~~ y l&as ~ ttn~~rred o Lc: ~tJ:u:ity. Idno c~ctnrr an tha lan~z. - bent I sbe~1 with LaId retainS a rL-c-Llipt for tech 1roterty fret the Stale authcrity. If property included in the bank?s crcst recent report of abandoned property bee nntbeen transtnrred to the appropriate state authority, cbtcin nOnS neat'S explanatioa no to why tu~h trans- fer hos cot occurred. PdO~EiJ~RE 5 - EXAttIXER ACTIONS if raqeired toe Ic~of ab~ndtted property have occurred, proceed to b. If required transfers of abandoned property have not occurred, recite the bank's explanation for such failure in your written report to this office. Proceed to the anal extjiatt~o:t proccnhttre. 67~Lh4O 0 - 81 - 9 PAGENO="0128" 124 ~;~:):oR~ d. hr the ~ eiih lie ~~ip;ro:1 .1~1tOti~ authority `-O-itten explanation of: an rotier' s proof: of dab or of an error in the preneoption of al,ando:nant en as to clarify discrepancies botwi-~a property reported in its report of abandoned pro?erty and thot property which was aubseui~eiitly transferred to the appropriate state authority. Deteriaine whether copies of tech written explanations are rctained in the hark'S records. PROCEDURE & - EXANINER ACTIONS a. If written explanations are filed, proceed to verification procedures- b. If written explanations are not filed, siake the appropriate criticieo and proceed to verification procedures. PAGENO="0129" 125 APPENDIX L.-COMPPROLLER'S~ ASSERTION OF EXCLUSIVE VISITORIAL POWERS FOR NATIONAL BANKS C-:~rc' e- c Currency A:nn~a~cr c~ ko1icna~ Banks V D. C. 23219 October 19, 1978 Xr. Charles E. Bohlen, Jr. Foegre and boson 1303 lorthvestern Bank building 3~imneapolis, 10 55402 This is in response to your letter of October 6, 1978, concerning our cnfcrcement of state unclaimed property laws and whether national banks viii be subject to state audits. It remains our opinion that pursuant to 12 1.~.S.C. 484 that this Office has sole visitorial powers over national banks fcr the enforcement of the substantive provisions of state laws which are applicable to national banks. If it will be of any assistance I am enclosing a copy of my remarks. I trust this is responsive to your incuiry, but if you have additional çuestions please feel free to call me at 202-447-1600, Sincerely, Thonas k'. Taylor Associate Deputy Comptroller Enclosure PAGENO="0130" 126 APPENDIX M.-1962 WALL STREET JOURNAL ARTICLE Wall Street Journal, January 22, 1962 .`VO.CLTX-~Nd. ~ -* (Jtrcta,rne~d Money States Step UJ~ Effo'rts To Grab Moiiutrng Pile Of AhandonedProp~erfy :Banks Firins~ai~I'.US.Ho1d 31~ Billion nj Tax Refunds Dividends Forgotten Items Hunt for 2,000 StockhoId~rs BY Atraun I,. MAIAe~,. JR. Staff Reporter of Tue WALL Sro~tt3ornoeAL * `. Sometime in the neict few days; George L. * Webster, ~one'time resident of Paris, `rex., * will contribute $448 to the State of Texas' hard- * pressed treasury. This ob~i°t be anf56t~or charity, however. Mr.. Webdter. if he is still * alive, is. quite unaware of his gift-or, for that matter, of the money's existence. ~ due~Mr. -Webster or his heirs on 15 shams of ~ `~iL~o~ ~"~l ~ summon otock FOr years Si. ~je'l luoci~ td'tJo di iden~u `)u ih~"~t itthres becaseca'Mr. Webster, the last owner be record, could not be located. Now, the oil company is turning over thS sum t6 Texas * un.,.r a oc~: . "eii!ch ci- `a for the stato abandoned propcrty of persons whose last kitown LtolrCi~d8 were In Texas. - - - ~fr.: Webster's dividwids tire only a minus. cute part of a vast, growing store of prop~sty that has been abandoned unwittingly by its owners or their heirs. Noone knows precisely how much thisisnclalmed fortune amounts to, --but many -state and corporation officiate be. llevo ft now exceeds $15 billion sod is growing at a rateof more than $1 biltioct a year. Tha abandoned property is held not only by such companies act Cities Service, but lies * scattered in forgotten eavings accounts, safe depocit boxes, old trunks and countless other places. Besides dividend checks, it includes cash, income -ta% rebates, money orders, * traveler's checks, Insurance company refunds, bonds, Social Security payments and deposits with utility companies. - - - Boelonta for States - - For many states, ever hungry 0'. addl' tlcnal revenue, thin swelling treasure.trove provides in increasingly important source of income. States with so-called abindoned property laws have collected rwghiy $175 mil- lion of unclaimed property in the pest three years. dulible thu emount collected In the pre. vlous decade. - Abencioned property promises to becorne *~) even larger source of state income In the next fey- years. Not 6isly is the unclaimed -~ `~sr;tese groovIng; boot a number of states are buic'rying ocx.' abandoned property `measures thsough their legislatures, or are broadening the scope of existing laws. Some `states are Intwistfylng their search for.. unclaimed property. . -. . . - - -- `"We have only begun to ecratch the surface of this thing," declares a New. JRrsey state -official. - - -. The right Of states to abandoned property derives from - an old English legal principle known as the power of eacheat. Under this principle, unclalthe-d property reverts to the cro*n In Britain. and In the U.S., to the statee. There are a number of reasons why the amot'nt of abandoned property is growing at a particulirly rapid rats. For.qne thing, a rash of cOrporate mergers and noaple changes In recent years has caused confusion among a number of stockholders. Furthermore, falnilles are moving more frequently these days and * sometimes they neglect to leave forwarding addresses. This Is what happened when Mr. Webster mOved from Paris, Tea. At th~ time, Cities Service had paid no common stock dtvldends for several yenta and the stOck's price had dropped sharply. Cities Service of. * flcials believe Mr. Webster reckoned his eh~rea were iuearly worthless and may. have thrown them out. - Search for Stockholders * *. * * Mr. Webster's care Is far from unique. Whoa if. M. Byltesby to Co., ft ~ilcago In. vestment company, several years ago reclessi. fled its steele and notified Its 5,000 stockholders to retarn their certificates, the company re calved nearly 2,003 notices mat-Iced, "Addressee onoved-no forwarding address." A Byllesby * exeuutive tsoten that ~uis company had paid no common stock dividend for better than a decads. Through an intensive search, the cnm* patsy has located all but 40 of Its nuisecing stoekhoid'ors. - * `The Federal Government holds about $5 blilion of unclaimed property. The Treasury, for example, holds $410 million in funds to cover Government securitiea which have ma~ turcd but have not been turned In for ~yment. Othw Governu-'nt.hold unclaimed property in. - eludes ~ctel ravings, tax refunds and Social Security payments. - Fjrot National City Bank of New York, one of the nation's major I esutrs CL. traveler's checks, reports that in the lest clx years It its: turned over to -the S tote of New York Piosee Sues to Page 18, Column 4 - Where's Oviner of Security Valtthd at Over $l,~1Oo;OOO? By a WALL svetrsir.50000At. 1105ff Reporter If you should happen to come acroéa an. aging security entitled Texas Pacific Land Trw-I Certificate No. 100 tucked away In an old trunk in the attic, don't throw It cut. It's worth more than $1,100,000. The certificate, ioeucd In. 1818 durirg a reorganization of the Texas & Pacific Stall- way, is believed to be the moot vaiuailo si-ogle missing security In the country. Ii rcpreeents 10,000 shares of Texas Pacific Lund Trust and-40.000 shares of TXL Oh Co., pius about $175,000 In accrued divi. deeds and interest. The security was regiotered for years iii the name of IltaIoe Bros & Co., a former New -York City brokerage firm. It dcccl. oged, however, that Blithe tIre's. didn't ac- baTty hold the rccurity, but either had lost It or sold it to a forgotte~n customer. 54cr. conlOs NatIonal Bank ~ Dsltaa is the court-appointed c:totodicn of the apparent. ly abandoned covet, which the state of Texan is arose trying to lay claim to. PAGENO="0131" I fl('l;ri!llcd ~Tñriey~ .fljs~ ~`I ii Abandoned Property Aids State Treasuries Ccstivnetf Tram F~rntFn~e °-7.t°SD tot fun0,s representing coverage cf travetar'a checks that have' gone urfclatroed for 10 corn. The bank, stresses, however, that even after (tile ttrne if an owner comes forth witte his traveler's checks he edn ~et h!s money. In ouch eases, the banl~ gc~it&ihe' stale foP reimbursement. Not all slates would pa:' in such caves, in come slates, once money han been ct~imed be the elate' tt- to ant re turrod' even t!the right!ut'gwner f~eter nhowa cp. Pal New York maintains a 1700,000 reserve t'a pus' rtch claims. 00.U7,rs, for New York - - UnIt! a. cl-argo to tiao,,law wan anode a lose rp~i, ~`cso' York stale had to wait 17 More i:~lore it could claim ab~upduoed in tanks and other savings irmil. Nose it cart cst!ect ouoh money after N years. Partly b~cauoe of the extra money reen:ved when th!s period was shortened, last year,New York collected a record 10.200,000 cdabandcnod property, nearly triple the pre P.educLotg the time .ln~tiiutions may bold rnis-eir.g osvcex-e' pro~erty is only ens atep many ore taking to obtain or increase reve- eues irons this onurce. fast year coven states -Couneclicut, Florida, Idaho, Illinois, Rhode Island and Tennessee, as well as Texas-enact. ad row aharoioned property legislation, bring. tnt- the number cl etales'with rich tows to 30. The nec' Tcxe.s tow ~ltows the stale to ca eeoc then banks. It in bccacse of this new no' th.st Mr. WetNere 1440 is being sent to tIle T~'sas trcese:ry. TIes Te*~s legislature cur- ren'tly ts meeting tel epeciat cession to consider a `prepcnat of Texas Gay. Price Dantel to ex- tend the elate's encheat law to property held by banka., Many of the new elate enctoeat laws Impose U!! penalties on Individuals or corpbrations which fail to report unclaimed property `they hold. Such penalties range up to $1,000 In floes assd'stx months In jati. Pennsylvania intensIfIes Search Arnocg states which are searching mare dil- igently these days for unclaimed property Is Per.nsylvr.nla. `We used to simply accept what n'ss turned in to us," rays Gilbert .T. t.upp, chief ef the tact-test divtttan of the Pennsyl- s'ar!a Deportment of Revenue. "Now we're ac tively ecarchtng far abandoned property. We r-eati:c the c~nly way we're going to get some of liii to go out, and dig it up." Two years ago, `Pennsylvania set up field teams to comb corporate records for ownertese funds end It now has 25 men engaged In this pursuit, st-carding to Mr. Lupp. A major dis- covery: Some 5700.000 in unclaimed dividend checks and other Items held by the Pennayt. yenta Railroad. Many state eeeheat laws are relatively new and they eltcn .casfltcf with one snathfr. For L'..slance, one state may attempt to encheit the urniotneed dividends of corporations head- qusrtered tot the stale lOut ether states- Texas. Inrons-enoy eltempt to eanheat any of these divtdcrds originally sent to addressees tee these stoles. 127 New, York and Pennsylvania currently are bnttting over some $43,000 In unclaimed money- mater funds held by Western Uninh Co. New York slate otficiate contend the abandoned nooney betongs to It because Western Union is a New York corporation. Pcnmylvaniq ciii. ciats claim the funds on the grouncts the money orders were purchased in Pennsylvania. Penn. sylvania tried to collect the money first and when It did so-Wcalern Union, fearing It later might be bitted by New York, ton, refused to piy. Pennsylvania then obtained a judgment In a state court to the effect that It was the state rightfully entitled to the money. But Western Union went into Federal court to chal- lenge the Pennsylvania court's jurisdiction In the matter. This case- reached the U.S. ~uprems Court, which last month upheld West. ct-n Union's contentioit that the Pennsylvania court was not the proper authority to decide the basic question of wheiher Pennsylvania hr4 New York should get the money. Pre- sumably, the fight on~tiois question will start all over again now in Fe1!eral court. Uncle Semi Holdings Many state officials are eyeing covetously the $3 bltiion Ia unclaimed property held by the Fedorsi Government, The state oficials com- plain they arc unable to corcheat the buik of these Federal funds berause Federal records frequently aron't available far Inspection and because Federal employee generally aren't au thoriced to make such transfers. A bill is now pending in Congress calling for regular ex- amination ci the files of Government agencIes specifically to determine whether the agencies are holding ownerlesa property that should be turned over to the states. Corporations and other organtcnttnng us- ually are required by law to make come effort to locate missing owners or their belie. These laws vary considerably from state to state. in New York, a financiat Institution must ad' vcrtL'e every item of 125 or more that has been unclaimed far 10 years or longer. The ads must be placed Itt at least two publlea- iiao~ Issued In the community `where the ac- count Is payable. The coat of the ads may be deducted from the unclaimed amount. Many c,qmpanies go beyond the basic legal requirement arid' search actively for missing stockholders. A good measure of this effort is the' activity of firms that trace missing persons. "We're enjsying a record b'tlMines~," de- ctares Daniel F.isenberg, president ef Tracers Co. of America, a New York.baoed cancers ihsi has located missing stockholders for many companies, including Chirago's I-il. M. Byitee. by. Mr. Eisenberg estimates his fires collected fees of more than $iOO,000 last year froTh corporations for this service, about 10 tImes the amount receIved five years earlier, Tra- cers' files bulge with data on some 23,000 inlu. Ing or formerly missing stockholders. The firm charges $15 for a "routine" case and as much as $250 a case on "tough assIgnments." Some companies are taking steps to keep better track of theIr stockholders, Cities Set-v- ice Is one of a growing number of companies which asks ehsrehotçlers to indicate changes of address on the backs of dividend checks. tintit recently, the company enclosed separate charuge.ef.sddrcos blonks with its dividend chcrks. Stockholders were obliged to malt the blanks back to the company and pay Ihe mail. ing expense. Cities Service executives regard the new system en much more effective. PAGENO="0132" 128 APPENDI)~ N.-PROPOSED BILL FOR FEDERAL AGENCY REPORTING OF UNCLAIMED PROPERTY TO INDIVIDUAL STATES 2~_~_ CONGRESS _~_SESST0N H 0R. IN THE HOUSE OF REPRESENTATIVES - Mr. ____________________________ introduced the foilowing bill; which was referred - tothe Committee on~ AB~LL To provide for the disposition of unclaimed property in the custody of the United States. Bait enacted by the `Senate and house of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Unclaimed Property Act". - DECLARATION OF POLICY - ~cc. 2. It is the policy of the Congress that-- - (a) The United States Government recognizes that the States nay eschcat or acquire as lawf9l custodians unclaiied property in - custody-of officcrs, departments, and agencies of the United States. whenever the o~ncrs of such property have or may have had a vcs ted interest thcrc~n anti whenever cIa~ms for dc) ivery and po~-s~on - PAGENO="0133" 129 therecf have been made by or on behalf bf such o~mers or their ~rs, ass~gxs, or representatives and have been unsatisfied. - (1~) Thc llni tcd Stntcs Govcrms~:nt shall not nsscrt an intcrc~ in such property by rcnson of Cn)' delay in thc prcscntation of claitas or demands for payment or dclivcry by or on beba) I of original owners i-f a State nay escimeat or b~dcme the lawful c.~stodicn of the pro;)crtv. (c) The tinitcd States Govcrm;rc~nt shafl assj~i the States in sccvcring end recovcrinr such property.. DEFINITIONS Soc. 3 :. As used in this Act-- - (a) The term "unclsimed prope1~ty" means any tan-Qible personal prcperty or intangible personal propcrty, including choses in action in arccnnts certain, and all debts owed or entrusted funds or other rrcrerey he1d by any Pederal agency or any officer or employee thereof, whether ocersioned by contract or operation of law or c:hsc--~.se, except bcnrses gratuities, and sums held by the Scc~.a1 Seorrity Adr.~.nistration, which has remained unclaimed by the 0CC: (1) .7 years from the. date of maturity or call for payment, if arising from transa~tions under the public debt; o (2) `7 )`ears after the last transact-ion concerning principal or interest, if deposits in the postal savings sys- tem; or PAGENO="0134" 130 (3) 7 years after the -j~roperty first became payable, de- mandable, or returnable, if arising from any other transaction. (b) Thç term "owner" means any person, including his legal reprcsefltat~~'~s~ wh'o has or had a legal or equitable interest in ujclaim~~ property. The owner shall be conclusively presumed to - be the person to whom unclaimed property was or is payable or returnable according to the records of the United States Government. - If two or inure persons arc intcri-St ed in the property, and the extent of their reSpect~'C interests is -unLnowri, it ~)ia) I be presumed that their IntCTCSt5 in such property are equal. (c) The term- "State' means any State of the United Sta'tcs, jncluding ai~y antcccdcr~t commonwealth, republic, territory, or other jurisdictiOns the District of Columbia, --. - the Comstcnn~ wcnl th of Puerto Rico, the Vi rgin Islands, and C*i:im. - (d) The term "person" includes any individual, partnership, corporation, unincorporated association, or other legal entity. (c) The term "Federal agency" means (I) any executive or miii- tar)' department, agency, or independent establishment in thc executive branch of the Governmcnt, (2) any wholly owned ~overnmcnt corpora- tion, arid (3) any establishment in the legislative or judicial branch of the Government (except the Senate, the Douse of RepresentativeS, - and the Architect of the Capitol and any activities under his direc- tion). (f) The term "Administrator" means the Administrator of General Services. (g) The term "Comptroller General' henna the Comptroller General of thO United States. PAGENO="0135" 131 DISCOVERY OF UNCLAIMED PROPERTY Sec. 4. (a)The Comptroller Ge~neral shall conduct annuaiiy an eraniretion of all records in possession of or telating to the accountS of each Federal agency concerning unclaim~d property. From such -~cc~-ds, the Cor~ptroller General shall determine and record the fell cu~n~ infooirati on ~:ith respect to such property: (1) The mane and last hnot;n address of each o\~ncr; (2) The dates essential toHdcternirie when the property became unclaimed property; (3) The reco~crable value,~ if funds; otherwise, a dcscciptiom of the property; and (~) The transaction whereby the propcrts' is held in ens tc.dv iiy such Fedora I ;u~cncy mmci the ~ninc and add ress tic cccl. (b) Cnccpt as otherwise provided by Scctinn 2575 of tic I I of the Umi ted Sta tea Code, a)) unci:' i aced property in the custody of am) Federal apency shall be transfcrrcd, under such rc::nl a ti ons as the Corp two) icr General slim)) p rescrib~, to the CtIS toil)' of the ,`lci nE stra toe, who slim)) retain custody thereof pcnihi rig itS di apart t ton pnran~cnt to the provi Si our of iii is /ic~ . - PAGENO="0136" 132 REPORTS TO STATES Sec. 5. (a) Notwithstanding any other provision of law, the Comptroller General shall report annually after June 30, 1979, to the authorized officer of any State upon request of that officer, all relevant information previously determined and uireported ccncerning unclaimed property in which that State is or may be interested under the provisions of this Act if the chief executiv~ of such State certifies and the Comptroller General is satisfied that the law of such State provides effective means whereby: - (1) the United States shall be held harmless or otherwist protected against any claim if the State.escheats or acquires lawful custody of the unclaimed property. PAGENO="0137" 133 -- (~ Fcc unrposes of paragraph (I), of subsection (a),in - c=acticc with transactions arising under the public debt it shdfl `cc sufficient if such State certifies it is a lawful custodian its laws and the Stato shall be entitled to such unclaimed rrcsarcy notwithstanding that all other States have not provided the certification required pursuant to section 5. RECOVEtY or: IJXCI.:\fl-1LI) pitoplEitTy ~Y STATES Sec. 6. (a) ihcrc ;iccordjii5' to the records of the Uoi~cd Statc~ ~scn3acd pursuant to scct~on 4 (a) th~ ]:ist ]cnown address of an owncr~ of nut-] tincd property is in a State, such unc) a)eed propcrty he] d by any Federal ar:Cflty aba]] be subject t~ (1) cschcat or ~cuatodi al us by- thu t State or 5 ts authorS ted rcI'reaeot;It 5 ye, or (2) ccl cc 3-:-: by 13 due :11)' who ]i:iS bee a a pj~o Sot t-cl by a court in that State for I be ptirpo::c - of to] S ret S n~ tinsel a of a ,ieci-:it:c-i , di n:phie:i rid,. PAGENO="0138" 134 or m ~s1n~ pcr.con or of an owner of unclaimed property where the property will he cschca ted or t;ikcn into c~istoc1y by the St:i t c if the owner or his successors do not c] aim the propcrty. For the purposes of this Act i'~ shall he presumed that the situs-of unclaimcd.propcrty is in the State of the last known or presumed address of the own~r. In case of any unclaimed property disclosed by such records to be owned by two or more persons- - . (1) if the last known addresses of owners are in one State, any owner's address which is unknown shall be pre- sumed to be in that~ State; (2) if-the last l;nown addresses of owners are in more than one State, the addresses of owners whose addresses are ~inknown shall be presumed to be in the States where the owners' addresses are known; and - - (3) if the records of the United States do not disclose the address of any owner of unclaimed property, suèh unclaimed property shall be presumed to have a situs in all the States and the Comptroller General shall determine the proportionate share of a State as follows: ~he total of such unclaimed property shall be multiplied by a fraction the numerator of which is that State's Population ad determined by the most recent census and the denominator of which is the total population of all States as determined by the most recent census. PAGENO="0139" 135 (b) If a State has adopted a sta~ute providing for the escheat or 1a~f'.1 cvsrody ef toclained property subject to this Act'and sarfsfied the ?rov~sioos thereof, or its authorized representative, or a c?er ff&rfary ef the e~o~er has obtaiaed sot noaropriate order or jud~rent of a St.itc court declaring thc right of the Statc or such fiduciary to cschcat, acquire custody, or oht~iin poanc'ssion of nor unclaimed property, anti - - . - - the Ad~n ist ia I or aba)) ,le) i ver or par ovcr the uoclaiotcd property upon written rcciucstThccotspanieci by a certified ccpy of tuic order or judgmcnt. *. - (c) Thccxpiration of any period of tine pccificd by statute or ecnr t o rdc r, dii ri up viii ch an action or p rocccd i ng may lie comic nec o e fit rc ri to eli t in p :1)' ccii t o f a ~ 1 ii in fo r f 1; or r cc uv~ry o f - proocrev shall not affect the right of a State, its authorized rcprc~cotctivc, or a proper fi ditti a~y of the owner to cschcat, CCC~:TC custody, or obtoen possession of unclaimed property in - accordance vith the provisions of this Act. (d) There is hereby suthoriz~d to be appropriated to the Ccroptroller General o~d to the General Services Administration, out of any money in the Treasury not otherwise appropriated, such amount as rosy be necessary to carry out the provisions of this Act. PAGENO="0140" 136 RULES AND REGULATIONS - Sec. 7. The Comptroller General shall prescribe such rules, regulations, forms, systems, and procedures for Federal a9encies as may be required for the administration of the provisions of this Act. ANENDMENTS Sec. 8. (a) Subsection 203 (m) of the Federal Property and Administrative Services Act of 1949; as amended (40 U.S.C. 434 (a)), is amended to read as follows: * "(m) Subject to the provisions of section 2575 of title 10 of the United States Ccide, the Administrator is authorized to tal~e possession of abandoned and pther unclaimed prqperty oripremises~ owned or leased by the Government, and to retain custody thereof penclin~ its disposition pursuant to the provisions of the Unclaimed Property Act. Except in the case of property transferred to the Administrator pursuant to that section, such disposition shall not be made until (I) the Administrator has made a diligent effort to determine and locate the owner of the property, his heirs or next of Rin, or his legal representative, and (2) 1 wear has expi red a It er the date of recci p t of such. pro;'c rty by the Mini ni atrator.". (b) The text of section 2575 of title 10 of the United States Code is amended to read as follows: Subject to the provisions of scCti otis 4712 and 9712 of this title, if money or other personal property, of a decgasccl rncinl,cr of an a rint.'ii fOrCe of the tIn 1 ted St :t ti's is in the Coat ociy of a ni I I I a 1) ii rh':I r I into I , I tic see ret a iy' Cii Iii (~fl e,1 nh a 11' ~. cup i t 1 :t a a Ic PAGENO="0141" 137 n dii i;:cnt effort to deicroinc ;cncj )ocntc thc\hci ra, kin, or c;:;] rcdrcacnt;ctivc pI the decc;,scd member. Pro- pcr:y cc; ining unclaimed 2 years after the death of the recinber be trensierred to the Adrsinistrctor of General Services, who c]cnll dispose of such property pursuant to thc Unclaimed Propcrty Act: - `(b) tflccnevcr any othctr lost, abandoned, or unclaimed pray is in the custody of a nilit~ry dcpartment, the secretary concerned shall rake a cii] igent effort to find the owner, hIs heirs or moat ef kin, or his legal representati\e. if the owner, his heirs or next ef kin, or;his icgal'representative cannot be found within i year after such pronerty is received at a storage point desig- ns ted bS the secretarY concerned, the~ secretary shall transfer such prcroray to the Administretor of General Services, who shall dispose of ~ property pursuant to the Unclrimed Prone~tyAct, except that if the owner, his heirs or next of kin, or his legal reprosentative is determined but not found, such property ciay not - :me so transferred until the expiratio~i of 120 days after the date when xctice, giving the time of the intended transfer, has been sent by registered mail to that perso~i at his last known address. (c) Subsections(e); (f), and (g) of section 47i~ of title 10 of the United States Code are amended to read as follows: PAGENO="0142" 138 "(e) If the summary court-martial cannot, dispose of the cff'ects un ~er subsection (d) because there are no persons in those categories * ~ because the court f) nds that the addrcsscs of the persons arc not known or readily asccrtai nab) e, the court shall ransi:ii t the effects to the 1)epartnent of the Army for disposition pursuant to section 2575 of this title. `(f) The summary court-martial shall make a full report of the transactions under this section1 with respect to ihic deceased, to the flcpartmcnt of the Army for tranamismion to the Genera) Accounting office for :c t ion an thori zed in tile Set t) emen t of accoun t~ of dc.ccnsetl inemlers of ~hc Army.". (d) Subsections (e), (1), and (i:) of section 9712 of title ~ ~,f ~je United Statcs Code are arnnnnded to nead as follows: "(c) If the summary court-martial cannot dispose of the cffccts under subsection (d) because there arc no persons in those ~aze~ories or because the court finds that the addresses of .the persons are not known or readily ascertainable, the court shall transmit the effects to the Department of the Air Force for dis- position pursuant to section 2575 of this title. - "(f) The summary court-martial shall make a full report of the transactions under this section, with respect to the dec~tased, to the Department of the Air Force for transmission to `the General Accounting Office for action authoriled in the'settlcment of accounts of deceased members of the Air Force.". . PAGENO="0143" 139 (e) Sections 4713, 6522, and 9713 of title 10 of the United. Stat~es Code are repealed. . EFFECTIVE DATE Sec. 9. This Act shall ta3~e effecton the first day of the second nonth beginning after the date of eriactsientof this Act. 67-~'~0 0 - 81 - 10 PAGENO="0144" 140 APPENDIX 0.-PAUL TAYLOR MEMORANDUM TO OFFICE OF THE VICE PRESIDENT CONCERNING UNCLAIMED PROPERTY HELD BY U.S. TREASURY DEPARTMENT OF THE TREASURY WASHINGTON, D.C. 20220 AL YSS'STS9T SECRETARY MEMORANDUM TO: Mr. Farmer Office of the ice President FROM: Paul H. SUBJECT: Comments on legislative proposal by State Treasurer of Ninnesotato permit recognition of State entitle- ment to unclaimed property held by the Federal Government. Your memorandum of February 1 requested our views on this subject. In an earlier telephone conversatiOn, Mr. Spahr of my staff indicated that formal policy views from the Treasury on the proposal could be addressed only by our Office of the General Counsel, but that we would be glad to give you in- formal comments from our perspective as a fiscal operating entity of the Department. The purpose of the bill is to insure the prompt turnover to States of Federally-held unclaimed property, based primarily on the last-known address o,f the owner and the passing of a seven-year period of time during which no claim is made. For public debt securities, the seven-year period is to run from date of maturity or earlier call for redemption. The Minnesota State Treasurer, Mr. Jim Lord, stated in his memorandum that the right of the States to escheat money owing to its residents has been expressly recognized by the Congress in the case of the U.S. Postal Savings System. However, with respect to the postal savings funds there was special Federal legislation that permitted the distribution of the unclaimed amounts to the States. These were not public put private funds which were originally held outside of the Treasury by the Board of Trustees and deposited in local banks. The transfer of the remaining umliquidated funds to the Treasury did not change their character as private funds. Many categories of unliquidated liabilities owed by the Federal Government rest on an entirely different foundation than the Postal Savings System. For example, when Treasury checks are issued by Government disbursing officers they are PAGENO="0145" 141 payable without limitation of time, thus requiring the Federal Gcvercccent to meet its obligations whenever the checks are xresented. loreover, when checks are returned as undeliverable or are lost or stolen and therefore not received by the right- .fui payees, the Government has an obligation to renail the checks or to issue replacements. In all these instances the Federal Government, in effect, pledges its faith and honor on payment of its negotiable instruments which are contracts between the holders and the U.S. Government. Another administrative complication of the proposal vis- ~-vis Treasury check-issuance and payment operations is that our unpaid-check magnetic tape files are not broken out by States; nor do they show the name and address of the payee-- omly the disbursing office symbol, check number, and amount of the Deyment. Any requirement to obtain the last-known address for potential claimants would therefore place incal- culable administrative burdens on our systems operations. 1r. Lord also mentions that millions of dollars of tax- payer refund checks go unclaimed or uncashed. There is another side to this matter which should also be focused upon. At any given time, there is an undetermined amount of taxes legally due the Government which are never collected. Asafe assump- tion is that the amount of uncollected and unpaid taxes far exceeds tax refunds which are unclaimed or..unpaid. This assessment is reflected in the Internal Revenue Services 1977 statmoent of financial cendition, which showed $8.3 billion far accounts receivable from the public. Thus, un- claimed or unpaid tax refunds should not be considered as a vimdfall to the Government but merely as an offset to losses ix the total Federal tax collection process. Complexities with respect to the proposal can also be foreseen in another major fiscal~operations area of-the Depart- ment--the issuance and redemption of public debt securities. In the first analysis, Treasury securities are contracts be- tween the United States and the investors and there is no basis for recognizing a State's claim thereto unless it has succeeded to the contractual interests of such inv~stors. In this connection, most States have enacted statutes dealing with escheat; however, because of the need to satisfy the requirements of constitutional dike process in connection with their utilization, the States have generally preferred to batons custodians of unclaimed property rather than successors of title. (Also, the relatively~small amounts usually involved militate against resorting to expensive legal proceedings.) PAGENO="0146" 142 As a matter of historical fact, our Bureau of the Public Debt has not stone-walled States where valid escheats have occurred pursuant to their own laws. What we have asked for, however, is an unconditional acquittance for any payments made, which means that the payees must legally stand in the shoes of the owners. A custodianship statute, such as that proposed, does not accomplish this. Unclaimed Series E savings bonds present a further problem: With their maturity extension periods, the addresses of record are not likely to provide any basis for establishing the owner's last residence. Noreover, under the savings bond con- tract there is an explicit right of survivorship where the securities are registered in the names of two individuals. Since the addresses of second co-owners and beneficiaries do not normally appear on the bonds, where they are unclaimed there is no way to establish the survivorship or residence of such parties. These are but a few of the administrative problems that would have to be addressed in dealing with the disposition of unclaimed property; they reflect those that I ate immediately familiar with in the fiscal area. Other Treasury offices and other Federal agencies would no doubt have concerns that are not addressed here. Therefore, if the States intend to seek passage of escheat legislation, additional consultation with the agencies and Congressional committees would appear to be a prerequisite. PAGENO="0147" 143 Mr. ROSENTHAL. Our next witness is Mr. W. K. Schnaitman of Baltimore; Md. Mr. Schnaitman, please proceed as you wish. STATEMENT OP W. K. SCHNAITMAN, BALTIMORE, MD. Mr. SCHNAIThIAN. Thank you, Mr. Chairman. First, let me say that no one. is more surprised than I to be here this morning. I have heard some publicity relative to the whole area of savings accounts where interest is no longer earned on it and it is placed in an inactive status and turned over to the State, and so on. I wrote you gentlemen that I had experienced such a problem and, lo and behold, within a week here I am. It. gives me faith in the American democratic system. I will relate my story. About 10 years ago my father passed away. The lawyer handled the settlement of the estate in which my mother became the owner of all the assets of the estate-I would say that roughly 90 percent of the assets involved savings and checking accounts and so forth, with a small State bank in the town of Ea~ton. Md. There was another small savings account with a national bank in that same town or branch of a national bank. The lawyer, rightfully so, convinced my mother that she should have my brother and myself listed as signers on her various bank ac- counts in case something were to happen to her. This was done at the small State bank. Through an oversight, our names were not added to the small savin~s account at the n~tional bank. Shortly thereafter, it became necessary to put my mother in a nurs- ing home and she has been there ever since for a period of roughly 9 years. We have been using the funds on deposit at the State bank to help take care of her medical needs, board and room, and so forth at the nursing home, together with social security funds, et cetera. After 9 years those funds began to run out. Before my brother and I start assuming the full support, I decided to look back through the records, the estate settlement, and so forth, to make sure we had not overlooked something. It was there that I saw listed among the assets a savings account at this national bank which at that point showed a little over S~2.000 as the balance in that account. Mr. ROSENTHAL. That was the Maryland National Bank? Mr. SCHNAITMAX. That was the Maryland National Bank. I reside in Baltimore and this branch is in Easton, Md. I called the branch and asked for someone who could discuss the savings account with me. I explained the situation and that it appeared that my mother would probably still have an account with them, but that I had no rec- ords other than something dating l~ack approximately 10 years ago. I was informed over the telephone-or asked over the telephone-if I had a passbook. I said no. I had not found one in any of the ~fFecth. They asked if I knew theaccount number. I said that I did not. They were very sorry, but if I did not have a passbook and an account num- ber. they could not help me. However. knowing that I was going to be in that area shortly there- after, I decided to wait and make a personal appearance at the bank, PAGENO="0148" 144 which I did do in late December of last year. I asked to see someone in person. I was turned over to a gentleman who had the title of branch officer. I again explained the situation that, first of all, I was only trying to determine if there were funds on deposit. I recognized that I would iiot have access to those funds but before trying to get a court order or something to get at them, I needed to find out if there was such an account. Again, there was the indication that since I did not have a passbook or an account number, they would not be able to work just from a name. I said, "I bet if I walked through the door here with a $200,000 check to deposit to her credit, provided you could~-find the account, you would find it pretty quickly." In any event, the gentleman said, "Let me see what I can do for you." He left me in his office for a period of about 5 minutes and re- turned with a computer printout with my mother's account and name and the amount of funds in the account, and he handed it to me. I examined the record and saw that "interest had stopped accruing" approximately 4 years prior to my visit. I asked why the interest had stopped accruing to the account. He said it was the bank policy that after an account is inactive-no activity-for a period of 5 years, they stop paying interest and stop accruing it-I should not use the word pay-they stop accruing interest on the account. I said that I don't understand why that. should be. You still have the $2,000. You are still earning on it-you are employing it every day in your business. On what basis do you stop paying interest. The answer was, "standard bank policy." He said not only their bank but that I would find it pretty generally throughout the banking system-after an account becomes inactive for a period of time, interest stops accruing. This I could not understand because it is a standard savings ac- count and it seems to me that if they stop accruing interest on one ac- count simply because there is no activity, then they should stop paying interest on everybody's account, in effect. Why did they differentiate between an inactive account and an active account? Mr. ROSENTHAL. The accruing of interest in and of itself isn't an activity, by their definition? Mr. SCHNAITMAN. By their definition. Also, another interesting thing is that while they were paying interest they have to give you a 1099 IRS form. That had stopped also at that period. It just was not recognized by my brother and myself that that form had stopped com- ing. My mother never had sufficient income to pay taxes anyway, so we did not miss the fact that that form had not been forthcoming for the last 4 or 5 years. In any event, when I kept complaining about the lack of interest, the gentleman again said, well, he would see what he could do. He stepped out of his office and in a matter of 10 minutes was back again with another computer printout where they had computed the interest and for the period of roughly 4 years where no interest had been accruing it would amount to some $400. They would credit the account, and we would go on our merry way again. It "would put it back on an active status" since I had appeared at the bank. PAGENO="0149" 145 After that, I proceeded to determine how we could get access to the funds. I had a discussion with a la~ yer. I finally came to the decision that the legal costs involved in trying to get access to those funds for my mother's support would take up a fair amount of those funds. So, since my brother and I are going to have to start. contributing to her support. anyway, we might as well start. doing that, leave the. funds on deposit. and they would flow to us at the time of the settlement of her estate. That. could be next year. or it could be several years from now. Just recently. I had another discussion with the bank informing them that I was going to leave the~ money with them, but I wanted to make absolutely sure this time that "interest would not stop accruing," that it would not be put on some inactive status, and would they please explain to me what the bank policy was regarding this. As explained to me. if the account remains inactive aoain. and accruing interest is not act ivitv. for 5 years without. hearing ~rom me, they would then put it. back on an inactive status, and stop accruing interest. Then, after a period of 12 more years. if they had heard from no one, they would eseheat the funds to t.he State of Maryland. but the State would get the funds on the basis of where it was 12 years prior thereto. There would be no interest accrued during t.hat 12-year period. Mr. ROSENTHAL. You could have deposited a dollar a year to keep the account active. Mr. ScIIXAITHAN. That was the response to: How do I keep this from happening all over? I could make a deposit to my mother's account. Mr. ROSENThAL. But you don't have t.he passbook. Mr. SCHNAITMAX. Yes; but I don't have t.he passbook. But I can make a deposit. to my mother's account occasionally, and that will keep it active. I am not here-I didn't volunteer to come over here today about my own problem, because I can take care of that, But it just dawned on me, how much money is out there on which interest is not accruing arid when the funds are finally escheated to the State, the State is only get.ting, in effect, the principal from several years ago. Yet, those funds are escheated to t.he State for the benefit of the owner. So, therefore, if the State ever finds t.he owner of t.he funds, they have still lost several years' interest. Mr. Wn~r~rs. Is this 5-year waiting period pretty standard? Mr. SchixArr3L~x. I don't know. I was only told by the bank. I don't know what goes on elsewhere. Mr. LORD. Often it is just a couple of years before the bank declares it inactive. Mr. WILLIAMS. So each bank can establish its own period of time? Mr. SCHNAITMAN. I am not saying any laws were broken. It just seems to me that because of my own personal experience- Mr. ROSENTHAL. We understand that. It just seems unfair, does it not? Mr. SCHNAITMAN. It just seems unfa.ir that a bank-I am in the money business-it just seems unfair that these funds-that the bank be. allowed to use these funds and earn on them, but yet stop accruing interest. PAGENO="0150" 146 I did ask the bank if any notice had been sent to my mother. Even though she was in a nursing home, her mail address on record-the mail would have come to my brother's home. He is residing at her home. Mail continues to come to this day in her name, junkmail and whatnot, soit is not a case of the post office not delivering mail addressed to her. There was basically no response to me as to whether any attempt is made at the end of that 5-year period to alert the depositor that they would stop getting interest, if you don't make an appearance or do something. I just gathered from the silence that there was no attempt made on the part of the bank to locate the depositor to advise them that interest would stop if they did not show up. Mr. ROSENTHAL. Thank you very, very much, Mr. Schnaitman. We appreciate your involvement, and we appreciate your coming down from Baltimore to tell us about this story because it is another example that is very important for the record to be filled in this way. Thank you very much. Mr. SOHNAITMAN. Thank you all for listening. Mr. ROSENTHAL. Without objection, at this point we will insert a copy of the letter which ~vIr. Schnaitman sent to the comrnitt~e out- lining his experience in this regard. [Mr. Schnaitman's letter follows:] PAGENO="0151" 147 CONGRESSMAN EEN ROSENTHAL ~ STA9F_ DOC # DEC #-_--------__-------_-_- Representative Benjamin S. Rosenth L JUL ~ 1980 Rayburn House Office Building - Room 2372 ____________________________ washington, D. C. 20515 COMMENTS: __________________________ Dear Congressman Rosenthal: ~0LECOD~ - In reading the American Banker for July 10th, I noticed the article on page one relative to your committee hearings on the alleged abuses by commercial banks in handling inactive accoonts. I am Director of Cash Management for Commercial Credit Cenoany, a $5 billion national finance company. I mention this cnly to indicate that I do have a fair amount of experience in banking. Recently I had a personal experience which left me shaking my head. My mother has spent the last~ ten years in a nursing home, gradually becoming more and more senile. Last Spring, in reviewing her financial status, I discovered that she had a small savings account with Maryland National~ Bank. This surprised me becruse we had not been receiving any report of interest paid (IRS Foon 1099). I searched for a passbook but I could not find one. I called the bank and was advised that since I had no pass- book, they would not be able to tell me whether the account was still in existence. Not being satisfied, I vent to the bank in person and after demanding to see someone in authority,~it was quickly determined that therewas an account with an excess of $2,000 in it. However, after a period of five years of no activity, it had been removed to an "inactive" status. When I asked about the lack of a 1099 Interest Form, it was stated that when~an acco~mt wad placed in an inactive status, interest stopped accruing. I couldn't believe it - the bank still had use of the funds, but no interest was being accrued to the owner of the ftmds~ The end result was that the bank agreed to compute the interest for the period involved, credit the accoont and return it to an "active" status since I had appeared cm the scene. There was no logical explanation given as to what legal grounds allowed,them to stop accruing interest, to discontinue interest reporting to IRS, etc. There obviously was no attempt on the bank's part to contact my mother, since her mailing address had never changed. Mail is still being delivered in her name to her former home where my brother currently resideè. The whole episode causes me to wonder how many people, particularly elderly people, are being~deprived of their property by such tactics. Also, in some instances Internal Revenue is probably being deprived of taxes on such interest income. In my mother's case, the latter didn't matter since she never had suf- ficient income during the period involved to be subject to tax. Yours truly, WKS:bjb . . Schnaitman ~-`~` 2301 Pentland Drive - Apt. 204 Baltimore, Maryland 21234 PAGENO="0152" 148 Mr. ROSENTHAL. Our next witnesses will be as a panel. We have Mr. Thomas F. Kelly, assistant treasurer, State of Massachusetts; Vivian E. Herbert, unclaimed property administrator, State of Virginia; David J. Epstein, attorney and consultant to States on unclaimed property administration; and Frederick B. Goldberg, general counsel, D.C. Office of Consumer Protection, appearing for Herbert Simmons, Jr., of that office. Mr. Kelly, would you please proceed as you wish at this time. STATEMENT OF THOMAS F. KELLY, ASSISTANT TREASURER, COMMONWEALTH OF MASSACHUSETTS Mr. KELLY. Thank you, Mr. Chairman and members of the subcommittee. My name is Thomas F. Kelly. I am the assistant treasurer of the Commonwealth of Massachusetts. Almost 3 years ago Robert Q. Crane, the Massachusetts State treasurer, launched a vigorous program to audit banks for unclaimed property. What we found was that the banks were taking their customers' savings and checking accounts, cashiers' checks, money orders, and other funds as their own income. The audits have caused an astounding increase in the reporting of the names of missing owners of unclaimed accounts from approximately $500,000 in 1977 to $7.8 million, just a few years later in 1980. The practices of the biggest bank in Massachusetts, the First National Bank of Boston, are typical of the abandoned property abuses occurring in Massachusetts. At the time the Treasurer's Office audited the bank it was taking through service charges as it own income all inactive savings accounts having a balance of $50 or less and paying no interest on accounts with a balance of less than $10. At. that time the bank had no agreement with it's customers providing for a $50 service charge. The reason for service charges was stated in a 1960 bank memo ~ * * We will service charge inactive accounts to prevent a large number of forgotten small accounts frompiling up on our books." The account "~ * * can be refunded if an officer feels that there is really solid justification -for doing so and particularly if the account is to be added to and continued. However, interest will not be restored in these cases." Justification for the charges is less clear since a 1975 memo reported, "There is very little cost involved in processing dormant savings accounts or in abandoning them because the process was automated when they put savings accounts on the computer." Inactive checking accounts and uncashed money orders similarly are being service charged $50 and taken as the banks own income. A few other examples of service charges are illustrative of how significant this problem can be to the customer. Based on correspond- ence our office has received, it is clear that even where the fine print of the passbook or regulations make reference to a service charge for inactivity the customer simply is unaware of the charge. In those few instances where a bank gives subsequent notification at the time of imposition of the charge, most of the customers who ultimately have their accounts taken do not in fact receive the notice because the bank no longer knows where the customer resides. PAGENO="0153" 149 While perhaps it can be argued that the unwitting customer should be bound by contractual terms obscurely set forth in the fine print of agreements he executed, I seriously question the fairness of such procedures. In the first place. the customer is receiving no service for which he is being charged. Generally, the banks imposing these charges make only a cursory search for the owner, at best perhaps checkmg only a local telephone directory for a. recent listing, meanwhile the bank has had the. interest-free use of an account which incurs no processing because nf its inactivity. I think the case of the Providen~ Institution for Savings, a. large savings bank in Massachusetts, provides a good example of fair dealing between the customer and the banl~. Incidentally, Provident was the subject of the first bank unclaimed property case decided by the tT.S. Supreme Court in 1911, which perhaps accounts for its enlightenment on this subject. For the last 3 years Provident has undertaken a comprehensive pro- gram to attempt to contact its missing customers. One Provident em- ployee is assigned full time for 2 months to locating the owners by checking telephone directories, contacting relatives listed in the bank records, checking with places of employment, and reviewing various other records. As a result of this search more than half of the missing owners are contacted. For accounts over $1,000, which remain un- claimed, two search services which~ have more extensive records and resources are utilized. For the first 3 years efforts together with the advertising of the names of the owners has returned all but $112,000 out of three-quarters of a million dollars, or 85 percent. The job of obtaining compliance~ has been a slow and arduous one because it has been necessary to audit~ each bank. Not only has Massa- chusetts received no assistance froth the regional office of the Comp- troller. in fact, we have been affirmatively hampered by the acquiescence if not the agreement that national banks are not required to comply with Massachusetts abandoned property law as it applies to cashier's checks, certified checks, money orders, and other official checks issued by the banks. Thus for years, the name of the missing owners were never advertised. The special assistant attorney general for Massachu- setts had advised the Treasurer that the regional counsel's position is completely without merit; a fact which the bank in practice has con- firmed by choosing to comply with our law upon demand .by the Treasurer rather than relying upon the regional counsel's opinion. Additionally, the Office of the Comptroller in 1977 was advised in writing by the Treasurer's Office that the national banks in Massachu- setts were taking millions of dollars of their customers' money. How- ever, the Office of the Comptroller ignored the warning and never responded to the letter. I have submitted a copy of that letter to the subcommittee for inclusion in the record. Quite recently, in connection with a complaint the Treasurer's Office filed with our U.S. Senator, Paul Tsongas, the Comptroller's Office advised us that their examiners checked for compliance with the State escheat laws. however, it is not their practice to make the results avail- able to the State regulators. I have submitted a copy of that letter for inclusion in the record. Mr. ROSENTHAL. Without objection, the two letters mentioned will become a part of the record at this point. [The letters follow :J PAGENO="0154" 150 ~ * ~e ~Lrn~nonc~eaIi/t ~/ Jt~ac~a~ei~ 3ceaic7 ~c~i~eni ,9~ze~ .~ae, ~le~,z 021J3 ~ ~ ~?eneraI December 7,1977 Charles E. White Regional Counsel Office of the Comptroller of Currency 3 Center Plaza, Suite P-400 Boston, Massachusetts 02108 Dear Mr. White: Pursuant to your conversation today with Mr. Epstein of this office, please be rc~vised that certified checks are reportable as Abandoned Property pursuant to Chapter 200A Secticn 5. We arc unewsre of any authority for the proposition that since the check is payable out of the Bank's fund instead of the customer's funds the property is no lonr'er reportable. The express language of the above referenced section suggests no such distinction which perhaps accounts for the fact that no bank has ever refused to report such monies are Abandoned Property. As Mr. Epstein advised you we are anxious to cooperate wcth your office, should you desire, in connection with our audit and enforcement program of Massachusetts Abandoned Property law. Our preliminary investigation has un- covered reporting practices by both National and State Banks which are contrary to the Corrrnonwealth's Abandoned Property Act. For example one National Bank is service charging out of existence all money orders of $50.00 or less. Apparently these have no contract allowing such charges. Most National and State Banks are taking substantial service charges on savings accounts before turning what is left over to the Treasurers Office; we are advised however that the service charge is never levied against the customer. Thus the service charge is intended only for the purpose of avoiding compliance with the law of the Conrnonwealth. Additionally there is a wide spread practice of simply failing to report Abandoned Property held by the trust departments such as unclaimed dividends, stock overages and uncashed trust checks. Our information indicates that the monies involved in these practices run into millions of dollars. If we can provide you with any other information please feel free to.call on us. Very truly yours, ~ Howard F. Lake Director Abandoned Property HFL/j PAGENO="0155" Ccm~troUe~cf the Currency ~tm~n;stratt~ c~ National Banks 2~9 ~arch 12, 1980 ~r. lobert C. Crane :reas~rer and leceiver General reas~rv 2e~aroment Cor~oo~:eaob of lassachusetts baron, ~assacb~setts 02133 151 APPENDIX B .~ beioann has asked me to respond to your letter of February 1, re~uestinc the aid of the Comptrollers Office in monitoring nariona bank compliance with ~4assachusetts' abandoned property Chief lational oxaminer ::ationaj bank Examiners currently check for compliance with state esobeat 1a~s donna their examinations. Any violation is brought to bank manacement's attention and correction is requested. However, :-a~ not been our practice to make the results of our examination to state reoulators or other state officials. Conotroller's Office is committ~d to enforcing national bank oo-r:ia009 with all applicable state laws. In keeping with this commitment, I request you contact Mr. John Downey, Deputy Regional Administrator in our Boston regional office, 223-2274. Mr. Downey will be happy to review our present~ procedures with you and discuss your specific needs in this area. Should you have any additional questions, please do not hesitate to contact me. PAGENO="0156" 152 Mr. KEUX. The Treasurer's staff had a preliminary meeting with the regional office of the Comptroller and it appears that their policy remains not to provide any meaningful cooperation. In closing, I believe it would be helpful for this committee to use it's influence and power with the Federal regulatory agencies to take steps to protect the consumer. One step would be to ask the Office of the Comptroller to change its erroneous position giving uncashed checks to the banks, and to instruct its examiners to insure that banks do not take their customers' money, in lieu of compliance with Massachusetts advertising and reporting requirements. Thank you. Mr. ROSENTHAL. Thank you, Mr. Kelly. Ms. Herbert, you may proceed. STATEM~N~ OP VIVIAN E. HERBERT, UNCLAIMED PROPERTY ADMINISTRATOR, STATE OP VIRGINIA Ms. HERBERT. Good morning, Mr. Chairman. I am Vivian Herbert, and I am the administrator for unclaimed property for the State of Virginia. The Uniform Disposition of Un- claimed Property Act is administered through the department of the treasury in Virginia. Our office has two permanent full-time employees and at the present time, two full-time temporary employees. We do not have auditors or attorneys on our staff to aid in com- pliance checks, however we have been fortunate in having the coopera- tion of our amlitor of public accounts office and the office of attorney general, when requested. Due to the small staff in our unclaimed prop- erty office, voluntary compliance by holders is very important. Reports of unclaimed property from banks and financial institutions has not been very substantial in the past, and we feel, in part, that this was due to the length of the dormancy period of 17 years. This dormancy period was lowered 10 years by the 1980 session of the general assembly. Prior to submitting a proposed change in the unclaimed property law, we attempted some research through a survey of banks in the Richmond area as to their practices regarding service charges, the dis- continuance of interest, and their means of notifying consumers con- cerning these practices. The results of the survey are attached to my statement. The three national banks in the Richmond area are noted on the survey form by an asterisk. In canvassing for the survey we visited each bank and asked for the rules and regulations governing their accounts, both checking and savings. We found it necessary to request copies of these rules and regulations, as they were not included in the display of the other pamphlets concerning the services offered by the bank. The copies of the rules and regulations, for all three national banks, were kept either in a desk drawer of a bank employee, or in the bottom drawer of a file cabinet, and it is stated in these rules that they are only available upon request. We feel it should be mandatory, when opening an account, that the rules and regulations, and this includes all banks and financial institutions, be given to the prospective account holder, along with the signature card. This would allow the consumer to decide if the rules and regulations were acceptable to them before opening the account, PAGENO="0157" 153 A great number of people are not even aware that such rules and regu- lations exist. The word "dormancy" as referred to in the rules and regulations of the bank should not be confused with "dormancy" as set forth in the Unclaimed Property Act. The board of directors of banks have the right to set their own dormancy periods and service charges. We found that the dormancy periods, as set by the banks, ranged from 1 to 3 years for checking accounts and 1 to 5 years savings accounts. At the end of this dormancy period, service charges on checking accounts, at the time of the survey last year, ranged from $1 per month to, "monthly maintenance as established by bank" and on savings accounts from S12 a year to, "as adopted by bank from time to time." An update on this survey from a service charge standpoint indicates that specified amounts for service charges have been changed to $3 per month and, "all dormant accounts be subject to the bank's current dormant account charges." Interest, in all cases, is discontinued when the account is declared dormant by the bank. Notice to consumers, in all cases, was merely by posting change in the bank lobbies for as few as 10 or as many as 30 days. Only one State bank required that notice be mailed to customers, although, under "Amendments" in the rules and regulations for other banks, both State and national, the following statement is included along with the notice of posting in the lobby: The Bank may, but shall not be required to, give such other notice as It may see fit, and may, but shall not be required to, mail notice of amendments to depositors. As to compliance, we feel that education is the key word in Virginia. The holders of unclaimed property need to be educated as to the re- quirements of our unclaimed property laws. Mr. ROSENTHAL. How do you do that? Ms. HERBERT. We feel that through, hopefully, some publicity. Mr. ROSENTHAL. How do you get the publicity to those people? Ms. HERBERT. We are going to try through the media, through local organizations, the bankers associations, the Bar Association, CPA's- their publications-to get the knowledge of the unclaimed property requirements to the people. Mr. ROSENTHAL. Is it possible that the people who are owners of un- claimed property will read CPA bulletins? Ms. HERBERT. No; I was speaking about educating the holders, the holders and the owners. We hope that through possibly publicity, even from this committee here, that owners will be more aware of it. Cer- tainly, through the media. Owners are not even aware of this law. The owners of unclaimed property need to be informed that such a law exists and that the State is trying to locate them and reunite them with whatever property has come to us in their name. We know that the banks and financial institutions, as well as other types of holders, do try to locate these owners prior to reporting them to the State; however, in several instances we have wondered why own- ers could not be located, PAGENO="0158" i~4 One particular instance involved ~ Federal savings and loan associa- tion, who reported two accounts in the same name-joint account- totaling over $61,000. It is hard to imagine that someone would leave that much money and just disappear. Our office, through the telephone company, found that there was a person living at the address reported, with the correct name, but the telephone was unlisted. We wrote a registered letter and the next day received a call from a neighbor of the person reported. It seems that the widow, age 81, of the gentleman who had opened the account was not aware that she had any money at all. She had been living on fixed income since her husband's death in 1972. Her husband had the foresight to open the accounts in both his and his wife's names, but did not tell her. But the most interesting as- pect of the whole thing was that the owners of the account reported had lived at that same address for 50 years. The story had a happy ending, however, the widow either removed the money from the sav- ings and loan association or reactivated the account. In any case, the money was deducted from the savings and loan remittance when it came into our office. We have attempted to seek assistance to aid in compliance with our State's unclaimed property law from the local office of the Regional Administrator of National Banks, the Regional Director of FDIC, the Vice President of the Federal Reserve Bank and the Comptroller of the Currency in Washington. I was well received in all instances and we discussed the possibility of including a cursory audit form for com- pliance with Virginia's unclaimed property law in their regular audits. In all cases I was told that it may be applicable to the consumer com- pliance examination programs that have been undertaken by the Fed- eral Government. In reply to a letter of October 24, 1979, to the Office of the Comptrol- ler of the Currency in Washington, Legal Division, to which I was re- ferred by the office of the Regional Administrator of National Banks in Richmond, I received a telephone call after the first of the year that our request to include the audit form was still under consideration. Approximately a montk ago, I had a visit from a representative of the local office of the Regional Administrator of National Banks. He requested a copy of the administrative procedures for reporting un- claimed property, as well as a copy of our law, and indicated that con- sideration was being given to including something of this nature in bank audits. We sincerely hope that this can be worked out. Thank you. Mr. ROSENTHAL. Do you think the Office of the Comptroller is being cooperative? Are they moving along satisfactorily? Ms. HERBERT. No, I don't think they are being uncooperative. I cannot say that. But they are not moving along. That was the first indication. Mr. ROSENTHAL. Why do you think that is? Ms. HERBERT. I have no hlea. Mr. ROSENTHAL. Without objection~ the information you referred t.o~ in your statement will be included in the recoi~d at this point. [The material follows :~ PAGENO="0159" 0 I)ormancy Perio(l F~tabl ished Service Chgs. Interest: Pa 1(1 Ofl Not:ice to customers re: ~j tut ~ ( ) (Norman t /\ccts.) Norman t Accounts Change n In terc~; t la tes/Serv I cc Charges Ckg. - Says. Ckq. Says. Ckq. S,vs. 1 5 51.01) per so. $2.00 per no - No flanking lobbies, Main office and branches Ii 199.99 or 0 $199.99,6~ Not required to make other publication or less plus other per annum N mail notices, hut may (10 SO. SC and mainte- $200.00 Statements mailed 4 time a year, nance clips. adopted by flank 5 $1.00 per mo. - No "Reasonable service & maintenance chgs. as in effect" - may change from time to time and he deducted froni acct, - no notice to customer $12.00 yr. As adopted by~ bank from time to time ~2.00 per moJ same as chkqi 3 Bk's current inactive Acct. Chgs. 3 Mo. mainte- nance as established by bank 3 $12.00 per mo. subject to change w/o notice to customer. May be charged mo, quarterly. semi-ann. or annually Lobby of main office Ii branches - ~ mail or advertise, at hank's discretion - not required I. No Lobby of the bank for 2 wks. No Posted in bank (every affected office) for 10 days in advance of the change. Copies of R. & R. availabe to customers upon request. No Published in Richmond newspaper on any 2 business days.in each of 2 successive wks - 10 days elapsing between publications Coot... PAGENO="0160" Dormancy Period Service Chgs. Interest Paid on Notice to customers re~ Established by (Dormant Accts.) Dormant Accounts Change in Interest Rates/Servoce Charges Institution(yrs.) _________ _ ____ _ Ckg. Says. J Ckg. Says. Ckg. Says. 1 5 $2.00 mo. $1.50 mo. - No Conspicuous place in each banking office for 30 days or mailing copy to depositor 1 1 $3.00 mc. $3.00 mo. - No - 1 3 with Service & $1.00 mo. - No Posting notice in bank - 10 days - and bal. less maintenance as publication in any local newspaper during than $50. adopted and that 10 day period - or giving depositor not changed at less than 10 days notT~e in writing. Bank's discre- tion 1 5 $6.00 S/A Chg. $6.00 S/A - No Notice mailed to depositors Charge Paid on re- (info, by phone - R & R not available in Bank) activated accounts PAGENO="0161" 157 Mr. ROSENTHAL. Thank you, Ms. Herbert. Next we have Mr. Epstein. Mr. Epstein, please proceed. STATEMENT OP DAVID ~. EPSTEIN, SPECIAL COUNSEL TO THE NATIONAL ASSOCIATION OP UNCLAIMED PROPERTY ADMIN- ISTRATORS Mr. EPs~rEIx. Thank you, Mr. Chairman. My name is David J. Epstein. I am an attorney practicing in Los Angeles, Calif., specializing in unclaimed property law. I serve as special counsel to the National Association of Unclaimed Property Administrators, an organization of 35 State governments. I first became involved in the unclaimed property issue in 1974 when I conducted a study which concluded that tens of millions of dollars of bank accounts were being service charged out of existence. In 1975 I assisted California State Coinp~roller Ken Corey, and Governor Jerry Brown in establishing a pr9gram to stop these abuses. Since then. I have served as an unclaimed property consultant to the States of Massachusetts, Minnesota, Montana, Illinois, Rhode Island, Wash- ington, and Wisconsin. Each year national and State banks, savings and loan associations, trust companies, brokerage houses, and other financial institutions play a multimillion dollar game of "finders keepers, losers weepers" with their missing customers' savings and checking accounts, uncashed money orders. cashier's checks and other property. In what is probably one of the worst consumer ripoffs now taking place. last vea*r alone banks, savings and loans, and trust companies simply took as their own income more than $40 million that is actually the property of their missing or forgetful customers. Based on actual studies of several national and State banks, it can be conservatively estimated there is almost one-half billion dollars in the illegally seized inactive accounts now owing by financial institu- tions to millions of customers. The examples you have b~en provided with today are not occasional examples. These are the norm. In my experience with more than a hundred national banks, I have yet to see a single national bank that did not service charge accounts and in almost every instance they ~topped the payment of interest. We know from the audits that have been conducted so far how much money is owing. These are conservative estimates. I think at this point it probably is the most serious consumer problem now confronting the average American. But this is only part of the picture. Audits of other businesses which are not the subject of these hearings, such as insur- ance companies, department stores and major corporations, suggest that estimates of $15 billion in unclaimed property growing at the rate of $1 billion a year~ may be accurate. Last. week's court ruling that the Bank of America must return to its customers an estimated $20 million in service charges, unpaid inter- est and penalties makes clear that these moneys belong to the depositor and not the bank. The reason for this problem is i~ot a lack of laws with the notable exception of the IMstrict of Columbia, since the turn of the century PAGENO="0162" 158 most States have enacted laws which require the reporting and sub- sequent delivery of unclaimed bank accOunts. It should be noted that the problem is not new. Both Congress arid the Comptroller of the Currency were put on notice more than a half century ago. In 1924, the State of Pennsylvania in hearings before the subcommittee of the Committee on the Judiciary warned, and I quote: The Comptroller of the Currency has never required his examiners to examine and make return of the unclaimed moneys held by national banks which have been carried to profit and loss. In other words, such banks have been permitted to steal their depositors' moneys ad libitum. The States also have not been without notice of the failure of banks to report and deliver unclaimed property. Throughout the country the procedure is identical. Almost every bank will impose a service charge against a customer's account if you fail to make a deposit or withdrawal for a relatively short period of time. Usually the customer is really never advised of the charge. As authority for the charges the bank relies on the fine print on the customer's signature card. We have the benefit today of the court's ruling in the Ban]c of Anwr- ica case, which I think is very appropriate and explains that these procedures are illegal. I would like to quote briefly from Judge Backus' decision: First, the primary and purported purpose of the signature card is not to form a contract but rather to provide the bank with the customer's specimen signature. Second, the customer is not actually or constructively notified at the time of exe- cuting the card that the bank will impose service charges if the account becomes inactive or dormant. Third, the customer has insufficient notice of or access to the bank's bylaws and regulations relating to service charges on inactive or dormant accounts. The evidence is clear * * * that a bank customer is not given, and as a practical matter cannot obtain, a copy of the bank's bylaws, rules and regulations and practices pertaining to its service charge practices * * ~. Fourth, the fact that the bank may unilaterally amend or modify its bylaws and regula- tions without notice to the customer would render a supposed contract created by the signature card illusory. Finally, the signature card, if a contract at all, is an adhesion contract which this court finds to be unenforceable to the extent It purports to authorize the bank to service charge or withhold interest from dormant accounts. Mr. ROSENTHAL. I see you are quoted in the Wall Street Journal article. You call the ruling the "death knell of bank service charge practices on dormant accounts." How do you come up with that inter- pretation if people are still required to initiate law suits to invalidate these signature cards as ostensible contracts? Mr. EPSTEIN. Perhaps I was overly optimistic. I was assuming that because Bank of America had litigated the case for a number of years and had lost in a very clear fashion that hopefully the other banks throughout the. country would follow the lead of the Bank of America. Mr. ROSENTHAL. Do you have any evidence to indicate that? Mr. EPs1~IN. No; I think that the thing we will have to look to is to see whether the Comptroller of the Currency will continue to take the ~position that-of course he cannot get involved in the rules- Mr. ROSENTHAL. Absent additional lawsuits, the banks will still go their merry way. Mr. EPSTEIN. That is correct. Mr. ROSENTHAL. That is the way it seems to me. Mr. EPSTEIN. My testimony later indicates that in the absence of litigation the banks will not voluntarily comply. I did not mean to PAGENO="0163" 19 suggest in that quote that they would comply, but that now the States have legal authority with which to require these accounts to be turned over for safekeeping and advertising. The judge in the Rank of America case also commented on the bank's practice that it sometimes voluntarily returned the service charges to the customer, and the court noted, and I quote: * * * depending on whether or not in the officer's opinion the customer was worthy of benevolence on the part of the bank, that is, was the customer likely to be a profitable customer. It is easy to see that the customers of the bank who could least afford the service charges or withheld interest are the ones most likely to be adversely affected by such practices. Surely the State of California would be classified as a good customer. A recent story in the Los Angeles Times, a copy of which is attached to my testimony, reveals just how~ the Bank of America's policy op- erates. Late last year. Eileen Herman, age 9, attempted to make a deposit to the savings account her parents on her birth had opened for her at the Bank of America. Instead, she discovered the bank had serv- ice charged her account $54 and sent the balance, $4.44, to Controller Cory. Bank officials refused to give Eileen the balance of her savings account until Cory held a press conference exposing the problem. Since banks insist that service charges must be imposed in order to compensate them for their services, at this point it would be useful to examine what service the customer~ receives in exchange for the service charge. The banks explained t.hat~ when an account is inactive it be- comes a target for employee embezzlement and in order to protect the customer against such unauthorized taking of his money, the account must be segregated and placed under special controls requiring a bank officer's prior approval before a withdrawal can be made. Thus, in order to pay for this extra protection of the customer's accounts and to prevent employee embezzlement, the bank typically takes and wipes out of existence through service charges the vast majority of all such accounts. Commonsense suggests that the overwhelming majority of missing bank customers would be much better protected by allowing a few of their accounts to be occasionally embezzled in lieu of the bank regularly taking their accounts as its own income. In any event, the extra cost- ~`Ir. ROSENTHAL. The question is this. Who should do the embezzling, the employee or the bank? Mr. EPSTEIN. It is the ultimate irony, Mr. Chairman. In any event, the extra cost is quite nominal and the money saved by the bank in no longer mailing monthly statements and not incurring the processin costs attendant to handing active accounts plus the earnings from suc accounts more than offsets any increased costs resulting from the customers' lack of deposits or withdrawals. States in maintaining custody and administering inacth~e accounts turned over to them for safekeeping incur costs ranging from 16 cents to 28 cents per year on each account. While banks typically claim it cOsts them $35 to $45 a year to main- tain an inactive account, for some inexplicable reason no bank has yet to accept the offers of the State treasurers of Minnesota and Massa- chusetts that they either return the money to the owner or simply turn the accounts over to the State for safekeeping instead of continuing to incur these considerable losses, PAGENO="0164" 160 The job of the States is a difficult one for several reasons. Unless the State is prepared to put auditors in the field examining bank records, it is clear that almost all banks will refuse to comply with the law. The recent experience of Montana in enforcing its law is revealing. In this case the Billings Gazette-I have a copy of the article and with your permission I will put it in the record [see p. 1094]-reported that the Security Bank of Billings was holding $11,000 in a certificate of de- posit owned by a 30-year employee who had died 11 years earlier. As a result of Montana's demand for the account, the bank searched local probate records and located the heirs named on the certificate of de- posit. The heirs when contacted by the bank said they had no idea the money was theirs. The estate had been settled almost a decade earlier. With State legislatures cutting back on the budget, a new program such as unclaimed property auditing frequently gets caught in the squeeze. Even where the States have hired and trained auditors the work has been arduous. While the Comptroller of the Currency has advised this committee that service charging by national banks is subject to State law-and that is in a letter from Comptroller Heimann dated December 4, 1979-and the Comptroller's examination pro- cedures include compliance with State unclaimed property laws, prior testimony indicates that a State cannot rely on such a review. Thus, in most cases it has been necessary for the State to literally go out and examine every national bank. With the increased activity on the part of the States, some national banks throughout the country are now contending under the "visitorial powers" statute, the State cannot examine their records for unclaimed property. For example, Seattle First National Bank, the largest bank in the State of Washington, has permitted an examination of only its most recent unclaimed property report, for a 1-year period. The bank's service charges are $88 per account and up to $104 per account. Law- suits have been filed against Crocker National Bank in California and the First National Bank of St. Paul in order to gain access to their records. Similarly, in Nebraska-and the Nebraska State treasurer is here today, Mr. Frank Marsh, who can probably relate his experiences if requested-and in Illinois, banks are resisting examination by law- ful State authorities. As indicated in earlier testimony, the Comptroller has created the problem by advising national banks they need not permit such examination for unclaimed property. Therefore, even in the few States which have auditing programs, the consumer is not adequately protected. Unfortunately, in the over- whelming number of States the consumer is left at the mercy of the banks. State unclaimed property laws are not self-enforcing and in the absence of some meaningful activity on the part of the Comptroller and other Federal regulators, the consumers will simply continue to lose their money just as they have since the first report to Congress in 1924. The service charge problem is now becoming more severe. Several large banks have recently instituted or increased their service charges. In order to bring an immediate halt to this consumer abuse in national banks. the States need the Comptroller of the Currency to undertake effective examinations for service charging contrary to the law. PAGENO="0165" 161 Additionally, it is my recommendation that no bank should be permitted to impose a charge on an inactive account that is not imposed on active accounts-other than for costs incurred in making special efforts to locate a missing owner. In other words, if the marketplace of owners of active accounts will not tolerate these charges, then the charges should not be allowed against missing owners who are not there to complain. Consideration Ghould be given to legislatively requiring banks to return the money in inactive accounts to the owner in lieu of imposing a service charge. Finally-and I emphasize-it shOuld be noted that the consumer is not entirely free from blame in this situation. Where the inattentive depositor has failed to advise the bank of a change in address, the cost of locating the missing customer, where the size of the account war- rants the effort, should properly be borne by that person and not by all of the bank's other customers. Thus, in that instance, a contract pro- vision providing for a reasonable service charge for locating the missing owner would seem appropriate. The one thing I would observe in connection with the question that has been asked about why this is occurring in the Comptroller's Office, I think, quite frankly, it is because there really is no constituency to advocate their interests-because the owners are missing. It is only the people who step into the shoes of the owners, the States, that in effect become the custodian of these funds, who can complain. We have been slow in doing that although the initial contacts with the Comp- troller, James Smith, were back in i975. But there really has not been an active effort until the last 2 years to tell the Comptroller about this. That concludes my testimony, Mr. Chairman. Mr. ROSENTHAL. Thank you, Mr. Epstein. Wit.hout objection, your entire ~tatement and attachments will be entered into the record at this point.~ [Mr. Epstein's prepared statement, with attachments, follow :J PAGENO="0166" 162 David J. Epstein Testimony before House Subcommittee on Commerce, Consumer and Monetary Affairs July 23, 1980 (202) 737 1234 SUMMARY OF TESTIMONY (Note: This material for release 10:00 a.m., July 23, 1980) JULY 23, 1980 -- David J. Epstein, the special counsel to an organization of 35 state governments, told a Congressional Committee today that new audit information shows that banks are mow holding some $443 million in funds which have been illegally seized from their customers. "In what is probably one of the .worst consumer ripoffs now taking place, last year alone banks, savings and loans, and trust companies simply took as their own income more than $40 million that is actually the property of their missing or forgetful customers", said David J. Epstein. Epstein, Special Counsel to the National Association of Unclaimed Property Adiuinistrators, during the past five years has helped eight states indentify more than $75 million which financial institutions had taken from their customers. The Los Angeles attorney, who has assisted California, Massachusetts, Minnesota, Montana, Illinois, Rhode Island, Washington and Wisconsin collect money improperly confiscated by banks, told Congress that banks routinely keep, in violation of law, money which should be returned to their customers or PAGENO="0167" 163 turned over to the state governments in trust. This happens, he explained, when the banks assess a "service charge" against inactive checking or savings accounts. `Almost every bank will impose a `service charge' against a customer's account if he has failed to make a deposit or withdrawal for a relatively short period of time, generally rancinc from six months to 24 months", Epstein said. The "service charges" eventually deplete manyaccounts, leaving a zero balance. The banks then assume the entire original balance as income to th~ bank, the Los Angeles attorney told Congress. He said the practice violat~s the law because banks and other financial institutions are~ required to report so-called "unclaimed money" to state gover~ments, which in turn hold the funds for safekeeping and attemp~ to locate the rightful owners.. "Under these laws the state~ attempts to locate the owner by placing ads in major newspapers and mailing notices to the owner's last known address", Epstein explained. "The money is held permanently in trust and the owner can claim it at any time." Epstein, who has specialized in "unclaimed property" law for the past five years, is also~ a consultant to the House Subcommittee on Commerce, Consumer and Monetary Affairs. The State of California, whose program he helped develop beginning in 1975, just last week won a $20 million lawsuit against the Bank of America. The court ruled that the bank had illegally confiscated the money from customers' dormant accounts. PAGENO="0168" 164 Epstein's projections of total suns illegally taken nationwide are based on actual audit experiences in California and Massachuset.ts. Those findings were projected on a per capita basis to other states. Appendix A to Epstein's testimony gives detailed breakdowns. 3. PAGENO="0169" 165 DAVID J. EPSTEIN ATTORNEY AT LAW. TWO CENTURY PLAZA. $UITE 2060 2049 CENTURY PARK EART LOS ANGELES, CALIFORNIA 00067 TELEPHONE (213) 922.9418 July 23, 1980 ~r. Chairman and members of the Committee, my name is David 3. Epstein. I am an attorney practicing in Los ~ngeles, California, specializing in unclaimed property law. I serve as Special Counsel to the National Association of Unclaimed Property Administrators, an organization of 35 state ccvernments. I first became in~olved in the unclaimed property issue in 1974 when I conducted study which concluded that tens of millions of dollars of bank accounts were being service charmed out of existence. In 197.5 I assisted California State Controller Ken Cory and Governo~ Jerry Brown in establishing a program to stop these abuses. Since then, I have served as an unclaimed property consultan~ to the States of Massachusetts, ~:innesota, Monzana, Illinois, RF~ode Island, Washington and wisconsin. Each year national and state banks, savings and loan associations, trust companies, brokerage houses and other financial institutions play a multimillion dollar game of "finders keepers, losers weepers" with their missing customers' savin9s and checking accounts, uncashed money orders and cashiers checks and other property. In what is probably one of the worst consumer ripoffs now taking place, last year alone banks, savings and loans, and trust companies simply took as their own income more than $40 million owing to their missing or forgetful customers. PAGENO="0170" 166 Based on actual audits of several national and state banks, it can be conservatively estimated there is a total of more than $443 million now owing by financial.institutions to their customers. 1/ But this is only part of the picture; audits of other businesses which are not the subject of these hearings such as insurance companies, department stores, and major cor- porations, suggest that estimates of $15 billion in unclaimed property growing at the rate of $1 billion a year may be accurate. 2/ Five banks in Massachusetts were found to owe $3.4 million; 23 banks in California $32.54 million; and three banks in Minnesota more than $1 million. Finally, last week's court ruling that the Bank of America must return to its customers an estimated $20 million in service charges, unpaid interest and penalties makes clear that these monies belong to the depositor and not the bank. The reason for this problem is not a lack of laws. With the notable exception of the District of Columbia, since the turn of the century most states have enacted laws which require the reporting and subsequent delivery of unclaimed bank accounts. Additionally, during the 1950's and 1960's more than 40 states enacted comprehensive legislation pro- viding for all types of unclaimed property to be placed in the protective custody of the state for safekeeping. Under 1/ Appendix Asets forth the computation of these amounts. 2/ Wall Street Journal, 1962 PAGENO="0171" 167 these laws tile state attempts td locate the owner by placing ads in i~ajor newspapers and mailing notices to the owners' last :~:novn address. The money is held permanently in trust and the owner can claic it at any time. Furthermore, almost seventy years ago the U.S. Supreme Court affirmed the constitutional right of states to take unclaimed accounts into safekeeping until the lawful owners could b~ located 3/ and 37 years ago the .S. Supre~le Court specifically ruled that national banks must turn over these accounts 4/ stating: "... it is within the constitutional power.of the state to project the interests of the depositors from the risks which attend long neglected accounts, by taking them into custody .... Considering the exist~nce of case law and statutes re~uiring the reporting and delivery of these accounts, it certainly is surprising that suchenormous sums of money escape the protective custody of state law and as hereinafter indicated instead find their way into the retained earnings column of the holder's balance sheet. In order to develop a~ frame of reference for pro- posing a solution to this probl~em it is helpful to review how such widespread noncompliance with the law was allowed to occur. 3/ Provident Institution for Savings v. Malone, 221 U.S. 900 (1911) 4/ Anderson v. Luckett, 321 U.S. 233,241 (1943) PAGENO="0172" 168 In the first instance, it should be noted that the problem is not new. Both Congress and the Comptroller of the Currency were put on notice more than a half century ago. In 1924 the State of Pennsylvania in hearings before the subcom- mittee of The Committee on the Judiciary warned that "The Comptroller of the Currency has never required his examiners to examine and make return of the unclaimed moneys held by national banks which have been carried to `profit and loss'. In other words, such banks have been permitted to steal their depositors moneys ad libitum. We have discovered this fact in Pennsylvania, where we have discovered and taken over many thousands of dollars which the national banks at first claimed they did not have, but which, in fact, they had transferred to `profit and loss' accounts." 5/ The states also have not been without notice of the failure of banks to report and deliver unclaimed property. Minutes of a 1962 organization meeting of the Association of Unclaimed Property Administrators detail various non reportir.g practices 6/ and the Wall Street Journal in a story that year reported on the vast sums of unclaimed property previously referred to. 5/ Appendix 13, Brief of Hon. Frank Eastman, Special Deputy Attorney General of Pennsylvania, Escheat of Unclaimed Moneys in National Banks, hearing before a subcommittee of the Committee on the Judiciary, United States Senate 68th Congress, First Se'ssion on S. 111, March 25, 1974. 6/ Unpublished minutes, Conference Relative to Abandoned Property Administrators, April 26-27, 1962, Tallahasee, Florida. PAGENO="0173" 169 Throughout the country, the procedure is identical. Almost every bank will impose a "service charget' against a customer's account if he has failed to make a deposit or with- drawal for a relatively short period of time, generally ranging from 6 months to 24 months. The lowest service charge takes all accounts of $20 or less. The highest service charge founá so far is $480 per account. Additionally, at the same tiie the bank stops paying interest on savings accunts, although in some cases interest will be paid if the account exceeds a minimum balance such as $50 or sioo. Usually, the customer is never really advised of the charge. As authority for the charges, the bank relies on the fire print on the customer's signature card which states that the customer is subject to the bylaws or rules and regulations now in effect or hereinafter ado~ted. tjntil recently the customer was almost never provid~d with a copy of the bylaws. which provided for the service charges and in any event a custoser at the time of opening an account would be unlikely to knowledgeably consider or appreciate such a provision. In many cases the bylaws were subsequently amended providing for a service charge in the first instance or substantially increasing a previously undisclosed service charge. The comments of the court in last week's Bank of America case 7/ regarding these practices are appropriate: 7/ Bank of America v. Cory, County of Sacramento, Superior - Court, California, no. 257509, pages 8-11, Statement of Intended Decision. PAGENO="0174" 170 "First, the primary and purported purpose of the signature card is not to form a contract but rather to provide the Bank with the cus- tomer's specimen signature. Second, the customer is not actually or constructively notified at the time of executing the card that the Bank will impose service charges if the account becomes inactive or dormant. Third, the customer has insufficient notice of or access to the Bank's bylaws and regu- lations relating to service charges on inactive or dormant accounts. The evidence is clear that a bank customer is not given, and as practical matter cannot obtain, a copy of the Bank's bylaws, rules and regulations and practices pertaining to its service charge practices ... Fourth, the fact that the Bank may unilaterally amend or modify its bylaws and regulations without notice to the customer would render a supposed contract created by the signature card illusory. Fina~y, the signature card, if a contract at all, is an adhesion contract which this Court finds to be unenforceable to the extent it purports to authorize the Bank to service charge or withhold interest from dormant acccunts," PAGENO="0175" 171 The ~ourt noted that the service charge was unfair even if a bank officer could forgive the charge "... depending on whether or not in the officer's opinion the customer was worthy of benevolence on the part of the Bank, i.e., was the customer likely to be a `profitable customer'. It is easy to see that the customers of the bank who could least afford the service charges or withheld interest are the ones most likely to be adversely affected by such practices. Surely the State of California would be classified as a `good customer'." A story in the Los Angeles Times 8/ reveals just how this policy operates. Late last~ year, Eileen Herman, age 9, attempted to make a deposit to the savings account her parents had orened for her at Bank of America. Instead, she discovered the bank had service charged her~ account $54 and sent the balance, $4.44, to Controller Cory. Bank officials refused to give Eileen the balance of her savings account until Cory held a press conference exposing, the problem. A 1974 survey of California banks by the California Attorney General's Consumer Protection Unit 9/ is revealing of statewide banking practices. Less than 20% of the banks made affirmative attempts to loc~te owners of an inactive account; more than 50% of the ba~-iks never informed customers of service charges; and almost half the responding banks ceased the payment of interest. 8/ See appendix C 9/ See appendix U; a 1978 survey by examiners from the Comptroller of the Currency and F.D.I.C. found that 38% of the banks failed to give notice of changes in savings and checking account terms. Division of Consumer Affairs memo dated February 7, 1979. 67.~4L~O 0 - 81 - 12 PAGENO="0176" 172 Since banks insist that service charges must be imposed in order to compensate then for their services, at this point it ~iould be useful to examine what "service" the customer receives in exchange for the "service charge". The banks explain that when an account is inactive it becomes the target for employee embezzlement and in order to protect the customer against such unauthorized taking of his money, the account must be segregated and placed under special controls requiring a hank officer's prior approval before a withdrawal can be made. Thus, in order to pay for this extra protection of the customer's account and to prevent employee embezzlement, the bank typically takes and wipes out of existence through service charges the vast majority of all such accounts. Comian sense suggests that the overwhelming majority of missing bank customers would be much better protected by allowing a few of their accounts to be occasionally embezzled in lieu of the bank regularly taking their accounts as its own income. In any event, the extra. cost is quite nominal and the money saved by the bank in no longer mailing monthly statements and not incurring the processing costs attendant to handling active accounts plus the earnings from such accounts more than offsets any inceased costs resulting from the customers' lack of deposits or withdrawals. States in maintaining custody and administering inactive accounts turned over to them for safekeeping incur costs ranging from PAGENO="0177" 173 $.l6 to $.28 per year on each account. 10/ While banks typically claim it costs then $35-$45 a year to maintain an inactive account, for some inexplicable reason no bank has yet to accept the offers of the State Treasurers of ~innesota and Massachusetts that they either return the money to the owner or~ simply turn the accounts over to the state for safekeepin~ instead of continuing to incur these considerable losses.~ Quite recently several~ unclaimed property admini- strators discovered through audi~s the full extent of the oroblem -- the banks were imposing service charges in lieu of rerorting unclaimed accounts. The problem was hidden because the holders simply reported only~ those larger accounts which survived the service charge and made no disclosure of the existE~nce of the accounts which had been reduced to zero by the service charges. Thus until~ 1974 when Robert Fairbanks of the Los Angeles Times wrote a~ series ofarticles documenting the abuses 11/ and California Governor Jerry Brown made an issue of these service charges and signed legislation curtailing the abuses, no one was fully aware of the true extent of the problem. In fact, the then California State Controller estimated that at best unclaimed property abuses 10/ California $.l6/year (se~ Appendix E) Massachusetts $.23/year Minnesota $.28/year 11/ Appendix F PAGENO="0178" 174 amounted to only a few million dollars. Based on increased reporting and advertising since California Controller Cory took office, the nonreportirig was closer, to a few hundred million dollars. Since the Minnesota, Massachusetts and California audit experiences documented the existence of such large sums of unclaimed accounts, a handful of other states have now initiated programs to recover these funds for their residents and taxpayers. The job is a difficult one for several reasons. Unless the state is prepared to put auditors in the field examining bank records, it is clear that almost all banks will refuse to comply with the law. For some reason compliance with the unclaimed property law is viewed as optional. With state legislatures cutting back on the budget a new program such as unclaimed property auditing frequently gets caught in the squeeze. Sir~ce an unclaimed property auditor normally makes audit findings of $250 up to $2,000 per hour and in some cases state law allows his salary to be paid out of the recovered property, the influence of the holders may account for the failure to adopt such cost effective programs. Ever where the states have hired and trained auditors the work has been arduous. While the Comptroller of the Currency has advised this Committee that service charging by national PAGENO="0179" 175 banks is subject to state law 12/ and the Comptroller's examination procedures include compliance with state unclaimed property laws, prior testimony indicates that a state cannot rely on such a review. Thus, in most cases it has been~ r~ecessarv for the state to literally go out and examine every national bank. All but a few state laws have no financial disincentive provisions for not reporting the~property; accordingly, the holders simply keep the accounts. While nearly every state law provides it is a crime not to report unclaimed property, im ~o instance has a prosecution~every been undertaken or for that matter threatened. With the increased activity on the part of the states, some national banks throughout the country are now contending that under the "visitórial powers" statute 13/ the state cannot examine their records for unclaimed property. ror example, Feattle First National Bank, the largest bank in the State of Washington, has permitted am examination of only its most recent unclaimed property report (the bank's service charges are $88 per account); lawsuits have been filed against Cracker Bank in California and the First National Bank of St. Paul; similarly, in Nebraska andIllinois, banks are resisting exa~.~ation by lawful state authorities. 12/ Letter from John G. Heimann, Comptroller of the Currency, December 4, 1979. 13/ 12 U.S.C. §484. PAGENO="0180" 176 As indicated in earlier testimony, the Comptroller has created the problem by advising national banks they need not permit such examinations for unclaimed property. Even where a state can obtain a budget for an adequate enforcement program, the problems in initiating the program are considerable. Auditin~g for unclaimed property is unique and requires specialized training for the auditors and sophisticated techniques and audit programs. At every step in the proceedings it is likely that the program will be met with considerable resistance from the largest and most effective law firms in the state. Further complicating the unclaimed property administrators' efforts is the typical situation that his attorney general's office is understaffed and simply cannot make the necessary personnel available for extensive enforcement efforts with numerous banks. The service charge problem is now becoming more severe. Several large banks have recently instituted or increased their service charges. Continental Illinois National Bank and Manufacturers Hanover charge $4 per year if the average balance of a savings account is less than $100, First National StatE~ Bank of New Jersey charges $12 a year on student and regular passbook accounts which average less than $100. 14/ Even if these banks gave advance notice to their customers of these charges, in many cases it would be 14/ Appendix G, New York Times, April 8, 1980. PAGENO="0181" 177 ineffective because small account owners frequently have r~oved. Thus, their accounts will simply be wiped out of existOnc~. As i~idicated, the cost to the American consumer in service charges on inactive banI~ accounts is enormous -- $40 million a year and increasing. Based on the experience of several states, it is reasonable to expect that at least half of the money can be returned to~the missing customers and probably much nore. However, if the banks continue service - charging at their present pace, by the time the majority of the states are able to recover the money for its citizens either it will be too late to locate the missing owner or the bank will have lost the owners' names. In order to bring an immediate halt to this consumer abuse in natio-tal banks, the states need the Comptroller of the Currency t undertake effective examinations for service charging contrary to the law. Additionally, no bank should be permitted to impose a charge~ on i~n inactive account that is not imposed on active accounts other than for costs incurred in making special efforts to locate *a missing owner. In other words, if the market place of owners of active accounts will not tolerate these charges, then the charges should not be allowed against missing owners who are not there to complain. If free checking account advertising is not free, banks should te prohibited from so advertising; if interest PAGENO="0182" 178 is not paid on savings accounts, banks should make adequate disclosures. 15/ Consideration should be given to legislatively requiring banks to return the money in inactive accounts to the owner in lieu of imposing a service charge. Finally, it should be noted that the consumer is not entirely free from blame in this situation. Where the inattentive depositor has failed to advise the bank of a change in address, the cost of locating the missing customer, where the size of the account warrants the effort, should properly be borne by that person and not by all of the bank's other customers. Thus, in that instance, a contract provision providing for a reasonable service charge for locating the rlissing owner would seem appropriate. 15/ Federal ~rade Commission Act, Public Law 93-637 §18f prohibits; unfair or deceptive practices by banks. PAGENO="0183" 179 APPENDIX A SERVICE CHARGES ON UNC~AIMED ACCOUNTS AND FUNDS HELD BY BANKS AND SAVINGS AND LOANS The extensive audit experiences of California and ~assachusetts `iocurnent the amounts of inactive savings and checking accounts, uncashed money orders, cashiers checks and other official checks and trust property now being held by banks throughout the remainder of the country. California Bank and savings and loan audit findings (See Schedule 1) $33,747,000 Average population of California during abandonment period (1960-73) 17.9 million Amount of service charges on inactive bank and savings and loan accounts and funds per person $1.89 The California figure is confirrn~d by ~assachusetts audit experiences ~f banks which resulted in a per person amount of $1.79 (With the inclusion of savings banks the amount will be almost equal to California; see Schedule 2) PAGENO="0184" 180 Customer Accounts and Funds Now Owing 2/ Z\raourits taken 1960-1973: Average Unite] Staten population (excluding California and Massachusetts) during 1960- ~973 -- 171 million at $1.89/person $323 million Amounts taken 1974-19;76: 3/ The amount of inactive accounts and service charging increases directly with the increase in total deposits by banks. Accordingly, by applying a ratio of U.S. deposits, 1973, to the total of U.S. deposits 1960-1973, or 12.3% to $323, inactive property for the year 1973 is $40 million. 1/ l'or the 3 period 1974-1976, the amount is $120 million Total service charges on inactive accounts and funds $443 million 2/ Ar ide fruit Ca] ifornia and Massachu3et ts, the o~:her states have not yet succeeded in compelling tie banks and savings and loans to repsy their customers' mactile accounts ~~nd funds which have been service charged. (See rcsponsen to Committee's Unclaifled Prorerty Questionnaire) Lack of auditors, pending litiq~tiOn, bank refusul to permit sod it~ , pending audits an] unfam ;liarity with servica charging proc1 ices account for the funds now ho ~rg hr Id by binks and smvioJ1 and loan';. 3/ Service c~arging usually commences by the 3rd year of inact ~v ity. 4/ Icrplying the 1 atio of audited service charges by Bank of America to it~ bank deposits in year cIT charge to total U.S. bank deposits yields a similar amount, $42 million per year. PAGENO="0185" 181 ~ - ~ E 444~4'~c!~ ~J ~ ~R c ~ ~ 44444 ~ ~ ~ ~ ~ ~E 444 44~44~ 4 L~ ~ i~r~ ~ I ~r 1 ~I I ~ ~ 4 U `-4 I t 1. PAGENO="0186" OPAT! CCOATWRLUD 0017609101 1*M!A8 13190091 1E1021)PEO P021 £012.0 AUDI? ACTIVItY 1976/1977 £13066 TEAl AT 432*8 30, 1977 Audit Diroct ----I1a~oi. d.v.lop.d- Tot*1 Totct 7664 fl~port AudU. *.ount A.uunt A.uunt *lav.nui EAin.tst.bti 26414 0r~mios1109 ~ ~)~4~4 ~,updebJ~ ~46~4 ~3~4 J1i~dt~ei~, 127 3*111613*370 0*, $ 927.56 $ 937.531 $ p 6e9.65 6 1,679.21 0 .0. 6 1,627.212~ 120 II28TA 1*110*0* 1*911802 166 13,602.115 13,602.05 5,621,.712 19,307.5% 306.03 l9,A96.)$~ 129 140YA7ITW 5*00103 174 2,310.75 2,310.75 .0- 2,310.75 .0. 2,310.75 97 1)0* `300011*, 10*11335, I1~3 17011*13 762 .0.. 257,944.31, .0- 257,91.4.34 .0- 257,944.34 131 *05.1.0 26*12155 166 4,3.04.97 4,464.97 -0-. 4,464.97 -0- 4,6(1.97 x 132 10I1V175#L 192117 OEW2I ~. 2% -0- 1fl3.,9Th22 76,134.12 261,121.4 369,257.90 . 410,3*9.74 1)3 81)70 0? A. LEVY 791 15,540.63 16,71.6.86 1.1,391.36 28,1)0.24 21, 7)3.77 . 52,992.011 134 WAIT FI213AL 5*017310 62 63,293.65 50,431.0) .0- 50,439.0) -0- 50,4)9.3)97 135 CALIFOIWI* C&SAOIJJI 10180 376 3.3,599.09 13,503.1,0 57,050.32 71,361.91 13,950.16 85,319.51 ,u 136 WALT 015517 FROFYJCTICII1 377 0,494.66 0,494.66 31,707.90 40,202.56 67,0)1.36 197,313.94 137* ILUE (73013 0? 00011021* CAL3~1*I4 1331 336,690.55 509,641.14 73,706.90 503,11,8.4 765,500.3) 1 1,340,660.37 13, 01 LIFE 1*917103 160 27,504.56 77~50A3.56 16,075.51, . 44,309.10 63,092.56 107,652.660* 1)9 STATE 1WTUAL 1*911303 131, 34,11,4.62 26,076.14 9,226.13, . 36,102.30 -0. 36,10.7.21 16 21,0 CITiZEnS 1*85013 * 302 54,586.12 49,120.14 5,475.90 54,586.32 4,593,65 59,179.7797 141 (617391117 06301 272 . 6,609.76 6,609.70 1,550.93 0,160.7* 19,032.69 - 37,201.80 0' 1.42 1OCt01?? PACIFIC IIATIOTIAL 1*1*11 822 .0- 1,338,410.66 2~123,032.74 3,461,451.30 2,349,531.05 `(`) 5,010,903.2) .8 1.43 (SIZED CALIFOI30L* 06111 2,716 1,209,743.97 . 1,269,743.97 79,912.66 1,349,650.6) 716 479.67 2,006,096.30 144 773A115/JDIUCA C0IUOOATICI* 3.50 253,400.00 111,220.53 77,051.50 . 109,000.14 -0. 109,096611 1.45 D2'13*L*L 5*80102 11,2 22,020.12 9,210.09 12,002.0) 22,020.12 , .0- 22,0.9)12 3.46 092717 2*00003 109 .0- .0. 3,267.46 3,267.46 -0- 3,267.66 0 147 MECSA1IICS 2000 07 3,93.1.28, 3,941.24 172.03 4,116.07 3,2)7.00 7,3t7.07.~ 31.6 `4621 0317*31:8 1,117 .0- 652,761,45 354,569.15 1,007,330.60 609,247.20 . 1,696,sfl.o0 iSO 01.0(D) 13*80 1,640 767,41.7.64 361,404.02 .1,394,613,92 1,756,015.74 1)0,594.96 1,006,610.80 151 1*1115216 17600 045 62,076.06 45,744.53 24,550.10 . 70,302.63 00,261.01 . 01,507.51 (~) 132 101713*3.1103104 ~13 0*101AT8 9*1%? ~j31~7, . 3~721k17 ~Q~_-. ,_751..9)2~UD ,754,9)3,6~ -~--- .1)4.932,621 S T0?ALI . 04.96~..444,.7j $~6,c4~.6Q $~,Q63,405,j5 $~,ocY7.fl99,3t 11*009.87 p.r Direct AUdit *lenr l7~2*2 $391.~ V,07.~ O001.fl . ~fl212Z ~0~ Ilacovery per Men Tse.r (106p so) 370,030.30 471,104.53 * 483~393.13 956,497.67 475,132.76 1,431,630.43 te,t per lien Tear 124J00,001 [.,j07,97~ j~3~,~00.001 let COU.ctAon,/10M*J11e per Auditor . _______ ________ SCHEDULE 1-2 . . (a) ~fl~A'*a44~ to ~ ~~~LL*o* ~ ~tl4)4o) *~ `~J4tLn E'4f'90 T9nts~*?. 6t~-~ qqi,~~ (`3) Croct~1~ fl,t*09'uL ~ f*~1,-~.~$' ~çC~..*tt ~ ~~I-4t~e' ¶~`~ ~ ~ PAGENO="0187" 183 ~ .~ti ~ 4 i~ "4 ;~ ~ ~ ~J _ ~ 11 ~ ,!fl ;»=~ ~ ~. ~ *~i~1 ~ ~1 *~ ~ .~; ~ ~ -" ~ ~ : ~r ~ ~* ~ ~ ~ ~ ~ __ - !~ h ~ * * i~L, 4~T ~ ~ ~ k PAGENO="0188" 184 Schedule 2 Massachusetts Partial Bank Audit Findings (See Schedule 3) $3,410,000 These findings are for banks having 63% of the total Massachusetts deposits. Therefore, when audits are completed, total findings should approximate $3,410,000 = $5,412,000 63 Massachusetts abandonment period is 10 years; to adjust for California 7 year period which was enacted in Massachusetts on May 5, 1980 the following computation is required: Audit findings $5,412,000 Average population during abandonment period (1958- 1969) 5.4 million Unadjusted average unreported bank accounts and funds per person $1.00 Average per year per person $1/10 years = $.lO Reduction of abandonment period from 10 years to 7 years (4 report periods) 4 x .10 1/ = $.40 Adjustment for increase in deposits at rate of 10% per year for 3 years $1.30 x 30% $.39 Adjusted amount of service charges on inactive bank accounts and funds per person (does not include savings banks) $1.79 1/ Reduction of the abandonment period increases the amount of dormant accounts. For example, Massachusetts in 1975 reduced its abandonment period from 14 years to 10 years. The reports of abandoned property for national banks for the prior year, 1974, equalled $103,000 for 1975 (a 4 year report period) $850,000 and in 1976, $188,000 or an 85% increase over 1974. PAGENO="0189" 185 Schedule 3 MASSACHUSETTS Amounts of Unclaimed Property Disclosed by Audit 1st National Bank of Boston New England Merchants National Bank Shawmut National Bank State Street Bank Bay Banks total audit findings $1,617,000 $ 344,000 $ 440,000 $ 666,000 $ 343,000 $3,410,000 PAGENO="0190" OF UNCLAIMED MONEYS IN NATIONAL BANKS HEARING ON THE JUDICIARY STATES SENATE. SIXTY-EIGHTH CONGRESS FIRST SESSION S. 111 A BILL TO AMEND SECTION 5219 OF THE REVISED STATUTES OF THE UNITED STAlES 186 ESCHEAT BEFORE A SUBCOMMITTEE OF THE COMMITTEE * ~*.* UNITED MARCH 2.5, 1924 Printed for~ ~the~n8g ot the :Committe~ on the ~udiciary 2 ~ I ~*~`*-`` -*~ ;*~,~`` *i L~: WASRINGTON GOVERNMENT PRINTING OFFICE 1!~24 APPENDIX B PAGENO="0191" 187 1;? COMMI~TE~ ON THE TUDICIARY FRANK B. BRANDEGEE, Connecticut, Cliairina* WILLIAM E. BORAE, Idaho. LEE S. OVERMAN, North Carolina. ALBERT B. CUMMINS, Iowa. JAMES A. REED, Missouri. LEBARON II. COLT, Rhode Island. HENRY F. ASHURST, Arizona. THOMAS STERLING, South Dakota. JOHN K. SHIELDS, Tennessee. GEORGE W. NORRIS, Nebraska. THOMAS 3. WALSH, Montana. RICHARD P. ERNST, Kentucky. AUGUSTUS 0. STANLEY, Kentucky. SAMUEL M. SHORTRIDGE, California. THADDEUS H. CARAWAY, Arkansas. SELDEN P. SPENCER, Missouri. W. DON LUNDY, (flerl GEORGS, GORDON PAYNE, A~si&tant Clerk SUBCO3(MITTEE ON S. 111 RICHARD P. ERNST, Chafrman SELDEN P. SPENCER. THADDEUS H. CARAWAY. II REQEIVED APR 18 1924 DOCUMENTS ~fVf~!oN 67-4LtO 0 - 81 - 13 PAGENO="0192" 188 ESCIIEAT OF UNCLAIMED MONEYS IN NATIONAL BANKS TUESDAY, MABCH 25, 1924 UNITED STATES SENATE, SuBC0MMITrEE OF COMMITrEE ON THE JUDICIARY, Washington, D. C. The subcommittee met, pursuant to call, at 3.30 p. m., in the hear- ing room of the Committee on Privileges and Elections in the Capitol Building. Present: Senator Spencer (acting chairman of subcommittee). Present also: Senator Pepper. The committee thereupon proceeded to the consideration of S. 111, which is here printed in full, as follows: [S. 111, Sixty-eIghth Congress, first session) A BILL To amend section 5219 of the Revised Statutes of the United States Be it enacted by the Senate and House of Repre8entatives of the United States of America in Congress assembled, That section 5219 of the Revised Statutes of the United States be, .and the same is hereby, amended by the In- sertion at the thereof of the following: "No legislation adopted by any State, which legislation provides for the escheat to said State of unclaimed moneys in the possession of national banks within -said State, whether such moneys be held on deposit or under a trust or trusts the active duties of which have all been performed, or which legisla- tion provides for the payment of such unclaimed moneys in the possession or national banks in said State into the treasury of the State enacting such legislation, without escheat, to be held indefinitely by said State, subject to being refunded at any time to the depositors of such moneys, respectively, when claimed by them or their legal representatives in the manner prescribed by such legislation, or refunded to the beneficiaries of such trusts, respectively, when claimed by them or their legal representatives, in like manner, shall be deemed or held void or invalid as an attempt by a State to define the duties or* control the conduct of the affairs of national banks, or to frustrate the purposes of congressional legislation relating to national banks or to Impair the efficiency of national banks to discharge the duties for which they were created: Pro- vided, however, That such legislation shall apply as well to unclaimed funds in the possession of State banks and banking Institutions as to unclaimed funds In the possession of national banks of the State enacting such legisla- tion: And provided also, That such legislation shall not provide for the escheat or the taking without esclieat of such unclaimed moneys after the expiration~ of a shorter period than fourteen years from the date when the respective. depositors or trustees shall have last exercised, In such manner as the afore- said legislation of such State shall prescrThe, any right of ownership or of possession of such unclaimed moneys, whether such moneys were held by said banks on (leposit or under a trust or trusts the active duties of which have all been performed." - Senator SPENCER. We will now take up Senate bill 111, a bill to amend section 5219 of the Revised Statutes of the United States. Senator PEPPER. Mr. Chairman, this bill was introduced by me at the request of the Hon. George W. Woodruff, attorney general of 1 PAGENO="0193" 189 2 ESCHEAT OF UNCLAIMED MONEYS IN NATIONAL BANKS the Commonwealth of Pennsylvania. Mr. Eastma~i is present on behalf of the attorney general of Pennsylvania, and with your per- mission will submit his statem~nt in support of the measure. STATEMENT OP HON. PRANK M. EASTMAN, SPECIAL DEPUTY AT- TORNEY GENERAL, COM1~IbNWEALTH OP PENNSYLVANIA Mr. EASTMAN. Mr. Chairman, it will not be necessary to take any evidence with reference to this bill. Senator SPENCER. Do you not want to make a statement? Mr. EASTMAN. ~O. Senator SPENCER. You think the bill will speak for itself? Mr. EASTMAN. Yes. Senator PEPPER. Will you submit to the committee the brief which you have prepared? Mr. EASTMAN. Yes; if I may have a little longer time to get it in better shape. Senator PEPPER. If it is a~réeable to the chairman, we will have the brief, when submitted, prmted as the substance of Mr. Eastman's statement to the committee. Senator SPENCER. That will be all right. When can you have it? Mr. EASTMAN. I can have it by the end of this week. Senator SPENcER. You may send it to Senator Pepper and he will send it to me. (The witness subsequently submitted the brief referred to, which is here printed in full, as follows:) BRIEF SUBMITTED BY HON. FRANK M. EASTMAN, SPECIAL DEPUTY ATTORNEY GENERAL OF PENNSYLVANIA The necessity or desirability of the passage of Senate bill 111, entitled "A bill to amend section 5219 of the Revised Statutes of the United States," arises from the decision of the Supreme Court of the United States in First NatIonal Bank of San Jose v. State of CalifornIa (67 U. S. Supreme Court, Lawyers' Edition p. 691, 1023), In which the right of the several States to eseheat unclaimed deposits in the hands of national banks, which right had heretofore been generally conceded, was denied. Since the decision in McCuIloch v. Maryland (4 Wheat. 316), and Osborne v. Bank of the United States (9 Wheat. 736), It has not been questioned that any law of a State which interferes with the operation of a Federal agency is prohibited by the provisions of the Constitution of the United States, but the question in such cases always Is, whether the Federal agency Is, as a matter of fact interfered with in its operation as such agent. * The later decisions upon this question begin with Commonwealth of Ken- tucky v. First National Bank of Louisville (9 Wall. 356-364, 1870), wherein the right of the several States to tax the shares of capital stock of national banks was upheld, and in which Justice Miller said: *" It certainly can not be maintained that banks or other corporations are instrumentalities of the Government are to be wholly withdrawn from State legislation. * * * That limitation is, that the agencies of the Federal Government are only exempt from State legislation so far as that legislation may interfere with, or impair their efficiency in performing the functions by which they are designed to serve that government. * * *" " It is only when the State law incapacitates the banks from discharging their duties to the Government that It becomes unconstitutional. * * *`~ In Union Pacific Railroad Co. v. Peniston (18 Wall. 5, 1873), JustIce Strong said: * "It can not be that a State tax which remotely affects the efficient exercise of a Federal power is for that reason alone inhibited by the Constitution. Every tax levied by a State withdraws from the reach of Federal taxation a PAGENO="0194" 190 -ESCHEAT OF UNCLAIMED MONEYS IN NATIONAL BANKS 3 portion of the property from which it Is taken, and to that extent diminishes the subject upon which Federal taxes may be laid." And so the decisions prior to that in First National Bank of San Jose v. State of California uniformly decide. Since the decision in that case, however, the Supreme Court of the United States has held in the case of First National Bank v. State of Missouri (68 U. S. Supreme Court, Lawyers' Edition, p. 235), that a ruling by a State court as to the construction and operation of a State statute is binding upon the Supreme Court of the United States, and a State statute forbidding national banks to operate branches within the State rests with the State, and not with the National Government. In this case the court says: "Nevertheless national banks are subject to the laws of the State in respect of their affairs unless such laws interfere with the purposes of their creation, tend to impair or destroy their efficiency as Federal agencies or conflict with the paramount laws of the United States * $ * and the principle which they establish is said to contain a rule and an exception. The rule being the operation of general State laws upon the dealing and contracts of national banks. The exception being the cessation of the operation of such laws when- ever they expressly conflict with the laws of the United States or frustrate the purpose for which national banks were created, or impair their effi- ciency to destroy the duties imposed upon them by the laws of the United Statos. * * ~" If a State may prohibit a national bank from establishing branch agencies within its jurisdiction, as held in the last-named case, it would seem as though it might exercise its right of escheat over unclaimed moneys in national banks. Since the decision in First National. Bank, of San .lose v. State of California, also the Supreme Court of the United States has held in Security Savings Rank v. State of California ~l8 U. S. Supreme Court, Lawyers' Edition, p. 119, 1t~23), that no right of a State bank Is infringed by the State requiring It t~ turn over deposits which haye remained unclainfed for a long period of time, and it is immaterial wheth~r the State will receive the money merely as a depositary or take it as an escheat This decision is conclusive as to Stat~ banks though having no bearing upon national banks, but Is referred to merely as showing the recent tendency of the decisions of the Supreme Court of the United States. The decision in First National Bank of San lose v. State of California hoith generally that an attempt by a State to define the duties of national banks -or control the conduct of their affairs is void whenever it conflicts with the laws of the United States or frustrates the purposes of national legislation or Impairs the efficiency of the banks to discharge the duties far which they -were created. -- - More specifically, it holds that a State can not dissolve contracts of de- posits made by national banks, even after the lapse of 20 years, and require banks to pay to it the amounts then due it on deposit accounts. In the said case the court says: - "Plainly, no State may prohibit national banks from accepting deposits or directly im~air their efficiency in that regard. And we think, under circum- stances like those here revealed, a S-tate may not dissolve contracts of leposit even after 20 years and require national banks to pay to it the amount then due; the settled principles stated above oppose such power. - - "Does the statute conflict with the letter or general object and purposes of * the legislation by Congress? Obviously, it attempts to qualify in an unusual way agreements between national banks and their customers long understood to arise when the former receive deposits under their plainly granted powers. If California may thus interfere, other States may do likewise; and, instead of 20 years, varying limitations may be prescribed-3 years perhaps, or 5 years, - or 10, or 15. We can not conclude that Congress intended to permit such re- sults. They seem incompatible with the purnose to establish a system of governmental agencies specifically empowered and expected freely to accept deposits from customers irrespective of domicile with the commonly conse- quent duties and liabilities. The depositors of a national bank often live in many different States and countries; and certainly it would not be an imma~ terial thing if the deposits of all were subject to seizure by the State where the bank happened to be located. The success of almost all cominercial banks depends upon their ability to obtain loans from depositOrs, and these might weil hesitate to subject their funds to possible confiscation." - - PAGENO="0195" 191 4 ESOHEAT OF UNCLAIMED MONEYS IN NATIONAL BANKS The decision in this case being of the court of last resort Is, of course, final and conclusive, but it can do no harm to point out that the power of the States to escheat Is just as exclusive as the power of the United States to pre- vent State legislation which interferes with the operation of a Federal agency. ~HE POWER OF ESCHEAT IS IN THE STATES AND HAS NOT BEEN DELEGATED TO THE UNITED STATES The powers possessed by the United States are enumerated powers or powers necessarily implied from the possession of such powers: "The Government of the United States is one of enumerated powers, the National Constitut:on being the instrument which specifies them and in which authority should be found for the ~xercise of any power which the National Government assumes to possess.'! (Cooley Civil Limitations, 7 Ed. p. 11.) "The Government of the United States can claim no powers which are not granted to it by the Constitution and the powers actually granted must be as expressly given or given by necessary implication." (Per Maishall, Ch. 3'., in Martin v. Hunter's Lessee, 1 Wheat. 303, 326.) "This instrument contains an enumeration of the powers expressly granted by the people to their government." (Marshall, Ch. J., in Gibbons v. Ogden, 9 Wheat. 1, 187.) The tenth amendment to the Constitution provides that "The powers not delegated to the United States by~ the Constitution nor prohibited by it to the States are reserved to the States, respectively, or to the people." The power of escheat is nowhere delegated to the United States, and is therefore confined to the several States. In American Loan & Trust Co. v. Grand Rivers Co. (159 Fed. Rep. 779-780), the power of the States to escheat property is clearly set out. * * ~ It was held in the case of the Mormon Church v. United States (136 U. S. 1, 57; 10 Sup. Ct. 792, 808, 34 L. Ed. 481) that the United States is parens patriae in the Territories, and the court observed; "`Chief Justice Marshall, in the Dartmouth College case, said: "By the Revolution, the duties, as well as the powers, of government devolved on the people. * ~` ~ It is admitted that among the latter was comprehended the transcendent power of Parliament, as well as that of the executive depart- ment." (Wheat. 651, 4 L. Ed. 629.) And Mr. Justice Baldwin, in McGill v. Brown (Brightly, N. P. 346, 373), a case arising on Sarah Zane's will, refer- ring to this declaration of Chief Justice Marshall, said "The Revolution de- volved on the State all the transcendent power of Parliament, and the pre- -rogative of the Crown, and gave their acts the same force and effect." Chan- cellor Kent says: "In this country, the legislature or government of the State, as parens patriae, has the same right to enforce all charities of a public na- ftre, by virtue of its general superintending authority over the public interests, where no other person is intrusted~ with it." (4 Kent, Corn. 508, note.) In Fontain v. Ravenel (17 How. 369, 384, 15 L. Ed. 80), Mr. Justice McLean, delivering the opinion of this court in a charity case, said: "When this country achieved its independence, the prerogatives of the Crown devolved upon the peoples of the States. And this power still remains with them except so far as they have delegated a portion of it to the Federal Government. The sovereign will is made known to us by legislative enactment. The State, as a sovereign, is the parens patriae."'" The court also, in Hamilton v. Brown (160 U. S. 256, 263, 16 Sup. Ct. 585, 587, 40 L. Ed. 691, et seq.) having the law of Texas upon escheats under con- sideration, discussed the question in some of its phases, and said: "By the law of England, before the Declaration of Independence, the lands of a man dying intestate and without lawful heirs reverted by escheat to the King as the sovereign lord; but the King's title was not complete without an actual entry upon the land or judicial proceedings to ascertain the want of heirs and devisees. (Attorney General of Ontario v. Mercer, 8 App. Cas; 767, 772, 2 BI. Corn. 245.) The usual form of proceedings for this purpose was by an inquisition or inquest of office before a jury, which was had upon a corn- i mission out of the court of chancery, but was really a proceeding at common law; and, if it resulted in favor of the King, then by virtue of ancient statutes anyone claiming title In the lands might, by leave of the court, file a traverse, In the nature of a plea or defense to the King's claim, and not in the nature of an original suit. (Lord Somers In the Bankers' Case, 14 Howell's State TrIals, 1, 83; Ex parte Webster, ~ Yes. 809; Ex parte Gwydir, 4 Maddock, 281; PAGENO="0196" ~192 ESCHEAT OF UNCLAIMED MONEYS IN NATIONAL BANKS 5 In re Parry, L; R. 2 Eq. 95; Pecple v. Cutting, 3 Johns, 1; Briggs v. Light Boats, 11 Allen, 157, 172.) The inquest of office was a proceeding in rem. When there was a proper office found for the King, that was notice to all persons who had claims to come in and assert them; and, until so traversed, it was conclusive In the King's favor. (Bayley, J., in Doe v. Redfern, 12 East. 90, 103; 10 Vin. Ab. 86, pL 1.) In this country, when the title to land fails for want of heirs and devisees, it escheats to the State as part of its common ownership, either by mere operation of law, or upon an inquest of office, according to the law of the par- ticular State. (4 Kent, Corn. 424; 3 Wasb. Real Prop. (4th Ed.) 47, 48); * * * These authorities inevitably lead to the conclusion that the Na. tional Government is not in any case the parens patri~ to which ownerless property of any sort in any State of the Union reverts. We think that within the States respectively it is the State which exclusively is parens patriie, and this result can not be affected by the fact that the property might happen to be in the registry of a Federal Court. Though In the registry it is, nevertheless. a part of the general property In the State. The State, under the authorities cited, might with more plausibility be held to succeed to the title of such prop- erty, and might have the right through its escheator to apply to the court for It if any Government be entitled to do so." Now, if a State may not prescribe a time after which unclaimed moneys In national banks may be escheated or taken withotut escheat it necessarily follows that such moneys can never be escheated. Suppose no time is fixed by a State when unclaimed moneys may be escheated. If no such period can be fixed it follows that on the death of the depositor, intestate, without known heirs or kindred, there can be no escheat, and ,therefore, the money must remain indefinitely in the hands of the depositary. - In the said case the court also takes exception to depositors living* In different States and countries being subject to having their unclaimed deposits subject to seizure by the State where the banks happened to be located, but it would seem that' the moneys of such depositors would necessarily be subject to the jurisdictions to which the depositors have voluntarily submitted them. The decision in Security Savings Bank v. State of California (68 U. S. Supreme Court, Lawyers' Edition, p. 119, 1923) seems to be conclusive upon this point: "The unclaimed deposits are debts due by a California corporation with Its place of business there. (State v. Anglo & L. P. Nat. Bank, 186 Cal. 746, 753, 200 Pac. 612; State v. Security Say. Bank, 186 Cal. 419, 423, 199 Pa. 791.) The debts arose out of contracts made and to be performed there. (Farmers & M. Bank v. Federal Reserve Bank, 262 U. S. 649, 600, 67 L. Ed. p. -, A. L. R. -, 43 Sup. Ct. Rep. 651.) Thus the deposits are clearly intangible property within the State. Over this intangible property the State has the same dominion that it has over tangible property. (Pennington v. Fourth Nat. Bank, 243 U. S. 269, 61 L. Ed. 713, L~ R. A. 1917 F, 1159, 37 Sup. Ct. Rep. 282; Bank of Jasper v. First Nat. Bank, 258 U. 5.112, 119, 66 L. Ed. 490, 494, 42 Sup. Ct. Rep. 202." - DEPOSITS IN BANKS ARE DEBTS OF THE BANKS AND CREDITS OF THE DEPOSITORS Unclaimed deposits, whether In State or National banks, are unquestionably debts of the respective banks: "In case of irregular deposits, as those with a banker, the relation of the banker to his customer Is that of debtor and creditor, and does not partake at all of a fiduciary character. It ceases altogether to be the money of the de- positor and becomes the money of the banker. It is his to do what he pleases with and there is no trust created. (Edw. Baum, 41, 45; 17 Wend. 94; 1 Mer. 568. 33 N. E. Rep. (Ohio) 1054; 138 Ill. 590; 33 Fla. 429; 104 U. S. 64. See 37 N. J. E. 18.) The legal remedy is a suit at law for debt; the balance can not be reached by a bill in equity (2 H. L. Cas. 39), except in some cases of 1n~ solvency, when a fund can be followed. (11 Phila. 511. See 1 C. C. App. 598.) The banker is not liable for interest unless expressly contracted for, and the deposit is subject to the statute of limitations (2 H. L. Cas. 39; 139 N. Y. 514)." Under the escheat laws of Pennsylvania unclaimed moneys held by a bank may, after the lapse of 14 years, be taken over by the Commonwealth, which Substitutes itself as debtor for the depositary and refunds to the owner of the moneys whenever proof of ownership is made. Such moneys may be actually escheated, but In practice this is never done in Pennsylvania. The CommOn- wealth in that State merely substitutes Itself as debtor of the unclaimed moneys PAGENO="0197" 193 6 ESCHEAT OF UNCLAIMED MONEYS IN NATIONAL BARKS in place of the depositary and holds the unclaim~1 moneys: SU1)ject to refund whenever the owners make proof of ownership. It will be noted that the necessary result of First National Bank of San Jose r. State of (~alif~rnia will be that all unclaimed moneys held by national banks will he retained by them. Before they were taken over they were dtht~ of the various national depositaries and subject to be claimed by the depositors of the various sums. There will be no autherity in existence, however, which can require the various depositaries to make payments of the several debts. Exi~ri- ence has showii in the State of Pennsylvania (and it is assumed that the case will not he different elsewhere) that after ~i comparatively brief period these moneys are carried to "Profit and loss," and the depositors thus lose their money. In fact, the national depositaries whose moneys were taken over under the law existing before tiie San Jase~bank case now insist that the moneys so taken over belong to them, and not to their depositors, and must be repaid to them. Yational banks are, therefore, according to their contention, entitled to keep and not to refund under any circumstances unclaimed. moneys so refunded by the State. They are given the right to confiscate and appropriate moneys which were deposited with them to he repaid to the depositors whenever claimed by them. This is the ground taken by eminent counsel for national banks in Pennsylvania which paid over to the Commonwealth a little more than 5400,OPO, which they are now asking to have paid back to them, asserting in the petitions asking for such refund the fact that they own such~ moneys. Assuming that the position taken by these eminent counsel is right, the several tanks to whom refunds are made will take the money under no compulsion to refund the same to the depositors thereof, and such moneys will undoubtedly be carried to "Profit and loss," as experience in collecting such moneys has shown in the past. Of course, what should properly be done is to restore the status of the national banks as debtors to the several depositaries, but in that event there would he no one to see that the unclaimed moneys were refunded to the depositors when they should be so refunded. It is possible that some such moneys may be recovered by suit. but in the vast majority of cases the real owners of such funds have no knowledge of the existence of the same, and the national banks may be relied upon not to make searches for the purpose of aiding the depositor. That has been found to be the case in Pennsylvania, where such search was made only after the banks were required to furnish the data relative to such moneys. Our enperience in Pennsylvania in the collection of unclaimed deposits has been that at least one-third of the moneys reported by the various banks is claimed from the banks and paid to the legal heirs of the respective depositors as the result of our advertisement and notice by maiL The Comptroller of the Currency has never required his examiners to examine and make return of the unclaimed moneys held by national banks which have been carried to "Profit and loss." In other words, such banks have been per- mitted to steal their depositors' moneys ad libitum. We have discovered this fact in Pennsylvania, where we have discovered and taken over many thousands of dollars which the national banks at first claimed they did not have, but which, in fact, they had transferred to "Profit and loss" accounts. PROPOSED ACT NOT OBLIGATORY It will be noted that the proposed act merely gives the States license to enact legislation of the kind specified. It by no means makes such action obligatory upon them. I take it that all the laws providing for the escheat of unclaimed moneys in the hands of national banks have been repealed by the decision in First National Bank of San Jose v. State of California, and that in order to escheat or take without escheat unclaimed moneys in the hands of national banks, it will be necessary for the several States to enact new legislation providing for the eseheat or taking without eseheat of such moneys. If the several States wish to make a gift to the various national banks of the unclaimed moneys in their hands belonging to their depositors, and to sacrifice the exercise of the power of escheat, they have only to leave the law as it 110W stands, while, on the other hand, if they wish to see that such moneys shall go to the true owners thereof, they may do so by enacting the bill now before the committee. PAGENO="0198" 194 ESCHEAT OF UNCLAIMED MONEYS IN NATIONAL BANKS 7 PRACTICAL OPERATION OF THE SAN JOSE BANK CASE A point which must not be overlooked is the fact that the operation of the San Jose Bank case, which will directly deprive the several States of several hundred thousand dollars, will indirectly deprive the several States of millions of dollars. The several State banks, the stock of which is many times in excess of the capital stock of national banks, will not willingly agree to relieve national banks from an imposition to which they continue to be subject. For instance, the amount taken from national banks by escheat in Pennsylvania since the enactment of the escheat act of 1915 has been over $400,000, while the amount collected from trust companies and State banks has been over $600,000. It is not at all probable that State banks and trust companies will continue to submit to the imposition of a charge, however just and proper; from which the national banks are expressly exempted. The result will be that the power of eseheat in all the States, except in the case of real estate belonging to persons dying intestate, without known heirs or kindred, which will amount in Penn- sylvania alone to several million dollars, will be altogether inoperative. It will then be in order, following the common practice, to supply the amount of revenue necessary to be supplied in view of the gift of the Supreme Court of the United States to the national banks by increasing the tax on coal and other necessities of life which the poor can readily and conveniently pay. EXPLANATION OF SENATE BILL 111 Senate bill 111 is modeled more or less upon the Pennsylvania escheat laws. It is not known exactly how many States provide for the escheat of unclaimed moneys deposited in national banks. It is known that California, Oregon, Pennsylvania, and Massachusetts, and possibly some other States, so provide. It is submitted, however, that if some or many States choose to do without this legitimate source of revenue and permit the despoiling of their citizens by the permitting of national banks to rob them there is no reason why States which do wish to utilize this source of revenue and prevent the spoliation of their citizens who are depositors in national banks should not be permitted to utilize this source of revenue and prevent the depositors in national banks from being despoiled. Senate bill 111 provides that States may provide either for the absolute escheat of unclaimed moneys In the hands of both State and national banks or for the taking of such moneys subject to being refunded to the owner on making proof of his ownership or other legal representatives thereof at. any time without limit. They may escheat or take without escheat un- claimed deposits or unclaimed trust funds, after the active duties of the trusts wherein the same originated have expired, and whether such moneys were unclaimed deposits or unclaimed trust funds arising In dry trusts, subject to but two restrictions: First, that such moneys shall not be taken until the expiration of 14 years from the time when the same were escheat- able or subject to be taken; and second, that the unclaimed moneys In the hands of State and national banks shall stand on precisely the same basis. The period of 14 years which must elapse before unclaimed moneys may be taken is twice the period after the expiration of which the death of a person whose whereabouts is unknown is assumed. This period does not refer to unclaimed deposits In savings banks, In the case of which a period of 30 years must elapse in Pennsylvania before unclaimed deposits can be escheated. There Is, however, nothing to prevent the committee from amending this period of time which does not seem too short In the case of ordinary banks of deposits. A copy of a pamphlet containing the Pennsylvania escheat laws is sub- mitted herewith. (On file with the committee.) (Whereupon, at 3.45 o'clock p. m., the subcommittee adjourned.) PAGENO="0199" 195 OFFICIALS MAKE REFUND , Bank Fees Nearly Eat Up * Girl's $58 in Savings BY ROBERT FAIBBANKS-.-- SACR)JtENTO-The Bank of Accoediog to -Mn. Herman, abe America took one on the chin Friday deposited about $58 incoib gifts that when state Controller Kenneth Ccry had been given to l~rheby.~ pon~roed on earnest girl whose email "~ ~ ~ trustee ~ acco~t had been all bUt f~ her, knowing that when she eras-sd by bank service charges. ~ 21. Ii e'auid still be lheae7 Bar-k citrials, oovcsdatg embar. Mrs. Herman eali * rassod. said it never should have ~P- - The Bemoans did mthing with the pened and quickly restored the moo- accoama until last a.omms~ when 11- cy bUt sent until thor Deroocat Cony, lean, who has been earning money at a likely contender for governor 15 chores ~rouod the house, wanted to 1912, tcld a rows `ence deponit $1.17. "If this were an isolated ezamPle,It- - "1 went-to the bank with my mom~- would be a shame. Bat urfortoenalely, ~y and the lady said to go over and it is net on isuloted mampte. ec~ this m~n. And be said that they "It is an insidious plot by the Bank -had aent my moowy to the state con- ed America to steal money diem from and I hod to write a loller to - the state contretlerta get my money - . - bock," Eileen told the news confer- ccc" has been is the news once. mitre cc l~ erUtreerteisy euire the Thue,onAug.9, 197 loenwrote F.onzaeanat co.mao~r of 19'l& when Der&.tie Ccnir - - - carei~'s F±mitnd G. Brown Jr. x~ rvaeeonej cr4 I ixrf to the leak chsr~sd thst his c'mcreit. !`2te C00 tenllnf,ri cr4 the mars mid ~ou hone - tmm Fn-r'.rr L -i:'m~e, was per. ~ mittr'.p b-ur.ka to levy illegal rorvun Can p2ecae rend lIla sos bemuse sozedsuritgsdspcs' rrlaoatoezroeo'ior.ma. ito. cbeckrg acccim'.o anti tari~ar ~forenrir4lIfarsne- alamo bef are toarcing them ovcr to Ohs Ho - - `tad then'ws coo- * Ar.Z Brown c.nrged. mccoy tht fercooce,b~ hod only $t44. The re- be gcr.g to toiiyeon was ho- mainder of the account, $54, was dn- * or.gkeeabyLebar.ks. - ducted by the bank ss-'oorvice ~ charges bafa-e the money was se Why was the mcneyaent to Co-y battang the ko-&miy BSSk ci ~`~7e A.cnra-ever once. ` `-~ `die eent to the etate. The controller mm Involved .~w1. then holds the finds in perpetuity fen oa.~ Homo.n . theirnightiul owners. - Vender, wcce eaveigs accc~.t `°~ * However, is practise, few ewnero evened a.her bath is * appear end the state keeps the neon- m~.rbetha Mrs. Herman were - --ey. By lev7lng eervice charges before with Cony at the news conference. - Please Tars to Pae 11, Cs!. 3 Los Angeles Times 11/3/79 ttsaed from First Page ~endiag in the fands,the banks, in of- fect,sharethéoonajl bonanza. The problem is. according to Cony, -that many.tenks have been so asia- .kna to get the service charge money that thèymake no major effort to find the rightlpl owners of the accounts before taking their cut and sending tbebalancetotheatftte. As Cony reminded newsmen Fri. 4ay, be has in the past reported that the Bank of America has been unable to fisidmach celebrities as-Willie Mc- Covey, Lucille Ball, Bob Hope, Can. dane Bergen and Cony, ttimsetL - "This bank is taking advantage of the young, the elderly and anyone who has committed the `crime' of for- getyng about a savings account," he the Hermans had not an- .tually forgatten about Eileen's ac- count. They load simply left it its the bank for more than seven years with. out adding onoubtracting from it. Why-had he bank not fotmd titem before sending -Eileen's money to the elate? - - Mrs. Herman mid that ohs and her hooband, William, a food market - mansgeg, load moved several times. adler-opening Eileen's account at the Bank of Ameiica's Fast View branch In SonPedro. - * - * - - However, she said, the family can- tlnaed to'-do all its business at the East View branch and she regularly turned in change of address cards to -loll thebankofthoirmovea Bank epokeasnan John Means told The Times that Bank of America al- lows each branch to decide what to do when the owner of a "dormant" ac- count reappears. In mogt cases, he continued, the money is oimply hand- edover without question, "In this Instance, the service charges ~sauld have been refunded," heaaid. -* * - Heweven It was not until an aide to Cory,Jalsn Jervin, walked with Eileen - * and her mother to a Bank of America branch one block from the elate Cap- itol thatEileen's money was returned. - Bank officials, aware of the situa- tion, turned over $58.93. lit addition, - Eileen will get the$4.44-that the bank sent to Corypreviousty. -- What will Eileen do with her men- - e)A~ the news conference, she said * showouldputltbackjnthebanki TheBankof America? - "Maybe,' she replied. APPENDIX C - ``.---- " v'-. -`- re. `.- - PAGENO="0200" 196 ~vct.~ .1. Y0UHGLR STATE OF CALIFORNIA OFIICE 01 TIlE AITOIINEY (SNESAL FRAP4CI$CO~4IO2 REPORT O~ SURVEY OF JThNKIUG INDUSTRY CONCRRUIUG TERI IIIJATIOII 01' INTEREST PAYIIENTS NIl) I?IPOSITION OFA SEIIVICE ChARGE ON DOJUIAIJT SAVINGS ACCOUNTS In ?tnri], 1914, the Attorney General's Consumer Protection Unit circulated a quest naieto all.the banks in California which arc entitled to_l~n~ç~g~nqs deposits. Rhat follows is an analysis of th~1E~~ that survey~~his analysis is based on the first 147 replies we have received. In addition, six banks wrote to us stating that they would not answer the questionnaire on the grounds that our office had no authority to ask such questions, either on the ground that the authority was vested in the Superintendent of flanks for state banks or in the Comptroller of Currency for national banks. Three asked for more information about the survey or our authority to conduct it, but did not state that they would not answer it. The first question was whether the banks classified savinqs accounts as dormant or inactive after a period of time. One hundred and thirty-two banks answered "yes"; two said Nfl0~; and 13 ~icre ne~i banks that had not yet adopted a policy on the question. (Numbers will not always add up to 147 because not all questions wore answered, answers were not responsive, or were contradictory.) O~g_11uqdred and seven of ti _]~2 banks which do classify savings ~ stated that they did impose a service charge because of the accounts' inactive status. ~i~u~tecn had not establisiii~d~pbT~cy on a s~~ic~ ldfrqo7511a26 did not impose a service charge. In rcviouincl the "no" answers, however, 17 were new banks established only in the last four years and only four had boon in existence lone enoutihi to have depozit~ subject to the oschoat laws, that is, 15 years. Those banks had relatively moderate assets (such as $9.5 millioii, $113 million, $88 million, $24 ~i1]ion) when cor~pare'~ to thic: rent of the bs:ihinq industry. As a bank cIro~,:; older, it naturally accunulaten i.:ore inactive accounts a~tl the larjer the lsn, tha more accounts are involved, Thus as banks gro~' older and qct lnrqt:r it is not supricing that more would adopt dormant account service charges. APPENDIX D PAGENO="0201" 197 The mount of the charge varied frer ~`U, `O a mojst:h to a mcizj- sins of $3 a oroth. (i.e learned frau another reliable snurce that: one aa i Mdl no ii r our j~ 0_nm irccnsr e I ~` 4 or r ion th fe r.ast :rL.pment c:msrie was ~1 a mmonth with 37 honks imposing such T.iirtv bank; innoseci a charism which was based upon the size of tm accsu~. For enamnle, rianu banks would impose no service cImercn~ l;:.ca of toe account. was over $300. In addition, a few banks ca~czcrv wruld simnlv ir:onsc a one-time charee of $10 or $25 to clcac cut acceunt if the balance was less than that amount. 15 determininc what constituted an inactive account, there wece essentially two factors to consider. First, the definition of `~nactivitv and second, the length of Limo that the account must be inactive. Cede of Civil Proceduro section 1513(a), states that for the purpose of identifying abandoned accounts, inactivity means making no withdrawals, deposits, presenting the passbook for the postinq of interest, corresponding with the bank concerning the account, or other- wise indicating an interont in the account. However, that definition applies cnlv to tho abandoned accounts which are transferred to the Controller. It does not nocessari~iv reflect the practices of the bank in irrosinc a dormant service charge. For enamule, 29 of the banks considered an account inactive if no demos its or withdrawals are rode during a certain neried, 7\ppar- enujv this is so evon if the.' know of the existence of the depositor and even if he presents his passbook for the posting of interest paricdicellv. `ILontv-nino ethers would add to the above criteria the postinc of interest in the passbook as an act by the consumer which ;:ould hoop the account active. Forty-six more would keep the account active if they had corriunications of any kind from the customer. Seventeen banks stated that if a 1099 form was not returned by the post office as undeliverable, they wouid consider tile account as renaininri active. Only a very few questionnaires or covering lotters (20 of 107) reflected a naLcy of raking an af:firmative attempt to locate the deossitor, either at the time the ~cceunt was defined as inactive or before transfer to the Controller. After a period of inactivity which wuald call for a service charge, these banks would write to the censumor too dormancy of the account and asking him to either activate it or close it. As to time lonuth of time an account was required to he inactive before it was assessed a service charge, nineteon~-ban}zs imposed the charge in one year's time or leon, one within 90 clays and six within six months. Forty-four banks impooed time charge after inactivity of one to three years. Forty-five banks imposed it on a period of over three and up to five years, and six did so after a period of over five to 10 years. Seventeen adam mocio~ the size of the deposit a factor in PAGENO="0202" 198 how soon the service charge was iriposeci. Of the 107 that charge a dormant service fee, at least 101 charge something within five years (1/3 the escheat time) --~-~-~- - As to how and when the consumer was informed of the existence of a service charge, 74 stated that the depositor was never informed o~ the service charge. however, counted among these are some banks which stated that the consumer was inf6rmed of such charge in the passbook. An examination of the passbook, however, would reveal that the consumer only agreed to abide by the rules and regulations of the bank or agreed to whatever service charges the bank imposed, without specification as to what they were or how they were applied. Only nine banks informed the consumer of the dormant service charge at the time the account was opened, either by a statement in the passbook, on the signature card, or in n brochure given to the depositor at the time the account was opened. One of these, a large foreign bank, gives the depositor a brochure describing in layman's language all rules governing the account, including all fees and charges which could possibly be imposed. Such a practice is to be commended. Eighteen other banks informed the consumer of the dormant service charge when a letter was sent to the consumer informing him that his account had been classified as inactive. * When a consumer appears at a bank with a passbook after the service arg~h ~ the banks is as follows: 86 refunded all service charges to the conggme~. It was not clear from our datn, however, and we have conflicting information from other sources, as to whether it was necessary in some cases for the consumer to specifically ask for a refund of that charge. This moans the coesurner would have to be aware, either from the passbook or external information, that such a service charge was imposed. Consider- ing the almost universal silence of the banks on the subject when the deposit was first established, such a fully informed consumer on this subject would be rare indeed. Four honks statec]~hat~ervice chsrcies would not be refunded onco irI~osed. Thirteen others stated that it depended on the individual case, the discretion of the branch manager, and one stated that it depended on the size of the account. On theggestion qf_whothe~ a bank stopped paying interest on the account after~ a period of inactivity, 66 banks answered "yes", 62 answered "no", and three made qualified responses to this question, such as that the interest is computed but not credited to the account and if the consumer claimed the account, the interest would ho paid to him. The impact of this practice would be to deprive the Controller of t~g PAGENO="0203" 199 intereet on the account but the bank would have full use of the plincinal until the end of 15 years of inactivity. liqht banks did not answer this question. One of those answering stated that they did not stop paying interest after the period of inactivity, nonetheless, that bank had a provision in its passbook eLating that aftcr ten years the account was `not entitled to interest peveents", All but 11 banks stepoed paying interest after the same period of inactivity as was required for a service charge to be ilrposei. In response to a question concerning hew the information concerning the stomping of the payment of interest on inactive accounts was provided to the consumer, 16 stated that it was not provided at all; 20 stated that it was provided at the tire of the opening of the account by the passbook, signature card, or brochure; 17 by a letter sent to the consumer at the time the deposit was classified as inactive; six v:en the customer reclaimed his dormant account; three upon the consumer's specific request for information; and seven did not answer this suestion. However, as already mentioned, an examination of the passbooks and signature cards of those banks who claim to give notice by such documents, do not do so. Agreement to "rules and regulations of the bank" or "all service charges' is, for the purpose of this report, no notice at all of a service charge due to inactivity in the account, All but one of the banks stated that their branches operated in the saro manner on all of the questions posed and that they informed their branches of this by operations manuals, procedure manuals, internal memoranda. and such, For questions about this report or for extra copies, contact: John C. Porter, Deputy Attorney General 6000 State building San Francisco,~CA 94102 JCP:dm (6/74) PAGENO="0204" 200 t~ENNETH CORY AREA COOS 916.445.S3%B CONTROLLER Qlmttwtler uf tIre ~t~z±c uf Qlaftforxüa DIVISION OF UNCLAIMED PROPERTY P. 0. ROX ISIS SACRAMENTO. CALIFORNIA 95*05 April 22, 1980 David Epstein, Esq. 2049 Century Park East Suite 2060 Los Angeles, CA 90067 Dear Mr. Epstein: You have asked for an estimate of the cost of maintaining records for dormant accounts in the Unclaimed Property Division. Unfortunately, we cannot provide precise figures but only an estimate based upon budget figures and experience. As you know, we have more than 750,000 names in our computer banks representing owners of unclaimed property. The cost of maintaining each account is in the range of 16 - 19 cents per annum. The cost figures include common stock accounts and tangible property accounts. Since maintaining accountability for those is slightly higher than for savings accounts, you may infer that the cost to maintain the record for one savings account for one year is something slightly less than 16 cents. Yours truly, w~-&~b. Thomas F. Holland, Jr., Chief Division of Unclaimed Property TFH: bcn APPENDIX E PAGENO="0205" 201 ~-.-~- -.~ .` . . -~-~ . --------~~ The reason 1 think that we have ~? .4 ~7 ~ fl t lone it ~ be au c it would just ~a. ~ ~ ~ ~y A~ ~ow~ n g Ba n k pidHinga~c~u~tsthatwould ~ r ~ ~ 1 lu~ v' ~t. ~tU(lit5 CqUCatc(l hv the ~` ~) C ~;: ~ ~ ~o F u n d Fees ~ j;~ . . ~ i1~ flflC Cd~(!. a ~ relatively small ~r~~ce Charges' on Deposits to Be Handed ~0~1th5r1 California bank (11 . ls~n(-hes) was found to be takine a to ~ ate Often High, M~y Erase Accounts ~ ° I ~ ~ ~1 . I .. ~ nothing about mone~ orders of SG~i i~._\~ ~ B~ ROBERT F°JRB ~`~1 `~ r k the imount in vl'ich mo I .ire sold. :-.-`c~~~ Co t~ Sp cif c-ill t h e itu tim ir I r c it 1 o- period II -o ~. i~eu ~ aoIa~ unci tare 1 sin epa it I n kept 5 IS) fin ii 1 0 $ war StIng California ban~w to levy vir- checking accounts, Christmas Club claimed money orders of 6 63 or lean. tu.a'i,y unrestricted `service charges' payouts, money orders and similar in a similar period it had S12,2S7 en miii$rs o~ dollars wend', of un- itemS that are lost or forgotten each worth of money orders worth more cwi::od de~suts end si-nilar dens year by the thousands. Current law than 563. These avcie reduced by $7,- `ho'. are up~~wi :e be turned over requires that theae items be given to 26.1 in service charges, leaving 64.' so the state, the state, together with any interest 664 for the state. they may have earned. 11 is unlikely that alt banks lesy a'- d'a', theusa~ds Even Flourno~,"s staff man, Gerco-. such heavy service charges on iiii- are e:ased ar.d never rich, concocted that the banks' right claimed money orders ~nd similar tvrrc'd over, to levy service charges on these items. But if they took only half as atto-'~'; "e~-"l' ~ " items could lie challenged on the -. sag t a's e ski a o a 1 dec ion I the t te ~ontinuedfronsThLtd Page18 Vl 1 and ins: beers' examining bank Supreme Court.~ much state reveni,tes from ever since. The court let stand an aiipstlate that source ~vóu1d be many Tteurn-o-'. the Eoo'abticdn candi- court rating indicating ihat banks tar governor, cart he had heed had ito right to make charges tImes , e near Y ;ae'arn of acwto poobtema' with the against the state that weren't made a year it da now. rnntks~ htotsikr.e'of unclatrned.fonde against their regular custosisni's. Other unclaimed items `sbfd `ass bellavod ~e could do But even if the banks had an un- might yield even more. tar the stae b-c n-srs',rtn ether c h all e n g e d rIght to levy such For lrest~nce banks report ferris c~ wr.etztrne~ pronortv, ~-j charges, the charges themselves unclaimed deposits of caaritv c5a~ce~l e'tc:k held t-,' cur- might still be contested on grounds about $700,000 a year. that they are excessively high, an at- However, there are indica- Luw"c.r'~ F' Gsrcovich Fl - torney,generale representative said. tiona that service charges ro a "ca ~ 1 ~ ~ Fu.r't-ier'nore tIe i e Ii co ei of $120 and higher might Vie cia f ing unclai s-i d orops. ty iequi -e be common in that area. "nok ~ ~ so unc ,,irs~e that banks file documents with the By law, a deposIt be- its secant ye r&Hcsaid ~ i controller's office describing service' comes unclaimed aqd be sold both did t charges they intend to levy against must be turned over to "ci's' `their value ` e no savings and cI-ideking accounts. `` the controller when the Noboth" knows how much lhe But when the attorney general's customer has failed to do ~e taitIn~ from unclaimed office began its investIgation, it business or make inquiry f'.md.", hof `eatjsmeteo based on the found that isty :12 itt 1511 honks hail for is years. oney o ers `koars-o"informathon available mdi- done so. an aim df ieeveid~55 million to $10 nil- However, Flournoy has nude little ted within seven years n'-''- ~ns, , , ue of theee legal weapon'. General- of purchase. ly speaking, he hae-thcough the However, an attorney tn sass cass. Fleurnoy continued, years-raised no objection to banks gs~eral's survey of bank. pr'rbsrou in coiirctir~g en- moving s5L'Vti.e charge st tiiil, practices (completed two c!arnec stank front corporations , Nor dies Hournoy ua1esn' the months ago) indicates that bonn c~rersgn:ened out, and his sinks to report tise total saluc of un' moat banks begin much `i._ o on he bank d smcd nros its th t cow tnt sooner to give these items its tased it `cosneidence' that the their hands. sansuel .1. (onl, cowl specialtreatment. work bagtin aoout the same time as accountant on Flourno's staff, said In most cases, if the cus- .k~e attqrsi.s~' general's investigation, banks ace required tis ce~iiict only tomes fails to do business APPENDIX F ,oebiltu sills, the California Ban cc as hat c left after ti cmi ci i han ot make lnqtti~y within .AOSIL, aWare of growing interest in deductions. . one to five' years of his t1~e,ii~ue, bggala two sionths'ago to Thus, though thg coriti'ollers ~ last visit (though it coqld ,u'ts~ shill Through the Legislature lice currently receives about $1.2 be as short as six months) J'iiit `a tea d Jegitmatize much of the million to $l million annu tlI fioin the bank wifl place the ac $`,o~s `pr~ujt,,. in fact, the meaeure `tlticltimed bank Hems, the amount count on "inactive" status cag'.t. bets some banks make, even mdày l~presdbt Only the tip of the atid begin levying service narntey, largely at the ~eposs- iceberg. charges against it. Suns' cxzecab. When asked shy he tees not ~`- ` A spokesman for the Ca- - tisg,rasartatjves of the attorney iiuire banks In s'eport cli esni'loisiest lifornia Bankers Aeon. and t" so a a Iou pin r \ 1 1 s Ill others siatersiessed sif `7 ~-as'h,mg,rhe.rneastrs. So far. plained that the special ?crnrthy has deemed to take a PAGENO="0206" 202 .sngerets. toe granotatfl- The bankers association sr demanded a refund, now is advocating a bill to ~shich he eventually re- empower the controller to ceived, but not before tell- a e t maximum s e r v i c e ing columnist Kahn. To charges for savings and check f u r t h e r, K a h n checking accounts. opened small accounts at seven of the bay area's 1at~ Such a measure-if en- - gest banks. He said none acted-would permit the told him plainly, if at all, banks to avoid problems that they would take aer- with customers like the angry grandfather. For, vice charges from an mac- instead of refunding his tive account. money, they could tell him Among Kahne readers that the charges were au- was Dep. Atty. Get. John thorized by state govern- C. Porter of San Francis- nient. Thus, the depositors' pay co. more if their accounts he- The attorney general's came inactive, and no one assistants s o o n decided could challenge the banks' that they had to know right to levy the same more about banking prac- charges against the state. I tices in connection with Also, if the controller inactive funds, Thus, they establtsheci ni a xi in u so sent a questionnaire to charges, then the banks about 180 banks, getting that are now charging 147 replies, above I h e so a xi m usia Only four of the 147 that would have to reduce their replied said there would rates. be no refunds once the The ha~ikers' bill Ic be. charge was made, Ing carried by Assern- The importance to the blyman Frank Murphy of state goes back to the Su- Santa Cruz, chairman of prams Court decision of the Assembly's Republi- 1967 indicating that banks ran Caucus. After a swift may not levy c h a r g 5 S passage through the lower against the confroller that house, it awaits hearing are not levied against cut- before the Senate Judicia- tomers. If that is the law, ry Committee today. and the banks routinely Fiournoy's position on waive charges on inactive the bill was formally cx- accounts, then why as's pressed iii aJune 10 letter such charges not waived to ilurpisy. lie said that for the controller? he was inquiring into the issue l)ut that many corn- Flournoy's staff man, plex f a c t u a 1 and legal Gercovith, said the banks questions were involved. would argue that they ~Since we are presently have a contractual right to uncertain of the full scope take the money from the of the problem and do not customer, whether they know whether your bill take it or not. Thus, they will properly resolve the may take it from the con- matter, we are not expres- troller. ing a position on AB3575 But to have a contrac- (the bill tossert at this tual right, there has to be , time,' F'v: a contract. However, if the customer was not told about the charges, it is questionable that one ex- isted. The 1967 decision re- sulted from a suit brought by the Bank of America in 1960 challenging a provi- sion of the state's Ln- claimed Property Act of 1959, the major law in this field. On Sept. 27, 1967, nine months after Flour- toy first took office, the state won, solidifying the controller's right to collect unclaimed property. u s is necessary to protect the account irons ~i'ooked bank tellers and other potential embezzlers ~vhe--.~eeing that the cus- tomes' is not watching his money - might steal it with a false withdrawal slip. T h u s, the customer's signature card or other documents are placed in a special file with other "in- actives." And before funds can be withdrawn from ac- counts in that file, a bank officer must approve. But this costs money, the banks say. Therefore, to protect customers' funds from crooked tellers and the like, the bank it- self must begin removing service ôharges from the account. According to the attor- ney general's survey, most banks charge about $1 a month, though some go as high as $4. Also, some stop paying: interest on the in- active accounts. Although recent devel- opments have centered on Fluornoy's handling of banks and their unclaimed funds, the topics of Un- claimed funds in general arose as a consumer issue In the San Francisco Bay area last year after a series of newspaper columns. Written by Robert Kahn, a business counsel- lor of Lafayette, Calif., the columns were titled `How Banks Steal' and dealt with the case of a grand- father who opened savings accounts for four grand- children and then put away the bank books for nearly 10 years. At the end of that tinse, a grandson-in college assd newly married - needed cash for a home. So the grandfather got the young man's bankbook, w i t h- drew all the money and gave it to hits. Six months later, in March, 1973, the grand- father decided to give the other three grandchildren their money, too. But each of the-three ac- counts contained less mon- cv than the fourth of six months before. It was then that the grandfather learned of `service charges which the .bastk had been resnc,vln" ~t th~ ~ ,,; c~5 PAGENO="0207" 203 B~g Banks Discouraging Small Savin~Accounts -. . -was giving some consideration to *.-- By ROBaRTA. BEf~NET~ `r:~"~~fblP For years, theNew York Bani' -, ..` for Savings has riot paid interest on ac -Savers with small accounts, those counts of less than $10. "I'm lookin, withlessthan$lC~D, aropurposelybeing seriously at raising thatmiaimuin,' drives away by a number ot large Mr.Callansaidyesterday. -`, 2. * barks, that have calculated that such . Some commercial banks, instead of occcunt.sareunpr-af::abte. . .- ` ;-. . charging fees, are refusing top.ay in- * The Manulactu.-ers Hanove~ Trust. .terestonaccountswithsmallbalances. CCnsparV, for example, began late last - In some cases, this could be more,hi- year charg'.ng a $1 set-vies fee for any. ;:pensive to the saver than a fee. If, for quartet-in ~-h.ch a oavini~s account hat- 2.'. example, a saver has SO'S in an acco'.int at-ce cL-red balcw S1CO cn any day - 0a ahic.'t 5!~ percent interest is paid, .d.rricg the three-rnm-.th pot-it'd. At Cit- the saver coulit lose moCO than $5 a bar-k, a similar p:an "is under exansi- :~year, compared with the $4 fee that * r.atirn,"acccrdingtoaspolcesman. .:.i':-'wcr1dbe Charged by Manufacturers Earl t. s ra U' a- I~, 0. la.-sd.Banii began Charging a CO.cent~-TheChao-e.Marshsttan'Bask, forts- i-s-sr~-ir&chargecnatsyra'~-i:sgsaccaunt "ample, will not pay interest on most -Cr -.throe-rrccth time deposit.. that ** savings accounts wherethe balance `arnc'.mte-d to less than $2.5 at the er-ui of ~- cL-cpa belowSICI) on anyday during a I, r'--" qu.ster -, ,~ - A. in o"Jc. `&~es er' s a ad Across th Hudson th United Jer that-ror-avL-tys-bsnks',',wisich are the~ seyBanlc, the state's second largest, b2ggest reservoirs C! savings in the~-1sfterthe First National State Bank-of city, have L-sot:tuued rrseasures com-Y . New Jersey, `arinocinced- last "month pat-able to three of the big commercial that, beginning in June5itwould charge - *-: - - . .:,: - `~; ,`~ -: -$2 each quarter in which the average B Es. S C.. ..n cia -san ~ b..la -c in any savor a accowsts the Ne-i Ycrk Ear~z fo- 0av-----s t~- . doppedbetowSlCI).~ -.,. - -. c-e-os'sdlargentL'sthncirys!terU~eBow: -. *. Thurman F. Breers, executive vice ecySas-irag.s Eat-k, n.ad his ~5 .,~ : - :-ContlnsnlonPage~ -. 4~:. ~ Big Banks Discouraging Small Savèrs~ Ce-alL ~"Fr-P ~el ~ o r' `sj c-s th e,e-i Je~n?l~~, had baJ~,nces 0~ La c, c re. it b... t `i t. y pay f r lo~er r-'tes of in ~ ~`-~" for United Jersey, said yesterday that let-es. on s.....tl Caving. .ccou~s than, - .`ViO found a lot of these accounts thebank had already closed about 8C0) theydo forlarge deposits. -.2. -- -~ were not owned bysmail savers at all,l'~ small savings accounts so a result of * ` For example, Federal regulations Mr. Breet said. Most of the owners of~ 9 the new policy. "That's Just what we prohibit commercial banks from pay. the accounts already had other acr-~_' had hoped for," Mr. Breen said.:-:'- -.. - ifl~ more than 5% percent on passbook- . counts its the bank and merely merged's. -The First National -State Bank savings accounts, whIle banks are pay-, the small account Into larger ones. Al.! `chargca a- $1 "monthly fee, collected lng i8percerit fordepositsof$l00,000or though United Jersey lost about 8,000j quarterly, on any regular passbook or more. -- ~--.... *.~ -- .` c - -~- * email accounts, Its savings deposits-c -* student account on which the average * * The cost of handling smdil accounts *. have.increasedsharply,headded. ~ - - balatscedrcpsbetow$i00. --- - . - --. -- ------Is extremely high, however, the bank- -,..-.._ * * Itt flhirsoin, the continental `Illinois' * era say, although it is difficult to deter- I Natir--sal Ear-k and Trust Company the - rntnepreciS-~Iy how much each account ~`"s l-'------" "-"- last J-"sua--y costs. In addition to Interest, the ox-; * be;c're-'ui,-~c~ a zr insurn of $1C') to posses include the personnel It takes to'' c"''sanarccar-'at-" b'c-'scbargiru'an' open these zrcco.ints, the additional * ~,r-:ual ocr-vito chat-re cf$4 ir the a~er- otaff nc-crIed to take core of the greater ege bularoce fell below $lC') for four demand attellers--,ndswsandthecosts -, - -v.. .. ~ oecdlng.cit statements. But the - `. - -~ - bankers say Itconts no more toopen APPENDIX G ._,,Dea,.ie .~er ~..es , -. * * and rnaintssina$50,co) account than it Las: July, the First Bank and Trust cfoesfora$llaccount. -- --, `- - *- --` - Company of Evanston, IlL, stopped Most bankers estimate that hn2ac~-' paying Interest on any account tuat ,.,uust does not break even until It falls below $50. - - - - - -.-.reachesatleast$500. * - , - -.* - Banks are becoming tougher on - Mr.Breen'ofUnltedJerseysaidthat,' * small savings accounts because they before the bank began charging its fee, have found that they are losing large about half Its savings* accounts,. or g7_L5L5Q 0 - 81 - PAGENO="0208" 204 Mr. ROSENTHAL. Mr. Goldberg is our next witness. Mr. Goldberg, you may proceed. STATEMENT OP FREDERICK B. GOLDBERG, GENERAL COUNSEL, DISTRICT OF COLUMBIA OFFICE OP CONSUMER PROTECTION Mr. GOLDBERG. Good morning, Mr. Chairman. My name is Fred Goldberg, I am general counsel to the Office of Consumer Protection of the District of Columbia. Mr. Simmons, the director of the office had intended to participate in this morning's hearing, but unfortunately was called to a meeting with the Mayor and other regulatory agency heads concerning our budget problems. The District of Columbia Office of Consumer Protection was estab- lished by the District of Columbia City Council by D.C. Law 1-76 and is charged with the responsibility to present the interest of con- sumers before administrative and regulatory agencies and legislative bodies, 28 D.C. Code, appendix 4(a) and (5). Accordingly, we appreciate this opportunity to appear before this subcommittee to address the issue of unclaimed property, a subject which until recently has received scant little attention, but nonethe- less has major implications for consumers. My testimony will cover a description of consumer problems in the area of unclaimed property, focusing specifically on the experience of the District of Columbia. I believe that the Uniform Disposition of Unclaimed Property Act, which most States have enacted, is lacking certain consumer protections which Federal legislation or regulation can most effectively provide. We applaud this committee for address- ing this issue in today's hearings. Mr. ROSENTHAL. There are twoS States and the District of Colum- bia that have not adopted this uniform law, and the reason the Dis- trict has not adopted it is what? Mr. GOLDBERG. We have only had home rule for 4 years. In fact, this bill is before the city council right at this moment. The markup on the bill is to take place tomorrow. We will be glad to provide you with a copy of the bill as it is finally reported. Mr. ROSENTHAL. That will be fine. Without objection, the record will remain open for the purpose of inserting a copy of the bill re- ferred to by Mr. Goldber [The material follows: PAGENO="0209" 205 ~ District of ~ Columbia Consumer - Protection 1424 K Street N.W. Washtngton,b.C. 20005 October 31, 1980 Donald Tucker Chief Eccncmist S~zbccmmittee on Commerce, Consumer and ::onetary Affairs Eoom 5377 Saybumn :-~ouse Office Suilding washington, D.C. 20515 Enclosed please find a copy of Committee print of 3-267, D.C.'s version of the Unfair Disposition of Unclaimed Prorerty Act. This bill vas adopted on October 28, 1980 by the City Council. This submission should complete our testimony of July 23, additicnal material is required, please feel free :0 oontact me. Sincerely, Frederick B. Goldberg General Counsel Enclosure FBG:sj PAGENO="0210" 206 ___~___ 1.5 Councilmesber David 4. Clarke 1.7 Conmittee Print 1.9 24 September 1980 1.10 4 REPORTED BILL 1.13 (I'~ THE NATURE OF A SUBSTITUTE) 1.15 1.17 IN THE COJNCIL JF THE DISTRICT JF CJLUMBIA 1.19 1.21 To prçvide for the disoosition of unclaimed personal and 1.25 intenqible prooerty in trie District of Columoia. Chairman Arrinqton Dixon introduced the followinq Dill at 1.28 the request of the Mayor' rihich ,~as referred to the 1.29 Committee on tne Judiciary. BE IT ENSCTED BY THE CDU'~CIL OF THE OISTRICT OF COLUMBIA, 1.33 that tnis act may oe cited as the "Uniform Disposition of 1.37 Jncleirned Property Act of 19B0". TITLE I Sec. 101. Ejq~j~ and Pur~se. The District of 1.43 Columbia currently lacks statutory authority to act as 1.44 custodian for suostantial sums of abandoned personal oroperty witnin its jurisdiction; Wherefore, this act is 1.45 intended to mandate the report and delivery oy holoers and PAGENO="0211" 207 to autnorize t~ie receiot for safekeepinq and fiscal growth 1.46 ny the District of Columbia of any and all personal property 1.47 whicn is ahanconed, as described herein, without reqard either to any maximum length of time for which SuCh Oroperty 1.48 was abandoned or to any statute limiting tne right to sue to claim such prooerty. Sec. 1D2. P~finiti~i~. As used in this act, unless tne 2.2 context otherwise reouires, the term-- (1) "Apoarent odner" me3ns the person whose name 2.4 aooears on tne records of the holder as the oerson entitle~l 2.5 to prooerty neld by the holder. (2) "Attorney General" means the chief legal 2.7 officer of a state. (3) "Banking orqanization" means any bank, trust 2.9 zoDpany, savin~s banK or a private banh~er or such other 2.10 individual or organization defined by th9 laws of the Uflited States or of tne District as a bank or banking organization. 2.13 (4) "Business association" means any corporation 2.15 (cther then a ouolic corporation), joint stock Company, 2.16 Pusiness trust, Partnership, or any association for Dusiness Durposes of twO or more individuals, whether or not for 2.17 orofit. including a bankinq organization, financial organizatjon, life insurance corporation, or utility. 2.18 (5) "District" ~.eans the District of Columbia. 2.20 PAGENO="0212" 208 (6) "Dosicile" iieans. with respect to businesses. 2.22 the state of incorporation in the case of a corporation 2.23 incorporated under the laws of a state aid tne state of the Principal place of business in the case of a person not 2.24 incorporated under the laws of a state and the state of the princioal place of business in the United States of America 2.25 in tne case of any other person. For ourposes of this 2.26 definition state includes the District of olumbja. (7) "Emoloyee benefit trust distribution" means any 2.28 money, life insurance, endowment or annuity oolicy Or 2.29 Proceeds thereof, securities or other intangible property. and any tangible prooerty. distributable to a participant. 2.30 former participant, or the beneficiary or estate or heirs of a oarticipant or former Participant or beneficiary. from a 2.31 trust or custodial fund established under a olan to provide 2.32 nealth and welfare, pension, vacation, severance, retirement benefit, death benefit, stock purchase, orofit snaring. 2.33 employee savinqs-. supplemental unemployment insurance benefits, or similar benefits. 2.34 (8) "Financial organization" means any savings and 2.36 loan association, building and loan association. credit 2.37 union, or investment company. PAGENO="0213" 209 (9) "ood faith" ~ieans honesty in fact and t~e 2.39 observance of reasonable Commercial standards of fair 2.40 dealing in the trade. (10) "Holder" means any person wherever organized 2.42 or doniciled (i) ii oossession of property belonging to 2.43 anotner or (ii) ~ho is a trustee~in case of a trust, or (iii) `vho is iidsbted to another on an ooliqation. 2.44 (11) "Intangible personal prooertv" means all 2.46 choses or things in action. (12) "Last known address" means a description of 2.48 the location of tns apoarent ovner for tne purpose of the 2.49 delivery and receiot of ~iail. - (13) "Life insurance corporation" means any 2.51 association or corporation including any non-profit relief 3.1 association as defined by section 8 of title II of the District of olurnbia Revenue Act of 1937 (D.Z. Code, sec. 3.2 47-1801). transacting the business of insurance on the lives of persons or insurance apoertaining tnereto, including. 3.3 without 1 initation. endownents and annuities. (14) "Mayor" neans the Mayor of tne District of 3.5 ~olucbia Or his authorized delegate. (15) "Owner" means a depositor in case of a 3.7 deoosit, a beneficiary in case of a trust, a creditor, claimant, or payee in case of other choses in action, or any 3.8 PAGENO="0214" 210 oerson havinq a legal or equitable interest in property 3.9 suoject to tnis act or his legal representative. 3.10 (16) "Person" means individual, bjSefleSS 3.12 CsSociation, government or governmental suociivisiori or agency. Dublic corooration, ouoflc autnority, estate, trust, 3.13 two or more oersons flaying a joint or cOmmon interest, or 3.14 any otner legal or commercial entity. (17) "Utility" means any person wno o~ins or 3.16 oDerates for public use, any plant. aauipment, prooerty. 3.17 franchise, or license for the transmission of communications or tne oroduction. storage. transmission, sale. delivery, or 3.18 furnisninq of electricity. water. steam, or gas. Sec. 103. ki~pert~yPresumedAbanjoned:General 3.21 Rul e. (a) All intangible personal property. not otherwise 3.23 covered by tnis act, including any income or increment 3.24 thereon and deducting any la~iful charges. that IS field or owing in tne ordinary course of the holder's business and 3.25 has remained unclaimed by the owner for more than seven years after it became oayable or distributable is Dresumed 3.26 abandoned. (b) Included witnin the coveraqe of this section bY way 3.28 of illustration is tne following prooerty: drafts. credit 3.29 PAGENO="0215" 211 balances, credit checks. uncashed vendor decks and any 3.30 otrier outsta~iciinq checks. (c) Property subject to this act snail be deemed payable 3.32 or distributable not.iithstancjing the o.~ner'~ failure to 3.33 Present eny instrument or document evidencing his right to receive the ocynent Provided therein. 3.34 Sec * 1 34. çondit ion sPrececjenttoPresu~t~nof 3.37 dQaDtDSi.S~gner3.iRuies. Unless otherwise provided by 3.38 statute of tne District, intangible personal proPerty is suP ject to a presumption of abandonment under this act if 3.39 tne connitions leedinq to a Presumption of apandonment as 3.40 zdescrioej in seCtjon~ 102 and 105 throuqi 114 are satisfied, an c: (C) Tne lest known address of tne apparent owner, 3.42 as shown on the records of the holder, is in the District, 3.43 (0) Ln apparent owner cannot be established and at 3.45 least one of the followinq aopiy: (1) the last known address of the person 3.47 entitled to the Property is established as being in the histrict; or 3.48 (2) the holder is domiciled in tne District 3.50 and nas not Previously paid or delivered tne property to a 3.51 state; or PAGENO="0216" 212 (3) the holder is the District qovernment and 4.2 it has not previously paid the property to a state, 4.3 (c) Tne last nown address of the aoparent owner, 4.5 as sno~in on the records of the holder, is in a State that 4.5 does not prov joe an escheat or abandoned proPerty 1 a~i applicable to the oroperty in question and tne holder is c,.7 (1) domiciled in tne District; or `p.9 (2) the District qovernment, 4.11 (d) Tne last Known address of the apparent ownere 4.13 as sno~n on the records of the holder, is in a foreign 4.14 nation and tne holier is (1) domiciled in the District; or 4.16 (2) the District qovernment, Or 4.18 (a) The transaction out of which the property arose 4.20 took place in the District, and: (1) (i) the owner of tne prooerty is unknown' 4.22 or (ii) the last known address of the apparent o?aner as `p.23 Shown on the records of the holder is in a state tnat does not provide an escrieat or abandoned Property law copliceole 4.24 to the property, ano (2) the holder is domiciled in a State that 4.26 does not provide an escheat or abandoned property law 4.27 applicable to tne oroperty. PAGENO="0217" 213 Sec. 105. ji S Precedent to ~, ~tjon of 4.30 ~ n~_~ _I~ ~2ic~t* Any sum payable on a money order, tra%'elers check. or 4.32 si~iiler ,qritcen instrument (otner than a tnjrd party bank 4.33 chec~z) on whicn a bankinq or financial orqanization or a business association iS directly fla~1e is presumed 4.34 adanooneci unler this act if the appropriate conditions leaclinq to a presumption of abandonmsnt as described in 4.35 sections 103 and 1b4 are satisfied and: (a) tne books aid records of the banking or 4.37 fina-icial organization or business~ association sncw that the 4.38 money orier, travelers cneck. or s~imilar written instrument was ourcnased in the District; (0) tne ban~inq or financ~ial organization or the 4.40 business association has its principal place of Dusiness in 4.41 the District and tne books and records of the business association 00 not snow the state in which the money order' 4.43 travelers check, or similar written instrument was ourcrased; or (c) tne bankinq or financ~ial organization or the 4.45 business association has its principal place of business in 4.46 the District, the oooks and record~s of tne bankinq or financial organization or business~ CsSOCiatiOfl snow the 4.47 state in which vie money order, tr~avelers checK, or similar PAGENO="0218" 214 written instrument was purchased and the state of purchase 4.48 do not provide an escheat or abandoned proPerty law 4.49 applicable to the delivery to the state of tne sum payable on sucn instrument. Sec. 1 06. 5.1 (a) Any demand, savings or matured time deposit with a 5.3 banking or financial organization, including deposits that 5.4 are automatically renewable, and any funds paid toward tne Purchase of shares, a mUtual investment certificate, or any 5.5 other interest in a financial organization is presumed 5.6 abandoned unless tne owner witnin ten years has: (1) in the case of a deposit, increased or 5.8 decreased the amount of the deoosit or presented tne oassoook or other similar evidence of the deoosit for the 5.9 crediting of interest; (2) communicated in writing with the banking or 5.11 financial organization concerning the Property; (3) otherwise indicated an interest in the property 5.13 as evidenced by a memorandum on file prepared by an employee 5.14 of the banking or financial organization; or (4) owned other property held by the banking or 5.16 financi.al organization for wnich suboaragrapris 1. 2, or 3 of 5.17 this subsection is applicable, provided that the banKing or PAGENO="0219" 215 financial organization comm~nicate5 in writing with regard 5.18 to the property that would otherwise be oresumed abandoned under this s'jbsection to the o~~ner1 at thC address to which 5.20 :o-~--Jnicaticns regarding tne othar~ property regularly are sent; or 5.21 (5) had another relationship with trie banking or 5.23 financial organization concerning whicri the owner hCs 5.24 (i) communicated in writing with tne banking 5.26 or financial organization; or (ii) otherwise indicated an interest as 5.28 evidenced by a memorandum on file~prapared by an employee of 5.29 the oankinq or financial organization, provided that the oankin~ or financial organization communicates in writing 5.30 with reqard to tne property that would otherwise be abandoned under this subsection to tne owner at the address 5.31 to wni:h communications regarding the otner relationship regularly are sent. 5.32 (b) cor ourposes of section 105(a), property includes 5.34 any interest or dividends thereon. (c) ~ny sum payable on a travelers cnezk issued ~y a 5.36 oanking or financial institution or a business association 5.37 in the District that has been outstanding for snore than fifteen years after its issuance is presumed abandoned if 5.39 the owner, for more than fifteen years. nas not communicated PAGENO="0220" 216 in writing witi the banking or financial organization or 5.40 Dusiness association concerning it or otnerwise indscatecl an 5.41 interest as evidenced oy a memoranc1u~~ or other record on file preoared oy an amoloyee of the banking or financial 5.42 organization or ousiness association. (8) A suil oayaole on any other written instrument on 5.44 whicn a oankinq or financial organization or business 5.45 association in tne District i5 oirectly liable, including r)ut not limite~1 to. certified checks, drafts, or money 5.46 orders. that has been outstanding for more than ten years after it was ~ayaole, or after its issuance if payable on 5.47 demand. is presLvned abandoned unless tne owner, nas within 5.48 ten years, communicated in writing witn the oanking or financial organization or business association concerninq it 5.49 or otherwise indicated an interest as evidenced by a memorandum on file preoared by an employee of the banking or 5.50 financial organization or business association. (e) ~o holder may imoose with respect to prooerty 5.1 descrioed in section 136(a) any charges due to dormancy or 5.2 inactivity or cease oayment of interest unless: (1) there is a valid, enforceable and written 5.4 contract between the holder and the owner of tfle proPerty 5.5 pursuant to which the nolder may impose sucn charges or cease oaymant of interest; PAGENO="0221" 217. (2) tne holder regularly, imposes such charges or 5.7 ceases accrual or oayment of interest anti dOes not regularly 5.8 reverse or other,,ise cancel such charges or retroactively DaY interest with respect to such Property; and 5.9 (3) for prooerty in excess of $10.03, the holder, 5.11 io rore than three months prior tb the initial imposition of 5.12 such cnarqes or cessation of interest, gives written notice 5.13 to tne owner of the amount of such charges at the last known address of the Owner that such charges will oe imposed or 6.14 that if~terest will cease, except that the notice provideti in this section neep not oe given with respect to charges 5.15 irposed or accrued or interest ceased Prior to January 1. 6.16 1960. (f) ~o holder shall deduct from the amount of any draft, 5.18 registered cneck. money order, certified check, trave'ers 5.19 check, cashier's check, treasurer's check, Or any similar written instrument any cnarqes imposed by reason of the 5.20 failure to present such items for encashment unless: (1) tnere is a ~Clid, enforceable and written 5.22 contract between the holder an~ the owner of the proPerty 6.23 oursuant to which the nolcier may impose such charges; and (2) the holder regularly imposes such charges and 5.25 does not regularly reverse or otherwise cancel such charges 5.26 with respect to such ProPerty. PAGENO="0222" 218 (g) ~otwitnstanc1inq anythinq to the contrary contained 5.28 in this section, in the event any type of Droperty subject 6.29 to this section is an asset of an Inciividual Retirement Account or Keogh Plan, establish pursuant to 26 U.s. Code, 5.30 sectiOn 408(a) or 26 U.S. Code, section 401(a). respectively, it snall not be deemed matured or otherwise 6.32 reoortable if, under tne terms of such plan, distribution of 6.33 all or part of tne property would not then be mandatory. (h) Any oroperty automatically renewable according to 5.35 its terms that is subject to section 106(a) shall oe cleesed 6.36 ~atureO for Purposes of this section uoon the expiration of its initial term. If at the time provided for delivery in 6.37 section 119. a penalty or forfeiture in the oayment of interest would result from the delivery of any Such 6.38 property. the tine for delivery shall oe extended until such 6.39 tine as ~O penalty for forfeiture would result. Sec * 107. Lç!3Lfl!A~ flds~j5iQ~jLifeInsuran~e 6.42 ~2CQQC~t L°Qt* (a) Unclained funds, as defined inthis section, held 5.44 and owing by a life insurance corporation, shall be presumed 5.45 abandoned if tne last known address, according to the records of the corporation, of the person entitled to the 6.46 funds is within the District. If a person otner tnan the 5.47 insured or annuitant is entitled to the funds and no address PAGENO="0223" *~219... of such oerson is known to the corporation or if it is not 5.48 definite and certain from the records of tie corporation 6.49 what person is entitled to the funds. it is oreSumed that the last known address of the person entitled to the fundS 5.50 is the same as the `ast Known address of tie insured or annuitant according to the records of the corporation. 5.51 (b) Unclaimed funds, as used in ~his section, means all 7.2 monies hOld end owing by any life insurance corporation 7.3 unclaimed and unPaid for more then seven years after the moni as became due ani Dayabl a as establ i shea from the 7.5 records of tie corporation under any life or endowment insurance policy or any annuitant contract wiich has matured 7.6 or terminated. A life insurance policy not matured b~ 7.7 actual proof of the death of the insured is deemed to oe mature and tie proceeds thereof are deemed to be due and 7.8 oayaole if s~cn oolicy was in force when tie insured 7.9 attained the limiting age under the mortality taple on which the reserve is based, unless the person apoecring entitled 7.10 thereto has within the preceding seven years (1) assigned, readjusted, or paid premiums on the oolicy. or Subjected the 7.11 oolicy to loan, or (2) corresponded in writing with the life 7.12 insurance corporation concerning the policy. Monies 7.13 otherwise paycole according to the records of the 67-~4O 0 - 81 - 15 PAGENO="0224" 220 corporation are deemed dJe and payable altiouqn th~ oolic:y 7.14 or contract nas not been surrendered as re0u*ired. Sec. 108. ~i ~d 7.17 The following funds held or owing by any utility are 7.19 oresumed abandonea (1) Any z~eoosit, including any interest thereon, made oy 7.21 a suoscriber with a utility to secure payment for, or any 7.22 sum oaid in advance for, utility services to be furnished, less any lawful cleluctions, that has remained unclaimed by 7.23 the oerson appearing on the records of the utility entitled 7.24 thereto for more than seven years after th9 termination of the services for wlith the deposit or advance payment was 7.26 made. (2) Any sum which a utility has been ordered to refund 7.28 and which was received for utility services rendered, 7.29 together with any interest thereon, less any lawful deductions, that has remained unclaimed oy tne person 7.30 appearing on tne records of the utility entitled tnereto for more than seven years after it became oayaole in accordance 7.31 with the final determination or order orovidinq for the 7.32 refund, regardless of whether the final determination or order reguirms any person entitled to a refund to make a 7.33 claim therefor. PAGENO="0225" 221 Sec. 109. UndLjbteL!Laaa1DLt!jutja~ 7.36 in~tt ~ Sny stoc~ or Other certificate of Owr~ersnip, or any 7.38 divideid. orofit. distribution, interest, oayment ofl 7.39 orinciosi, or other SUr~ held or Owing by a business 9sso:i3tior~ for or to a shareholder, certificate holder, 7.40 ~e-~ibsr. oonci~iolder, or other security holder, or a oarticipatin~ oatron of a cooperative, who nas not claimed it. or corresponded in writing with tne ousinesS asSociation concerning it, wit~in seven years after the date prescribed for oaynent or delivery, is oresumed aoandoned if: 7.43 (a~ It iS neld or Owing by a business association 7.45 organized under the laws of or cre3ted in the District; or 7.46 (0) It is neld or owing by a business association doing 7.48 ousiness in the District, out not organized LJI'~der the laws 7.49 of or created in tne District, and~the records of the ousiness association indicate that~tne last kflOwfl address of 7.50 the oerson entitled thereto is ifl the District. Se:. 110. Pr of~iness ons and Bank 1B.Q 9.2 ~ 8.3 411 intangible personal property distributable in the 8.5 course of a voluntary dissolution of a business association. 8.6 oanking orqa~ization, or financial~orqanization organized under the laws of or created in the District, that is 8.7 PAGENO="0226" 222 unclaimed by tne owner within twO years after the date for final distribution, is presumed abandoned. 8.8 Sec. 111. ~LE~j~çj8ij~t* 8.11 (a) 411 intangible personal property aid any income or 8.13 increment thereon. held in a fiduciary capacity for the 8.14 benefit of another person is presumed abandoned unless the owner within seven years after it becomes oayaole or 8.15 distrioutable, has increased or oecreased the principal. accepted payment of orincioal or income, corresponc1.~a in 8.16 writinq concerning the property. or otnerwise indicated an 8.17 interest as evidenced by a memorandum Ofl film with tne fiduciary. (b) For the ourpose of this section. if a person holds 8.19 property as an agent for a business association, the agent 8.20 is deemed to hpld the property in a fiduciary capacity for that business association unless the aqrmellent between the 8.21 aqent and the business association provides otherwise. For 8.23 the purposes of this act. if a person who is deemed to hold oroperty in a fiduciary capacity for a business association 8.24 alone, that person is the nolder of the property only insofar as the interest of the business association in the 8.26 oroperty is concerned and the business association is the holder of the property insofar as the interest of any other 8.28 oerson in-the property is concerned. PAGENO="0227" 2231 Sec. 112. ~ 8.31 Ex:eot for prooerty nelo by the property clerk of the 8.33 Me~rpppli~an Police Deoarti,ent as provided jfl the i~evised 8.34 Statutes of the District of Columbia~ sections 408 through 424 (D.C. Code. sections 4-151 through 4-167). afl 8.35 intanqib~e personal property h&Icl for the owner by any 8.37 public corporation, puplic authority~ or public officer of the District, that has remained unclained oy the owner for 9.38 nore trian two years is presuned abandoned. Se:. 113. ~ 5.41 ~fl enoloyee benefit trust distributior~S and any income 8.43 or other increnent tnereon is presumed aparidoned if the 8.44 owner within seven years after it becones oayable or distrioutable nas not acceoted the distribjtion. :orresoorided in writino concerning the distribution, or otnerwise indicated an interest as evidenced by a memorandum 8.46 or otner record on file with tne fiduciary of the trust or 8.48 :ustodial fuid or adninistrator of the pla, under which the trust or fund is established. Sec. 114. 1~_~8Ct ificates and Credit Memos. * 8.51 (a) sift certificates and credi~t memos held or owing in 9.2 the ordinary course of the holder's business tnat have 9.3 remained unclaimed by the owner for1 more trian seven years PAGENO="0228" 224 after oecoming payable or distributable are presumed 9.4 abandoned. (b) If a gift certificate or credit memo is redeemable 9.6 for cash or nercharldise. its value for purooses of tnis act 9.7 shall oe tne amount paid by the purchaser. Sec. 115. fl QQ»=~P~J2!1 ~ 10 QLog.~.~u2ti~p~1. D~ll personal property, tangiole or intanqible, held in a 9.12 safe deposit box or any otner safekeeping rePository in the 9.13 District by any Person in the ordinary course of business, 9.14 .rnicn is unclaimed by the owner for ten years or more from 9.15 tne date Ofl ,~hich the lease or rental period on the POX or otner repository expired is presumed aoandonecl. 9.16 Sec. 116. Qfl~LQi~c.~. 9.19 Linoaid wages or outstanding payroll checks held or o~4ing 9.21 in trie ordinary course of the holder's bJsiness that have 9.22 remained unclaimed by the owner for more tian one year after becoming payable Or distributable are presumed aoandoned. 9.23 Sec. 117. Q3rt3fAbandOflE~~QDert~. 9.26 (a) Every person holding funds Or other Property, 9.28 tangible or intangible, presumed abandoned under this act 9.29 shall report to the Mayor with respect to the property as nereinafter provided. (b) T~e reDort must Oe verified and must include: 9.31 PAGENO="0229" 225 (1) exceot with respect to travelers checks ana 9.33 noney orders, tne na-ne, if known, ana last known address, if 9.34 any and if known. of eacri person aopearirig from the records of tne holder tO be the owner of any~ prooerty of the value 9.35 of $50.03 or more oresumed aoandOfled~ under tflis act; (2) in case of unclaimed funds of life insurance 9.37 corporations, the full name of the insured, or annuitant and 9.38 the beneficiary and his last known address according to the life insurance corporation's records; 9.39 (3) ii the case of the contents of a safe deposit 9.41 box or other safekeeoinq repository ~r ifl the case of other 9.'t2 tarnaiole prooerty, a description of the orooarty and the olace ~~here it is neld and may be inspected oy the Mayor, in 9.43 which case tne report must set forth any amounts Owing to the holder as shown by SeCtion 118; 9.44 (4) the nature and identifyin~ number, if any~ or 9.46 descriotion of tne prooerty and the amount aopearing from 9.47 the re:ords to be due, except that items of value under $50.30 snall be reoorted in the aqqreqate; uoon the 9.48 aQqreqatiOn exceedinq S50.00; (5) the date when the property oecame payable, 9.50 demandable, or returnable~ and the date ~f the last 9.51 transaction with the owner with respect to tne property; and PAGENO="0230" 226 (6) other information which tne Mayor prescribes oy 10.2 rule as necessary for the administration of this act. 10.3 (c) If tne person holding property presumed abanooneP is 10.5 a successor to other persons who previously neld the 10.6 oroperty for the owner. or the holder nas changed his flame while noldinci the oroperty~ the holder snall file with ti'S 10.7 report all prior kno,~n names and addresses of each holDer of 10.8 the property. 10.9 (d) The report must De filed before s~ovember 1 of each 10.11 year as of June 30 next oreceding, but tne report of life 10.12 insurance corporations must be filed before M3y 1 of eacn year as of Decemoer I next precedinq. Tne Mayor may 10.14 Postpone tne reporting date upon written request bY any oerson reQuired to file a reoort. 10.15 (e) If tne holder of proPerty presumed abandoned under 10.17 this act has in its records an address of ttie apparent 10.18 owner. the nolder shall, not norm than One iundred and 10.20 twenty days prior to filing the report required by this section, send written notice to the owner at the last known 10.22 address to prevent abandonment from being presumed. (f) Verification, if made by a partnership, must be 10.24 executed by a partner; if made by an unincorporated 10.25 association or private corporation, by an officer; and if made by a public corporation. by its chief fiscal officer. 10.26 PAGENO="0231" 227 Sec. 118. Notice and Publication of LiSts of AbandOned 10.29 (a) Mithin ole hundred and twenty Pays froi~ the filinq 10.31 of the report repuired by section 117, tne Mayor shall cause 10.32 notice to be published at least once each week for two consecutive weeks in a newspaper of qeneral circulation in 10.33 the Pistrict. (b) The Publisned notice snail be entitled ``~otice of 10.35 `~e~es of Persons Appearinq To Be Owners of Aoandoned 10.36 0roperty.' and snail contain: (1) Tne names in alphabetical order and last knoWn 10.38 adoresses, if any, of persons listed in the report ana 10.39 entitled to notice as nereinoefore soecified. (2) A statenent that information concerning tne 10.41 amount or descriotion of tne property and the name and 10.42 address of tIe holier nay oe obtained by any persons possessing an interest in the property by adireSsinq an 10.44 inpuiry to tie kayor. (3) A statement that if proof of claim is not 10.46 oresented by tne owner to the nolder and if the owner's 10.47 right to receive the property is not established to the nolder's satisfaction within sixty-five days from the date 10.48 of the second puolished notice, the abandoned property will oe olaced not later than eiqnity-five days after such 10.49 PAGENO="0232" 228 oublication Pate i, ttie custody of the Mayor anci all further 10.50 claims must thereafter be directed to thC Mayor. (C) The Mayor is not required to publish in such notice ii.i any item of less than $50.00 unless the Mayor deems such 11.3 muolication to be in tne public interest. (ci) Within one hundred and twenty days from the receipt 11.5 of tne report required by section 117, the Mayor snail mail 11.6 a notice to each person havinq an address listed therein who apoears to oe entitled to property of the value of $50.00 or 11.7 more presumed abandoned under this act. (a) The mailed notice shall contain: 11.9 (1) A statement tnat, according to a report filed 11.11 with tie Mayor, oroperty is being held to which the 11.12 addressee apoears entitled. (2) The name and address of the Person holding the 11.14 oroperty and any necessary information regarding tne cnanges 1145 of name and address of the holder. (3) A statement that, if satisfactory proof of 11.17 claim is not presented by the owner to the holder by the 11.18 date soecified in the oublished notice, the oroperty will be olaced in the custody of tne Mayor and all further claims 11.19 must be directed to the Mayor. PAGENO="0233" 229 (f) This Sectioti is not applicable to sues payable on 11.21 travelers checks or coney orders and similar written 11.22 instruiients that are presumed abandoned under section 104. Sec. 119. E~L~1 11.25 (a) Exceot as otherwise provided in suDSectiofls (b) and 11.27 (C). every person ,iho ties filed a report under section 117. 11.28 shall ,.ithin six nonths after the final date for filing reports as reajired by S9CtiOfl 117. pa~ or deliver to the 11.29 ~Cyor all abandoned property specified in the report. 11.30 (b) If tie owner establishes his riqht to receive the 11.32 abanpoleci property to the satisfaction of the holder before 11.33 the property has been del ivered ofl if it aopears that for some other reason the presumption of apandonment is 11.34 erroneous. tie holder need not payor ~eliver the property whici ,qill np lonqer be presumed abandoned to the Mayor, but 11.35 in lieu thereof shall file a verified written explanation of 11.3b the proof of claim or of the error in the presumption of ao endoirnent. Cc) In the case of sums payable pfl travelers checks, 11.38 money orders and similar written inStrumentS presumed 11.39 abancloled under section 105 or any other property reported pursuant to section 117 for which the holder has not 11.41 reported tie name of tne apparent owner, tie property shall PAGENO="0234" 230 he paid or delivered to the Mayor at the time of filing the 11.42 report specified in section 117. Sec. 120. ~ict~~rR ievedfr23~ 11.45 ~ 11 *46 ~ 11.47 (a) Upon the payment or delivery of oroperty to the 11.49 Mayor, the District assumes custody and responsibility for 11.50 the safekeeping of the prooerty. Any derson who pays or 11.51 delivers proderty to tne Mayor in good faith under this act is relieved of all liability to the extent of the value ~f 12.2 the property so paid or delivered for any claim then existinq or .~flicn thereafter may arise or ~e made in respect 12.3 to tne prooerty. Property removed frol) a safe dCposit box 12.4 or other safekeeoing repository may be received oy tne Mayor 12.5 subject to any valid lien or contract providing for the nolder to be reimbursed for unpaid rent or storage charges 12.6 and the actual cost of tne opening thereof. ~hicn rent an~ charges must be oaid out of the proceeds remaining after the 12.8 Mayor nas deducted therefrom his sellinq costs. (b) Any holder who has paid money to the Mayor pursuant 12.10 to this act may `flake payment to any person appearing to the 12.11 holder to be eltit~ed thereto. and uoon filing proof of oayment and oroof that tne payee was entitled thereto, the 12.12 PAGENO="0235" 231 Mayor shall fortnwith reimourse the noloer for tne payment without deduction of any fee or ot~ner :narles. If 12.1, reimoursement is souqht for a payment made o~' a negotiab'e instrument i~cluding a travelers check or money order. the 12.15 holder must oe reimbursed under this subse:tion upon filing proof that the instrument was duly presented to the holder 12.16 and that payment was macla thereon to a person who appeared 12.11 to the holder to be entitled to payment. 12.18 Ic) e~~y holder who has del ivered prooerty to the Mayor 12.20 oursuarit to this act may reclaim tne property without 12.21 payment of any fee or other charges upon filing proof that the owler thereof nas :lained the~oroperty from the holder. 12.22 The Mayor. in tne Mayor's discretion, may accept an 12.23 ~ffii~vit of tne holder stating the facts that entitle tne 12.25 holder to reimoursment under this~suDSecti3fl as sufficient proof thereof. Se:. 121. ~ 12.28 Ip ç~em ents3wne~s~çcount. whenever property otner than money is oaid or de'ivered 12.30 to tne Mayor under this act, any dividends, interest or 12.31 other increments real ized or accruing on the prooerty at or pefore lipuidation or conversion thereof into money, shall 12.32 oe crezlite~, u~On receipt. to the~ owner's account Dy the 12.3't Mayor. PAGENO="0236" 232 Sec. 122. ~ 12.37 (a) All abandoned property other than soney delivered tO 12.39 the `fayor unoer this act may be sold after tne dcl ivery oy 12.40 the Mayor to tne hiqnest bidder at public sale. The Mayor 12e42 may decline the highest bid and reoffer the Property for sale if the Mayor considers the price bid insufficient. The 12.45 Mayor need not offer any property for sale if. in the Mayor's opinion, tne probable cost of sale exceeds the value 12.47 of the property. (b) Any sale held under subsection (a) shall be Preceded 12.49 oy at least a sinqle publication of notice thereof, at least 12.50 three seeks in advance of sale, in a newspaper of general 12.51 circulation in the District. (C) The Purchaser at any sale conducted oy toe Mayor 13.2 oursuant to this act snall receive title tp the property 13.3 purchased, free from all claims of the o~iner or prior holder thereof and of all persons claiming throug~ or under the 13.4 owner or prior holder. The Mayor shall execute all 13.5 docu1~ents necessary to complete the transfer of title. Sec. 123. Qtoosit~f Funds. 13.7 (a) During the first two years after the effective date 13.9 of this act, no less than fifty-percent (505) of all 13.10 oroperty received under this act. including the proceeds from the sale of aoandoned property under section 122. snall 13.12 PAGENO="0237" 233 forthwitn be clepositeci by the Mayor~ifl a separate trust fund or kept for safekeeping with a holder whicn is a bank or 13.13 trust company in order to make prompt Payment of claims duly allowed by tne Mayor as nereinafter provided. The remainder 13.15 Percentage of funds received Cnd any income or increment to 13.16 the funds deposited in tne trust fund accruinq during such two years ~ay oe deposited in the general fund of the 13.17 District. (b) All funds received or kept under thiS act after the 13.19 two-year period descriped in subsection (a). including tne 13.21 Proceeds from the sale of abandoned, property under section 13.22 122. shall forthwith be deposited ~y the Mayor in the general fund of tna District, except triot thS Mayor shall 13.24 retain in a separate trust fund an amount not less than S100,000.0D in order to make prompt payment of claims duly 13.25 allowed by tne Mayor as nereinafter, provided. Before making 13.26 the deposit the Mayor shall record at least the name and last known address of each person appearing from tne 13.29 nolciers' reports to be entitled to the aoa~dpned property and of the naoe and last known addr~ess of each insured 13.30 oerson or annuitant. and beneficiary and witn respect to each policy or contract listed in thm reort of a life 13.31 insurance corporation. tne policy or contract number, the 13.32 name of the corporation, and the amount due. The record 13.34 PAGENO="0238" 234 shall be available for puolic inspection at all reasonable business hours. (C) Before makinq any deoosit to tne credit of the 13.36 general fund of the District, the Mayor may deduct: (i) any 13.37 costs in Comiection with tne sa'e of abandoned prooerty. or with the disoOsitibn by other means of abandoned property 13.38 under section 122(d). (ii) any costs of maflinq and publication in con~ection with any abandoned prooerty. and 13.39 (iii) reasonable service Charqes and (iv) the costs incurred 13.40 in examininq records of folders of abandoned property ana collectinq sjch oroperty from such holders. 13.41 Sec. 124. filiog ~ ~ 13.44 Any person. excluding a state. claininq an interest in 13.46 any property paid or delivered to the Mayor under this act 13.47 may file a claim to the oroperty or to tne net proceeds from its sale. Tne claim mjst oe on a form prescrioed oy the 13.48 Mayor and must be verified by the claimant. Sec. 125. Q~tt ~ 13.51 (a) the Mayor shall consider any claim filed under this 14.2 act.. The Mayor shall within thirty days of the receipt of 14.3 any claim either pay the claim or qive written notice to tne 14.4 claimant of a denial in whole or in p3rt. Upon a denial or 14.5 a failure by the Mayor to respond within tnirty days, the PAGENO="0239" 235 claisant may reQuest a hearinq on the claim. Upofl SUCh 14.7 reluest the Mayor shall hold a hearinq and receive evidence in accordance with section 1D9 of the District of Columbia 14.8 ~d~,inistretiye Procedure Act (D.C. Code, section 1-1509). (b) If the claim is determined ifl favor of tne claimant, 14.10 the Mayor shall maKe pay~ient forthwith of only that amount 14.11 whiCh tne Ucyor actually received plus any dividends or interest allowed under section 121. Tne claim snall be paid 14.13 without deduction for costs of nátices or sale or for 14.14 service charqes. Sec. 126. ae~RvePty~C1~im 14.17 (a) St any time after Dropery flas been paid or deliVered 14.19 to tne Mayor under this act, a state is entitled to recover 14.20 the Property if: (1) Tne property was presumed aoandoned in the 14.22 District because tne apparent owner was unknbwn when the 14.23 oroperty was presuned abandoned under this act. the last known. address of tne apparent owner was in fact in a states 14.24 and, under tne laws of that state, tne prooerty escheated to or was subject to a claim of adandonnent by that state; 14.25 (2) Tne last known address of tne apparent owner of 14.27 the Property aopearing on the records of tne holder is in a 14.28 state and, under tne laws of that State, the property has 67-~4O 0 - 81 - 16 PAGENO="0240" 236 escheated to or oecome sub ject to a ci ci a of aoandoneent bY 14.29 that state; (3) The records of the holder were erroneous in 14.31 that they did not accurately reflect tne a:tual owner of tne 14.32 Oroparty and tne last kflOwfl addresS of tne actual owner ~s in a state, and. under the laws of tnat state, tne prooertv 14.33 has estheated to or become subject tO a cl ala -of aoanaoflment by tnat state; 14.34 (4) The property was presumed coandonea to the 14.36 District undersection 104(e) of this act ~nd under the laws 14.37 of tne state of domicile of the holder t~e property nec escheated to or become subject to a claim of anandonment by 14.38 that state; or (5) The prooerty is the sum payable on a travelers 14.40 check, money order or otner similar instrument tnat was 14.41 oresumed abandoned to the District under section 105. the travelers check, money orders or other similar instrument 14.42 was in fact ourchased in a state. and, under the laws of that state. the oroperty has escheated to or become suoject 14.43 to a claim of abandonment by that state. (b) The claim of a state to recover estheated or 14.45 abandoned Droperty under this section must be presented in a 14.46 form prescrioed Dy the Mayor. who shell coisider the claim within tnirty days after it is presented. Tne Mayor shall 14.49 PAGENO="0241" 237 allow the claim if tne Mayor deternines that a state is Sntitlecj to the abandoned oroperty.~ 14.50 Cc) In connection with all property so delivered to a 15.1 state, tne Mayor shall seek indemnification from tne state 15.2 making tne claim tnerefor Sec. 127. ~L_~f~LQ~. 15.5 Any person aggrieved by a decision of the Mayor. or as 15.7 to wiose claim the Mayor has failed tc hold a nearing within 15.9 a reasonable tine pursuant to sectj~on 125(a), may have sucn claim reviewed pursuant to the District of Columpia 15.10 Administrative Procedure ~ct (D.C. Code. Sections 1-1501 et t~ g.). Sec. 128. ectiJP.~fle~-D~-Ve 15.13 (a) The Mayor, after receiving reports of property 15.15 0ee!-~ed abendoned pursuant to this act, may decline to 15.15 receive any oroperty reported which the Mayor considers to have e value less than the cost of giving notice and holding 15.18 sale, if the Mayor considers it desjraole oecause of tne 15.19 small sul, involved, the Mayor may postPone taking possession 15.20 until a sufficient sum accumulates. Unless the holder of 15.22 the Property is notified to the contrary witnin one hundred and twenty days after filing the report reguired under 15.23 section 117, the Mayor shall be deemed to nave elected to receive the custody of the property. 15.24 PAGENO="0242" 238 (b) If a holder elects to report and deliver proderty 15.26 otherwise suoject to this act prior to tne time that the 15.27 property is oresumed apandoned hereunder. the Mayor. if the Mayor deems it in the oest interest of tne o,rner. may 15.29 consent in writinq to acceot the report and delivery of the property uoon the conditions and terms as the Mayor shall 15.30 prescribe. The Droperty delivered under tflis subs~ctiofl 15.31 shall be held oy the Mayor and shall not be presumed abandoned until such time as the proberty ,,ould otherwise be 15.32 oresumed abandoned under this act. Sec. 129. Periods of Limitations `lot a Bar. 15.35 (a) The exoiration of any period of time specified by 15.37 contract. statute, or court order. durinci ,~hich a claim for 15.38 recovery of money or pronerty can ~e made or. durinq which an action or proceedinq may be commenced or enforced to 15.39 obtain payment of a claim for money or recovery of property. 15.40 does not prevent tne money or property from oeinq presumed abandoned property. or affect any-duty to file a report 15.43 required by this act or to pay or deliver abandoned property to tne Mayor. - (b) `lb action or proceedinq may be, commenced by th~ 15.45 Mayor to enforce aiy provision of this act more than ten 15.46 years from the date any property was reportable under thi5 act. ,Iith respect to property initially reportable pursuant 15.47 PAGENO="0243" 239 to section 301(b) of tnis act. no action or Proceeding may l5.4~ oe cDrn~enced by the Mayor to enforce any provisions of this act more than ten years from the effective date of this act. 15.51 Sec * 130. ~ 16.3 (a) The Mayor cay require that any person shall file a 16.5 verified report statinq ,4hetrier or not tne person is holding 16.6 any unclaimed oroperty reporteole or deliverable under this act. (b) Th~ Mayor nay at reasonaole-times and upon 16.8 reasonable notice examine the records of any person to 16.9 determine if sucn person has compliea dth tne provisions of this act. It shall be no defense to sucn a request for 16.10 examination that the person believes it is not in possession lo.11 of any property reportable or deliveraole jnder this act. Cc) If a person under section 111 is treated as the 16.13 holder of the property only insofar as tne interest of the 16.14 business association in such property is concerned, the Mayor may pursuant to subsection (b) examine the records of 16.15 the person provided that tne Meyor~shall give the notice reriuired by subsection (0) to bOth~the person and the 16.16 ousiness association not less than~90 days prior to the 16.17 examination. 16.18 (d) If a holder shall fail to maintain the records 16.21 required by section 131 and the then available recoros of 16.22 PAGENO="0244" 240 the holder for the periods subject to the act are not sufficient to permit the preparation of a reoort and 16.23 delivery of abandoned property, the noldar shall be ordered to report and deliver such property as may reasonaoly be 16.24 estimated oased upon any other records of tne holoer whiCh 16.25 ex 1St. Sec. 131. ~ 16.27 Any information or records required to be furnished to 16.29 the Mayor as provided in this title shall oe confidential 16.30 and shall not oe disclosed tO any persdn except the person who furnished the same to the Mayor and except as provided 16.31 in sections 118 and 123 or as nay be necessary in the proper administration of this title above. 16.32 Sec. 132. ~ 16.35 (a) Except as provided ifl subsection (o) and unless the 16.37 Mayor provides otherwise by rule, every nolder required to 16.38 file a report under section 117 shall, as to any property 16.39 for which it has obtained the address of tne owner. maintain a record of thn name and address of the owner for ten years 16.41 after the date the property may have become reportable. 16.42 (b) Any business association that sells in tne District 16.44 travelers checks. money orders, or other similar written 16.45 instruments, other than third-party bank ciecks on which the business associatiOfl is directly liable or that provides 16.46 PAGENO="0245" 241 those travelers checks, money orders. or similar written 16.47 instruments to others for sale in the District, shall maintain a recoro of sucn instruments while they remain 16.48 outstanding indicating the state and oate of issue for 3 years after the date the proPerty may nave become 16.49 reportable. Tne record iiay be destroyed after the record 16.50 ties oeen reteined for such reasonable time as the Mayor b~ 16.51 rule snail designate. 17.2 Se:. 133. ~ Abandoned 17.5 If any person refuses to pay or oeiiver abandoned 17.7 Property to the Mayor as required under this act, the Mayor 17.8 tay bring an action in the Superior Court of the District of :oiu~bia to enforce such delivery. 17.9 Sec. 13'.. ~LQ~ç~~n 17.12 (a) At t~1e request of a-state,~ the Corporation Counsel 17.14 of the District may bring an action in the name of tne 17.15 Adninistrator of tne state, in any court of appropriate jurisdiction to enforce the unclaimed Property laws of the 17.16 state against a nolder ii the District of Property subject 17.17 to escneat or a ci aim of abandonment by the state. if the state has agreed to pay exPenses incurred oy the Corporation 17.18 ounsel in brinqinq the action. PAGENO="0246" 242 (b) The Mayor nay request that tne Attorney General of a 17.20 state or any other person bring an action in the name of tne 17.21 Mayor in the state. The District shal1 oay all expenses 17.22 including attorney's fees in any action under this subsection. Any expenses paid pursuant to tnis suosectiOn 17.23 say not oe deducted from tne amount th5t is subject to the 17.24 claim oy the odner in accordance with thiS act. Cc) The Mayor nay enter into an agreement to provide and 17.26 to receive information needed to enable the District and the 17.27 state to audit or otherwise determine unclaimed property 17.28 that tne District or tne state may be entitled to escheat or 17.29 suh~ect to a claim of custody as abandoned property. The 17.32 Mayor nay oy rule require the reporting of information needed to enable tne Mayor to comply with agreements made 17.34 pursuant to this section and prescribe the form~ including verification of the information to be reported ana the times 17.35 for filing tne reports. (d) The Mayor may loin witn states to seek enforcement 17.37 of this act against any person who is or cay be nolding 17.38 property reportaole under this act. Sec. 135. a8itit~* 17.41 (a) Any person who.failS to render any report or perform 17.43 any other duty required under this act shall pay a civil 17.44 penalty of one hundred dollars (SiDO) for each day each PAGENO="0247" 243 reoort is withheld or each outy is not performed, out not 17.46 more than one thousanddollars ($1000) for each such violation. (b) Any oerson who willfully refuses to report, Pay or 17.48 deliver abandoneci Property to the Mayor as reciuired Under 17.50 this act shall be punished by a fine of not core than 5300.OD or i~risonrent for not more tian ninety days. or 17.51 00th. Sec. 136. ~piQCc~~tQfCiviLYenalties. 18.3 (a) All fines levied pursuant to section 135(a) are 18.5 civil in nature. (b) The Mayor may issue a notice of violation to any 18.7 oerson who violates a provision of this act. The notice 18.8 shall (i) state the nature of the~violation; and (ii) 18.9 aescrioe the procedures provided in this section. (C) A notice of violation shall Oe the summons Cfld 18.11 complaint for ourposes of this section. A duplicate of the 18.12 notice of violation shall be served personally on tna person to whom it is issued as provided in subsection (d). The 18.14 oriciinel or a facsinile thereof shall oe filed with the Jffice of the orporation Counsel and shall oe deesed a 18.15 record kept in tne ordinary course of business and shall be orirca facie evidence of the facts~contai.,e( therein. 18.16 PAGENO="0248" 244 (d) A notice of viOlCtiOfl sfl~ll oe served personally 18.18 uoon tne alleged violator. If the alleged violator is not 18.19 oresent the notice of violaton snail be served by affixing such notice to the place ~f business in a conspicuous place. 18.20 (e) The Mayor shall prescribe the form for the flOtiCe of 18.22 violation. A Maiors rule or order estaolisning tne asoUnt 18.23 of collateral snail be subsitted by the Mayor to tne Council 18.24 of tne District of Columbia for a thirty (30) calendar day review period, excluding days of Council recess. ~4o such 18.26 rules or reqjlations snail take effect until the end of the thirty (30) calenoar day period beginning on tne day such 18.27 rules or regulations are transmitted by thC Mayor to tne Chairman of the Council, and then only if during such 18.28 period, the ouncil does not adopt a resoljtion clisaoPrOving such rules and regulations in whole or ifl part. 18.29 (f) A Person snail answer a notice of violation within 18.31 fifteen (15) days oy (1) depositing and forfeiting collateral in an 18.33 amount established by rule or order of the Mayor; or j8.34 (2) ~eoOsiting collateral in an amount established 18.36 o~ rule or order of the Mayor and requesting the Superior 18.37 Court of the District of Columbia tO set a t~rial date. (g) Unless otherwise provided~ the conduct of any civil 18.39 trial commenced pursuant to subsectiofls (b), (c). (d). (e) 18.40 PAGENO="0249" 245 and (f) shall oe governed by the Rules of the Suoerior Court of tne District of Columola Rules of Civil Procedure. 18.41 (h) In such trial, tne complaint of a violation of this 18.43 act shall be brouqrit in the name of the District of Columbia 18.44 my tne Corporation Counsel. The burden of proof snail be 18.45 umon tne District of Columbia and no violation of this act may me estabi I shm~ except upon proof by a oreponderance of 18.46 the evidence. (j) sll fines, collateral, and fees collected under this 18.48 section shall oe paid into the General Fund of tne District 18.50 movernment. (i) 4 fine or collateral is due and pavamle oursuant to 19.1 settiol 134(a) uoon aefault or a f~indinq at trial in favor 19.2 of the District government or upon the failure of a person to answer a notice of vi~l~tion wi~thin fifteen (15) days as 19.4 orovided ifl subsection (f). - (k) tailure of a person to pay a fine or collateral when 19.6 due shall cause suth fine or collateral to be due and 19.7 oayamle in twite the oriqinal amount not to exceed two 19.8 thousand dollars (S2000). (1) The Jistri:t of olumoia shall have a lien upon any 19.10 amount due and payable as a fine or collateral pursuant to 19.11 section 135(a). Such lien snall not be effettive unless: 19.12 (A) the District government shall have filed in the Office 19.13 PAGENO="0250" 246 of tne Recorder of Deeds of the District of olumbia in a 19.15 docket provided for such liens, a written statement containinq tne name and address of the violator and the date 19.16 and aporoximate olace of the violation; and (B) the District government has qiven notice of the filing of SUCh lien to 19.17 the violator. Toereafter, tne District government is 19.18 authorized to file suit in tne amount of t~e its lien. Sec. 131. ~ 19.21 (a) No aqreement or contract with a person for a fee or 19.23 compensation to locate, deliver. recover, or assist in tne 19.24 recovery of oroperty reported under sectio~ ill, entered into within seven (7) months after the date oayment or 19.26 delivery is reguired under section 119. is valid. (b) `Jo a~reeSent entered into after seven (7) montns 19.28 from the date ~f delivery of tne property oy the holder to 19.30 the Mayor is valid if a oerson tnereOy uidertakes to locate property included in a report for a fee or other 19.31 compensation exceeding ten percent (lOt) of the value of the recoverable oroperty unless the aqreement is in writing and 19.33 signed by the owner and discloses the nature and value of the oroperty and tne name and address of tie holder of the 19.34 property as such facts have Deen reported. Nothing in tfli5 19.36 section shall oe construed to prevent an owner from PAGENO="0251" 247 asserting at any time that an aqreement to lpcate property 19.37 is based UDOl an excessive or unjust consideration. Sec. 138. Rules ani R~gulatj2ns. 19.40 The Mayor is authorized to issue sucn rules, 19.42 regulations, aid Orders as may be necessary in order to 19.43 effectuate the purposes of this act. 19.44 Sec * 139. ~ 19.47 There are authorized to be appropriated such sums as may 19.49 be necessary to carry out the provisions of this act. 19.50 Sec. i'~O. ~ijit1. 20.2 If any provision of this act or~ the application thereof 20.4 to any person or circu~,stanca is held invaHd, tne 20.5 invalidity snail not affect otner provisions or applications of the act which can be given effect without tne invalid 20.6 Provision or application, and to this end the provisions of this act are severable. 20.7 Sec. 141. ~a~U_8_cti9i'. 20.10 This act snail be apolied and construed as to effectuate 20.12 its general Purpose tO make uniform the law with respect to 20.13 the subject of this act among those states enacting it. Sec. 142. ~ 20.15 Sections 1 throuqh 5 of An Act To eliminate the 20.17 maintenance by the District of Columbia of perDetual 20.18 accounts for unclaimed moneys neld in trust oy the PAGENO="0252" 248 qo~iernnent of the District of Columbia aoprOved December 18, 20.19 1963 (77 Stat. 419; D.C. Code, secs. 47-140 throu)fl 47-144) 20.21 are reoealed. TITLE II 20.24 Sec. 201. Section 408 of the Revised Statutes of the 20.27 )istrict of olumbia (D.C. Code, seCtion 4-151) is amended 20.28 as follows bY designating the existiflq section as subsection "(a)" and acmcliaq to the end thereof the following 20.29 "(b) For purooses of sectionS 409 throJqn 425: (1) the 20.31 term `lost prooerty' means any persona) oroperty, tangible 20.33 or intangible. tne owner of which is unknown and which has been casually or involuntarily parted with through 20.34 negliqence, carelessness. or inadvertence; ano (2) the term 20.35 `finder of lost oroperty' means any oerSon otner than a oublic officer of the Metropolitan Police DeoartaentWho has 20.37 found lost prooerty.". Sec. 202. Section 417 of the Reiisezi Statutes of the 20.40 District of olumbia (D.. Code. section 4-160) is amended 20.41 as follows (a) Strike suosection (c) and redesignate subsection 20.43 (b) as (m). (b) Strike subsection (a) and insert in lieu thereof tne 20.45 fo)lowing PAGENO="0253" 249 "(a) ~4ith respect to all property (including 20.47 money), exceot perishaole oroperty, animals, firearms and 20.49 oroperty of insane persons, not otherwise Disposed of in 20.49 accordance witi se:tion Cp16 of the Reviseci Statutes of the District of olurnbia. that shall remain in tie custody of 20.50 the oroperty clerk for not less than ninety (90) days. 20.51 except motor vehicles which shall ~e held for not less than 21.1 sixty (60) days. without being claimed and repossessed, the 21.3 oroDerty clerk shall: "(1) publish or cause to b9 ouolisheci, in a 21.5 newsoeoer of general circulation in the District once a week 21.6 for three (3) consecutive weeks, (I) a description of the oroDerty and (ii) notice that if such oroperty is not 21.8 clai~eci oy tie riqntful owner within sixty (60) days from the date of first cub) ication, title to the oroperty shall 21.10 revert to the finder of lost Property after deduction for the exoenses of custody and puplication, or to the District 21.11 of Coljn~ia in all other cases; and 21.12 "(2) post or cause to be posted in tie 21.14 Metropol itan Pp1iC~ Deoartment Headquarters where public notices are commonly or usually posted, a coDy of the notice 21.15 oublished in the newspaper of qeneral circjlation in the 21.16 District, anci shall make a record of tie date when such oubi icat ion and the post mg of the notices are made. 21.17 PAGENO="0254" 250 "(0) If neither the riqotful owner nor toe finder 21.19 apoear to claim the lost prooerty. title to such prooerty 21.20 shall transfer to the District and maybe sold at public auction at sucn olace and time as the property clerk may 21.21 direct and in such a manner as to exooSe to the inspection of bidders all prooerty so offered for sale. The property 21.23 clerk needs not offer any property for Sale if. ifl the oroperty clerk's ooinion, the probable cost of sale exceeds 21.25 the value of the property. "(c) The ourcnaser at any sale coidLicteci Dy the 21.27 property clerk pursuant to this title shall receive title to ~1.28 the property purchased. free fron all claims of the rightful owner or the finder of the property and all persons claiming 21.29 through and under the rightful Owner or the finder. The 21.30 Property clerk snall execute all documents necessary to complete the transfer of title. "Cd) ~ll proceeds from any sale under this- section 21.32 shall be deposited in the general fund of the District," 21.33 Sec. 203. The Revised Statutes of the District of 21.36 Columbia sections are amended by adding to the end thereof the following new section to read as follows: 21.37 "424. Nothinq in sections 408 through 424 snall be held 21.40 to reQuire the prooerty clerk to~ke posseSsion of, or ~ 21.41 flake disoosition of, any abandoned intangiole personal PAGENO="0255" 251 ; oroPertY~whizh is otnerwise provided for in Title 1 of tfle 21.42 `District of Colu~~j~ Uniform Djsp~sitioi of Unclaimeci Property Act of 1930.'" 21.'+3 TITLE III ?1.46 Sec. 301. (a) This act shall ta~ke effect after a tflirty 21.50 (30) day period of Conoressional revie., following approval 21.51 Dy tne ~`ayor (or ifl the event oy tne L'ayor, action by the o~ncil of tne District of Colurnoia to override the veto) as 22.1 oroviced in section 502(c)(1) of tné District of Columbia Self-Governrent and Governsental Reorganization Act, 22.2 Cooroved Decenoer 24, 1973 (67 Stat. 813; o.:. Code, sec. 1- 22.3 17(c) (1)). (b) Title I of tnis act shall apoly retroactively to all 22.5 items of prooerty ~hicr~ `gould nave t~een presdmed abandoned 22.6 if tnis act nad been in effect as of January 1, 1980. 67-4'iO 0 - 81 - 17 PAGENO="0256" 252 Mr. GOLDBERG. The process began in 1978, just 2 years after home rule was granted. Table 1 of my testimony is a compilation of information on this subject obtained from four major savings and loan institutions in the District of Columbia. It shows that over $26 million of consum- ers' accounts were considered dormant at the end of 1978. Even more significant, however, is that the one institution that is most active in pursuing the owners of dormant accounts, Perpetual Savings & Loan, has kept the average balance in these accounts to only $162, while other institutions with less aggressive locating procedures have bal- ances ranging up to $2~179. This 1,345 percent difference clearly in- dicates that an aggressive locating policy can be successful in assur- ing that the proper owners of unclaimed property will claim their property, once notified of its existence or it status. A survey of the District of Columbia commercial banks conducted by the Comptroller of the Currency reveals that an additional $25 million in dormant accounts resides in such institutions. When one speculates as to the amount of unclaimed property re- maining in the hands of utility companies, trust companies~ securities brokers, insurance companies, and others, and combines this with the amounts indicated above as reflecting the amounts held by banks and savings and loan institutions just in savings and checking accounts, it becomes clear that the amount of financial loss to the District of Columbia consumers may be in the hundreds of millions of dollars. The bank survey I referred to moments ago also indicated that pro- cedures employed by banks in attempting to locate the owners of these domant accounts vary widely from bank to bank. This is true for service charge, imposition, interest cutoff, interest restoration if a claim for the account is later made, time limits before declarations that an account is dormant, efforts to locate customers, and other unclaimed property policies. A second survey performed this week by my office indicates that a consumer with a new or active account, or interested in opening an account, would have a very difficult time discovering the unclaimed account policy for nearly every D.C. commercial bank. In fact, sev- eral of the banks we contacted told our researcher that they were not giving out any information on the phone concerning their unclaimed property policies. One bank indicated that this was under the direct order of the president of the bank. A call to the president of the bank yielded no response. Mr. ROSENTHAL. What bank was that? Mr. GOLDBERG. National Bank of Washington, where I personally have my own account. What are the consequences of canceling interest on a dormant ac- count, which appears to be the policy in most of the institutions in- volved? If a savings account was opened with $100 in 1955, which accrued interest at the rate of 51/4 percent compounded quarterly, it would now be worth $368.37. Had interest stopped accruing after 5 years, which is the case in some instances, it would be worth only $129.80: after 10 years, $168.46; after 15 years, $218.66; and after 20 years, $283.81. Obviously, the consumer has much at stake in avoiding an interest cutoff. Yet it appears that such a cutoff may occur without the account owner's ever learning of this action. PAGENO="0257" 253 My office receives 4,000 complaints every year on a myriad of prob- lems facing consumers. Because we are grossly understaffed, our policy is to refer complaints to other agencies rather than becoming involved in the resolution of these complaints. Such is the case with claims of individuals who have attempted to reclaim their property from financial institutions in the District. We refer our cases routinely to the Comptroller of the Currency. I have no specific case histories which I can relate to this subcommittee this morning. However, I can address the types of complaints which have filtered through my office on their way to the Comptroller of the Currency. Perhaps the most common complaint of consumers concerning dormant account.s is that financial institutions seem unable or un- willing to verify old accounts. In some cases, the consumer might have retained the bank passbook, but the institution, which has no records to rely on. will not honor the passbook nor the claim for funds. Consumers are not always guilty of neglecting their accounts. Many consumers operate under the misassumption that banks are required to hold their accounts in perpetuity for them. One District of Colum- bia consumer wrote in a complaint that. he used a certain account as a "superemergency" account, and therefore purposely let the account lie dormant while he anticipated the interest would continue to enlarge his account. A Virginia consumer put it this way: I was always brought up on the fact that you could put some money in the bank and forget about. it. The only rule. I ever heard of was that the bank reserved the right to close an old account, after sending the customer notice. and then they would stop paying interest on the account. The trusting view that most Americans have that savings in a bank can be permanent creates a sense of outrage when we hear how many banks destroy records or lose them after 5 or 10 or more years, resulting in total loss to the consumers. To an outsider unfamiliar with the issues, the rights of the con- sumer and the importance of finding the consumer in these situations may seem uncontroversial, but that is not the case. There are at least three distinct groups involved with this matter: The financial institu- tions and other property holders, the States and the District of Co- lumbia, and the consumers or property owners. Before the property is turned over to. the States, the holders have an interest in keeping the property for as long as possible.. In fact, in a recent Baltimore Sun article, a copy of which is attached to my tes- timony. t.wo Maryland banks admitted that this is considered a profit item unt.il it is turned over to the State. Until that point, the States and consumers have a joint interest in maximizing recordkeeping and in maximizing the balances of accounts which the holders could even- tually turn over. After this occurs, however, the holders and the States have interests which are contrary to the consumers' interest. If recordkeeping re- quirements are lax, the States will have fewer claims to honors and the banks will have less administrative work to perform in assisting claimants against the States. Thus, the States and holders have their own interests. which may be contrary to the interest of consumers. That. is why we feel that Federal action is necessary. I believe the Uniform Disposition of Unclaimed Property Act, which most of the States have passed, reflects the interests of the PAGENO="0258" 254 States and holders, but not those of consumers. The act permits service charges to be imposed without notice, and merely states that holders exercise "due diligence" in locating owners, without defining the term. Many banks interpret this as requiring only that one first-class letter be sent to the last known address~ an address that may already have resulted in mail being returned to the bank. The city council of the District of Columbia is now considering the Uniform Act. The Office of Consumer Protection suggested that "due diligence" be defined as: Taking the following steps, if feasible, with respect to each item of property reported before filing the report required by this section. That would be the report to be turned over to the District of Columbia. (1) At least one mailing return receipt requested, and one mailing regular first class, to the buyer's last known address be sent; (2) Checking of available directories, and of property belonging to and infor- mation about the owner, which are held or accessible by the holder; (3) Contacting the owner's last known employer, and the current occupant of the owner's last known address; (4) Obtaining the owner's new address when the owner requests to transact business on property left inactive for one year or more prior to such request, or when mailings from the holder to the owner are returned to the holder for lack of a correct or current address; and (5) Such other steps as the circumstances may warrant. These are the steps taken now by Perpetual Savings and Loan. That is the savings and loan institution I referred to before which is main- taining a low average balance. Even if this act is passed, however~ the District is only one juris- diction, and most States do not have legislation that requires strong efforts to find consumers. We therefore favor Federal legislation in the areas of particular concern to consumers: efforts to locate account owners, service charge notifications, account status notifications, in- terest cutoff time periods, service charge refunds, interest restorations, and maintenance of identifying records by holders and States. Such legislation would not affect the structure of the Uniform Act, nor would it reduce its benefits to the public. Comprehensive defini- tions of unclaimed property, uniform procedures for the handling of unclaimed property, and escheat to the State of such property provide protections to all parties concerned by establishing consistency and predictability. It should be emphasized that once property is turned over to the State's treasury, or the District of Columbia's: treasury, a claim against such property could be filed at any time in perpetuity, making the District a custodian of the property and not the owner thereof. Moreover, by the District's acting in this custodial capacity, the right- ful owner would have additional protection against possible bank- ruptcies, liquidations, mergers, or the defense of the statute of limita- tions, which could occur while the property is in the hands of private entities. If the Congress does choose to act on this question, I believe it should affirm the Supreme Court's decision in Teci~a~ v. New Jersey, 379 US. 674~ 1965. This case echoes the basic principle of escheat of descendants without heirs or devisees. that intangible property belongs to the juris- diction where the descendant resided. We agree that this is fair because ownership of intangibles is spread more or less according to population PAGENO="0259" 2~5 around the country, while the majority of institutions which have transactions regarding the property, and most of the records and cer- tificates pertaining thereto, are held in only a few major cities. Any other treatment of this question would operate to the benefit of only a few States and operate to the disadvantage of the majority of jurisdictions. In summary, I strongly urge this subcommittee to take action which will provide consumers with the ability to obtain access to property which is rightfully theirs. Making ends meet in inflationary times such as these is a trying experience for most consumers. We cannot allow a situation to continue where consumers find their own hard-earned sav- ings have disappeared without notice or the opportunity to claim their property before losing it. It seems unacceptable that consumers who think they are going to go to the bank and find that they have a nest egg find that they have a goose egg. Mr. ROSENTHAL. Thank you. Mr. Goldberg. Without. objection, the additional material which you referred to in your statement will be inserted in the record at this point. [The material follows:] PAGENO="0260" 256 TABLE 1 - DORMANT ACCOUNTS - END OF 1978 D.C. SAVINGS AND LOANS *Figures not segregated for D.C. indicates D.C. statistics. Source: individual S&L responses to Federal Home Loan Bank Board Survey. Institution of Accounts Total S Amount Average BalancE National Permanent 3,894 * 8,486,112 * 2,179 * (5 years) Perpetual 15,840 * 2,568,000 * 162 * (5 years) Columbia Federal 4,904 6,913.410 1,410 (1,283) (7 years) (2,468) (3,165,729) Interstate Federal 3,757 8,124,102 2,162 (1,648) (5 years) (3,515) (5,793,760) 28,395 26,091,624 $918. PAGENO="0261" Baltimore Sun, Sunday July 6, 1980, p. Al ELEANOR P. GRAHAM her $93 deposit was l6t By Kinga Dessnuer and Timothy &1. Phelps Nearly a year ago, Henry Dease, a truck driver, deposited $121 in his checking account at Maryland National Bank. He was not credited with the de- posit. Eleanor P. Graham, an 81-year.old retired school teacher, deposited $93 at the same bank in September, and lost her money. In the same month, Margaret Myers, a Baltimore insurance clerk, deposited two checks totaling $253.12 in Maryland National, but the money did not reach her account. Each of these deposits was rejected by the bank's computer because of a mistake made by the customer in filling out the deposit slip. The bank, instead of contacting the customers-whose names were clearly written on the deposit slip -put the money in a special account that eventually is'added to the bank's profits If the customer does not claim the money. Over the last four years, Maryland National records show, the bank has used this procedure to accumulate-ille. gaily, state officials say-more than $300,000, benefiting financially from its own lack of zeal in tracing the wayward deposits of its customers. The $300,000 refers to checking de- posits. Some hank officials suggest that when other accounts, such as passbook accounts, are included, the total may go much higher, but Maryland National has declined to provide information on mis- directed deposits to those accounts, Equitable Trust Company, the state's second largest bank after Maryland Na- tional, also keeps these funds for itself, though Equitable says there was only $6,700 in the account at the end of 1978. Elizabeth Pettcngill, a spokesman for Equitable, first said the tnoney goes to the state abandoned properties office. After being told that records show the state does not get that money, she ac- knowledged that it goes to one of the bank's own accounts. In one instance, Equitable also failed to, track down a would-be depositor though the name was written clearly on the deposit slip. Miss Pettengill said the narneon thedcposit. slip was..iilcgiblc. Told The Snu had a copy that was easy to read, she checked further and said the money had not been refunded because the branch had lost the customer's signa- ture card. Most of the other major banks in the state, all considerably smaller than Maryland National and Equitable, send at least small amounts of this money to the state's abandoned property office. They all say they always track down a deposit if it has a customer's name on it, though Maryland National officials said they believed the failure to locate cus- tomers in such cases was common to Sec BANKS, A14, Col. 1 ~iUL ~ Customers,~ enrors add to banks9 profits I , ~ ~,, `~`M~k~,'.;"~ 4 t ki~. 4 k t% / 4 4 ~~7q I) 0' PAGENO="0262" 258 actually protects the banks: Two officers Dease learned from a reporter of the most Maryland banks, must sign refunds to prevent unauthorized whereabouts of his lost deposit, he ex- The modern mechanical comprdrisise" withdrawals. claimed in amazement: "I thought my son of computerization, as one banker put it, `There's nothing in the code that tells Isad taken that money. I sent him to the and the mammoth size of the larger banks us to regulate these accounts," said John bank with it. I would have.held It against contribute to the banks' failure -to track Witowaki, an examiner fer the agency. him the rest of his life." down the occasional mistake. There is also `We can't spell out everything. We suggest Mr. Deaee used a slip obtained at the an often-stated assumption by bank offi- prudent banking practices. It's a word-of- bank rather than oneS printed with his cials that any customer who is the iictim mouth directive. Common sense prevails." name and number for his $121 deposit. He of an error will "scream bloody murder" . Charles R. Geergius, the deputy bask. wrote only his nume and the amount on so noon so his bank statement arrives-if commissioner, said recestly-after.sever- - the slip. Later that day, the bank's corn- the mistake is not inthe customer's favor. al inquiries by reporters-that such funds puter rejected the deposit. The computer --However, in at least two cases The should go to thestate if the banks truly recognizesno names; it is programmed to Sons has studied-one involving a large cannot find-their rightful owners. But his - identify accounts by number only. department store and the other an individ- office han not informed the agency Mr. flosses wife, Annie, runs Dease's cal account-depositors who did-complain chargedwith collecting unclaimed proper- Grocery, a small neighborhood stare on when deposits failed to show up on their ty that such accounts exist. - Calhoun street. She went to the bank when statements were told they could not be - Maryland National and Equitable `she noticed the deposit was not on the htlped because they. cosld hot produpu Trust defend keeping the deposits, saying - monthly statement, but was told the bank their deposit slips: . - that the gain in offset by credits granted to could help only if she could provide the - - Many bank customers, moreover, tend customers' accounts for lost deposits even original deposit slip. The sos, 16, had lest to assume that banks never make use- when the bank cannot find the transaction it. - takes, which in some cases peisuades the and by losses the banks sustain in other "They know me well at the bank," said customer that he need not balance his departments, such as forged checks and Mrs. Dease: "It seems if you deposit men- bank statement. - - - . - . - tellers' shortages.. - ey regularlythey'd help,but they didn't." Even large businesues canIose money "That account reduces our losses," said Maryland National officials say their this way. In the course of this investiga- 3. Howard Eager III. a bank official, policy for dealing with such deposits is to ties, it was discovered that an ares do- "[The money left overj is absorbed tate the send a memorandum to the branch where ~,srtmest store had not been credited with - system. But I'd rather you didn't tell the the deposit was made. The memorandum an -$828 deposit. Company officials now state that." - reads: "If you can aupply the customer's expect to recover between $5,000 and Informed by the reporters of the banks' account number, please- credit the ac- $10,000 from several local banks after use of the messy, John P. Mansion, chief count," However, bask officials acknowl. learning from a reporter what had hap- of absedoned properly in the state comp- edge that In some cases, little effort is, pehed. . - troller's office, said he will attempt to eel- made to track down the rightful owners. One store official said the procesi of lect the funds retroactively. Unlocated do- Mr. Eager said there is an alphabetical getting the,mesey back has not bees easy, posits, though not specifically mentioned listing of customers by name at the cen- "The banks are extremely slow in in the nbandoned property low, come us- Oral office in Baltimore. He said using it checking inquiries which will end up -in dora catch.all section, be said, creates "a time problem" for bank person- charges to them," he said. "You have to The $121 of Mr. Duase, the $93 of Miss nd, though. "[You do it[ if you have the keep following them up." One bank told Graham and the $253 of Mm. Myers con- time and if you think of it," he said. him that after 90 days the money would tributed to nearly $41,000 accumulated in "It's not a high priority for a branch not be given back, henaid. - eight months by Marylasd National in this manager," said Robert White, another Last October, the store's: financial manner. In 1977 alone, the end-of-year bank official. It is the customer's respoaai- agents wrote to a bank saying the store residue was more than $137,000, of which bility to make sure the deposit slip is cur- bad not been given credit for two deposits no refunds have bees made since the close rect in the first place because "moot tall, that had been made. The bank replied that of that fiscal year, though banklofficialo ers are too buoy," Mr..Wlsite said. the store would have to produce deposit said the figure was artificially inflated by In the Baltimore area alone, there slips. - some bookkeeping errors that occurred were 596,739 deposits to Maryland Na- There is almost no effort by state so- that year only. tisnal chocking accounts In May, Mr. thorities to see that the banks pursue those Each of these persons had a name on Eager said, O~ those, only 167 went to the lest deposits, though-the bank commission- his or her deposit slip. In fact, in a sar~pIe unlocated deposits account, -and 103 of er's office acknowledges that its primary of 16"unidentified" deposit slips obtained those had been credited to their rightful responsibility is supposed to be the protec- by~Tho Sun from the bask's files, 12 per- owners by the end of June, he said. ties of depositors. sane were found in minutes by ~ reporter - He sai~ 64 of those were still outstand- The bank commissioner's office seeks using the telephone directory. ing at the end of the month, and 40 of to esforce only one regulation concerning Although the $121 error was not a large those had been in the account for five days "unlocated" accosnts, a regulation that sum to Maryland National, the loss had re- or less, He said 167 "problem children" - percussions in the Deane family. When Mr. among nearly 600,090 -transactions in a PAGENO="0263" ed' account does sot reflect uncredited The confusion for some customers aris- dc~osil.s to passbook savings accounts, en from the fact that the bank's number is which some bark suarco~ said may make embossed alongside the customer's sum- ep the la~geet part cf the errors. - her, and contains the same number ?~ dig- Tris is because passbook accounts are its. cut provided with monthly statements of Mary Ellen Sheppard, aupervisor of the dupnaits, which could alert some custom- department that deals with errors at Equi- era to errors. The total amount of money table, said, "I've been trying for years to absorbed by the bank therefore may be get them to take that number off the considerably moro than~ the amount re- cards. People use it by mistake all the heeled by the usuredited deposits f~om time. It's so confusing it's been tamed as checking accounts, dividend checks or an account number to sew customers at a savings accounts other than passbook ac- couple of the branches." -. counla. ` That number, in effect, has become an One source of errors is the difficulty account for the bank. It is programmed in- some customers has's in identifying their to the computer and receivea the errone- sccsunt number when they do rot use the ens deposits. - prepristed deposit slips provided by the A bank spokeswoman said that in the bank. Ore customer wrote in his same but future the account number ~ill be eat- seed c-nly six digits of his eight-digit ac- lined in white and clearly identified. Court sumber,leaving elf tens zeroes at. Several of the larger banks acknowl- the beginning. The computer recognizes - edge their responsibility to pass unidenti- only accounts Tith the correct number of fied deposits along to the state after a 12- digits. .. year waiting period, though the amounts The bank has issued at tenet ens kind of they provide are generally small. deposit slip bearing only the customer's Mercantile Safe Depo~it & Trust Corn- account r.umbsr, sot his name, lithe nor pany sent the atate $796 las~year. `It's us- her is torn or somehow altered, the possi' claimed funds and we aren't entItled to b:liso ef finding the account by means of it" said H. Frank Schorr a bank official. the some is eliminoted. Mr. Schorr said Mercantile has special Mrs. Myers's mistake is ens made by equipment that allows it to trace evetsv individuals and bu.sinesscs that have ac- check that is deposited, leaving only cash counts at several books. In making her de- deposits for the state. ~` posit at Maryland Natisrol, she used a do- Suburban Trust Bank turned over posit slip printed Sm her account at Equi- $29 178 in 1976 and nothing in 1979 be- table Trust Compsny. Altho:gh bsnks are cnuse, a bank official said, the money cur.stontly exchnnging checks through a being held for both coors was mistakenly clearinghouse, ouch crphoced deposit slips, sent the first year. - are rot stoats exchanged by the banks. First National Bask of Maryland's re- Tho less of deposits is sot the only coot port was not clear, and It. Dennis Cçrbin,' some depositers pay fo~- toeir errors. ~ who prepares the bsnk'a report-refused to the unwitting consumer draws checks explain it. . . wl'ichb snot reached cco~t he mat Union Trust Compast turned osur pay overdraft charges of $7 to 615 on each ~ t~t ~u ~ ~j1 check, depending c~ri t 55 . the banks Jim Walinski, of Union Trust., charges are not waive i t e cus c~rr~r said the current amoOsts -going into tTPe points out that the moses as ceo a ~ . account, which to hold for 12 years befdte bank all the while. - being turhe'd over, are much bigher Some banks, Equitable Trust, ores.- about 614 000 or $15,000 annually. :: ample knawingly benefit from, practices . that are o snurce of error. The plastic The banks Cannot spend tho money dur- cards issued b~ Equitsblo for use in the ing the 12 years, but they can include itan automatic teller machines have an ac- the reserves against which they may lend count nambk~ emb-oss.ad en them that be- mosey at interest. If 61,000 was lent at, jenge to the bank-cot the customer. This for example, 10 percent annually com- -number to a code that identifies the bank pounded interest for 12 years, it would and the region in which it is situated. ears a total of $2,138.43. - 259 gr.r-d average. bile the bon7.s emphasize the small cf criers, they also slate thot it is el. exg'-::st.e and t.inse-ccro:m- tog for to march far the rosen in the d.runt:r Cr tho:r c-ac ru-ccrds. ctc:cso. too tsar.1:. as a result of irvesl.ica:l:-r, has vndcrtsken to inn- pro: o its proce~ros fcr tandisog such do- posts. Mr. Eager said. if he thmght the ban:'o policy of ke-epcg the leftover money is legal, Mr. Eager said, "I don't have any big problem with it. That's because of the side of the - ferns I sit en. There probsblyis a small r-orserloze ef the situations like these tnt have been the right to state pla--.ad to try to - a as it is to mae a ts~::: these do's, t:a~'s c:rs:y right cot cf roy rrcfit." Tee people a: the branch c*fiices also tie c..sicrneos to check far mis- ~ c: :he:r c-an. V.'he,o a re:-nrter r.ni.if:od Mrs. Meets of Cur ciy~ t-r-:r'i-cd onlsta5:e, s~u went to toe tool: ann her de:.:sit ot.p and damned far moray. SC:- aete~ Macroan Saxon, as- - sonar: rc::ayer cf rho branch, whether / Ens ban~: rntif:e.e cestcrnera of such errors. f-irs. Myers said Ms. Saxen told her the en:-::re ceatornors to ask for come-c- - ~s S:e said ftc. Saxec as-cs her, "Don't As `.ie darers Cf t:ne 11 deposits dens- c-estate there is romoorksbte dIversity a..-:-g tie pee:le wi's rna'e soot trio- ts~es, award del.tsrc, who lost 51,075 in tho way. c-wr.s a det:nate.osen in Havre do Gras:. Otarald F,. Mendeleon, win recor- oreS MM satan his wife cheated their' statement, is a Baltimore dentist. El~o::r-P. Graham, 61, a-ha lost $03, is a retired school teacher. In all, more than $2,500 was recovered this month by the people who were in- formed of their lost deposits during the course of this investigation and were able to provide the bank with their deposit Mis.s Graham, in particular, was sheep. ish oh-oct her mistake. `For a tescher of mathematics, this is a d:sgrme," s-aid Miss Graham.' who ta'.gCI at the Rcland Per:-: Country School Too leer-s car total from the "cnlccat- PAGENO="0264" 260 Mr. ROSENTHAL. Thank you very much for an illuminating and significant presentation. We want to assure you all that we will pursue this matter with the diligence that it obviously requires. Was there anything additional that should be added that we may not have covered? Mr. EPSTEIN. There is one pomt I would like to add, Mr. Chairman. I want to emphasize that we have had an experience in all but a hand- ful of national banks that records relating to old accounts, old savings accounts, are not available. In fact, in the Bank of America case, the $20 million that the court says must be returned to the consumers, for most of that there are no records of the names of the owners, and those amounts are arrived at by examining other records of the bank. So, the problems tha.t have been related are compounded. At least in the future, by encouraging banks to keep records, we can cut down on this. Mr. ROSENTHAL. Do they keep all of their records on computer tapes and things of that nature? Mr. EPSTEIN. Most of the banks used to be on manual systems, and when they converted to computers- Mr. ROSENTHAL. Were these prior to conversion? Mr. EPSTEIN. Prior to conversion. The problem now is they are maintaining the records, but for the older property they were not. Mr. ROSENTHAL. Did you want to say something, Mr. Goldberg? Mr. GOLDBERG. There was a question raised before about the period of time before dormancy is declared, and the general consensus was that it is from 5 to 7 years. In the District of Columbia there is more of a variety than that. It goes as low as 3 years. Mr. ROSENTHAL. Thank you all very, very much. Without objection, we have two articles which were submitted to the subcommittee for inclusion in the record. These will be inserted now. [The material follows:] PAGENO="0265" B~k of Arneric~ Told to Ha~nd Over. $20 Million to St~zte e Interest and Fees on Unused Accounts Are ~nvolved in California. Court Ruling By c WALL Sr~tErJ0rRNAL Staff Repcn-ter SACRAMENTO, Calif-In a ruling that could affect unclaimed property practices In treat slates, a state judge ruled that Bank of America must hand over to the state about ~D million in service charges and interest collected on dormant accounts. A apcl~esman for BankAmerlcà Corp., the bank's parent, said a decision on whether .to appeal won't be made Immediately. Lawyer David J. Epstein of Century City, CallL, a consultant on unclaimed property lar-z f:r a half dozen slates, called the rul* thg `the death knell for bank service-charge practices on dormant accounts." He says the ruling' Is a breakthrough on practlc~ covering such abandoned property as uncashed dividend checks and unclaimed insurance-policy proceeds. :Escheats System The six-year-old lawsuit questioned a sys- tem In many states called escheats. Under California's 1159 esckeat law, funds that lay dormant for seven years in bank accounts are to be turned over to the state if the bank can't find the owner. The state then acts as -custtxlian for the depositors. In 1974, San Francisco lawyer Gary J. Near filed a lawsuit on behalf of two account h~dere against California's controller. Since then, the state controller joined the action by filing similar suits against Bank of Amer' ins and others. Essentially, the lawsuits contend that banks shouldn't be permitted to keep the service charges levied against the dormant accounts. That money, they argue, also should be turned over to the state. Where Is Bob Hope? * Mr. Near's suit claimed that the state `controller had breached his duty by failing to object to the banks' making the service charges. In addition, he disputed the banks' claim that they tried to find the holders of Inactive accounts, noting that Bank of America bad failed to find such account holders as entertainers Bob Hope and Lu' * dUe BaIl, former Gov. Edmund G. Brown ~Sn, San Francisco Giants baseball player Willie McCovey and even ~he state control- ,ler, Kenneth.Cory. In the Bank of America case that conS chided this past January. president A. W. Clausen `testified that "I cannot explain" why the bank had failed to find Mr. Mc' Covey. He added that people make mis- takes. "Even Willie McCovey didn't bat a thousand," Mr. Clausen said. Several banks settled out of court. And earlier this year, a suit against Crocker Na' tional Bank was thrown out of court on a technlcailty; the state Is appealing that deci' ~sion. Recently. Bank of California settled Its suit with the state for about $300,000, and * Wells Fargo Bank settled the matter for an amount "In the vicinity of SI million," says one attorney. A bank spokeswoman says she can't confirm or deny that figure. Suits In Minnesota **. -, James F. Lord, Minnesota's treasurer, says the state filed similar lawsuits against two banks there, First National Bank of St. Paul and Farmers & Mechanics Savings Bank in Minneapolis.. Both banks are con- testing the suits. A House subcommittee has scheduled hearings this week~on al1eg~ed bank abuses of inactive savings and checking accounts. In his 31 page opinion, Judge A~ Richard Backus said Bank of America must account for and pay to the controller all service charges collected against the dormant ac- ~coun~s and nil interestwithheld from them before they were turned over to the state frqm Sept. 18, 1959, plus interest from the date the accounts were first payable. * Taking a swipe dt California, the judge said "it is clear from the evidence that, but for the action by the taxpayers~thecontrol-- ler wouldn't have-adequately pursued the re- covery of the amounts due" from the banks. - Mr.-Near says be stands to colleCt $2 mu' lion td $4 million in legal fees from the $20 million. 261 TIlE WAI.l. STREE'l' iOURNAI~, 19 -* M,mda~'. July 21, 1981) ~ - PAGENO="0266" Acounts At that potht, the funds would be transferred to the city treasury; glv- Ing the city custody - but not title -to the money, guaranteeing thata rightful owner could claim It later. Instateswheresuchalawlslflef. fect, the portion of unclaimed property that is returned varies -from less than 5 percent to nearly70 percent, depending in part on the aggressiveness of the state's adver- tising campaign. But several experts agree that the District's return rate would be, * fairly low at first, because some of the accounts are very old and be- cause thecity's population is fairly transient. - - A second unknown factor in * determining what portion of the un- claimed funds would benefit the - city is the question of how broad the law - which must pass the city Council and congressional review* period -would be. * Although the D.C. Bankers As- sociation is not lobbying publicly ~against the bill, ft has asked for modifications on a half-dozen points. ` -* * For example, C. Jackson Ritchie, executive vice president of First American Bank, convinced the staff. cf the council's Judiciary Commit- - tee that requiring institutions to re- port every account larger than~ $10. would be a biirden.7he version that - a council committee will consider - Thursday calls for reporting ac- counts over $50. - * The committee -will also decide - whether to require the Institutions to add back into a dormant account service charges which have been~ - subtracted during the last 10 years., The comptroller found that 11 D.C. banks last year imposed $177,-. 000 in service charges on almost 30,- 000 accounts which met that partic- - ular bank's -definition of lnaôtive. Most of thebanks say they will add -the service charges to the account if the original depositor claims it. All the banks told the comptrol- ler that they use phone books and city directories to locate missing de positors, but do not take more active *st~p~ - - - -. - - 262 Banks HoId.$25 Million In Dormant Funds Could Lessen D.C. Budget Deficit - By Sheilah Kast W~hnnS~&affWr1tef -~ DC; banks, rather than deposi- tors or the financially troubled Dis- trict government, are reajiing the benefit of at least $25 million in funds unclaimed by customers for seven years or more. The District is one of two jurisdic- tions in the country without a 15w to force banks to turn over the bulk of the unclaimed money to the city's treasury. Although the City Council * is considering such a law, It is not - likely to take effect before next -` spring. .~ - Such a law would give the city's treasury a one-time windfall and substantially reduce the city's $409 million accumulated deficit - a deficit which last night prompted Mayor Marion S. Barry Jr. to an- nounce a stringent program of * budget cuts and bond issues. - The £25 million for unclaimed - bank accounts in the District was tallied by the U.S. comptroller of the * currency, who regulates D.C. banks, at the request of Rep. Benjamin S. Rosenthal, D-N.Y. - Rosenthal is chairman of the House Government Operations subcommittee on corn- *merce, consumer and monetary Sf. `fairs. - At a hearing scheduled for to- `morrrow, Rosenthal also platis to release information about D.C. sav- ings and loan associations. Sources say tbe information, gathered by. the Federal Home Loan Bank Board, shows that S&Ls are holding about as much in unclaimed funds as the banks~ To that $50 million amount, the law under consideration would add security deposits left with utility companies, unclaimed life Insur- ance benefits, unclaimed stockdivi- dends and so-called "official items," such as cashiers checks and money orders. If the law works efficiently, a large portion of that `total would be distributed to the customers who originally deposited the funds, or to theirfamiliesandheirs.-._. The law under consideration in the District would require all of the institutions to report to the, city any accounts which have been inactive for seven years. The city would :. then advertise the depositors' - names in two newspapers for two, weeks running, attempt to send let. tess to the depositors. . . - Washington Star, July 22, 1980 Mr. ROSENTHAL. The subcommittee stands adjourned. [Whereupon, at 11:08 a.m., the subcommittee adjourned, . to reconvene at 10 a.m., Thursday, July 24, 1980.] PAGENO="0267" BANK TREATMENT OF INACTIVE CHECKING AND SAVINGS ACCOUNTS THURSDAY, JULY 24, 1980 HOUSE OP REPRESENTATIVES, COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE, OF THE COMMITTEE ON GOVERNMENT OPERATIONS, Wa.shington, D.C. The subcommittee met, pursuant to notice, at 10:10 a.m., in room ~ Rayburn House Office Building, Hon. Benjamin S. Rosenthal (chairman of the subcommittee) presiding. Present: Representatives Benjamin S. Rosenthal, Eugene V. Atkin- son. and Lyle Williams. Staff present : Donald P. Tucker, chief economist; Eleanor M. Vanyo, secretary, and Jack Sha.w, minority~ professional staff, Committee on Government Operations. Also present: David J. Epstein, ~ttorney, consultant to States on unclaimed property and administration. Mr. ROSENTHAL. The Subcommittee on Commerce, Consumer, and Monetary Affairs will be in order. We continue this morning the hearings on bank treatment of inac- tive checking and savings accounts. Our witnesses tl1is morning are Jo Ann S. Barefoot, Deputy Comp- troller for Customer and Community Programs, Office of the Comp- troller of the Currency and Edmund G. Zito, Chief National Bank Examiner, Office of the Comptroller of the Currency. Ms. Barefoot? STATEMENTS OF ~O ANN S. BAREP(~OT, DEPUTY COMPTROLLER FOR CUSTOMER AND COMMUNITY PROG~RAMS, OFFICE OF THE COMP- TROLLER OF THE CURRENCY; AND EDMUND G. ZITO, CHIEF NA- TIONAL BANK EXAMINER, OFFICE OF THE COMPTROLLER OP THE CURRENCY Ms. BAunrooT. Thank you, Mr. Chairman. Mr. Zito and I would like to make, brief opening statements address- ing the major questions which the subcommittee has submitted to us. With your permission, we would ask that our entire statement be included in the record. Mr. ROSENTHAL. Without objection, it will be included in the record. [See. p. 278.] (263) PAGENO="0268" 264 Ms. BAREFOOT. We appreciate the opportunity to offer the views of the Office of Comptroller of the Currency regarding bank practices involving service charges and suspension of interest on dormant ac- counts, and bank compliance with State unclaimed property laws. As this hearing involves both commercial examination matters and consumer protection, we have thvided the testimony between the Chief National Bank Examiner and the Deputy Comptroller for Customer and Community Programs. The Comptroller's Office sets priorities for the allocation of exami- nation time and supervisory attention in a way which seeks to assure that serious problems and potential problems receive greatest scrutiny. In the commercial area, the primary objective is to assure the safe and sound operation of the institution and compliance with national bank- ing laws. In the consumer examination, most of our examination time is devoted to enforcing the equal credit laws, Truth-in-Lending, and the Community Reinvestment Act. The agency does examine all national banks for compliance with all applicable laws, but we allocate our limited resources to areas which are major problems or exhibit a significant level of consum~r complaints. In order to place the issues surrounding dormant accounts in per- spective, it should be noted that we have received very few complaints from individual consumers or from State officials and have found few violations through our examination process. As a result, we have not viewed dormant account practices as a major area of noncompliance by national banks. Therefore, while the subject is covered in our ex- amination program- Mr. ROSENTHAL. Could you go slower? I am having trouble follow- ing you. Ms. BAREFOOT. Yes, sir. This is a summary of the statement that I submitted. Mr. ROSENTHAL. Then it is all the more important for me to follow it. Ms. BAREFOOT. I will be happy to read more slowly; yes, sir. We have not viewed dormant account practices as a major area of noncompliance by national banks. Therefore, while the subject is covered in our examination program, it does not receive the emphasis that, for example, the capital adequacy of an institution would receive. Nevertheless, we are continually seeking to modify our examination procedures to improve enforcement of all relevant State and Federal laws. In this regard, the subcommittee's questions have been very helpful to us in evaluating our present programs and policies regard- ing dormant accounts and in identifying areas for potential improve- ments. Mr. ROSENTHAL. Our questions have been helpful to you in review ing your procedures? Ms. BAREFOOT. Oh, yes. Mr. ROSENTHAL. That is nice to knOW. Ms. BAREFOOT. As a final introductory note, let me point out that our remarks are directed toward our experience with national banks, which account for approximately 4,400 of the Nation's 42,000 de- pository institutions. The subcommittee's first question asked for information on con- sumer complaints relating to dormant accounts. In response, we have PAGENO="0269" 265 reviewed historical data available through our computerized consumer complaint information system. This analysis indicates that from 1977 through the first 5 months of 1980, only 1 percent of all complaints we received were in the category designated as "possible eseheat or in- active account." Mr. ROSENTHAL. Dormant people do not complain; they do not know; that is the problem. Ms. BAREFOOT. I recognize that. Mr. ROSENTHAL. So that citing those figures is totally irrelevant. Ms. BAREFOOT. We do not feel that it is totally irrelevant. I think you are certainly right that an account often becomes dormant because the person has lost track of it. Mr. ROSENTHAL. They do not knOw anything that has happened to them, so how can they complain? Mr. Zrro. That is a judgment that one could make if the banks, or savings, or loans, or brokerage houses, or insurance companies made no attempt to contact the person. However, sometimes, obviously, the mail is received and no contact is exercised. Mr. ROSENTHAL. But people who have not been successfully con- tacted are not going to complain. Mr. ZIT0. Unless they. for whate~er reason, find out that they have, or if they care about it; but you obviously cannot make somebody care about it. Mr. ROSENTHAL. We had some witnesses yesterday who seemed to care. Mr. ZIT0. Yes, we understand that. Mr. WILLIAMS. Are you assuming, because they do not contact you, they do not care? Mr. ZITO. No. we are not assuming that. We are just saying that one of the vehicles we can use to make a judgment on how much we should expand our examination approach or procedures would be based on the complaints that one receives from the consumer public or from the appropriate State regulators. Mr. ROSENTHAL. We had testimony from State regulatory agencies that they had contacted you folks a number of times, and you were less than agreeable. Mr. ZIT0. There were a couple of instances that we are aware of, and a couple of the witnesses yesterday, we understand, expressed the opinion that they had had less than satisfactory cooperation from this office. In those isolated instances that were pointed up yesterday, I think clearly, John Heiniann, has specified time and again that we are prepared to cooperate to the extent possible~ consistent with our limited resources, to achieve our mutual objectives in this area. Mr. ROSENTHAL. If the average citizen wanted to complain, and pre- sumably you were the people to complain to, how would they do that? Mr. ZITO. If it were a national bank, Mr. Chairman? Mr. ROSENTHAL. Yes; presuming it were a national bank. The fellow from Baltimore complained about the Maryland Na- tional Bank. That would be one of yours; is that right? Mr. ZIT0. Yes, sir. it would. Mr. ROSENTHAL. So how would a person complain to you? Mr. ZIT0. Without talking about a specific national bank or instance, John Heimann, shortly after he took office, about 3 years ago, insti. PAGENO="0270" 266 tuted a consumer complaint pamphlet which is displayed in the lobbies of national banks around the country and which many national banks have copied and, in fact, added their own logo in modification to the pamphlet. Mr. ROSENTHAL. Have you checked to see if that is displayed physically? Mr. ZITO. Yes, we have. Mr. ROSENTHAL. Have you ever done it? Mr. ZIT0. I have not personally been in the field since that program was instituted, but our examiners have been instructed to check for it. Mr. ROSENTHAL. I have never seen it anywhere. Mr. Zrro. Do you have an account with a national bank? Mr. ROSENTHAL. I visit a number of national banks, and I have never seen it. If somebody wanted to write to the Comptroller, how does a per- son do that? Ms. BAREFOOT. They would just write a letter either to the Washing- ton or the regional office. The complaint pamphlet has a tear-out, self- mailing envelope. Mr. ROSENTHAL. If the pamphlet was not in the bank-and I have never seen one, frankly, and I have visited many national banks- whom do they write to? Ms. BAREFOOT. If they wrote to the Comptroller of the Currency, either in the Washington or the regional office1 we would answer them. Mr. ROSENTHAL. Where do they write to in Washington? Mr. ZIT0. We have a whole consumer complaint division, Mr. Chairman. Mr. ROSENTHAL. If a person says to me they want to write a letter to the Comptroller of the Currency, and do I not know the address, where do I tell them to write to? Mr. ZTTO. Washington, D.C. 20219. Mr. ROSENTHAL. Just Washington. D.C.? Mr. ZIT0. The Comptroller of the Currency, Washington, D.C. 20219. Ms. BAREFOOT. Thousands of people manage to find us every year, Mr. Chairman. Mr. ROSENTHAL. They do? Ms. BAREFOOT. Yes; we answer many complaints in Washington and in ourregional offices. Mr. ROSENTHAL. But dormant people will never find you. Please continue. Ms. BAREFOOT. In order to make a more thorough analysis of recent complaints, we also conducted a special review of more t~han 500 com- plaints received from January through May of this year in four of our regions covering 19 States. These complaints included those labeled as problems with service charges~ service charge disclosures, and inter- est payments, as well escheat and dormant accounts. We found that only six of these complaints were based on dormant account problems. In summary, we believe the record indicates that national bank cus- tomers have not had substantial concerns in this area, either recently or on a historical basis. PAGENO="0271" 267 With regard to your questions on the propriety or reasonableness of certain practices, we believe that whether a given practice is legally reasonable or appropriate must be determined under relevant State statutes and judicial precedents governing contract law. Mr. ROSENTHAL. But national banks say that the State statutes do not. pertain to them. Mr. ZIT0. When there is a Federal statute speaking to a particular issue. Mr. ROSENTHAL. You just said that this particular situation is gov- erned by State statutes. Is that right? Ms. BAREFOOT. That is correct. Mr. ROSENThAL. Does that apply to national banks? Mr. ZITO. Yes, it does. Mr. ROSENTHAL. They have asserted that they have a higher obliga- tion to the Comptroller of the Currency. Mr. Zrro. No. We informed national banks, historically, over time, that they are subject. to State Statutes if the State law does not con- flict. with Federal law and does no~ frustrate congressional intent in creating and maintaining a national banking system. Mr. ROSENTHAL. They apparently have not taken that advice to heart, from the testimony we heard. Mr. Zrro. That may be in a couple of instances, and we examine for compliance with State escheat laws, Mr. Chairman. Mr. ROSENTHAL. Say that again. Mr. Zrro. We examine in our examination program~ Mr. ROSENTHAL. I know, but have you ever sent a notice to the na- tional banks telling them that they are bound by State law in these kinds of situations? Ms. BAREFOOT. I am sure that we have- Mr. ROSENTHAL. How can you be sure? Ms. BAREFOOT [continuing]. Informed them as an ongoing matter that they are subject to State laws. Mr. ROSENTHAL. Do you have a copy of the notice? Ms. BAREFOOT. On the question of escheat in particular, have we? Mr. ZIT0. On the national banks' responsibility to comply with rele- vant. State laws; we have notified the national banking industry sev- eral times. Mr. ROSENTHAL. You have notified whom? Mr. Zrro. The national banking industry several times. Mr. ROSENTHAL. How did you do that? Mr. ZITo. In a variety of ways. First, beginning in 1977, this Office instituted a mass mailing of the Comptroller's Handbook for National Bank Examiners-"handbook"-to all national banks. Any new na- tional bank also automatically receives a copy of the handbook. The handbook explicitly directs examiners to confirm that the bank is com- plying with various State laws, inCluding escheat laws regarding all types of deposit accounts. So in effect, any bank officer who reads the handbook is on notice that we believe national banks should be comply- ing with these laws. The Comptroller's Office has further notified banks of their duty to comply with applicable State consumer laws through Banking Circu- 67-'t'~O 0 - 81 - 18 PAGENO="0272" 268 lar 94. This circular explained that our Office was planning to expand our consumer examination procedures to include checking for compli- ance with State laws, upon receipt of information from State authori- ties. Banking circulars, as a matter of policy, are mailed to all national banks. Mr. ROSENTHAL. Did you ever send a notice to every single national bank in the country? Ms. BAREFOOT. On the question of escheat in particular, we have not sent a separate notice to national banks requesting compliance solely and specifically with escheat laws. We have sent individual letters when the questions have come up, and our examiners do examine for compli- ance with State laws when they are in the bank. Mr. ROSENTHAL. That is not notice to a bank that the examiner examines. Ms. BAREFOOT. Mr. Chairman, I think the banks are generally very sensitive to the examination process, and when the examiner is in the bank. Mr. ROSENTHAL. How do you know they are sensitive? You make all these statements without any basis in fact. Are you a lawyer? Ms. BAREFOOT. No, sir. Mr. ROSENTHAL. I do not want to be contentious, but you cannot make those kinds of statements without proof. Do you have any kind of printed copy that you sent to national banks to tell them that they must abide by State laws? Mr. Zrro. Other than the handbook and Banking Circular 94, there has been no one issuance that has gone out at a point in time to national banks telling them that they are responsible to comply with State laws. However, our examination process deals with compliance with State laws. Mr. ROSENTHAL. Do you have any copies of examination reports where the examiner has said this bank is not complying with State laws? Mr. ZIT0. Yes, we do, Mr. Chairman. Mr. ROSENTHAL. How many of those do you have dealing with the question of escheat? Mr. ZIT0. We do not know offhand, Mr. Chairman. Mr. ROSENTHAL. You do not have any? Mr. ZIT0. No, I did not say that. I said we do not know offhand, Mr. Chairman. Mr. WILLIA~is. Do you think there is enough of a problem to justify these hearings? I notice in the testimony here that you say you have had few complaints and inquiries. Do you feel there is a major problem? Mr. Zrro. I think that when a congressional subcommittee determines that an issue is sufficiently- Mr. Wu~r1t~v~rs. I am asking do you feel it is? ~Mr. Ziro. No, I do not. Mr. WILLIAMS. You do not feel this is a significant problem through- out the country? Mr. ZIT0. We have no nationwide data or no input from State offi- cials in various capacities that we deal with day in and day out to PAGENO="0273" 269 indicate to us that this is a sufficient issue to warrant Federal regula- tion by our office. Mr. Wiu~i~rs. Have you heard any estimates as to how many dol- lars are involved in these accounts? Mr. ZITo. Yes, we have. Mr. Wui4L~s. What was that? Mr. ZIT0. The estimate says, as I believe Mr. Epstein testified yester- day, $443 million. Nr. WuI~IAMs. That is not enough to worry about? Mr. Zrro. We do not agree with, his mathematics, first of all, Mr. Congressman. Mr. WLu4L~s. What is your number? Mr. ZITo. We have not worked on a specific number, but even if it was, we are talking about a commercial banking system that has roughly Si trillion in deposits, a commercial banking system that- Mr. Wni~i~xs. But $443 million, using their mathematics, in ac- counts that are $50 or less, on average, we are told, is a lot of people. Tha.t is not enough to worry about? Mr. Zrro. In relationship to all of the retail deposit accounts over time in the country, I do not believe so. Ms. BAREFOOT. Mr. Williams, if 1 might add to that, I think it is very helpful to have the hearing, particularly to focus on problems which. it appears to me, tend to concentrate in certain States. WTe have no national law, no national regulation; we have State laws. Mr. Wn~r~i~uis. Do you think we, should have Federal regulations? Ms. BAREFOOT. In my opinion, the case has not been made that we should have a nat.ionai law. Mr. Wu1a&Ms. $443 million, and probably thousands and thousands of people-schoolchildren and everybody else-and that is not important? Ms. B~EFoo'r. Again, I am not sure about the estimate, and I also feel that the problems appear to be more concentrated in some States. Mr. RosExTiL-~L. What States are they concentrated in? Ms. BAREFOOT. Apparently the Ones that you had at your hearing yesterday and the ones which responded to your survey as having the problem. They are ones in which we would be very pleased to work closely with to try to resolve the problem. Mr. ROSENTHAL. Here is one instance where I happen to have see- cific information. In New York State, the State law limiting service charges on dormant savings accounts exempts national banks. Section 7 of the New York State banking law does not apply to national banks doing business in New York. If you people do not have any rules and regulations nor are paying attention to that question, those national banks in New York State are just not being bothered by anybody. Mr. Zrro. I think our testunony speaks to the fact that we feel that it is a State matter to deal with, that national banks are subject to them. Mr. ROSENTHAL. But they are specifically exempted by New York State law, and I do not know how many of the other 49 States they are exempt in. PAGENO="0274" 270 Mr. Zrro. Then our position, Mr. Chairman, would be that it is in- cumbent upon the State to take the initiative to bring national banks under the same umbrella that State banks are under. Mr. ROSENTHAL. Have you ever notified the States? Have you ever convened a meeting to say, "Listen, this is a serious problem"-or you people apparently do not think it is a serious problem-"and we ought to get together"? It seems to me there should be some uniformity. In New York State-just so we understand each other-the State law limiting service charges on dormant savings accounts exempts national banks. What rules are those national banks operating under? Not New York State laws. Mr. Zrro. I have not reviewed that particular statute, and I would like to talk to our regional counsel in New York to clarify that. Mr. RosENThAL. I have not l~ad the Library of Congress make a search of this; I do not know how many other States have that same kind of law. Ms. B~~ooT. Mr. Chairman, on the fundamental question, we are not trying to create the impression that we do not think this is a prob- lem at all. We are saying that we think it has to take a fairly limited portion `of our resources which we are trying to allocate where we think the most serious problems are. As a result of the hearing, we have decided to change our procedures on dormant accounts. Mr. ROSENTHAL. Where do you get your resources? You do not get them by appropriation of Congress, do you? Ms. BARiFOOT. That is correct. Mr. ROSENTHAL. You get service charges from the banks that you deal with. Ms. BAREFOOT. That is right. Mr. ROSENTH4L. So what changes are you going to make? Ms. BAREFOOT. The specific proposal which we have decided to adopt is to use the complaint data, which, as you say, might be only the tip of the iceberg. Mr. ROSENTHAL. You are not going to get any information from dormant people; they do not complain. Ms. BAREFOOT. We do receive some complaints-you heard com- plaints yesterday-and we feel.that they can be indicative of a problem in a bank, and that we would give the complaint data to the commercial examiner who is examining for compliance with State laws, to take a closer look in those banks to see whether there is a problem with dormant accounts. Mr. ROSENTHAL. For example, New York is one case. The District of Columbia is another. The Comptroller of the Currency, as I under- stand it, is the sole regulator of banks in the District of Columbia. Is that correct? Ms. BAREFOOT. Yes. Mr. ROSENTHAL. Yet, you do not impose any standards in this area in the District of Columbia. So these banks do anything they want. Ms. BAREFOOT. That is because the District of Columbia has not adopted a la~v. They have one pending, as I understand it; and when they do, we will be very happy to enforce it. Mr. ROSENTHAL. What is the law pending? PAGENO="0275" 271 Mr. Tuc~n. It is an unclaimed property law which would not neces- sarilv address a lot of these issues. Mr. ROSENTHAL. It does not address the issues we are talking about; it is an unclaimed property law that they are considering. Mr. Zrro. And essentially, our position is that. tl1is is a.n area where the State or, in the case of the District, the District should take the initiative to pass a law, and then our examiners will examme for compliance. Mr. ROSENTHAL. But the law that they are considermg does not deal ~vitli this question of service charges on dormant accounts, does it? Mr. Zrro. That is the issue that shOuld be taken up by the District. Ms. BAREFOOT. As I understand it, the law under consideration is the tniforrn Disposition of LTnclaimed Property Act, which would require due diligence by the bank to try td locate the holder of the account and that type of thing. Again, our posit.ion has been that it should be up to the District just as it should be up to a State. Mr. ROSENTHAL. How many States have any restrictions on dormant accounts? Mr. ZITO. It is our understanding that the District of Columbia is the only jurisdiction that now lacks an escheat law affecting dormant accounts in some way. Mr. ROSENTHAL. They do not. DO you know what these laws are? Has anyone done a compilation of th~ni? Mr. Zrro. As you can imagine, Mr. Chairman. the laws differ signif- icant.lv from State to State, depending upon the State's needs and philosophies with regard to regulation or addressing themselves to this area. In our regional breakup, since we have 14 regions, our regional coun- sels in eac.h of our regions would esse~itially be responsible for keeping abreast. of the specific State consumer statutes in the absence of a Fed- eral statute. Ms. BAREFOOT. Mr. Chairman, in 1977 the Comptroller notified all States of our intention to enforce State laws and asked them to give us copies of their consumer protection statutes. regulations, and ex- amination procedures. We were, frankly, disappointed with the results of that survey. As I recall, we received material from 19 States. We only received examination material from eight States, and only three States sent us anything on escheat. This, again, was a reflection to us of the apparent lack of priority placed on that by most State banking departments. We have used that information, and we do at the regional level try to use more information. We have been considering a. more massive ef- fort. to ascertain what State laws are and exactly what the e~amina- tion procedures are at. the State level. Mr. ROSENTHAL. I am looking at h number of letters that you folks were kind enough to furnish us. Do you have copies? Ms. BAREFOOT. Are you talking aboUt the complaint? Mr. ROSENTHAL. This whole thingis on one person. Here is a fellow who writes from Fairfax, Va. He wrote a letter to Governor John Dalton. He assumed-I assume that he assumed-that PAGENO="0276" 272 the Virginia National Bank was something Governor Dalton would have something to do with, but that is not correct, is it? Ms. BAREFOOT. It is not correct. Mr. ROSENTHAL. I am surprised he did not know that the Virginia National Bank was a national bank and that the Comptroller of the Currency was the person to write to. I am really surprised at that. MS. BAREFOOT. Mr. Chairman, we have made very significant efforts to make the complaint process easier. Mr. ROSENTHAL. Where do you put these ads? In the Federal Register? Ms. BAREFOOT. No; through the complaint pamphlet. The complaint pamphlet says on it, "Do you have a complaint against a national bank?" Mr. ROSENTHAL. Have you ever seen one of those in a bank? Ms. BAREFOOT. I have not seen it in my bank, but I have not looked for it. Mr. ROSENTHAL. Are you the two people who are at the top of the hierarchy of bank notifications and complaints or something? I mean, if I had your job, I would be riding around the District and Virginia seeing if these banks have them posted. Ms. BAREFOOT. We have examiners. Mr. ROSENTHAL. Have you ever asked the examiners if these things are around? Ms. BAREFOOT. Yes, we have. The use of the complaint pamphlet was voluntary on the part of the banks. Mr. ROSENTHAL. Was what? Ms. BAREFOOT. Was voluntary. We did not require the banks to use the pamphlet, but we did check to see whether they did, and we found a very high level. Mr. ROSENTHAL. Why do you people not save your money? Did you print it? Was it a nice printing job? Mr. Zrro. Beautiful, Mr. Chairman. Mr. ROSENTHAL. And who is seeing it? Nobody. Ms. BAREFOOT. The Postal Department has told us we have to change it. If there is a feeling that it is not worth doing it- Mr. ROSENTHAL. The Postal Department told you what? Ms. BAREFOOT. We have to change the size of the pamphlet. Mr. ROSENTHAL. Why? Ms. BAREFOOT. Because it is too large for the new postal regulations. We have assumed that the pamphlet was worth continuing because consumers sent it to us. Mr. ROSENTHAL. Are. you going to change the size? Ms. BAREFOOT. We nlan to. Mr. ROSENTHAL. But you have never seen one in the bank. You have never seen one in the bank. I have never seen one in the bank. That is three of us. Have you ever seen one in a bank? Mr. TUCKER. No. [Laughter.] Mr. ROSENTHAL. Anyway. this nice guy who lives in Fairfax. Va.. Mr. George Giles, wrote a letter to Governor Dalton dated Novem- ber7. 1978. It says: PAGENO="0277" 273 Dear Governor Dalton: I had a savings account at Virginia National Bank at Seven Corners, Va. I opened the account on March 16. 1965. and deposited 825 there. On March 31, 1965, I deposited another $25, bringing the balance to S.~0. The bank paid me interest on these dates: October 1965; April and October 1O~~; April and October 1967 * * ~. At the end of October 1970, I had a balance of $62.32. Recently, I had to go to the hospital fOr an operation. I needed some money. On November 1, 1978, I closed out the account, and the bank told me that all I had in the account was ~41.81. He thought lie had $62.32. Now lie has $41.81. I had not drawn out any money. Since the bank had paid me interest for five years without me putting in any more. I assumed that they would keep on paying it. I did not go down to the bank to have them enter it into the bank book, but I assumed they kept a record, and I would add it on some day. Do you think that was a fair assu~nption he had up to that point? Ms. BAREFOOT. It strikes me as a fair assumption, yes. Mr. ROSENTHAL. Ne too; and I would bet you there are millions of Americans in that identical situation. not thousands but millions~ who put the money in and do not ta.ke the bank book to have the interest entered. and assume the interest is continuing. Then he continues: When I closed out the account, they told me that they had stopped paying the interest and had been charging me money to keep the account, and these charges had reduced my balance. At no time did they notify me of this charge, and they tell me that they are legally right in what they did. If this is so, then we need to change the law to make them notify a person when they start charging him to keep his money. When a person gets old and retires, he does not have any extra money to put in banks. but he would like to let what he has stay in the bank and draw interest. Will you please get a law passed that will allow people to do that? Very truly yours, George Giles, 8910 Karen Drive, Fairfax, Va. 22031. Then lie says: P.S. If you want to check it out, my bank account number Is C-1463-9. I do not know, but I think that is a very telling story. Ms. BAREFOOT. We have said in our statement that we agree that people should be provided with disclosure of the terms of their account, including if it were to become dormant. As a matter of principle, that is clear to me. The point that we are making is that there are State laws governing this area. Mr. ROSENTHAL. But the Sthte laws, for practical purposes, exempt national banks. Ms. BAREFOOT. I do not believe that that is true. I was not familiar with the New York exemption, but, generally speaking, we operate under the assumption that State laws do affect national banks. Mr. ROSENTHAL. Will you prepare for this committee an analysis of every State law-State rules and regulations-as to whether or not they exempt national banks and what communications or correspond- ence you have had from citizens suggesting that the national banks have refused to abide by State laws? Ms. BAREFOOT. Mr. Chairman, as I mentioned earlier, we attempted to do that in 1977 and had a great deal of trouble compiling it. Mr. ROSENTHAL. Why? Ms. BAREFOOT. Because the States did not answer our questions. PAGENO="0278" 274 Mr. ROSENTHAL. They did not answer your letters? Ms. BAREFOOT. They did not answer our letters. Mr. ROSENTHAL. What State did not answer a letter from the Comp- troller of the Currency? Ms. BAREFOOT. As I mentioned, most States did not. We only had 19 replies out of 50~ and we were offering to enforce their laws relative to national banks. Mr. ROSENThAL. You probably had the wroflg addresses. Ms. BAREFOOT. We wrote to the State banking departments. Mr. ROSENTHAL. And they did not answer your letters? Ms. BAREFOOT. That is correct. Mr. ROSENTHAL. I find that very, very incredible. Mr. Zrro. Mr. Chairman, the comprehensive survey that the commit- tee staff did only got 27 replies from the States. Mr. ROSENTHAL. From my own staff? But my own staff does not have the clout that you folks have. Mr. Zrro. I would not say that, Mr. Chairman. Mr. ROSENTHAL. It is obvious; I cannot do anything with you, so how can I do anything with the States? Mr. ZIT0. I think we worked very closely with the subcommittee staff and welcomed the exchange that we had with them. Mr. ROSENTHAL. I would tend to agree with you that this is not SALT II, and it is not the biggest thing for the future of the country, but I have just an intuitive feeling that there arc millions of George Gileses in this country who are getting ripped off by banks, and I do not think it is a fair thing, a.nd I think we should try to do something about it to stop it. The first thing we have to do is find out what the States are doing. So, why don't you renew that study and send the letters by registered mail, return receipt requested, to all 50 State bank regulators? This way we will have a compilation of those that received the letters and those that did not respond. If, after 2 weeks, they do not respond, we will send them telegrams-we will do this project together-and pay for it from our resources. MS. BAREFOOT. Would you like to address the dormant account ques- tion only or the other consumer protection laws as well? Mr. ROSENTHAL. Just this one issue. This is a nice simple issue that I understand and the public, I think, has shown an interest in. Mr. Epstein, do you have any other ideas of things we should do? Mr. Ersi~IN. I think that wouTd be helpful. We can provide the Comptroller's Office with the correct mailing address of all the State administrators. In all the States I have been working with, I have yet to find this letter you are referring to inquiring what the State escheat laws are. However, if you go to the Library of Congress, they are avail- able on the shelves. So I think you could just have a law clerk go down there. Mr. Zrro. We welcome your help, Mr. Epstein. MS. BAREFOOT. I was going to mention that I worked for the Senate for several years and tried to undertake this type of a study of State laws on late charges and assumption laws and that type of thing, and the Library of Congress could not provide us with a 50-State summary. But we will be happy to try to cooperate in getting a better picture of what the State laws are. PAGENO="0279" 275 Mr. ROSENTHAL. This is a nice simple issue in which we can all understand what ought to be done. There is an injustice being inflicted on, I happen to think, millions of people, and it ought to be corrected. What, in your judgment, will be a legal service charge for inactivity in the future in light of the Bank of America judgment? The court ruled in that case that. a signature card, if a contract at all: Is an adhesion contract which this court finds to be unenforceable to the extent it purports to authorize the bank to service charge or withhold interest from dormant accounts. What. is your reaction to the substantive finding of that court, and what are you doing to implement that finding? Mr. Zrro. Mr. Chairman. as you know. the courts just issued a pre- liminary ruling late last week. We have not had a chance to study it. It has potential significance as judicial precedent for banks in Cali- fornia which was previously not for~hcorning in this area and, in that case. might have a dramatic impact. We would like time to study that before we give you a reasonable opinion of what impact it may have. Since that case-I guess the final decision has not come down yet- the bank. it. is my understanding. has 30 days to appeal. We would like to just study the matter and weigh the potential impact without in any wa prejudicing a possible appeal. Mr. ROSENTHAL. But. you are going to pursue that matter, and you nrc going to try to adjust to t.hat decision? Mr. Zrro. We think that it may be a significant judicial precedent. Mr. ROSENTHAL. Which means what? Mr. ZIT0. Which means that we will be interested in seeing the out- come of it as it affects the State of California. We are not sure if it affects anybody beyond the State of California. Mr. RosExTIrxI~. I think it does. I have not read the decision, but I would certainly think so. Mr. ZIT0. We have not had a chance to study it either. Mr. ROSENTHAL. It is not a question of the State of California but of the Bank of America. I have not read the decision, so I do not want to speculate. Mr. ZIT0. Thank you. Mr. ROSENTHAL. The Federal Home Loan Bank Board, I am told, has a policy where they limit service charges to $1 per year, and the S. & L.'s must mail a notification to the depositor at least 30 days prior to the imposition of this service charge. You have no such rule or regulation? Mr. Zrro. That is correct. Mr. ROSENTHAL. Why not? Mr. ZIT0. Once again, we have no congressional legislation or intent to point to that encourages the Comptroller's Office to promulgate any such regulations. Mr. ROSENTHAL. But they have no congressional legislation. Mr. ZIT0. I am not sure about that, Mr. Chairman. Mr. ROSENTHAL. I am reasonably sure; although something might have got past. me. I know of no such legislation. Congress never would have legislated in this area just for them and not for the other regula- tory agencies; that. to me, makes no sense. Mr. Zrro. In any event, as we stated in our testimony, we look to the States for deposit contract law, and where the States speak to the escheat issue, then we- PAGENO="0280" 276 Mr. ROSENTHAL. But why did not the Federal Home Loan Bank Board look to the States, as you do? Mr. Zrro. I cannot speak for them, Mr. Chairman. Mr. ROSENTHAL. What do you think? Ms. BAREFOOT. I am not a lawyer, but I have long had the impression that the Federal Home Loan Bank Board has had a broader statutory authority for general rulemaking and has certainly used it more than the Comptroller's Office has. Mr. ROSENTHAL. But you have statutory authority to do this, do you not? Mr. ZIT0. Yes; we do. Mr. ROSENTHAL. Of course you do; so there is no sense in saying they have broader statutory authority when you already have statutory authority. There is something else. Mr. Zrro. I am not sure it is anything more than just being no specific statute or indication from Congress that this was something that they had intended in passage anywhere within the National Bank- ing Act or anywhere within a variety of consumer laws that Congress has recently passed. Mr. ROSENTHAL. My impression is that you clearly have statutory authority to do it. My impression is that you have been busy with other things; you have been sluggish; you have been lethargic; you have been lacking in compassion, lacking in understanding of the small depositor. That is my impression. Mr. ZITO. I do not agree with you, Mr. Chairman, but I think that you would find- Mr. ROSENTHAL. I do not mean this personally; I am talking gener- ically; you understand that? Mr. ZIT0. I understand, Mr. Chairman. I think you would find the Comptroller's Office to be in the fore- front in advocacy on many, many consumer fronts and consumer issues. Mr. ROSENTHAL. I think that is probably true. Mr. Zrro. And I think our mission, particularly since John Heimann has been the Comptroller, has been extraordinary in this area. Mr. ROSENTHAL. Exfraordinary is a very strong word. Mr. Zrro. I think it is an appropriate one. Mr. ROSENTHAL. If that is the case, do you share your examination reports with State authorities? Mr. ZIT0. No; we do not. Mr. ROSENTHAL. So, here you are relying on the State laws in this area. If you find something, you say your examiners find it, yet you do not share it with the States. What is so extraordinary about that? Ms. BAREFOOT. Mr. Chairman, I think this is an area where, as a result of the hearing, we could perhaps improve or clarify our procedure. We are entirely willing to require the bank to give the State a re- port, in compliance with the State's escheat statute, and to enforce a followup on that if it does not happen. We do not release our examina- tion reports to anyone except under certain very rigid circumstances. Mr. ROSENTHAL. Why do you not share it with State authorities? I would be curious to know why. Mr. Zrro. Our practice is based on a number of judicial precedents and statutes, such as 12 U.S.C. 481, which indicate that examination PAGENO="0281" 277 reports are to be held in strict confidentiality, as a general matter. And Congress has made some very exclusive exceptions to that, such as the GAO. We have an excellent working relationship with the GAO on a variety of issues. This is an area where we examine the national banks; Congress has given us sole visitorial powers; and we are prepared to follow up with enforcement if necessary. Mr. ROSENTHAL. In other words. you are not working well with State regulatory agencies. First of all, they do not even answer your letters. so that is the number one problem. Mr. ZrTo. But that is not necessarily our fault. Mr. ROSENTHAL. I could not say it is. But you have discretionary authOrity to release portions of your examinations, even though you are cOnstrained by statute from releas- ing the. examination. You have authority and discretion to release portions of such examinations for supervisory purposes to Federal and State agencies. Is that. right? I think the problem here is that we are dealing with a "never never" land. You were not too interested, they were not too interested, and nobody did anything about this subject. Mr. Zrro. I think, as Jo Ann has pointed out to you, based on the subcommittee's interest in this area, which has been very helpful, we have instituted or will be institut.ing some steps to make a reasonable attempt. consistent with our limited resources. to improve in this area. Mr. ROSENTHAL. When will the subcommittee be in a position to evaluate these "reasonable attempts" and this other study that is going to get started? Thirty days? Sixty days? Mr. ZITo. I do not think that a timeframe, given our off-the-top-of- our-head judgment, is really fair to the subcommittee or us at this time, Mr. Chairman. We are in contact with your staff, particularly Mr. Tucker. Mr. ROSENTHAL. I want to have this done before this year is out- the whole matter straightened out, one way or another. We are going to take a recess in the first 2 weeks of August. Then we will come back, and we will probably come back after the election. I want this matter fully and fairly resolved by the end of this year; win, lose, or draw. Mr. Zrro. It would seem to me, Mr. Chairman, that a lot of that would depend on how forthcoming the States are. Mr. ROSENTHAL. You have got to send them a letter. Send a letter, registered mail, return receipt requested. If you do not get an answer, we will send them a telegram-OK? Mr. Zrro. OK. Mr. ROSENTHAL. If you do not get an answer from the treasurer, then we will send a telegram to the Governor of each State. Mr. Zrro. We have both done that; we got 19 responses, and you got 27. Mr. ROSENTHAL. But both of us ought to try a little harder. Mr. Zrro. Agreed. [Mr. Zito's and Ms. Barefoot's prepared statement follows:] PAGENO="0282" 278 0 ~ ~ Comptroller of the Currency Administrator of National Banks Washington, D. C. 20219 F~~: RELEASE 202/14147~1800 July 214, 1980 STATEMENT OF EDMUND G. ZITO CHIEF NATIONAL BANK EXAMINER and JO ANN BAREFOOT DEPUTY COMPTROLLER FOR CUSTOMER & COMMUNITY PROGRAMS OFFICE OF THE COMPTROLLER OF THE CURRENCY BEFORE THE SUBCOMMITTEE ON COrDIERCE, CONSUMER & MONETARY AFFAIRS OF THE COPG'IITTEE ON GOVERNMENT OPERATIONS U.S. HOUSE OF REPRESENTATIVES JULY 214, 1980 We appreciate the opportunity to offer the views of the Office of the Comptroller of the Currency regarding bank practices involving service charges and suspension of interest on dormant accounts, and bank compliance with state unclaimed property laws. Our statement will provide the Subcommittee with information based on our experience with examinations and enforcement of state unclaimed property laws by our examiners, and on our PAGENO="0283" 279, cooperative efforts with state authorities. Since the issues raised by this hearing involve both consumer protection and coercial examination matters, we have divided the testinony between tbe Chief Latiomal Bank Examiner and the Deputy Comptroller for Customer and Community Programs. Ccm~troller's Office establishes priorities for allocating examination time and supervisory attention in a manner intended to assure that serious problems andpotential problems receive greatest scrutiny. In the commercial area, the primary objective is to assure the safe and sound ope±'ation of the institution and compliance with national banking la~~s. In the consumer exanina- tion, the areas receiving the most examination tine include ecual credit laws, Truth-in-Lending, and the Community Eeinvestmemt Act. The agency does examine all national banks for compliance w±th all applicable laws, but we allocate our limited resources to areas which are major problems or exhibit a significant level of consumer complaints. In order to place the issues surrounding dormant accounts in perspective, it should be noted that we have received very few complaints and inquiries from individual consumers or state offiodals, and have found few viol~tions through our exanination process. As a result, we have not viewed dormant account prac- tices as a najor area of nonconplianceby*national banks. Therefore, while the subject is covered in our examination PAGENO="0284" 280 program and procedures, it does not receive the emphasis that, for example, the capital adequacy of an institution receives. However, o~e are continually seeking to update and modify our examinations procedures to improve enforcement of all relevant State and federal laws. In this regard, we believe that the Subcommittee's questions have been very helpful to our Office in evaluating oi~r--present programs and policies in this area, and identifying areas for potential improvements.. However, we mote that these remarks are directed toward our~experience with approximately ~ national banks while there are approximately ~2,OOO depository institutions. This statement represents only the view of the Comptroller's Office, and should not be considered to represent policies of the Administration. I. ALLEGED BANK PRACTICES REGARDING SERVICE CHARGES OR INTEREST PAID ON DORMANT ACCOUNTS The Subcommittee's invitation asks that we address a number of questions regarding certain alleged practices by banks affecting dormant accounts. Specifically, the invitation listed the following practices: PAGENO="0285" 281 Service Charges o Imposition of service charges~which have not been authorized by any valid contract of deposit with the depositor; o Failure to provide neaningful disclosure or obtain ~mformed consent of the depositor even in the case of a legally valid deposit contract authorizing service charges; and C :mposition, without adequate disclosure or consent, of service charges which were~ unreasonable in magni- tude, including wiping out entirely small accounts or ~.mposing on large accounts fees totally dispropor- t~omate to the cost of maintaining the accounts after making allowance for the value to the bank of continued ~se of the funds without the bffsetting cost of processing account transactiobs. :mterest Payment Suspension Suspension of interest payments or accrual of interest on dormant savings accounts without advance disclosure of such pract±ce, without notice to the depositor at the time of the suspension, ~nd possibly in violation of the contract of deposit; and o Perfunctory or no effort by banks to contact owners of dormant accounts, to ascertain their continued interest in or awareness of the accounts. PAGENO="0286" 282 The Subcommittee's invitation further specifically requested information on recent consuner complaints alleging such prac- tices and our comments on the propriety and reasonableness of these bank practices, The letter asked us to specify existing federal regulations governing advance disclosure and contemporary notification of customers of the bank's practices in regard to dormant checking and savings accounts, and other substantive bank practices in these areas such as regulatory limits on the reasonableness of service charges, interest sus- pension, and bank efforts to locate account hol~ers; to identify all statutory authority that could be relied upon to provide the basis for further regulation by the Comptroller's Office in these areas; and to indicate any plans by this Office for further regulation of the practice of national banks in this area. A. Recent Consumer Complaints In response to the Subcommittee's request for information regarding consumer complaints concerning dormant accounts, we have reviewed historical data available to us through our com- puterized Consumer Complaint Information System. Our review establishes that consumer complaints in this area haSTe been few in number, both historically and in the recent past. To determine the significance of recent complaints involving dormant accounts, we reviewed more than 500 complaints from PAGENO="0287" 283 four of our regions encompassing 19 states, from January 1 through May 31, 1980. These included all complaints in four broad categories which we believed might possibly relate to dormant account problems: `Possible Escheat or Inactive Account," "Disclosure of Account Service Charges and Terms," "Payment of Interest," and "Servic~ Charges." Our review stowed that only six of the conplaints in these categories involved national bank practices affecting dormant accounts. s~x were in the "Possible Escheat or Dormant Account" category. Complaints in the other categories generally involved cervice charges or interest payments on active accounts. The eschea: category itself was overinclusive in that it included comPlaints related to the closing of active accounts. cf the six complaints involved service charges. In all ::tese cases, customers alleged that their bank had imposed service charges without notice on very small (less than $2~00) accounts. In one such case, further investigation sh~ed that the bank had not inposed service charges. Instead, the account had been closed out due to mistaken identity problems. In two cases, the banks refunded or offered to refund the money. In the third case, the bank had imposed a service charge on a ca--drags account, but only after sending notice to all passbook' account holders describing conspicuously and specifically the amount of such charges and the date when such charges would become effective. PAGENO="0288" 284 In two other cases, customers complained either that funds had been escheated without notice, or that the bank failed to pay interest when the account was dormant. In both cases, facts provided by the bank records contradicted the allegations and we. found no violation of law. In ope of these complaints, we found that the bank did not pay interest on three accounts because the balance in each was less than $10.00. However, neither the cornplaipant nor the bank identified these as dormant accounts. The final complaint was simply a request to trace funds deposited prior to the "Bank Holiday" of 1933. Our investi- gation showed that the account was closed out by the customer in l93~4. Based on our review of these complaints from four regions, we believe it is likely that only a small percentage of the total of 283 conplaints recorded in the four potentially relevant computer codes from all regions in the first five months of 1980 actually involved practices affecting dormant accounts. We believe it is logical to assume that, as was the case in our four-region survey, only those complaints in the "Possible Escheat or Dormant Account" category will actually prove rele- vant to dormant account problens. H±sto~ically, complaints in this area also have been an in- significant portion of the total consumer complaints received. PAGENO="0289" 285~ From 1977 through the first five months of 1980, only one percent of all complaints were in the "Possible Escheat or D~i'mant Account" category. Even when all four possible cate- gc'ies ai'e included for this same p~riod, the percentage increases to only five percent. This latter figure is almost certainly a substantial overstatement due to the overinclusiveness of the categories. s~r.~ry, our records suggest that neither consumers nor state author±t±es have had substantial concerns in this area, either oscently or as a historical matter. P. Pro~r~ety or Reasonableness of Alleged Practices regard to your question regarding the propriety or reason- a~eness of certa±n practices, we believe that the legal answer n~st be determined under relevant state statutes and judicial pi'ecedents governing contract law. As you know, Congress has chosen not to exercise its power to regulate the substantive terms or disclosures affecting deposit contract law. In the absence of federal legislation governing the imposition of service charges or suspension of interest on dormant accounts, state law is controlling so long as it does not unduly interfere with the eff±cacy of our national banking system or discriminate against national banks. Accordingly, in states which permit service charges or suspension of interest with regard to dormant accounts, with or without meaningful disclosure, national banks PAGENO="0290" 286 may engage in such practices. However, where state law restricts such practices, national banks nust comply with those restrictions. The requirement that national banks conform their conduct to pertinent state contract law is embodied in Comptroller's Interpretive Ruling 7.7515 which provides that: "A national bank may, consistent with contracts of deposit, impose such service chargeson dormant accounts as its board of directors determines to be reasonable." (Empha~is added.) While the underlying premise of this ruling is that a valid contract must exist for service charges to be deducted or interest payments suspended, it is the clear intent that state law govern all issues of contract formation, contract interpre- tation, and contract enforcement. Given these general principles, it is the view of this Office that any service charge imposed on a dormant account in the absence of a valid contract authorizing such a charge, or in contravention of the specific terms of the contract, is inappropriate and unreasonable because it is in contravention of state contract law. The same conclusion applies to a suspension of interest not authorized by the deposit contract or imposed in breach of the contract's provisions. The need for "informed consent" or "meaningful disclosure" to the consumer of the possibility of service charge imposition or interest suspension must similarly be determined in light of PAGENO="0291" 287 existing state law. If state stat~tes and judicial decisions indicate that the existence of a deposit relationship contem- plates or permits such changes, whether or not the depositor receives a meaningful disclosure, these practices are valid and binding on the depositor. :;ctw±thstanding the fact that certain practices may be legally perr.!ssible under state law, we believe that, as a matter of Drinciple, consumers should be provided, at the time they open deDcs~t accounts, with meaningful disclosures of all significant bank practices which may affect dormant accounts. Banks should also be encouraged to provide contemporaneous notice of interest suspension to dormant account holders. Both of these measures ~ benefit the banks as well as~consuners, by minimizing the nuzber of accounts remaining in a dormant status. Such accounts represent an opportunity for dishonest employees to defraud an institution, and bank practices which monitor and systematically reduce the number of such accountshelp reduce the bank's exposure to losses through fraudulent manipulation. believe that the most appropriate means of assuring adequate consumer protection and bank risk reduction in this area is through state legislation. We would support such state initia- tives and would be pleased to provide assistance to state au~thorities in formulating such proposals. Our belief that state initiatives are superior to federal regulation in this area is based on a number of considerations. First, no PAGENO="0292" 288 comprehensive studies are presently available which show that the benefits to be conferred by additional federal legislation would balance or outweigh its costs. We therefore believe that additional evaluation is necessary before any uniform. legislative proposals are formulated. Furthermore, even if the evidence established a need for reforms in certain cases, we belie~re it would be inappropriate for this Office to adopt a rule affecting riati nal banks regarding the type of disclosure required in connection with certain service charge practices. Because the .contract law of different states m~y vary signi- ficantly, the state courts and legislatures are best able to determine the need for reforns and to structure then to suit particular circumstances. Finally, we note that the area of contract law is one that Congress has traditionally left to state regulation, with few exceptions. We do not believe this policy should be disturbed without compelling evidence of the need for federal intervention. On the issue of the proper or reasonable amount of a service charge, this Office has viewed Interpretive Ruling 7.7515 as allowing only those charges deemed reasonable by the bank's board of directors, in view of the bank's cost and competitive position. Generally, this Office does not view it as appro- priate to routinely substitute its judgment for that of the board of directors. However, we are prepared to require corrective action in cases where a service charge is demonstrated PAGENO="0293" to be clearly disproportionate to the cost of maintaining the account and to the competitive situation of the bank, in the absence of contrary state law or judicial precedent applicable ~n particular circumstances. recognize that our Office could~ improve examiner awareness of potential problems in this area. Accordingly, we have decided to implement a policy using the computerized Consumer Complaint Information System ("CCIS") to assist commercial examiners in determining whether service charge practices are a sIgnIfIcant problem in particular banks. Under this policy, o~r commercIal examiners will receive a CCIS printout showing w~etber a bank's service charge pr~ctices have been the subject of consumer complaints. In a case where complaints have been flied, the examiner will be instructed to give particular attention to the bank's compliance with Interpretive Ruling 7.7515. :m IbIs regard, it should be noted that several states presently bave laws prescribing whether and in what amounts service charges ~ay be Imposed on dormant accounts:. In a case in which the state statute specifically prescribes a Jower amount than that dictated by the board of directors, we would view the state statute as controlling so long as it did not impose an undue burden on national banks or impose discrimiriary requirements. To date, our OffIce has not ruled any state~ service charge restrictions tobe invalid on such grounds. PAGENO="0294" 290 The final practice on which the Committee asked us to comment was the failure by banks to make reasonable efforts to oontact owners of dornant accounts, at the time they reported dormant accounts to state authorities. In any state which has adopted the Uniforn Disposition of Unclaimed. Property Act ("UDUPA"), Section 11 (as of year end 1979, 32 states had adopted a version of the~ act), a bank's failure to nake reasonable efforts to contact an owner of?a dormant account would in many instances contravene that law. Section 11 of UDUPA expressly mandates that, if the holder of property presumed abando~ed knows the *owner's whereabouts, and the owner's claim is not barred by a statute of limitations, the holder must communicate with the owner and take steps to prevent the presumption of abandonment before filing an annual report on abandoned property with the state. Furthermore, the statute expressly mandates that the holder must exercise "due diligence" to ascertain the where- abouts of the owner. "Due diligence" is a legal standard, and its content varies greatly depending on the conduct which it is intended to describe. Generally, courts have recognized that "due diligence" is a relative term, that its meaning must be resolved in view of the circumstances of each parti- cular case, and that it generally includes "reasonable dili- gence" or the diligence exercised by a prudent man in the conduct of his own affairs. Given this flexible concept, this Office could decide whether a particular procedure to locate dormant account owners was PAGENO="0295" 291 reasonable only on a case-by-case basis, in accord with appli- cable state judicial precedents under UDUPA, or under other statutes or court cases requiring a~ certain standard of bank care ±n not±fy±ng dormant account holders prior to reporting the funds to the state treasurer as, abandoned. If no statutes or judicial preceden~s in a particular state require a bank effort to contact the owner, we believe a bank s~oud take steps that are reasonable under the circunstances are i~keIy to produce results without incurring expenses tisproporoionate to the amounts inyolved. If the number of tornant accounts becomes so large as to raise a possible threat to the safety and soundness of a b~nk, we are prepared to ±nst~tute enforcement proceedings to insure that the bank takes corrective measures. As in the case of our support of more nean~ngfuI disclosure of service cliarge practices, we believe reasonable efforts to contact dormant account holders ininize the bank's exposure to losses through fraudulent ramipulation of such accounts, in addition to protecting the interests of the bank custoner. C. Federal Regulation of Bank Praôtices Regarding Dormant ccounts ~ere are no federal regulations applicable to national banks which generally require advance disclosure and/or contemporary notifi.cation of customers of bank practices that may affect PAGENO="0296" 292 dormant accounts. However, the Conptroller?s Interpretive Ruling 7.7515 does provide that banks may impose such service charges without advance disclosure or contemporaneous nottfi- cation only if such practice is consistent with the deposit contract. There are no specific federal banking statutes which appear to contemplate, either expressly or in their legislative history, that the Comptroller's Office should promulgate regulations affecting dormant accounts and state escheat laws. As we dis- cussed previously, although Congress has authority to legislate for national banks, it has made no determination regarding the need for contemporaneous disclosure or advance notification by national banks before imposing service charges on dormant accounts. The Comptroller does, of course, have broad rulemaking authority to prescribe banking regulations affecting the conduct of national banks. Such authority is implicit in the regulatory framework of the National Bank Act itself and in the purpose and breadth of the statutory delegations of power made to the Comptroller by Congress. This general rulemaking authority has been explicitly confirmed in the recently enacted Depository Insti- tutions Deregulation and Monetary Control Act of 1980. These authorities clearly provide the Comptroller with power to regulate a broad spectrun of banking practices, including the PAGENO="0297" 293 power to prevent or prohibit unsafe and u~isound practices. We believe the exercise of such authority to regulate dormant account service charges would be inappropriate, however. Traditionally, this Office and the Congress have viewed the reasonableness of contract provisions as appropriately within the domain of state regulation. view of the longstanding federal policy of non-intervention in the area of state contract law, and the absence of any explicit Congressional directive for this Office to impose sub- stantive regulations in this area beyond those incorporated under state law, we have no plans for specific regulation of the practices of national banks in~the area at this time. ~egard~ng substantive bank practices other than disclosure and ~ooif~cat~on, such as regulatory limits on the reasonableness of service charges, the suspension~of interest, or bank efforts to locate and ascertain the continued interest of owners of dormant accounts, there are no federal regulations now appli- cable to national banks governing such conduct. As was the case with statutory authority for the regulation of disclosure and not~f~cat±on pract±ces, the Comptroller has the authortty to regulate in th±s area. However, for the reasons discussed earlier, we do not believe federal initiatives of this kind are desirable and have no plans to impose new regulatory burdens on national banks in this area at this time. PAGENO="0298" 294 II. NATIONAL BANK COMPLIANCE WITH STATE UNCLAIMED PROPERTY LAWS There is no simple answer to the question of whether, in every case, a ri'ational bank will be subject to state unclaimed property laws to the same extent as a state chartered insti- tution. Instead, the answer will vary depending on the kind of unclaimed property law effective in a particular state. More specifically, state escheat statutes are usually of two types: (1) true escheat statutes which provide that the property reverts in full ownership to the state and that the former owner thereafter has no right or title to the property or its value, and (2) "custodial" statutes which provide in essence that when an account or property has been dormant (the true owner not having been heard from nor having corres- ponded in writing for a specified period of years), the legal custody of the property is then transferred to the state. The state may have custody in perpetuity, but the former owner at any time may reassert his claim to the property. If such a claim is proved, the state will honor and pay the claim from the special fund reserved from the proceeds from escheated properties. The tendency in recent legislation has been to make the state the indefinite custodian of the abandoned property, chiefly through the adoption of UDUPA. Additionally, a number of states have adopted conceptually similar schemes dealing with unclaimed property. PAGENO="0299" 295 In those states where a custodial statute such as UDUPA is in effect, the United States Supreme Court has indicated that a national bank will be subject to the state law. In the landmark case of Anderson National Bank v. Luckett, 321 U.S. 233 (191114), the Supreme Court assumed that each state possesses the inherent right to step into theshoes of depositors reason- ably presumed to have abandoned property. Where the state merely takes custody for depositorswithout (at least immediately) effecting a forfeiture, the Court r~asoned that there would be no unjustifiably radical change in the depositor's contractual r±ghts. Thus, if the state adequat~ly notifies the depositor of the change ifl the situs of his property, there is no un- lawful interference with the national bank's power to contract w~:b ~.ts customers, and the law is valid. This reasoning is ccms~stent with the judIcial principle of preemption which holds that although Congress has the primary authority to legIslate for national banks, state laws are valid to the extent that they do not conflict with federal statutes or do not frustrate the Congressional intent in creating and main- ta~.ming a natIonal banking system. In accord with these prIncIples, the Comptroller has consistently advised national banks that they may be subject to and should comply with appropriately framed state unclaimed property laws. Although this Office has recognized that state escheat laws may apply. to national banks in appropriate cases, we have, also PAGENO="0300" 296 consistently interpreted the federal banking laws to preclude visitorial access by state authorities to national bank books and records for the purposes of examining and enforcing ccmpliance with state unclaimed property laws. This interpretation is based on 12 U.S.C. § 14814, which states that: No bank shall be subject to any visitorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed by Congress.... In the opinion of this Office, any attempt by state authorities to examine a national bank's books and records in order to enforce state unclaimed property laws constitutes an illegal and unauthorized attempt to exert those visitorial powers which 12 U.S.C. § 14814 confers exclusively on the Comptroller. This interpretation, which is incorporated in the Comptroller's Interpretive Ruling 7.6025(b), is supported by a number of federal court decisions. This Office also has long held that examination reports and examination working papers are to be held in strictest con- fidence. Although the Comptroller has the discretion to release portions of such documents for supervisory purposes to federal and state agencies, we have never committed our- selves to routine disclosure to state authorities. This policy reflects our view that the reasons for confidentiality and the risks of the loss of confidentiality in such cases PAGENO="0301" 297 far outweigh any potential supervisory benefits to be gain~d from disclosure. In the case of enforcement of state unclaimed property laws, we believe it is doubtful that disclosure of examination reports or working papers could provide any additional public beref~t in view of the Comptroller~s own express commitment to examination and enforcement regarding state unclaimed property* laws. RegardIng the proposal that this Office notify state authorities if vIolatIons are uncovered, we believe a more appropriate course cf actIon is that suggested by our basic enforcement statutes. ~en vIolations of state law are found, we require the bank to fIle a report with state authorities or take other steps appro- priate to effect compliance. We then monitor the bank to ensure that It follows corrective steps; if the bank refuses to do so, we obtain compliance through enforcement proceedings. If a state has further problems with any bank, the authorities should aert our OffIce so that we can follow up in particular cases wIth our enforcement powers. Notwithstanding our position that national banks are not legally compelled to submit to state examination and that. examination reports are confidential, this Office has never taken the position that state authorities are barred PAGENO="0302" 298 absolutely from access to the books and records of national banks for the limited purpose of facilitating compliance with state laws on unclaimed property. We do not object if a national bank voluntarily elects to permit inspection of its books and records by state officials for the purpose of determining compliance with escheat laws, if the examination is properly limited to those books and records relating to escheat law compliance. In accordance with our advice, national banks have in fact permitted limited state review of certain records associated with unclaimed pr~perty law compliance on various occasions. In view of our position regarding this limited ability of state authorities to examine national banks and to inspect examination documents, the Comptrollerts Office has accepted the responsibility for examination and enforcement of compliance with such laws by national banks. We have in place specific examination policies and work programs designed to insure examination and enforcement of state unclaimed property laws. Because the various state statutes differ in a number of way~, the Office expects each of our regional offices to px~ovide appropriate examiner training in escheat laws. The Office is constantly modifying and updating our examination procedures to improve examiner training in state laws and thus to insure better enforcement of such laws. As part of this process the PAGENO="0303" 299 Office has taken the first step in this plan by soliciting fron state supervisors a list of those codsumer protection laws in each state subject to regulatory eñforcenent by state agencies, copies of the written examination ~rocedures used by the state examiners, enforcement mechanisms available to the state agencies, and any other infornation that night aid in our enforcement efforts. The Comptroller's Office has a number of policies and programs des~~ed to verify the adequacy of national bank recordkeeping for feterm~m~.ng periods of dormancy under state law, and for deterrLmThg compliance with state unclaimed property laws as applied to a variety of deposit acbounts. In particular, the Comptroller's Handbook for National Bank Examiners ("Handbook") contains a system for insuring that state unclaimed property laws are enforced. First, the general commercial examination procedures in the Handbook and the~ Comptroller's Handbook for ~ao~cmal Trust Examiners expressly require the examiner to Thsure that the national bank is complying with state unclaimed property law "with regard to all forms of dormant deposits" and trust accounts. Additionally,~ the Handbook prescribes specific deposit account internal control and verification procedures affecting dormant demand and tine deposit accounts, off!c~al checks (including bank di~afts and money orders),. crust deposits and other "bank controlled accounts" (which would include unclaimed property ~rising from corporate transfer activities). The procedures specifically require n - RI - PAGENO="0304" 300 the examiner to determine whether dormant demand and time accounts and stale official checks are identified and segregated, generally to determine the adequacy of internal controls the bank places on deposit accounts, and to review the recomcilementS of all types of ~eposit accounts. A final measure aiding enforcement of state escheat laws is our policy of encouraging examiners to use their experience and expertise to supplement written procedures when this seems appropriate. An examiner has broad discr,~tiom to perform additional work programs or investigate a particular area in greater depth whenever, in his or her judgment, there appears to be a significant problem or potential problem for the bank. The commercial examination procedures, including those for deposit accounts and internal controls on such accounts, are generally designed to insure that all bank systems are docu- mented in a complete and concise manner, to determine com- pliance with applicable law, and to initiate corrective action when the examination reveals procedural deficiencies or violations of law. Thus, if an examiner verifies that a bank's deposit account internal controls are adequate under the commercial examination procedure, such controls are very likely to be adequate for purposes of determining whether an account is dormant under state law, or for other purposes PAGENO="0305" 301 under the state law. See Handbook, section 3Ol.l-3Ol.~. For example, a bank's failure to s~gregate dormant accounts from other accounts is cited by our examiners as a deficiency in internal controls. Subsequently, our enforcement division has reached agreements with such banks requiring them to correct all internal control deficiencies, including the ones relating to dormant accounts.~ While such measures are des±gned pririlarily to prevent a bank's exposure to loss through fraudulent manipulation of the accounts by officers or employees, such steps also serve to insure that the bank's recordkeeping procedures are adequate for the purpose of complying with state escheat law. There are two areas mentioned in the Subcommittee's invitation which our deposit account examination procedures do not spec±f~caily cover in verifying compliance with state unclaimed property laws: travelers checks not issued by the bank and property in safe deposit boxes. In the vast majority of cases, travelers checks are sold on consignment and would not be reflected on a bank's deposit account ledgers. In those few ~mstamces where the bank is the issuer of travelers checks, our examiners would apply the sane examination pro- cedures as for other official checks. As for safe deposit boxes, they ar'e not subject to our deposit examination procedures because legally and contractually there PAGENO="0306" 302 are no dormant "safe deposit accounts.' Instead, the bank and customer enter a rental contract whereby the bank receives a fee for renting safe deposi~c boxes of various sizes and assumes responsibility for exercising reasonable care and precaution against loss of the boxes' contents~ In a case where the lessee appears to have abandoned the box's contents, our pro- cedures are designed to insure that the contents are protected from unauthorized tampering by negligence or fraud. See Handbook, sections ~O3.l, L103.Ll, L~O3.5. Regarding enforcement of national bank compliance with state law, it is the express policy of the Comptroller to include in the examination report provided the bank's board of directors a citation of violations of applicable law found during the examination, including violations of law relating to unclaimed property, and to require the bank to correct these violations. See Handbook, section 600.1. Generally speaking, the Office requires correction of any violation of relevant state or federal law cited in the examination report. In addition to these express policies designed to insure enforcement of state escheat law, the Comptroller has at various times communicated with state authorities responsible for the administration of unclaimed property to aid the enforcement of state laws by our examiners. In several cases, our Office has offered to cc~~erate with state authorities to develop special examination procedures to improve the enforce- of state escheat laws. ~e intend to continue these PAGENO="0307" 303 efforts in the future, and we are donfident that any problems perceived by state authorities can be resolved through such cooperation. The Comptroller's Office believes that the programs and polic±es now in effect are generally adequate to insure effic±ent examination and enforcement of state escheat laws. ~e also believe that these programs are appropriate in view of the need to allocate our limited resources to discharge effectively our primary duty of assuring the safety and soundness of the national banking system, and of enforcing a variety of federal consumer protection laws. Consistent with these l~m±tations, we do recognize the need for improve- cf our procedures in some areas. Accordingly, in ad~t~on to the CCIS printout plan~ discussed earlier, we also support a policy of increasing the use of concurrent cor.roercial and consumer examinations. Such examinations wIll provide examiners with increased awareness of how escheat law conpilance and dormant account~ practices impact on consumers as well as on the bank's general stability. The Committee's final question regarding national bank com- pliance with unclaimed property laws was whether any national bank examiner had found instances of non-compliance with state escheat laws in specific instances, and if so, what findings and steps were taken to correct such problems. Ir~ the short PAGENO="0308" 304 time available to us~ to prepare for these hearings, we have been unable to catalog or analyze the instances of such vio- lations, although our regional offices report that violations of state escheat laws do appear occasionally in the examination reports. As we stated earlier, it is the Office's policy to require correction of any such violations. CONCLUSION We believe that, overall, the programs and pol~ies of the Comptroller are adequate to ensure satisfactory enforcement of state escheat laws. Moreover, the specific modifications to our policies suggested in our testimony will help to further strengthen and improve these procedures, consistent with our need to allocate limited resources efficiently. Eased on our own examination experience and on our survey of consumer complaints regarding dormant account problems, we are unable to conclude that illegal or unfair practices by national banks in this area are a significant problem at this time. In the absence of any evidence indicating that the benefits of formulating national standards in this area would justify the inevitable costs, we believe federal inter- vention is not currently war±~amted. We therefore encourage state legislation where circumstances indicate a need for ~oular reforms, and continued cooperat ire efforts bet;ceen feteral and State authorities. Mr. ROSENTHAL. The subcommittee standsadjourned. [Whereupon, at 10:50 a.m., the subcommittee adjourned, to recon- vene subject to the callof the Chair.] PAGENO="0309" APPENDIXES APPENDIX 1.-CORRESPONDENCE CONGRESSMAN EUGENE V. ATKINSON EUGENE V. ATKINSON IT ~ongre~«= of t1~jc~Anitcb ~`tatc~ o~ ~epre~tntntibe~ ~ 20515 (4~2)93S-elI7 Aunust 6, 1980 The Honorable Eenjmoin S. Rosenthal Thain-an, Sb-ittee on Carrerce, ConsuTer and Munetaxy Affairs Cort-ittee on Goverrtent Cmerations U.S. Hares of Peoresentatives ~:sehintcn, D.C. Re: Sob-msrrdttee investigation into bank handling of inactive accounts. Dear Hr. Cnsirren: I cc very oonccrned about the ailedged abuses-intended or otherwise- that precipitated the sub-csxrrnittee' s inguiry into bank handling of inactive accx)unts. Especially troubling is the apparent lack of co-ordination between state officials and federal officials; ~thile the necessary authority is already available, neither seems interested in assisning the rnguisite responsibility. Even cursory contact between pp staff and the appropriate Pennsylvania officials indicated that the sarre sort of problem which have been described br' witnesses-state officials and private citizens-before this sub-crsTnittee have plapeed depositors in pp hare state. It seems that Pennsylvania author- ities have diffulculty enforcing even the state's modest escheat law. Roan- thile, countiess citizens lose countless dollars through the various unfair bank policies under investigation here. For your inforration, and that of the sub-carmittee, enclosed are copies of tao letters that I have received fran officials in the Pennsylvania Depart- rent of Franking. The infonration therein contained coincides, for the case of Pennsylvania, with other evidence ~rhith has been presented te the sub-ann- mittee. I believe that the seemingly pervasive problems we are currently investi- gating have been long overlooked or ignored. I trust that this sub-ccemittee' 5 oversight werk will lead to the alleviation of these problems. I anorend you, Mr. Chairman, as well as the sub-cxnmsittee staff, for your conrern with and effort in conducting this inquiry. Sincerely, EUGENE V. AThINSON Rorrber of Congress EVA/dfz Coo. (305) PAGENO="0310" 306 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF BANKING P.O. BOX 2155 HARRISBURO, PA. 17120 717 :787-1854 July 28, 1980 Mr. Dirk Zysahlag Congressman Atkinson's Office 412 Cannon House Office Building Washington, D. C. 20515 Dear Mr. Zysahlag: In accordance with our telephone conversation of July 23, 1980, I am submitting the following information concerning dormant accounts in Pennsylvania State Chartered financial institutions. Unfortunately, the Confidentiality Statute of the Department of Banking prevents me from forwarding an actual complaint letter to you. Therefore, I shall attempt to reconstruct for you, a typical complaint concerning a dormant savings account: Mr. X's mother passed away in September, 1970. Mr. X is executor of her estate. Hr. X finds a savings passbook among her possessions. Her account is with Y state chartered bank. The passbook shows a balance of $356.00. The last deposit was posted on July 10, 1970 and no withdrawals are indicated. Mr. X writes to the bank asking for the new balance, since he assumes that interest would have been added to the old balance. In reply to his letter, the bank states that they do not have any record of an account with the number and name he gave them, They also inform him that records are kept for 7 years and that their records do not show any active or dQrmant account in his mother's name. The bank also indicates they have checked their Central File and also their records of open and closed signature cards and cannot find anything in his mother's name. Consequently, they must assume that the account was closed by someone prior to 1973. (Their records date back to 1973.) Hr. X then writes to me for assistance. Section 108 of the Banking Code of 1965 does say that the minimum time required to retain records is 7 years. It does not state that -records may be unilaterally destroyed after 7 years. Also, the 7 years starts to run only after "the date of the making of the last entry thereon." There is no "last entry" on accounts which have an existing balance. Then after 21 years (Savings Accounts), those monies must be escheated to the State. Checking accounts are to be escheated in 10 years from date of last entry. PAGENO="0311" 307 This Department has also received coi~plaints concerning the savings accounts of school children which have been absorbed by banks' service charges over the years. Some of our financial institutions have a contractual agreement with the customer which allows them to deduct a service charge for dormant accounts. If this Department receives a complaint of a dormant account in a National Bank, we forward this to the Comptroller's Office in Philadelphia for disposition. If a complaint is filed concerning a dormant account in a Federal Savings & Loan Association, it is forwarded to the Federal Home Loan Bank home office in Pittsburgh or their office in Philadelphia, which ever is ost ccnvenient to the consuoer. Our Department processes complaints concerning State Chartered financial institutions only. Our records concerning the number of complaints about dormant accounts are as follovs: YEAR f OF COMPLAINTS 1977 4 1978 6 1979 1980 through June 2 TOTAL 14 If I can be of further assistance to you, please do not hesitate to contact me. Very truly yours, Wilbur H. Stark Consumer Affairs Coordinator WHS:bs CC: Honorable Ben NcEnteer, Secretary of Banking Everett X. Hamnacher, Jr. Special Assistant to Executive Deputy Secretary PAGENO="0312" 308 COMMONWEALTH OF PENNSYLVANIA DEPARTMENT OF BANKING P.O. BOX 2155 HARRISBURG, PA. 17120 (717) 783-8243 July 28, 1980 The Honorable Eugene V. Atkinson The United States House of Representatives 412 Cannon House Office Building Washington, D. C. 20515 Dear Representative Atkinson: Your staff has requested I comment on the subject of inactive deposit accounts in financial institutions and the manner in which they are supervised in Pennsylvania. When a depositor puts his money in the bank, he does so subject to a definite specific or implied contract, usually in the form of a signature card, the terms of which both he and the bank know. This contract can be changed from time to time by mutual agreement. Thus, if a depositor opens an account at a time when no service charge is made by the bank against accounts, he may not be charged by the bank for maintaining his account until and unless he agrees to this. In actual practice, when the bank determines to make a service charge, the depositor can either agree to this charge or future charges, or can remove his account from the bank, In the case of an inactive account, the depositor has no opportunity when a service charge is made to either agree to or refuse to accept the changed conditions. Consequently, there being no meeting of the minds on the matter, the charge cannot be made and the original con- tract under which the depositor opened his account must stand. Service charges may be imposed on an active account; the continued deposit of funds by the customer at the institution is taken as acceptance of the new terms. Pennsylvania abandoned property law provides for the escheat of funds to the Department of Revenue if the account has been inactive for a period of 21 years, in the case of a savings account; or for a period of 10 years, in the case of any other type of account. The Depart- ment of Revenue in the past has maintained a field audit force to enforce this, but I understand in recent years the field audit force has been discontinued because of relative cost factors. PAGENO="0313" 309 The Pennsylvania Department of Banking, as part of its routine annual audit of each State-chartered bank, ascertains that the bank's service charge policy is in conformance with the Department's position on the matter. We do not normally conduct an audit of individual accounts due to time and cost factors involved. In addition to undergoing the Department of Banking's annual examination, the bank also maintains a full-time internal audit department or has a yearly audit performed by an outside accounting firm, or often both. Tnis Departrent does not regulate or supervise banks with a National charter; that function is per~oroed by the Office of the Comptroller of the Currency. We are not aware of what policies or procedures that agency has established concerning service charges on inactive accounts. If I can be of any further assistance, please do not hesitate to contact me. Sincerely, Everett X. Hammacher, Jr. Special Assistant to the Executive Deputy Secretary EXH:na PAGENO="0314" 310 INDIVIDUAL DEPOSITORS' COMPLAINTS Department of Chemical Engineering and Environmental Engineering Rensselaer Polytechnjc Institute Troy, New York 12181 29 July 1980 House Government Affairs Committee on Commerce, Consumer and Financial Affairs Washington, D.C. 20230 Dear Subcommittee: According to a recent article I read in the newspaper, you are presently studying the practice of making service charges to inactive bank accounts. I would like to lend my support to this conclusion. We had a small business which eras no longer conducting any active business, but which had a small account in the National Commercial Bank and Trust Co. (now Key Bank N.A.) of Troy, Hew York. We felt we would keep this amount in the bank in the event the corporation could buy a new business and become reactivated. Since we did not write any checks during a period of a year we suddenly got a statement from the bank that we would be charged $6.00 because the account had remained inactive for a year. At the end of the ~econd year, we received a similar service charge. Inasmuch as the origi- nal balance was only $30.12 you can see this severely depleted the remaining amount of money in the account. Had we realized it, a withdrawal (or a deposit) of only $1.00 would have made the account active and it would have lost less money in ser- vice charges. The main reason we did not withdraw $1.00 was that there was no real justification for this withdrawal, inasmuch as we had no expenses during this period of time. I suppose had we been smart, we would have withdrawn the dollar one year and returned it to the account the following year. Anyway, I wish to provide you this information to confirm further the infor- mation which has been provided for you in your investigation. Thank you for this opportunity to beof some help to you. Very truly yours, ~ ,j ~ i~ Lbnald B. Aulenbach, Ph.D. Professor of Environmental Engineering DBA:js PAGENO="0315" 311 July 30, l9SO Representative Benjamin Rosenthal Rayburn Office Building Suite 2372 ~ashi'ngton, D.C. 20510 Dear Representative Rosenthal, I am enclosing an article which. appeared in the Fairbanks newspaper, The D~i1y~ News-}Iiner. 1 was amazed to read that there had not been complaints about thIs practice. My own bank account had a five dollar service charge charged against it for the last quarter and ~my complaint was addressed to the bank manager. He stated that assessing service charges against dormant accounts was "bank policy" and that he had answered "thousands" of questions about it. It is this bank's policy to return the ~ney deducted if the custoii~r complains. Another bank in Fairbanks cleared out a dormant checking account belonging to a friend of mine and~didn't return the noney until she filed a complaint with the attorney general's office. Our state attorney general's office has an excellent record in consumer protection and shortly after the matter was reported to then, the bank returned the money and issued an apology. It seems to me that this practice is a problem here in the state of Alaska and I feel strongly that banks should not be allowed to arbitrarily help themselves to the customer~s money. Sincerely yours, ST~FF_~ COMMt~ ~ n~ tOc~t: Marian Carlson 207 Kody Drive Fairbanks, AK 99701 PAGENO="0316" 312 AL. E. CUDLIPP, JR. 5500 N. BRAESW000. APT. 184 HOUSTON, TEXAS 77096 July 21~, 1980 Members United States House Governmental Affairs Committee Submoimnittee on Commerce, Consumer and Monetary Affairs United States House of Representatives Washington, D. C. Gentlemen: In this morning's HOUSTON POST, page l3A, I read where your sub- committee is now' investigating bank and savings and loan association fees and charges. I would like to suggest that if legislation is now being written con- cerning these affairs that it include full disclosure as to what fees and service charges are in effect by these institutions, Recently, I sought to open a special account, which would be relatively small, and sought to determine what fees and charges would be levied against such an account and wrote several banks asking for their schedule of charges. None would reveal what their present, past, or contemplated charges were, Most ignored n~r letters of inQuiry, Thanks very much for your attention to this matter, Yours very truly ~:i ~. ~ Al, E, Cudlipp' 1~r/ PAGENO="0317" GLOUCESTER VIRGINIA 23061 ph~~: 693-2795 ~ `1~0 COMM~ I read with interest the accounts ~ on bank service charges. Many of us who have been victomized by these charges have no idea where to complain. I have been victomized twice by a bank in this little village. The first tine was with a checking account I had jointly with my father at First Virginia Bank of Tidewater. Luckly, I kept most of his money in a savinos account at another bank and used the checking account to pay his bills. 1 Eould transfer money to the checking account a.s needed. When he died in 1975, there was a S~9.0O balance in the account. While the estate was being settled, I left the checking account undisturbed. I received monthly statements from the bank. After a while, they stopped coming. I called the bank to ask why. They told me that because I had not written a check for over six months, they had placed the account on an inactive list and would charge me $1.00 per month for the entire tine no check wt~written. I had not received prior notice of this action, nor was I informed that this was the bank's policy. The account was in the name of Will F. Jenkins or Mrs. Elizabeth J. DeHardit, # 32-564-538. The second time this happened was siith the same bank and an account I set up as an escrow checking account for my real eatate business. In order to keep this account active, I always made a deposit each year to cover the service charges for that coming year. I did this for a number of years. The bank followed the same procedure with this account. First they stopped sending re monthly statements, with no prior notice. After a phone call, I was informed that this account had been put on an inactive list because no checks had been written in six months. This account was 80-657-362 in the name of Elizabeth J. DeHardit Escrow, Real Estate Broker. t~eedless to say, I have had no further dealings with this bank. I wonder how many others were victomized in this way? What right does a bank have to regulate how often you write a check on an account? True, the mr~ey I lost did not amount to much, but multiply this by the number of customers ?~cted, and it amounts to quite a sum. ct~\ `4 Eliza~th J. Delfardit 313 Eli~,~,abeth J. DeHardit REAL ESTATE BROKER Hor. Benjamin Rosenthal, Chairman House Goverrental Affairs Subcomittee on Ccmerce, Consumer and ~onetary Affairs U. S. House of Representatives washington, D.C 20515 Dear ~r. Rosenthal; PAGENO="0318" 314 QUEN11NLGRE;N.MD July 28, 1980 31 .iseo'~LJ ~nJ~j~ Rep. Benjamin Rosenthal ~ Rayburn House Office Bldg. Room 2372 `~ Chairman House Governmental Affairs Washington, D.C. 20515 Dear Representative Rosenthal: One enclosure is from the Orlando Sentinel (7-25-80). The other is from the most recent encounter with a dormant bank account. I have encountered three situations with dormant bank accounts: 1. One bank sent a statement at intervals for one year on a dormant bank account. The service charge was increased from $0.75 to $1.00 per month. At that time no further statements were sent until the account balance reached 0. This decrease, $57.05 to 0, occurred from April 29, 1971 to July 9, 1974. A final credit memo was sent (7-9-74) stating "This account closed to prevent any further Service Charges". * The bank's policy, after a dormant account was one year old, was to send a statement every six months. Customers were then told that the account was being closed out when no funds were left. 2. A similar situation at another bank was corrected in 1977 when a physicians group self-insurance account was changed from checking to a savings account. 3. A third bank in Flay 1980 sent a statement stating an account had been closed out. This was an account carried at our old office. I complained about not ever having received a statement. The bank said other complaints had been made, but no statements have to he sent on dormant accounts after one year. They said the policy in Florida was that both savings and checking accounts that have been abandoned go to the state after ten years. This bank did send me a cashiers check for the $42.47 (enclosure). You are correct in the quotation, "Dormant people don't complain. So citing those figures is irrelevant". Thank you for trying to bring this problem into perspective. ~ _~//~~ (~ie in L. Green, H. / * You will receive the original hardback version of One Taxpayer's Revolt in the near future. The chapter on "The Bank Factor" details the dormant account plus several other situations. PAGENO="0319" 315 SUN 151 QF ORLANDO"59UTH ORLANDO OFFICE * QUENTIN L. GREEN, M.D. ~) 44 W. STURTEVANT AVE. ORLANDO, FLORIDA 32806 AUDIT STMT ___________ 1031"73 [ 665 8 .2199 578 _____________ CA~E 0' LAST ITATWEMT A~O~WT WWSER 42.47 I o~ ,00 12.47 30.901 .00 `~ui~ra~ + ~° ~TAi~JOS~TS - CHECKS PMD ____________ 1 J x .06] + 0 Li~.06j ~.isJ 1~.!o I~J ~ i Cr~LJ LI ~ X L~J + ~ E~I?~Li CHECKS DEPO SITS )AY RAL.ANCE 12, 30:00 SERVICE CHARGE ./~,1Jez~o f 01 ~ DIRECT.ALL INÔUIRIES ON yOUR 425-4211 BOOKKEEPING P, 0. BOX 3833 ORLANDO, FL C-CHECK CORRECTION C-DEPOSIT CORRECTION .~*._ ___ ______ -. 1 2 I MAy.13,198Ol _________ IIPATI Oc T) sTAy~It~.I 4 13 13 * 62.47 * 30.47 30.00 .00 67-~O 0 - 81 - 21 PAGENO="0320" 316 George Greenwald 118 Willow Lane Leesburg, Fl. 327'-~8 Sept. 28, 180 Hon. Benjamin Rosenthal U. S. House of Representatives Washington, D .0. Dear Sir, I have recently become aware of your inquiries, along with David J. Epstein, into the problem of money lost by depositors when banks close out inactige or dormant accounts. Early this year I had the task of journeying up to Pennsylvania to assist my aunt, Estelle I. Karpel, in final- izing the affairs of her late husband, Victor J. Karpel, who died in Jan. 1980. Found among Mr. Karpel's effects was a passbook issued by the Audubon Nat'l. Bank, Audubon, N. J. and registered to Victor J. Karpel and Estelle I. Karpel. The passbook has four official bank entries dating from Oct. 19'~-6 to Mar. 1957. The amounts of the entries range from W350.OO to W2,837.00 The passbook has no number or other means of identi- fication. In the interim the Audubon Nat'l. 8an1~ has merged with the Colonial Nat'l. Bank and is now the MidLantic Bank/South. I made several inquiries by mail and a persoflal visit to the IlidLantic Na±'l. Bank / South in Audubon in order to resolve this problem. I gained little cooperation or information from the bank officials other than to inform me that the account was declared inactive and had been ~losed~ in view of the fact that Mr. and Mrs. Karpel had never resided more thah forty miles from the area, I feelthere was little or no effort by the ~ank to contact them and advise them of the action taken by the bank. I would appreciate any advise or assistance you could g ive me, as to what recourse is available in this situation. Sincerely, George 0. Greenwald PAGENO="0321" 317 7-25-80 Rep. Benjamin S. Rosenthal U.S. House of Representatives Washington, D.C. Dear Congressman Rosenthal, The attached bank statement is more evidence for your hearing on the methods banks are using to make money. Granted the amount is not all that much, but the point remains that in the case of 1st Va. Bank they just added the money to their own account.. I never received any notice~that the account remained on their books nor notice that they were going to access any interest or "servicer charges. The reaction I recieved from the bank was tough. You are welcome to use this~statement if you wish. S~nc~rely,1 ~ r 7T'~hn F. King ~ 6422 Majestic Lane Fairfax, Va. 22033 861-0564 378-5618 PAGENO="0322" 318 FIRST VIRGINIA BANK JOHN F KING OR BEVERLY A KING 4's22 MAJESTIC LANE FAIRFAX VIRGINIA 22030 ~ (~ NOTICE: SEE REVERSE FOR IMPORTANT INFORMATION. r R L~O9-337] ~ _______________ PAGE 1 SEE REVERSE SIDE FOR CHANGE OF ADDRESS FORM. FOR A LIMITEO TiME ARE AVAILABLE AT A ONLY LOW CONSUMER 13~ ANNUAL iNSTALLMENT LCA~TS PERCENTAGE RAT~. Z1.~7 BALANCELAST.STATEMENT 21.57 10-03 *SERVICE CHARGE -1.00 11-02 -1.00 12-C3 20.57 1~.57 *SERVICE CHARGE -1.00 01-03 1&.57 *SERVICE CHAROE -i.OC 02-Li 17.57 *SERVICE CHARGE 03-03 1~.57 *SERVICE CHARGE -1.00 -2.00 04-03 1~..57 *SEFVICE CHARGE -2.00 05-02 12.57 *SERVICE CHARGE . -2.00 Oô-03 1C.57 *SERVICE CHARGE PAYMENT AMOUNT PAYMENT DATES NEXT PERIOD MATURITY DATE CURRENT BALANCE .~- PREVIOUS BALANCE - PAYMENTS & CREDITS + ADVANCES THIS PERIOO+ LATE CHARGES + `TKI~ = NEW BALANCE ~~NTHLY BALANCE AVWLAELE CRED~ 1~~51~SJOWN ~ AONTHLT PERIODIC RATE .~.~T*NNUAL PIRCENTAGE RATE PAYMENT DUE DATE ~1j~~~4T DUE ;~ ~ ~ ~ a~ pay,~1 d~ MAIL ANY CASHAMATIC BILLING INQUIRIES TO BANK ADDRESS ABOVE. PAGENO="0323" 319 ~ ~ ~ 2~ C~4~( -~e~P~ ~ 7c~ ~ ~ &~ ~i~6 ~ I ~44~&C~J ~ 7~) -~L~e ~ ~ ~ ~ ~ 2~cp L~) ~ PAGENO="0324" 320 I - -. VVL~~. k~~' cAL~) O~ ~ ~tk~v+~1 &~ ~ ~ ~ ~%~- ~ ~, `¼) ~ ~- ~+1~QL Q~L~-~ ~-t~ 3~ ~ ~ ~i1~ ~c~La-Q~ ~ 4~4~~ck i~-LJ~ f~L~L~ ~ ~*~4 ____ ~ ~ ~ w~& rVY~ L~ -~QA ~ (J t~ ~ ~LL ~ ~ ~ Private J'/eafecl POOl', Coforeci ff.1.V., ?jfJoocIturnin~z ~ii/epface~i..2Inot31ruc1ecI Ocean V~tL S /~tt 7 ac~-~ ~ W~k~ PAGENO="0325" 321 ~ ~`r7~2j ~z~-/-- 7~//2~' L~L1 £`~ ~ ~ e~~f ~ ~ ~ I ~ ~ ~ ~ ~, ~ ~ ~ ~ ~ ~1~2~;# ~ ~ ~lf~1L ~ ~ ~ ~2 ~ ~) ___ - ~ ~ ~ a ~ ~ ._&~- `~ ~1' -~-~--~ ~~-`i~-ie~ ~4~~Z~(/ `~ ~ ~ c4~d 4d ~ 2 ~ .~- 2~ I ~ PAGENO="0326" 322 /~ ~ /` ~` ~ç /9~ro ~ ~ ga~L~I /~- ,~%e ~ ~ I ~ 4&~ 2t~7~t~ ~ffi~t4~ 5 7T~-~ ~7 CC~Z41i1Zc-C4~ / /j2~>Lt~: ~ ~ z~I~-~ ~z~c2~Lk, J~r~ ~ /x~P ~ ~ £ E6c7~I~-1L4~ ~ ~ ~ ~ç~4~1 ,d~ ~ J,~Z4~ ~~I4 ~/ dl d~-' ~ ~ 7;9 ~ ~1t~24i~ ~4r~ `~ __ a _____ ~h&ei~~ ,W~ i~Y~z~ ~h4~ *~LI/ 1~r PAGENO="0327" 32~S \~ /%~ ~ ~ ~ ~ ~ ~AJL~ ~ JJ~?; d ~ / ~ ~ ~ ,~ --I' j,J CONGRESSMAN ~EN RECE(V STAFL~ DOC# REp,)~44'~ AUG 4 1980 P~P~ - cO~WEN1S: FBi COOE~ PAGENO="0328" 324 /~ ~ ~ ~ -~ ~ ~ 7 / ~ ~ -~ ~ - 1~ /9 ~2I~de c~4~V /~ ~ ~ j ~ -~ ~ ___ ~ / ~ 7 -~~--~ ~ 7_i~2-~r-c~ ~ ~ ~ -~ S j/~/7~ ~ I~ ~ 7/~/~ ~3/~2 PAGENO="0329" 325 /#~ff!! y~-~ C- PAGENO="0330" 326 j~c t~t&~44~LAJ~LL ~ ~" / ~ ~a~Mz~ &7~1fl2't4J~, nu~L1~Z~~ - J /`U44L ,~ tz~ ,~M~4tti ~ &4~~ ~ ~4a~ta~~ A1IA44~4i Id~~ ~ 1~A22~ ~,&Ld~ü~ oat~~ ~bzia~ J~4J#~ &4~*~~ ~Z~1L1~ ~ ~Uu~~z ~rni~y ~ t~LL~VLI. ~ 4t~4i~~ ~ ~4~IL ,(,~LL ~ J ~ f~~i ~ A ,~ ~ ~W~(L ~ J PAGENO="0331" ~tLZ b/W~& ,t~41 ~J~4j ~ ~ ~ 4~M~ c~ ~4L ~ J~~1~L t~/AqId~ZZn~ LA7~c&L~7tct ,gi4~t~ ~/~L ~ M~JÜ~ J ~ M' ~ ,9W~:Z~(si. / 4~ ~Ip~ic~, ,~ i~J~u~ ~ ,~ ~ ~ ~4?/4~M2~ dthx& 1~tz~ ~ j ,é/c~ ~ wL~ ,7,~ aJ~t ~t~4~t il~a~ 4C~jj4,~, ñ;u1~ £I~1 ~u~t~aL ( ~rfr&~'ZZ&~e 4&~ç~ ~4t), ~ `4 H ~LL ~4i ~ L~~1i ~ ~r~4 ~1L~ ~ 327 $10 ~ 1&i~ PAGENO="0332" 328 4i~6~/i~Jd~ ~I4~4~ ~ `4tIu~ aiiJL/~tuI~ o~21~&~,9244fu4J ~?!=~tt 1!=~M~ ~ ~Z~f21~<~. ~L~~44z 1I~1tU(~LÜ, )& J~t ~Ztt4~ LIS Cc~m~cis1lit1x*riph from t&POttfOIIOLFLCWSItLeIFS ~pp&,Jioiu d.cor~tives byE. A. S~guy PubliaI~ by IA~airie des Arts ~stifs, Paris Pru~h, ~.r~oo-x~o(?) THE METROPOLITAN MUSEUM OF ART Pmari~, I~c~ I~n ~ `s$ PAGENO="0333" 329 (6 ~ (~o ~ 21 J(?.~ ~ ,&k,.~QJ1, 191M~2 U ~~~RESSMAN BEN ROSENTHAL / ~ RECEIVED .t Doc# 1~E~ 5 ~ Pt, ~ £~ MO ~ `~M `~Z~ A~&~ ~ ~ ~-r~ oj *~ J~4~ ,~L ~ ~ ,~4&~4 ~ ~ ~ e~ -~ ~4-~' 4 ~ ) &~~? 46~ ~ ~ j)t4~ riLc.e'~L ~ ~ ~4~Lt 1-Z/ (~ I ~- I `~ ~ )~-,, ~fe2-te ~~-~e- ~ £~~-~~-- & r~- L~44twc~e, a~ ~ ~~J'~a~%-4 `~-r `~-~`~ I~ t.;~ "f~ £~!, ie~-~ i~_Q_. f~frfl~LS~&) ~ ~ ,ep4e~z PAGENO="0334" 330 2., ~ ~ ~ ea~ 4~L ~ `S ~ ~e~I2'~ aq~ ,1e1 A~L~ ~fr p~ ~ ~ ~ ~ ~ r~? ~ +~ ~ 4e~ ~-e~I ~ ~ ~ ~ pp ~ /7 ~ "S /2c~4/~2.d~Z4 V~L~ L PAGENO="0335" 331 B A N K E R S T R U S T C. 0 M P A N Y 186.03 UNION TURNPIKE, FLUSHING. N.Y. 11366 - TELEPHONE 212 434.I~OO May 1, 1980 Mrs. Car~uela Grub 159-3]. 81st Street Howard Beach, N. Y. lik].k Re: Savings Account #3~-l76056 Richard M. Grub and/or Mrs. Carmela Grub ~ar Mrs. Grub: In reference to the above account, I am sorry to say that all records for the year 1961, which is the last entry date in the book, have been destroyed. The savings account documents which used to be kept for 10 years are now destroyed after 6~ years in conformity with the bank's "Record Retention Schedule" which is monitored by our Auditing and Legal Departments. I have also checked with our "Abandoned Property Division" and they t~. 1 me that nothing in your name was transferred to that Department in either 1971 or 1972. If nothing was transferred to Abandoned Property in your name from your branch during these two years, then we must aes~e that you or Richard completed an affidavit aa to lost passbook and the &ccomt was closed without the book. Very truly yours, ~~(~$~6&J/ K. Sofia ~st~r ~o~t Sop. 67~L~O 0 - 81 - 22 PAGENO="0336" 332 A' p k / " `2 159-31 81st Street Howard Beach, Queens, NY 11414 ~ ~ )c~ ~c'-f ç~ August 29, 1979 Bankers Trust Company 3855 Third Avenue New York, New York Re: Mrs. Carmela Grub Account 34-176056 Gentlemen: I wrote you a letter on November 16, 1977 regarding my mother's account, mentioned above, stating that she lives with me and found this bank book which is her's and her son's, Richard GriUo. At that time you advised us that the money was turned over to the government and you no longer had the money in your bank. I wrote to the government and to date they have never answered me. My mother lost the letter and I don't recall where I wrote and would very much appreciate your advising me again, where I can write to retrieve this money. I realize that it is not a great deal of money, but to old people who don't have much, it is a si~nificant amount. Thank you for your kind attention to this matter, I remain, Yours sincerely Mrs. Rosealba Rosario Daughter to Carrriela Grub rr End. PAGENO="0337" 333 / ix AC~UNT RICHARD 14. GRILLO and/or ~S. G~1A GRILLO 34'-1605Q DAT! ~ t~~ostr nnuExr f !ALANCE ~cccuwr P40. **zO~~= 20.00 1 E: M~1C6I *Q,1j5 ***20.05 ~ JAnio*61 *3000 ***5005 A I M~17-61 , e**'10fJ5 ~ a FEB-6*61 1 **60iI~ **130.05 I B h~R-9~61 **44ftQ~J **170,05 ~ P~AJ~2'T~6i. ~. *~3o.qc~ **200.05 B G ~ A?~46t NI APR ~i'~4. O~1 1*200,95 0 `C *t3OJiO **230.95 I C *e50fl0 **280,95 * *61. *~~fl **380,95 1 0 ~ Ju~i ~.6i. **17.00 **397 95 i E LEASE 1NFO~ (US OF (NY CHANGE 0 ADDRJ juuq~6i r*~3~ **40034 0 z JUU261 *35000 **89.6f) **~~1)J3~ AB ~ ~ JtJL3I.6t ***5034 ~ JUL~16i. `C 0 BANKERS TRUST COMPANY NEW YORK I ALWAYS VEPIPY ~TIY BEPOES LEAVING WINDOW PAGENO="0338" 334 August 1, 1980 House Government Affairs Subcommittee On Commerce and Monetary Affairs, House Office Bldg., Wsshington, D. C. 20515 RE: Service Fees Laggard Accounts Gentlemen: I recently read in a Daytona Beach, Florid newspaper an art- icle by the Associated Press on this matter which you have under investigation. Recently in January 1980, I had the same experience with a checking account with the Hamilton Bank & Trust Co., Alexandria, Va, I opened an account with them over 10 years ago with a no minimum balance and no service charge agreement and check writing limitation. When I moved to Florida I maintained a substantial balamce for a while so when I would visit the Washington, D. C. area I could write checks on a loca~1 banfr;or cash checksfrom a Florida bank if necessary. Later Ibalance for $100.00 so I could maint- ain the account, when I thought I would not be visiting there too soon. This I did for over ~+ years and received no change in bank requirements In December 1979, I wrote out a check for $100.00 to transfer the funds to my Florida bank and the check came back " insufficent funds". I wrote a letter to the bank "Hamilton Bank & Trust Co." to close the account and send me my $100.00 balance, To my surprse anothrbank "Central Fidelity Bank" absorbed them sending me a check for $80.00 stating there was a"~2.OO monthly "Dormant Charge" for $20.00 and a bank statement showing the $2.00 dormant monthly charge. Enclosed are a copy of the bank statement and a letter from the bank sho'&ng the charges to my account. If they had notified me of the changes in policy and my agree- ment ~ith Hamilton Baric& trust Co. I would have closed out the account with no loss to me which I think they should have done legally as I had never done business with them. Enclosed are copies of bank statement and a letter from them stating it was "Dormant Charges". Sincerly yoyrs, }~emmeth B. Smith 21 Ocean Palm Viilas South Flagler Beach, Florida 32036 PAGENO="0339" 335 ~ Central Fiddity Bank ~ 5802 Columbia Pike L~ I Bailey's Crossroads, Va. 22041 Telephone 820-8900 January 4, 1979 Mr. Kenneth B. Smith 21 Ocean ral: V11.~ south Flagler Beach, Fla 32036 Dear Mr. Smith: Enclosed is our check in the ar~ount of $80.00 which represents the balance in ~`our accOunt 400361-6. The $20.00 difference in the balance in your account from September 1977 until today is dormant charges. After ne year of no activ~Z.ty an accrunt is considered dormant and is subject to a $2.00 monthly dormant fee. Your account has not been service charged. I remain, - Very truly yours, Debbie M. Crctts. Assistant Vice President enclosure PAGENO="0340" 336 STATEMENT ~ CENTRAL FiDELITY BANK BAILEY'S CROSSROADS,VIRGINIA22O41 ~-`--- ` 4O03616~ 1cE~ETH B SMITH ~ ~ DELLIE M SMITH BOX 111 8 PLEASE ADVISE US OF USE REVERSE SIDE FOR 21 tJCEAPO PALM VILLAS SOUTH ANY CHANGE IN ADDRESS RECONCILING YOUR ACCOUNT FLAGLER BEACH FL 32026 I L EALANCE CHECKS AND OTHER CHARGES - DEPOSITS AND OTHER ~E 100100 ~oo S I 04/25 9800 200 S 05/29 9500 ~OO S 06/25 9600 ~OO S 07/26 9200 200 S 08/28 9000 ~0O 5 09/21 8800 ~OO S I 10/29 8600 ~0O S I 11/27 6I~OO ~00 S 12/21 82~0 ~0O S 01/02 8000 SUMMARY OP ACTIVITY ~-~- -r~~ - - ~ -m 10~00h~0 ~ 8000] EXPLAMATION OP SYMBOLS C-Certitie~ Check, [-List. H-Memo, P-Other Charges, RItEYr Retarre& S-Service Charge, 0-Transfer, X-Mairterance Charge KENNETH B SMITH - DOLLIE M. SMITH `~ 1223TALSTER-ROAD-~60"4207 ________ ~_ ~ ~ -- - ~ ORDEROF~___-_/4/---ç-- - - ~-__~- ~ ~I -- - "~/` ~ - B~1~AN 3~IUST CO. - .` - - ALCXANDRIA,VIRGINIA - : ,. -. - - FOR ~ - - -~r~- ,rrn~' PAGENO="0341" 337 AMERICAN BANKERS ASSOCIATION AMERICAN 1120 Connecticut Avenue, N.W. BANKERS was1i~gton,D.C. ASSOCIATION 20036 EXECUT1VEVICE 1RLSIDENT M!tisW.Al,o~nde~ 202/467-4211 August 14, 1980 The Hcncrcble Beniarin S. Rosenthal Cnairnai-. Sic ccrrittee cm Ccroerce, Consumer, and Monetary A±fairs ~cmmittee cm ~-overirnsnt Omerations U.S. Mouse of Representatives Washington, D.C. 20515 Dear Mr. Chairman: Thank you for your letter of August 4, 1980 requesting comment upon financial institution management of inactive accounts. We agree with you that this aspect of bank rnanagement~ has caused problems for both banks and their customers, and these problems should be addressed and solved. The sane maw be said for all institutions having customer accounts ;chich are dormant or in some cases closed. The American Bankers ~sscciation, ~doic:n includes over 13,100 full service banks, believes that state initiatives in this area are the mast appropriate means to protect the rights of all parties--consumers, states, and all institutions. Proper investigation of industiy treatment of dormant accounts requires a counrehensive analysis of copplex and sometimes disparate con- ceo-as. State unclaimed property statutes vary widely among jurisdictions. Each local law reflects the underlying policy considerations of that state's legislature. We recognize and support this function of local government to effectuate legitimate standards to protect the property rights of its citizenry. Any inquiry into applicable state laws must include an examination of judicial resolution of law suits involving in- dustry responsibility for such deposits. Due to the many differences in unclaimed property statutes, bank management of inactive accounts varies vithin the banking industry. The variety of related, but as yet unresolved, cuestions necessitates a long-range project amang all interested parties. The Untional Conference of Conkssioneo~s of Uniform State Laws has established a Special Drafting Cormitteéto revise the Uniform Disposition of Unclaimed Property Act of 1966. Our active participation in this project demonstrates banker willingness to develop substantive measures to remedy deficiencies within existing state statutory standards governing the treat- ment of inactive accounts. The many legal and operational difficulties PAGENO="0342" 338 AMERICAN CON11NUINGOURLE1TEROF BANKERS August 14, 1980 ASSOCIATION SHEETNO. 2 inherent in this type of legislative effort requires exhaustive inquiry. This cooperative undertaking is eliciting appropriate input from state governments, consumer representatives, and the business community. Our Association has just formed an industry-wide task force to examine all aspects of proposed revisions in the uniform legislation. This group includes bankers and lawyers representing institutions of all sizes and different regions of the country. We expect this group to produce proposals based upon a keen awareness and appreciation of all points of view. Sincerely, Willis W. Alexander PAGENO="0343" 339 15, 19ED INDIVIDUAL FINANCIAL INSTITUTION COMMENTS ~8LthLL~ FEDERALCREDIT UNION SERVING CITY. COUNTY. STATE AND FEDERAL EMPLOYEES OCM~SCNThAL 21 ~ j AUC2O~9?~ Bem~amtm S. Rosenthal, ~rman / ~ Rouse Government Operations Subcommittee -- - RayburnBouse Office Building Washington, D.C. 20515 Dear Mr. Chairman: I've enclosed a copy of an article about the Ialleged~~ raiding of dormant accounts by financial institutions. I take exception to their testimony as I believe these risoffs, if they occurred, are very isolated events. Did the witnesses submit written evidence of the number of financial institutions which are raiding dormant accounts? Did they submit the names of the financial im.stitsticms who are raiding? We must be careful not to let a anaU ~oup of people with unsubstantiated cbmplaints condemn all financial institutions. We hive over 1,303 dormant accounts, i.e., t1~e members have not conducted any busimess at all at the credit union for the past year or more. Almost a third of these have not tramsacted business at the credit union for over five years! Many of theme members have as little as $5.00 in their account. If we loan this sane $5.00 to a member, the credit union will earn 68 cents interest income for the year. in the mean time, we will have sent that member four quarterly statements during the year - 60 cents postage expense. Our data processor charges us ~6.3 cents per account per month - $4.35 additional expense per year. Plus, each year we attempt to send a special mailing to each of the dormant accounts trying to get then to activate their account, to let us know they are aware that they have a credit union account, or to close the account. This amounts to approximately 25 cents more expense. Less than five percent of the members responded to the special mailing. As you can see, we make at leant 25 attempts~over a five year period to keep the members aware of their accounts. Before we esoheat the accounts to the state or deplete the accounts via expenses, we rake a~finsl effort to get the money to the member. Over a five year period, the credit union will have earned $3.40 on the account while spending ~26.OO! Bow can anyone possibly say we're rippong off the cons~ner if we charge a service fee only after we've made repeated attempts to contact the member; those attempts to contact the member become very costly. PAGENO="0344" 340 Financial institutions are not trying to ripoff the consumer. We'd gladly send the consumer a check for the balance in the savings account if the consumer would tell us where they live. The article states that financial institutions took over $~+O million of the customers' savings. But, how many millions of dollars did those same institutions spend in attempting to get the money to the consumer? Much more than $kO million, ~ sure. The $40 million represents a minuscule amount when compared to the billions upon billions of dollars in savings accounts. I strongly urge the subcommittee to not rush in and pass a regulation to correct these alleged abuses. It is important that the testimony of the witnesses be authenticated. The problem should be researched to determine if there is a bonafide problem, plus to determine what new legislation would ultimately cost the consumer and the financial institutions to "protect" the consumer. Would the costs outway the benefite? Thank you for your tine and consideration. ~eock Office Operations Manager cc: Congressman James Abdnor House of Representatives Al Theroux, President South Dakota Credit Union League, Inc. PAGENO="0345" 341 ~ WJANK 11TH AND CORNHUSKER HWY.,. P.O. BOX 80009 ~ Augos~ 4, 1980 - XECa Honorabl~ Benjamin Rosenthal AUG 7 980 20515 Dear Representative Rosenthal ~ I understand from our Congressman, Douglas Bereuter, t a ~-ou are Chairman of the subcommittee on Commerce, Con- sumer, and Nonetary Affairs which held a hearing July 23rd and 24th pertaining to what was reported as a "rip- cff" of the consumer by commercial banks and savings and Icans in our local newspaper. The article stated that dormant balances were quickly transferred to the banks income account at rates of $1 to $3 per month. It is true in our small bank that any inactive account with a balance of less than $300 pays a 50~ service charge per month for the cost of maintenance of the account on computer, postage, mailing, auditing, reserves, and so forth. I am sure that it would be easy to document a cost of at least double this amount in "out-of-pocket" expense and employee staff time in maintaining the account. Your committee may have no idea of how many people leave, move to another address, and simply neglect to notify their bank that their address has changed and we have no way of contacting them. It is, therefore, easy to build up lit- erally hundreds, and in the case of larger banks thousands. of accounts that are serving no useful purpose to anyone and yet a monthly statement is being mailed only to be returned which further presents a storage problem. On children's savings accounts, we do not pay interest on any account unless the amount per quarter earned is 25~. Here again it is easy to have tremendous numbers of accounts with $1 to $3 balances which never are closed out.or used again after the initial deposit. In these times of quickly increasing expenses, it is notpossible.to afford the luxury of letting your accounts become filled with in- active, very small balance accounts. At the end of seven years, of course, all balances are transferred to the State of Nebraska who must mai~itain the records on them in perpetuity as we do when we~ transfer them to unclaimed balances. This means that the customer would be returned MEMBER F.D.I.C. PAGENO="0346" 342 in full any balances that would remain at any time if they request them. This seems to be more than fair to the cus- tomer. I cannot think of any other service that is rendered to an individual on a monthly basis where they would not expect to pay a service charge whether or not they used the service. Please consider the expense that banks are under in their operations. Our ultimate consumer is the depositor and it is important for us to remain a viable financial institution and continue to increase our capital accounts through retention of earnings if this consumer is to be protected. This point often times seems to be overlooked. Thank you very much for your consideration of this request. Alice M. Dittman President AMD/tlr PAGENO="0347" I / OF SPRINIJDALE, A4KANSAS 72764 ~ A~ONGRESSMAN BEN ROSEN1~HAL V RECEIVED July 14, 1981 ~ DO~ ~ ~L23l~O The Honorable Benjemin S. Rosenthal, D., NY CO~~Th House of Representatives Washington, D.C. 20551 Fl Dear Mr. Rosenthal: I read from the "American Banker, Thursday, July 10, 1980 (copy enclosad) that a House Gover~ent Operations Subcoittee was going to investigate "abuses" by banks, again. On and on it goes. One ~mvestigation I recall in recent years resulted in unbelievable tegislation on banks. No one coittee will ever realize the regvlaticns, reports and disclosures resulting from an investigation of No. Bert Lance. If you recall our courts found him not guilty. Nave any regulations, reports or disclosures been removed? No. I believe you will find that the majority~ of financial institutions serve the public to the best interest of that public. I also believe in our courts, and any real abuses can be handled through our courts for the best result. Our bank has a policy for dormant accounts and it is followed. We charge $1.00 per month on an account which has had no activity for one (1) year and which we have lost contact with the customer. After five (5) years these accounts must be reported to the State of Arkansas. Ne make every effort to contact customers before this time. Generally, we find it is the customer who has failed to turn in a change of address or a deceased person who did not have a joint account. There are even occassions where the service charge is refunded when we locate a customer. 343 FIRST JERRY L REINERT PAGENO="0348" 344 FIRST NATIONAL BANK SPRINGDAL~ ARKANSAS B. Rosenthal Page2 July 14, 1980 Thank you for allowing me this opportunity to speakup. I simply could not allow myself a fatalistic attitude upon reading the article. Banking is one of the finest professions in the world and should remain so. It would sees that our government would have better things to move on to. S~E~ely, /Jerry/ L. jWeinert ) ViceJPre~ident & Cashier JLR: jmt Enclosure PAGENO="0349" 345 ROLL & KOLODY, INC., LETTER REGARDING LOCATOR SERVICE (2/2) 935 5353 ROLL & KOLODY, INC. 22 East 49th Sties'!, New York, N.Y 1OO/7~~ ,,,~ August 5, 1980. Hon. Benjamin Rosenthal House of Representatives of the United States Washington, D.C. Dear Congressman Rosenthal: I recently read an article (see enclosed) concerning the investigation by your subcommittee of the raiding of dorr~ant accounts of missing customersby banks and savings and loan institutions. I subsequently spoke to the AP reporter, Jay Perkins, and learned that Mr. Jim Lord had reported great success in Minnesota when banks and savings institutions were required to take active steps to find missing depositors. My reason for writing is that we represent a company which, for 56 years, has engaged successfully in the track- ing of nissing people. In fact, their record of success is better than 8O~, and their charges are very nominal ($5 per located depositor). To our knowledge~ they are the largest and oldest con~any of its kind in the~world. It appears to me that if banks and savings and loan institutions were required, as a minimal step, to utilize the services of a company such as my client, the incidence of raiding by banks would virtually be eliminated. We will be happy to cooperate with you in any way, Congressman Rosenthal, and to go'\into~much more detail on our method of operations, systems, procedures, etc. and how they might be applied toward helping to solve the prob- lem at hand. Please let me know in what way we can be of service to your subco~.mittee, If you would like to meet us, we will be happy to do so at your convenience, either in New York or in Washington. Sin~erely, A.. ~ I ( Win Roll Chairman enc. WR/grb PAGENO="0350" APPENDIX 2.-FEDERAL AGENCY MATERIALS COMFI'ROLLER OF THE C~RRENGY LETTERS TO STATE AUTHORITIES CONCERNING VISITORIAL POWERS OVER NATIONAL BANKS 7 Comptroller of the Currency Administrator of National Banks Washington, D.C. 20219 October 19, 1978 Mr. Charles B. llohlen, Jr. -. Faegre and Benson 1300 Northwestern Bank Building Minneapolis, MN 55402 Dear Mr. Bohien: This is in response to your letter of October 6, 1978, concetnirig our enforcement of state unclaimed property laws and whether national banks will be subject to state audits. It remains our opinion that pursuant to 12 U.S.C. 484 that this Office has sole visitorial powers over national banks for the enforcement of the substantive provisions of state laws which are applicable to national banks. If it will be of any assistance I an enclosing a copy of my remarks. trust this is responsive to your incuiry, but if you have additional questions please feel free to call tie at 202-447-l600, Sincerely, \~4~iwYh'z1~ 2~. ~lauJdJOhI Thonas U. Tayl.r Associate Deputy Comptroller Enclosure (346) PAGENO="0351" 347 Memorandum To : Thonas F. Holland, Jr., Chief Dote : January 18, 1980 VIA : Daniel B. McKinley A,7 ~ Place: Sacramento Eulenf~. McMinn Frc~. ~ ~S~5l~fl'S OFFICE Divisicn of Jnclained Property Sez~: First National Bank of Cloverdale We have atteopted to schedule an audit of the First National Bank of Clovendole, but we have been refused entry because a dispute in juris- diction has arisen with the Coostroller of the Currency. Cn January 7, 1980 we sent an entrance letter to the bank to sche~u1e the audit for February 1+, 1980. I called Mr. Ruppert, President of the bank today to confirn those arrangements. He said that he had no prob- lens with the audit but that Leo Hollenberg, who represents the holding conrany, independent Bankshares Corporation, did object. I called Kr. Eolleoberg in San Pafael (415-1+56--8000) to define his cb~e:ticns. He had talked to a Mr. Nelson and Mr. Kent Glover with the Ccn:trcller of the Currency. They objected to any state agency exanin- a national bank. I called Mr. Nelson, Counsel for the Comptroller of the Currency at (1+15) 556-1+307. We discussed the past audits of the large national banks and I cited our audit authority as section 1571, CCP. He stated that as a general colicy no state agency has the authority to examine oaticnal banks and cited Commerce Clearing House, Federal Banking Law Retorts, April 1979 #85618. It is unfortunate that this proble~ was raised on such a small bank. But we do expect some findings fran the audit and we alan expect the sane problem at other national banks. Our question is, have any prior agreements been made with the Comptroller of the Currency? If not, can the Controller's Office make such an agreement? I have requested the Commerce Clearing House citation. If you need any more information, please call. PAGENO="0352" 3) 348 Comptroller of the Currency ` " Administrator of National Banks Fourteenth National Bank Region Steuart Street Tower, Suite 2101 One Market Plaza San Francisco, California 94105 January 21, 1980 Mr. Hulen McMinn State Controller's Office Post Office Box 1019 Sacramento, California 95805 Dear Mr. McMinn: In response to your request of January 18, 1980, I am enclosing a copy of a recent letter published by Commerce Clearing House in Federal Banking ~ The letter restates the consistent policy of the Compti~1Tèr of the Currency, that generally the Comptroller has the exclusive authority to conduct examinations and review the books and records of national banks. I trust this information will prove helpful to you. Sincerely, PAUL uUNNAR NELSON Acting Regional -Counsel Enclosure PAGENO="0353" Comptroller Staff Interpretive Le~ ers 77,173 Production of Bunk Rt'cords standing on this p nt. the Comptroller's Ollicc pruhihits Crocker from advancing any fitti(IS iii the 1)0010 without our permission. Since wo have not considered the question of Crocker's selling the Class B certificates, we request that Crocker notify this Office prior to ilisprising of them. Crocker will also be responsible fr adhering to restrictions ins- posril in the Federal Reserve Board's letters of November 3, 1978, and February 14, 1979. The opinions expressed in this letter apply only to the proposal specifically before this Office and do not necessarily indicate the views the Office may take on future proposals. Accordingly, national banks wishing to issue mortgage-hacked pass-through securities, whether along rIte lines of this proposal or others previously reviewed, should obtain the prior review of this Office. Such proposals should be submitted to the appropriate region- al office. LIMITATION OF VISITORIAL POWERS ~ E5,1EE] State Officials' Authority to Conduct Examination or Compel Production cl Records Severly Lirrtited. Richa~ V. Fitzi~erald Director, Legal :\dvisory Services Division. Letter No. 93. ~ 2, 1979. ioic:pretitig 12 USC 484 (~ 59,b12); 12 CFR 7.6023 (U 60,893). This is resOrinse so your letter of Dc- ~iio;ber 13, 1977, to Comptroller of the - C:rrency, John l-leiriiaitn. lit your letter, ~~ou requested that We affirm whether the documents you attached-a copy of Batik- .~Teg Circular 39 dated December 9, 1974, ~ind a letter from this Office to Mr. Barrett Although federal courts have held that this S. Zuckerman dated April 20, 1973,-rc- statute permits state courts to order the pro- * aect the current position of the Comptrol- duction of a national bank s books and records, icr regarding the authority of the Wtscon- in general the courts have not acknowledged - its Department of Revenue, to compel ` . - . that state admintstrattvc agenctes may require - .z.Ln~l .ian,is to produce records of their the production of such books and records of ccstonrrs pursuant to an income tax audit a national hiatik, Bowics a'. Sltawano, 151 -, i-I invest:ga!ton of those customers. The F. 2d 749 (7th Cir. 1945) ` Gist/inc v. Hark- state that the \\tsconstn Dc- ,tess, 199 U. S. 148 (1905). In accordance ~rtrotct of Revc~ttc lacks such authority, with these judicial interpretations, the Comp- ~Atter revtewtttg relevant judicial prece- troller of the Currency has taken the posi- :.~dcnts and the position taken by this Office tioti that the exercise of. visitorial powers e the past four'yi'ars, this Office must over national banks is exclusively vested that conclusion, in the Conspiroller except as otherwise stated in our previous letters, the provided by federal law. Other officials, ~exercise of such powers of inspection and including state officials have no authority ~zamination by state officials constitutes to conduct examinations or to inspect or :-`h~ie exercise of "visitorial powers," which require the production of hooks and rec- r:ercise is severely restricted in the case ords of natic,,,,rh lsanks, except as authorized citations! banks bs' 12 U. S. C. § 484, by law. Interpretive Ruling 7.6025(b), 12 ~ahich provides: C. F. R. § 7.6025(b). ~No bank shall tic subject to any visitorial In view of 12 U. S. C. § 484 and In- ,~pcwers other tIn-in suclt as are authorized terpretive Rulitig 7.6025(b), it is the posi- Pederal Banking Law Reports 349 ~771 7-2S-7'i * tc~eired. This is the total amount Crocker -eculd. be COO tingently liable for as carried -cii its books. In r.'achitig our conclusion i.bcet the smount subject to 12 USC 82, we are aware ci the review given by the rat- ~ to the undvrsvrititig standards by Crc:kcr for sclcctiiig mortgage loans far the pool and of the rating ageticies' tectative decision to provi(le ~mne of their * h:~ber nvestrnrtit grade ratings. Addition- ally, we considered the almost negligible ~istcrical loss experience on conventional dr.gte iami!s- tome tnortgage loans itt Cahi- ferris between 1973 anml 1977. Crccker has represented to this Office that he ~er:i~catcs do not evidence an in- 0 cr obligatioti of the sank or its hc~diog cco-i--ar:s-, and that neither the hank company guarantees the paverre: c-i principal or interret on the cer- ifeates. To assure there is to misuiider- by law, or vested in the courts of justice or such as shall be or shall have beets exercised or directed by Congress, or by either House thereof or by any commit- tee of Congress or of either House duly auth orized. ¶ 85,168 PAGENO="0354" I have reviewed the materials you have submitted to us regarding a potential viola- tion of Interpretative Ruling 7.7010 (12 C. F. R. § 7.7010) by the National Bank (NB). Please note that my opinion is limited to the situation presented by the following facts: NB had placed a deposit with a local Foreign Bank (F. Batik) which relent the money to a Foreign Borrower (F. BR.). On October 28, 1977, NB entered into a deposit agreement to place funds up to ~2 million or its Swiss franc equivalent with F. Bank for a year at a rate of l~/~ percent over three months LIBOR (London Inter- flank Offered Rate). This agreement was pursuant to Foreign Country law. On November 3. 1977 F. Bank relent the funds to F. BR. for one year at a quarterly ma- turity basis at a rate of 2 percent over LIBOR. F. Bank exchanged the Swiss francs with the Foreign Central Bank and gave F. BR. the F. Curr. (Foreign Cur- rency) equivalent. F. BR. then signed a promissory note to F. Bank payable in Swiss francs. NB made this indirect loan because it was barred by Foreign Country law from making a direct loan to F. BR. Because of concern over F. BR's ability to repay its loan F. Bank obtained a stand- by commercial paper underwriting line in favor of F. BR. front Foreign Investment Bking. Corp. (FIBC), a well-established Foreign investntent banksg corporation. If F. BR. defaults on its loan to F. Bank. FIBC must purchase commercial paper from F; BR. sufficient to retire the out~ standing balance of the loan. In a November, 1977, letter to F. Bank (the hold-out undertaking") NB pledged the certificate of deposit to F. Bank for the purpose of reimbursing F. Batik, either partially or totally, in the event of de- fault on the part of the F. BR. in the re- payntent of its loan from F. Bank. So long as any part of the F. BR. obligation to F. Batik remained outstanding, the fledge front NB to F. Bank was uncon- ditional and irrevocable. F. Bank was un- (Icr no obligation whatsoever to resort to / other remedies against any party prior to offsetting against the certificate of deposit. .1' In consideration for this pledge, F. Bank gave NB an assignment of the promissory note of F. BR. and gave NB power of at-~: torney to act in behalf of F. Bank regard. ~t ing the loan to F. 13R. and the standby 4t underwriting agreement of FIBC. The;-,t assignntens is effective only upon defaukr~ byFBR 1. R. 7.7010 provides in pertainent pat~ as follows: [al national bank may lend its cred~\.~ bind itself as a surety to indemnify ~ other, or otherwise became a guaranto~j if it has a substantial interest in tht~ performance of the transaction involve4~ or has a segregated deposit sufficient tfl~ amount to cover the bank's totaI.poten'.~ tial liability. . . . Under appropriate cir'~ cumstances. foreign branches may © 1979, Commerce Clearing House; 350 77, 1 74 ..~ niptroller Staff Interpretive Letters ,~ Bark Loan to Foreign Borrower tion of this Office that national banks may disclosure of confidential and priv~l~j~ ~ legally refuse to coniply with requests by financial information about a customer.-h ~ state officials and others to supply finan- this regard, we have consistently advi~~'.~ end inforniatinti about their customers cx- that hanks consult legal counsel as to t-~ ctpt under the compulsory process of a risks involved, and that in most instan~i_f.:~ state or federal court order or as perntittetl the safest and most prudent course~ is, ~ by federal statutes. surrender no financial information, with~~ f `l'his Office, however, has not taken the the consent of the customer, except in ttton tInt it wo~jTI 1c~ri~ ~n~jtI~j~T contpulsory process of state or federi'j rT~kt0 suppl~ sstrliiufortttatton without court ordi_r t `~i~ a compulsory court order when in its . . .. ~ T~ problerni~ I trust that this letter is responsive~ ~, `~ ~ödoTiig. a~ pointed out in Banking Circu- your inquiry.. Please accept my apolo~~ lar 59, is possible exposure of the hank to for the delay encountered in sending thu ~civil liability resulting front unauttiorizcd re ponse to you NATIONAL BANK AS GUARANTOR [IT 85,169] Foreign Transaction Declared Loan Not Guaranty. .... John M. Miller, Deputy Chief Counsel. Letter No. 94. May 3, 1979. Interpretiiik 12 CFR 7.7010 (11 60,903). ¶ 85.169 PAGENO="0355" 351,. Comptroller of the Currency Administrator of National Banks D. C. 20219 ~arch 12, 1990 ~`r. Robert C. Crane Treasurer and Receiver General Treasury Demartment Commonwealth of Passachusetts Boston, Rassachusetts 02133 Reimann has asked me to respond to your letter of February 1, 1930 retuesting the aid of the Comptroller's Office in monitoring bank ccmrliance with Bassachusetts' abandoned property statute. ~:aticna1 Bank Examiners currently check for compliance with state laws during their examinations. Any violation is brought bank manacemant's attention and correction is requested. However, it has not been our practice to m~ke the results of our examf~FfToB~ ~ -TEe mtr le soffli midt ntional bank compliance with all applicable state laws. In keeping with this commitment, I request you contact Mr. John Downey, Deputy Regional Administrator in our Boston recional office, 223-2274. Mr. Downey be har~y to review our present procedures with you and discuss your specific needs in this area. Should you have any additional creations, please do not hesitate to contact me. Sincerely, Edmund G. Zito Assistant Chief National Bank Examiner PAGENO="0356" 352 SUBCOMMITTEE LETTER OF INQUIRY CONCERNING DORMANT ACCOUNT SERVICE CHARGES BY NATIONAL BANKS NINETY.SIXT1-I CONGRESS ~tongre~ of tbe ~niteb ~`tate~ ~`°~`~ ~~ou~e o~ 3acprc~entatibe~ COMMERCE. CONSUMER. AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS October 24, 1979 Hon. lohn G. Heimann Comptroller of the Currency Administrator of National Banks Washington, D. C. 20219 Dear Mr. Heimann: As stated earlier in my letter of October 11, the Commerce, Consumer and Monetary Affairs Subcommittee has been investigating bank handling of dormant deposit accounts and other unclaimed property held by banks. One topic on which the Office of the Comptroller will be requested to testify when a hearing is held wiil be the legal opinion and regulatory policy of your office toward bank service charges on such items. If a legal opinion and statement of regulatory policy on this question can be provided in advance of the hearing, I would appreciate having it at your earliest convenience. It has been alleged to the subcommittee that it is common practice for banks to deduct from dormant accounts or other unclaimed property periodic service charges that are not assessed against active accounts or current balances owed (as on bank drafts or money orders). It has also been alleged that the service charges are often deducted without the knowledge or prior consent of the depositors or owners. These charges are deducted, it is alleged, without a valid contract with the customer authorizing the charges. Then these charges are often refunded to any customer who reactivates a dormant account. In addition, it has been alleged to the subcommittee that some banks suspend interest accruals on dormant savings accounts and then retroactively restore the interest to the account if the depositor reactivates it. The regulations of the Comptroller of the Currency state: `A national bank may, consistent with contracts of deposit, impose such service charges on dormant accounts as its board of directors determines to be reasonable." (12 CFR 7.7515) In order to assist the subcommittee in reviewing this situation and understanding the meaning of this regulation, please state the legal opinion and regulatory policy of your office concerning the following points: PAGENO="0357" * 353 What conditions must be met in order for there to exist a valid contract of deposit between a national bank and a depositor that permits the bank to assess dormancy service charges when there has been no activity in the account for a certain period of time? 2. Is there any legal or regulatory requirement that a depositor must receive an explicit disclosure of the bank's intention to impose dormancy service charges before such charges are imposed? If so,~ a. Is disclosure by means of a notice posted in the bank lobby considered adequate disclosure? b. Must the actual amount of the service charges be disclosed to each customer, or is disclosure of the existence of such a charge sufficient, without mention of the amount? c. Is it permissible for a bank to assess service charges against dormant accounts without prior notice if these charges are later refunded in the event the account is reactivated by the owner? (Note the effects of the service charges in this instance may be to frustrate the intent ~f the state unclaimed property laws and to give the banks a financial incentive not to attempt to locate the owners of the dormant accounts.) 3. Are there any constraints that limit the discretion of the board of directors of a bank in setting "reasonable" service charges? For example, is the board entitled to ignore (a) the prospective earnings to the bank from continuing to hold and irweet the deposit and (b) the actual direct administrative costs to the bank of maintaining the deposit? 4. If a bank suspends the accrual of interest on a savings account when the account becomes dormant, does this suspension~of interest accruals constitute a service charge? a. If so, is it `reasonable", in the terms of regulation 7.7515, for the service charges in such a case to vary in direct proportion with the size of the account and to be as large as five percent or more of the account annually, regardless of the size of the account? b. If not, what regulations, if any, apply to the suspension of interest accruals on dormant savings accounts? 5. \that preconditions must be met in order for it to be permissible for a bank to assess service charges on unclaimed or dormant liabilities arising from uncashed bank drafts, money orders, or travelers checks? Sincbrely, *11 (! I.* ~ Benja in S. Rosenthal Chair~an BSR:tv PAGENO="0358" 354 LETTER TO SUBCOMMITTEE CONCERNING DORMANT ACCOUNT SERV- ICE CHARGES BY NATIONAL BANKS, DECEMBER 4. 1979 C) Comptroller of the Currency Administrator of National Banks Washington, D.C. 20219 December 4, 1979 Dear Mr. Chairman: This is in response to your letter of October 24, 1979, in which you ask this Office to comment on the legal issues involved in the imposition of bank service charges on dormant deposit accounts and other unclaimed property which is held by the bank. A bank's authority to impose service charges on dormant accounts is based entirely upon state contract law. In states which permit such charges, national banks may assess them; however, if state law restricts such charges, national banks must comply with those restrictions. The requirement that national banks must conform their conduct to pertinent state contract law is embodied in Comptroller's Interpretive Ruling 7.7515 which provides that: "A national bank may, consistent with contracts of deposit, impose such service charges on dormant accounts as its board of directors determines to be reasonable." 12 C.F.R. § 7.7515 (emphasis added). While the underlying premise of this ruling is that a valid contract must exist for service charges to be deducted or interest payments stopped, it is the clear intent that state law govern all issues of contract formation, contract interpretation, and contract enforcement. Thus, your specifically enumerated questions, regarding the type of instruments upon which service charges may be imposed, the sort of notice necessary to create contracts which permit service charges, the necessity of disclosing the amount of the charge, and the reasonableness of that amount cannot be answered without specific reference to the law of the state in which the national bank is located. Because the laws of each state may differ, and the state courts are better able to interpret and apply the pertinent law to contract disputes, it would, in our opinion, be inappropriate for this Office to arbitrarily establish a national standard regarding the permissibility and amount of such charges. Moreover, inasmuch as many of your specific questions are at issue in complex pending PAGENO="0359" 355 litigation, it would be highly in~ppropriate for the Comptroller to express an opinion on them. See Bank of America v. Cory, Civ. No. 257509 (Sacramento Super. Ct., filed October 20, 1975) (scheduled for assignment on December 3, 1979). Most importantly, it should be recognized that state law, and not federal regulation, governs this issue. The Comptroller's Interpretive Ruling does not purport to preempt state contract law. ~ John G. Heirnann Co~Dtroller of the Currency The Honorable Benjamin S. Rosenthal, Chairman Subcommittee on Commerce, Consumer, and Monetary Affairs Washington, D. C. 20515 PAGENO="0360" 356 SUBCOMMITTEE REQUEST FOR TESTIMONY NINETY-SIXTH CONGRESS Q~on~rt~ of ttje ~nitc~ ~`tatt~ ~ou~e of ~tprt~efltatit3t~ COMMERCE. CONSUMER. AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS July 8, 1980 Hon. John 0. Heirnann Comptroller of the Currency 490 L'Enfant Plaza East SW Washington, D. C. 20219 Dear Mr. Heimann: For some months the Corronerce, Consumer and Monetary Affairs Subcommittee has been investigating the handling of dormant accounts and other unclaimed property in banks and other financial institutions, as Nell as unclaimed pro- perty held by the U.S. Internal Revenue Service. Under its general legislative oversight authority for the activities of the U.S. Treasury, the Internal Revenue Service, the Securities and Exchange Commission, and the federal bank regulatory agencies (Comptroller of the Currency, Federal Reserve Board, FDIC, Federal Home Loan Bank Board, and National Credit Union Administration ), the subcommittee has now scheduled two days of oversight hearings on Wednesday and Thursday, July 23 and 24, in Room 2247 of the Rayburn House Office Building. I am writing to request the testimony of the Office of the Comptroller of the Currency at these hearings on Thursday, July 24, at 10 A. M. The purposes of the hearings will be (a) to review the practices of banks and other financial institutions in handling dormant deposit accounts and other unclaimed property in their possession, with a view to determining whether the practices of these institutions represent unfair treatment of consumers; (b) to review the regulatory approach to and activities of the relevant federal agencies in this area; (c) to review national bank compliance with state unclaimed property laws and the role of the Comptroller of the Currency in ensuring national bank compliance; and (d) to review the practices of the Internal Revenue Service in its handling of unclaimed tax refunds owed to individuals. The Comptroller's Office is requested to testify concerning (a) its infor- mation from consumer complaints concerning national bank practices in this area, (b) federal regulation of adequate disclosure and customer notification by banks of their practices toward dormant accounts, (c) federal regulation of substan- tive bank practices other than disclosure and notification with regard to dormant accounts, and (d) the role of the Comptroller's Office in examining national banks for compliance with, and enforcing national bank compliance with, state unclaimed property laws. PAGENO="0361" 357 The bank practices which are alleged to be widespread and which this hearing will examine are the following: 1. Service charges: Service charges are frequently assessed on dormant accounts that are not assessed on active accounts, and it is alleged a. often these service charges have not been authorized by any valid contract of deposit with the depositor; b. even in those cases where there exists, under the legal requirements of applicable law, a valid contract for the imposition of dormancy service charges, the depositors often have never been notified or informed of the service charges -- there has been no meaningful disclosure or informed consent; and c. the service charges that are impbsed without adequate disclosure or consent are often unreasonable in magnitude: small accounts are wiped out entirely and large accounts are charged fees totally incom- rensurate with the costs of maintaining the accounts, after making allowance for the value to the bank of continued use of the funds without the offsetting costs of processing transactions against the account. 2. Susoension of interest payments or accruals: In some instances, it is alleced, banks suspend the payment or~accrual of interest on dormant savings accounts, without advance disclosure that this is the bank's practice, without notice to the depositor at the time of the interest suspension, and possibly in violation of the contract of deposit. 3. Perfunctory or no effort by bank to contact owners of dormant acpji~~: Banks are widely reported to have certified to state authorities, at the tire that they reported dormant accounts to these authorities under the states' unclaimed property laws, that they could not locate many owners of do~srt accounts who were prominent public officials or recognized insti- tuticms. Clearly the banks had made no reasonable effort to contact these cwners to ascertain their continued interest in and awareness of the accounts. Ncccc-oiiance with state unclaimed property laws and resistance to state enforcement efforts: National banks in several states have been found to be complying only inadequately with the state unclaimed property laws, and in some states they have attempted, with encouragement from the Comp- troller's Office, to prevent state authorities from examining bank records to determine the adequacy of compliance. With respect to each of the first three alleged bank practices (viz.~ service charges, suspension of interest, and lack of effort to contact), I am requesting testimony on the following questions: PAGENO="0362" 358 A. Have recent consumer complaints to the Comptrollers Office alleged any such practices? If so, please summarize the extent and general nature of the complaints. B. What is your view of the propriety or reasonableness of the alleged bank practices? C. Do there exist any federal regulations applicable to national banks governing advance disclosure and/or contemporaneous notification of customers of the banks' practices with regard to dormant checking and savings accounts? If there are any such, please identify the relevant regulations and cite their authority. In addition, please: 1. identify all statutory authority that could be relied upon to provide the basis for further regulation by the Comptroller's Office of advance disclosure and contemporaneous notification of the banks' practices; and 2. state whether the Comptroller's Office has any plans for further regulation of the practices of national banks in this area. 0. Do there exist any federal regulations applicable to national banks govern- ing substantive bank practices in these areas, other than disclosure and notification, such as regulatory limits on the reasonableness of service charges, the suspension of interest, or bank efforts to locate and ascertain the continued interest and awareness of the owners of the dormant accounts? If there are any such, please identify the relevant regulations and cite their authority. In addition, please: 1. identify all statutory authority that could be relied upon to provide the basis for further regulation by the Comptroller's Office of these substantive bank practices; and 2. state whether the Comptroller's Office has any plans for further regu- lation of the practices of national banks in this area. With respect to national bank compliance with state unclaimed property laws, please address the following questions in testimony: E. Are national banks subject to state unclaimed property laws to the same extent as state chartered institutions? F. Does the Comptroller's Office take the position that state authorities have no right of access to the books and records of national banks for the pur- pose of determining compliance with the state laws on unclaimed property? If so, please state the authority for this position. PAGENO="0363" 0. Does the Comptroller accept the responsibility both (a) to examine national banks for compliance with, and also (b) to enforce national bank compliance with, state unclaimed property laws: H. What specific policies and programs does the Comptroller's Office have for: 1. training national bank examiners in the relevant portions of state law; 2. verifying the adequacy of national bank record keeping for determin- ing periods of dormancy under state law and for other purposes as required under state law; 3. determining compliance with stat~ unclaimed property laws as applied to (a) demand and savings accounts, (b) safe deposit accounts, Cc) r.nney orders, bank drafts, and travelers checks, (d) unclaimed property arising from corporate transfer activities, and (e) bank trust accounts; 4. enforcing national bank complian~e with state law where deficiencies are found, including requiring correction of past deficiencies; 5. granting state authorities access to relevant portions of examination reports and examiner working papers and/or notifying state authorities of deficiencies found? I. Have national bank examiners found any noncompliance with state unclaimed property laws in specific instances? If so, please describe the findings and state what further steps have been taken in those instances? request for supplementary information for the record will follow this letter. Please provide 100 copies of the prepared statement on the day of the hearing, with 15 copies at least 24 hours in advance for the information of the ramhers. Sincerely, Benjamin S. Rosenthal Chairman SSR:tv PAGENO="0364" 360 BANKING CIRCULAR CONCERNING DORMANT ACCOUNT SERVICE CHARGES. SEPTEMBER 25. 1980 BC- i~ ~ Comptroller of the Currency Administrator of National Banks Type: Banking Circular Subject: Service Charges on Dormant Accounts and Abandoned Property Law TO: Chief Executive Officers of National Banks Considerable attention has recently been focused on the amount of unclaimed property held by the nation's financial institutions. In particular, the policies, practices and procedures of national banks as they relate to dormant accounts and state abandoned property laws have been the subject of much discussion and a recent Congressional hearing. DORMANT ACCOUNTS Interpretive Ruling 12 CFR 7.7515, Service Charges on Dormant Accounts, provides that `A national bank may, consistent with contracts of deposit, impose such service charges on dormant accounts as its board of directors determines to be reasonable." The directorate of each national bank is responsible for reviewing the basis for the bank's service charges on dormant accounts and for recording its determin- ation that the charges are reasonable. The record of the board's determination of reasonableness will be reviewed by national bank examiners during the course of their examination. ABANDONED PROPERTY LAW It has been, and will continue to be, the policy of this Office to monitor national banks' compliance with applicable state laws, including abandoned property law. To this end, we are revising our examination procedures to enable us to more effectively evaluate compliance with those laws and to assure that prompt remedial action is taken when violations are found. The directorate and management of each national bank are responsible for implementing policies and operating procedures which will insure compliance with all applicable state abandoned property laws. These policies and procedures should be tested by the bank's internal and external auditors and will be reviewed by national bank examiners during the course of their examination. You are encouraged to stay abreast of developments in this area and to evaluate the impact they may have on your bank. Date. September 25, 1980 PAGENO="0365" 361 QUESTIONNAIRE TO STATE AUTHORITIES CONCERNING STATE LAWS APPLICABLE TO NATIONAL BANKS C) Comptroller of the Currency Administrator of National Banks Washington. D.C. 20219 September 30, 1980 The recent attention given to dor~nant account practices and aban- doned property laws has resulted in a request from the House Sub- committee on Commerce, Consumer and Monetary Affairs that this Office cooperate in an effort to determine the extent to which state legislation exists for these areas. We are soliciting input from each state and would appreciate it if you would supply us with information concerning the application of your state's banking, abandoned property, and contract laws to dormant bank accounts. Please respond to Questions 1-9, keeping in mind the four general questions stated below: a. What does state law (bo~h statutes and court decisions) say about each of the topics speci- fied below (giving the exact language)? b. What regulations promulgated by state agencies deal with each topic (specifying in each case the state law under whibh the regulation was promulgated)? c. In each case, does this law or regulation apply only to state-chartered depository insti- tutions or does it apply also to federally- chartered institutions? Where there is any difference in how the law applies to state and federally chartered institutions, please explain the differences~. d. What state agency or agencies administer or take enforcement responsibility for each law or regulation identified in the answers above? PAGENO="0366" 362 The topics of interest in this request are laws, court decisions, and regulations pertaining to: 1. Definition of "dormant' (i.e., number of years, etc., before institutions can treat an account as dormant) 2. Linitations on or prohibitions ~gainst: a. service charges on dormant accounts not imposed on active accounts; b. suspension of interest accruals or pay- ments on dormant savings accounts; c. transfer of savings funds to non-interest- bearing status when savings certificates mature; d. taking of dormant accounts in their entirety into bank income; or, e. suspension of statement mailings on dormant accounts. 3. Notification of individual customer at the time: a. account is placed in "dormant" status; b. dormancy service charges are imposed; c. funds are transferred to a non-earning status or interest payments are suspended; d. statement mailings are suspended; or, e. funds are reported to or escheated to state under unclaimed property law. 4. Disclosure to customer, at time account is opened, of bank policies toward: a. definition of dormancy (under what conditions bank will treat account as dormant); b. service charges on dormant accounts (to include the dollar amounts); c. suspension of interest payments on dormant accounts; d. transfer of funds from natured certificate of deposit to non-interest-bearing status; and, PAGENO="0367" 363 e. suspension of statement mailings. 5. Disclosure to all customers of subsequent ~s in these bank policies. 6. Reporting and delivering to state authorities long-term dormant accounts as abandoned property. 7. Repori~ng to state other information about dormant accounts, such as: a. service charges taken on dormant accounts; b. accounts closed out completely because ser- vice charges wiped them out or banks other- wise canceled them out and took them into income; c. savings accounts on~which no interest is being earned because of dormancy; d. transfers of funds into non-interest-bearing accounts (because of dormancy or because of lack of notice from depositor when certificate of deposit matures) 8. Record retention on dormant accounts removed from the books by: a. service charges; b. withdrawal of funds by owners; or, c. delivery of funds to state under unclaimed property law. 9. Efforts to establish coi~tact with: a. depositor, when it is known that address in bank records is not accurate; or, b. heirs, when depositor is incapacitated or deceased. Copies of this letter have also been forwarded to your state's Administrator of Unclaimed Property and Attorney General. Please coordinate your response with these individuals. Please send all material to the Chief National Bank Examiner, Comptroller of the PAGENO="0368" 364 Currency, Washington, D.C. 20219. In order that we may comply with the Subcomittee's request for a report by year-end, I'would appreciate your response by November 1, 1980. Thank you for your assistance in this matter. Sincerely, John G. Heimann Comptroller of the Currency PAGENO="0369" 365 FEDERAL HOME LOAN BANK BOARb: LErFER T~ SUBCOMMITTEE CON- CERNING FEDERAL REGULATION OF DORMANT ACCOUNTS AT SAVINGS AND LOAN ASSOCIATIONS, SEPTEMBER 11, 1980 1700 0 S~eet. NW. `~`~ W~hi~gto~. D.C. 20552 * * F~d~t ~ L~ B~k Syst~ Federal Home Loan Bank Board ~ ~ F~d~al S a~'i~g~a~ d L~ C~~ti~ SepteloLber 11, 1980 Honorable Benjamin S. Rosenthal Chairman Cc~.mittee on Comnerce, Consumer ar.d Honetarv Affairs House of Representatives Rayrumn House Office Building, Rm B-377 Washington, D. C. 20515 Dear Hr. Chairman: In your letter of August 7, l~980 to Chairman Janis, you incuired about the Bank Board's regulations as they pertain to inactive savings accounts. It should be noted that the Bank Board's regulations relevant to inactive accounts apply only to Federally-chartered associations; the Board has no regulations applicable to inactive accounts in State-chartered associations. Our responses to your specifi~c questions follow: 1. Do Federal regulations limit the imposition of service charges on savings accounts at savings and loan associa- tions by reason of inactivity or dormancy? Does any such limit on service charges apply only to Federally-chartered associations or to all Federally-insured associations? Section 545.1(c) of our Rules and Regulations for the Federal Savings and Loan System (12 CFR 545.1(c), copy enclosed) authorizes Federal associations to charge a fee of up to $1 annually against a savings account if the association is not required to distribute earnings on the account, and if no payment and no distribution of earnings has been made on the accOunt for 36 months preceding the imposition of the charge. The regulation requires thirty days advance notice before the imposition of such a charge. Federal associations are not~required to distribute earning on accounts of less than $50 if the board of directors of the association adopts a policy not to distribute earnings on such accounts which it may do pursuant~to 12 CFR §545.3(g). 2. Is it permissible under Federal regulations for savings and loan associations to discontinue the payment or accrual of dividends or interest on savings accounts with balances in excess of $50 after certain periods of inactivity or dormancy? What Federal regulatory limitations are there on the discretion PAGENO="0370" 366 of associations to suspend dividend or interest payments or accruals on accounts larger than $50? Do these limitations apply only to Federally-chartered associations or to all Federally-insured associations? The regulations do not permit Federal associations to cease paying interest on accounts of over S50 except pursuant to the prescribed redemption procedures. The redemption provisions provide: "If any notice of redemption shall have been duly given, and if the funds necessary for such redemption shall have been set aside so as to be and to continue to be available for that purpose, earnings upon such account shall cease to accrue from and after the date specified as the redemp- tion date and all rights with respect to each such account shall forthwith, after such redemption date, terminate, except only the right of the holder of record of such savings account to receive the redemption price thereof without earnings." These provisions are contained in paragraph 7 of Federal asso- ciations charters N and K (revised) and paragraph 11 of charter K. The provisions state that, "at any time sufficient funds are on hand, the associations shall have the right to redeem, by lot or otherwise as the board of directors may determine, all or any part of any of its savings accounts on June 30 or December 31, by giving 30 days' notice of such redemption by registered mail. . The association's discretion with regard to redemption is curtailed by the following limitation contained in paragraph 7. "The association may not redeem any of its savings accounts when there is an impairment of its capital or when it has any request for withdrawal which has been on file and unpaid for more than 30 days. The redemption price of each savings account redeemed shall be the full value thereof, as determined by the board of directors, but in no event shall the redemption price be less than the withdrawal amount of such savings account." PAGENO="0371" 367 3. If service charges are imposedor dividends or interest payments are suspended, what regulatoryobligation is imposed upon the savings and loan association to notify the individual customer ci the service charge imposition or the dividend/interest susoension? :;otice is required in connection with the imposition of a service charge as described in the answer to "1 above and notice is required prior to redemption as described in the answer to "2" above. 4. Are savings and loan associations subject to any Federal regulatory limitations or direction concerning: a. definition of dormancy; b. suspension of statement mailings on dormant accounts; c. efforts to locate or contact the owners of dormant deposits or to return this deposit balance to them; c. segregation or special internal controls over dormant accounts; or e. mreservation of records ~n accounts closed or turned over to State authorities pursuant to State unclaimed property laws? Except as noted above, Bank Board regulations do not contain special provisions or definitionsrelating to inactive accounts. We note, however, the practice of proper accounting methods by association management would routinely uncover the existence of such inactive accounts. If we ray be of further assistance, please let us know. Sincerely, Ira L. Tannenbaum Deputy General Counsel PAGENO="0372" 368 FEDERAL REGULATIONS ¶ 771 163 BYLAWS 544.5 Prescribed form. 544.6 .Amvndosent to bylases. 544.6-I Preparedness em, gooey amendments to bylaws. AVAILABILITY OF DOCUMENTS 544.7 In association offices. 544.8 (Deleted, effective August 3, 1979.) AUThoRITY: §9 544.1 to 544.8 issued tinder sec. 5, 48 Stat. 132, as asttcndcd; 12 U.S.C. 1464, Reorg. Plan No. 3 nf 1947, 12 P.R. 1231,3 CFR, 1947 Supp. Nore.-- An opinion that iisteeprets a provision of any Federal charter is annotated under Charter N unless the provision in question is not similar to one that is part of Charter N. Charters K and E, which are not incorporated into the text of the regulations, are printed immediately after § 544.1 and are followvd by their .mylasvs. ¶ 771 CHARTER 544.1 Isstiance of charter. (a) Charter N Except as provided in para- graph (b) of this section, svlten tile 13o.std ap- proves a petition for a chatter for a Federal association wtcler section 5(a) or section 5(i) of the Act, it shall Pa~e a charter in the fol- losving form, known as Phi Icr N: CHARTER N I. Corporate title. f}~*~ full orporate title of the Federal association hereby chartered is Federal Savings and Loan Associa- 2. Office. The home office shall be located at , in the County of - State of 3. Objects and powers. The objects of the asso- ciation arc to peBble thrift by providing a ceo- venieot and sale nmcttmod for people to save and invest money and to provide for tsr se,und and ceo- no,niral financing of knimmes; and, isi lie arcesoplish. mcnt of such otajvvts, it sttalt hav,s perpetual sure's. lion and power: (1) To act as fiscal agent of the United States sshrn designated for that purpose by the Secretary of the `l'rrasury, tttmmler such regu- lations as he may prescribe, and stmall prrfmmrsn all such reasonable duties as fiscat agent nt tIme United States as he may require and to act as agent br any other instrumentality of the United States when des- ignated for that purpose by any s,irh insmruimtv~mtatity; (2) To sue and he sued, complain and defend n any court of lass or equity; (3) To haveaeorpnrote seat, ntTtxed by imprint, facsimile or othcrscise; (4) To ap. point officers and agents as its business shalt reqsiire, and altose them suitable compensation; (5) To adopt bylasos not inconsistent soith the Constitution or laws of the United States and rules and regulations adopted thereunder and this charler; (6) To raise its capital, which shall be unlimited, by aeco ptiog pay. meats on savings accounts representing share interests in the association; (7) To borrose money; (8) To lend and otherssise invest its funds; (9) To wind up and dissolve, merge, consolidate, convert, or reorga- nize; (10) To purchase, hold, and convey real and personal estate consistent seith its objects, purposes, and posoers; (II) To mortgage or lease any real and personal estate and take stich property by gilt, de- vice, or bequest; and (12) To exercise all pobsers renlerred by late. In addition to the foregoing powers expressly enumerated, this association shall have power to do all things reasonably incident to the accomplishment of its express objects and the per- fornmance of its express poscers. It shalt exercise its poscers in conformity s:4th all lasos of the Unted States as they tome are, or as they may hereafter be antended, and seith otl rules and regulations coltich are not in conflict svith this charter nose or hereafter madr theretinder. 4. Members. All holders of the association's sav- ings accounts and all borrosoers therefrom are mem- bers. In the consideratidn of all questions requiring action by the members of the association, each molder of a savings account shall be permitted to cast one vote for each $100, or fraction thereof, of ttme sc;th- domssal value of his account. A borroseing ucotber shall be permitted, as a borrosoer, to cast cue vote, and to cast the number of votes to sohieh lie may be entitled as the holder of a savings account. No mem- ber, hossever, shall cast more Ihan 50 votes. Voting may be by proxy. Any number of members present at a regular or special meeting of the sneeibcrs shall csstitite a qmmsrmmrn .Ammtajerity of att votes cats at any riveting of cmcmohers shall determr.ino soy qmmes. lion. The nsentbers who shatt be ontitted to vote at any meeting of the narmbers shall be those oseniog savings accounts and borrosoing members of record on the books of the association at the end of the calendar month next preceding the date of such meeting. The number of votes sohich each member shall be entitled to cast at any nsceting of time members shatl be determined from ttse hooks of the association as of the end of the cale,sd;me nterth next preceding the date of such meeting. These soho seere members at the end of the caleadar month next preceding the date of a meeting of members but seho shall have ceased to be t,mosmsbers peior to such meet- ing shall not be entitled to sole thereat. All savings accounts shatl be ncnam'-smable. 5. Directors. The association shatl be ueder the direction of a board-of directors of not less than 5 nor ionic than 15, as fixed in the im-tociation's by- lases or, in the absence of any such bylaw provisibn, §544.1 lawn providing for xuch conversions are met, conversion is completed. [Rev. cF 8-3-79) ¶ 763 § 543.12 Organization after conversion. After a Federal charter is isatted tinder § 543.11, the association's menabcrx sitall, after due notice, or upon a valid adjourntncnt of a previous legal meeting, hold a meeting to elect directors and take all other action necessary fully to effect the conversion and operate the association in accordance with law and these rulex and regulations. Immediately thereafter the board of directors shall meet, elect officers, and transact any other appropriate business. [Rev. cF 8-3-79) - ¶ 770 PART 544-CHARTER AND BYLAWS CHARTER 544.1 tssuance of charter. 544.2 Amendment of charter. 544.3 Adoption of Chance K (res.) by a Charter N Federal association. 544.4 Issuance of charter. 3rd rid. 0-79 PAGENO="0373" it may make such additional loans and investments as may thereafter be authorized by amcndmrnts of the said rules and regulations. 9. Power to borrow. The association may borrow money in an aggrcgrate amount not cxaccding one- half of its capital; the amount which may be bor- rowed from sourccs other than a Federal home loan bank shall not exceed one-tcnth of such capital. Nothwithstanding the foregoing limitations, the association may, with prior approval by the Federal Home Loan Bank Board, borrow from a Federal home loan bank or from any Federal agency or instrumentality without limitation, upon such terms and conditions as may be required by such bank or agency. The association may pledge and otherwise encumber any of its assets to secure its debts. 10. Reserves, surplus, osd distribution of eurxistgo. The association shall maintain general reserves for the sole purpose of meeting losses; such reserves shall include the reserve required for insurance of accounts. Any losses may be charged against general reserves. If and whenever the general reserves of the association are not equal to at least 10 percent of its capital, it shall, as of June 30 and December 31 of each year, credit to such reserves an amount equiva- lent to at least 5 percent of its net earnings for the 6 months' period, or such amount as may be required by the Federal Savings and Loan Insurance Cor- poration, whichever is greater, until such reserves are equal to at least 10 percent of the association's capital. At of June 30 and December 31 of each year, after payment or provision for payment of all ex- penses, credits to general reserves and such credits to surplus as the board of directors may determine, and provision for bonus on savings accounts as au- thorized by regulations made by the Federal Home Lean Bank Board, the beard of directors of the as- sociation shall cause the remainder of the net earn- ings of the association for the 6 months' period to be distributed promptly on its savings accounts, ratably, as declared by the board of directors, to the with- drawal value thereof; in lieu of or in addition to such net earnings, any of the association's surplus funds may be likewise distributed. Such net earnings shall be credited to savings accounts or paid, as di- rected by the owner. All holders of savings accounts t,nettetjaase at the susan rate and on the same basis in sIte disttihutinn of comings: Provided, That the atsocnat:on is not ecquirmil to distribute earnings on short-tress savings accounts or on accounts of $10 or less. Except as provided above, carvings shall be declared on all savings accounts of record at the close of each such 6 months' period, on the with- drascal value of each such account at the beginning of the said 6 months' period, plus the payments mode thereon during such period (less amounts withdrawn, and, for purposes of participation in earnings, de- ducted from the latest previous payments), com- puted at the declared rate for the time invested, determined as provided below. The date of invest- ment shall be the date of actual receipt of such pay- ments by the association, unless the board of direc- tors fixes a date, not later than the troth of the month, for determining the date of investment of payments on savings accvastts or designated classes thereof. Payruents, affected by such determination date, received by the association on or before stich determination date shall receive earnings as if in- vested on the first of such month. Payments, affected by such determination date, received subsequent to rich determination date shall receive earnings as if invested on the first of the next succeeding month. Notscithstanding any other provision of its charter, 369 164 ANNOTATED MANUAL as from time to time expressly determined by resolu- tion of the association's members. Euch director of the association shall be a member of the association, and a director shall cease to be a director when he ceases to be a member, Directors of the association shall be elected by its members by ballot: Provided, That in the event of a vacancy in the directorate, including vacancies created by an increase in the number of directors, the board of directors may fill such vacancy, if the members of the association fail so to do, by electing a director to serve until the rmxt ar.ooal meeting of the members. Directors shall be elected for periods of 3 years and until their sue- corrors are elected and qualified, bat provision shall be eoa~e for the elrc:inn of approximately one-third ci he booed of dierctars each sear. 6. ~ Too a.s:nciaeion shall have the rieht ta pay the withdrawal value of its savings accounts at any time upon application therefor and to pay the holders thereof the withdraxcal value thereof. Upon receipt of a written request from any holder of a savings account of the association for the withdrawal from such account of all or any part of sloe withdrawal value thereof, the association shall within 30 days pay the amount requested; Provided, That if the association is unable to pay all svith- drawais requested at the end of 30 days from the date rf such requests, it shall then pay all with- droemals requested in accordance with such methods and procedures as to amounts and allotments of fuedt for soch porposes as thall be provided in reevlatinos mode be the Federal Home Loan Bunk E~ood ix effect at she date of the request for with- rico-vol. Holders of undoes accounts for which appli- catiOn for withdrawal has been mode shall remain he~ers of savings accounts until paid and shall not 7. Jie!ea~tion. At any time saffcient funds are cc. hard, the ossvciotion shall have the right to redeem, by tot or othorsoiso its the board of directors may datoe:oine, all or any part of an~ of its sax ings accounts on June 30 or December 31, by giving 30 days' entice of such redemption by registered mail addressed to the holder of each reich savings account at his last address as recorded on the bool:s of the assnointion. The association may r.nt redeem any of its savings accounts cohen there is an impatsment of its capitol or when it has any requast for scithdraseal which has barn on file and unpaid for more than 73 days. The redemption price of each ravings ac- count redeemed shall be the full value thvreof, as determined by the board of direct s but in no moot shall the redemption price be I -s than the scith- draseal amount of such sovivgs anmuant. If a ravings account which is rederrnsd is eo:ilod to participate in any reServe for banns, tine aeor:nt in such roserve for bonus which it properly allocatric In such savings account shall be paid as part of the redemption price thereof. If any notice of redemption shall have been duly given, and if the funds necessary for such re- demption shall have been set aside so as to be and to continue to be available for that purpose, earnings upon such account shall cease to accrue from and after the date specified as the redemption date and all rights with respect to each such accotnt shall forthsm'ith, after such redemption date, terminate, except only the right of the holder of recurd of such savings account to receive the redemption price thereof without earnings. 8. Lasso us.d investments. The association may moame any loan or investment authorized by stotstte and ho robs and regulations suede by the I-Tome Loon Pant: Booed and in effect on :\ugust 15, 1949; § 544.1 (The next page is 167) 3rd ed 0-79 PAGENO="0374" (Secretary) .l-.9 [Reserved) OBJECTS AND POWERS (Sec. 3) .10 [Reserved] .11 [Ed. Note.] [Thcre follows a brief statement of the general law on the interrelationship of the express and implied powers of Federal associations. This statement is given here to avoid repeating it in connection scith the opinions on various specific implied powers, schich are annotated below.] Federal savings and lean associations are not general business corporations, but specialized corporations created by Congress for certain defined and limited purposes. Those purposes are stated in Section 5(a) of the Home Owners' Loan Act of 1933, as amended, to be ", , to provide local mutual thrift institutions in sclsich people may invest their funds and in order to provide for the fi- Dancing of homes A specific delineation of the lendisg and investment authority of Federal savings and loan associations is f.)und in Section 5(c) of the Home Owners' Loan Act. Unlike other financial institutions, such as commercial banks, their lending authority is strictly limited; their psimory author- ity is to lend their funds on the security of their savings accounts* or on the security of first liens upon real property. With respect to the raising of capital, Federal savings and loan associations are limited to the ;aett.nsls prescribed in Section 5(b) of the IdOL Act; they stay not issue per- manent stock. The limited auttliority of Federal savings and loan associations is significant, inasmuch as the ear- macness of their express poscers arts to limit the implied or incidental powers schich they cay reasonably assert. Sn determining what the implied or incidental poacers of any corporation are, there arc few firm reference points; sclsct5aer an art comes within the implied powers of cor- poration is a sc5ard question of lass and fact, to be deter- snined in ..~h r.~se feom aft its facts and cec.,ost.onces. In a given isaronre, the drtersnination of whether an associ- ation has the implied power to engage in an activity may be suuhstansiatly a matter of judgment, and, seithin the range of permissible powers, the Board can establish limics and guidelines by issuing regulations and rulings. re is she general rule that corporations organized for I bsssiness and trading purposes have the authority to do schat acill legitimately tend to effectuate their ex- press pssrpccses and objects, and that they may ordinarily do all those things that are convenient, suitable or neces- 3rd ed a-78 sary to enable them to perform fully the undertakings designated in their charters, and which sits' ally and cut- tonsarily attend the bs,sinesses for which they were orga- nized. Iloseever, this rule is generally applied tore strictly to bunking and trust companies because they occupy a fiduciary position in that tlsey invite the pulalic to submit to them possession and care of its property and the public scho so trsmsts them is primarily entitled to protection. The case of Cesitury Federal Savings and Loon Association V Sullivan, 116 N.Y.S. 2d 323, notes that "posrers merely convenient or useful are not issiplird if they are not essen- tial" for such institutions. (116 N.Y.S. 2d at 327). See Fletcher Cyclopedia of Corporations §) 2486 and 2538. .12 [Ed. Note.] [The following opinion is quoted sub- stantially in full.] This will reply to your memorandum wherein the fol- lowing question is raised: "Does a Federal association have the legal power to contribute funds, either directly or indirectly (e.g., to a trade organization via an assessment route), to a state- chartered guaranty-stock association (in this instance, one with serious supervisory problems) when the contribution is occasioned by rnlightened self-interest in snaicr;aining the state association as a `going concern' in the AI'edn~al association has the power, by virtue of its charter, "to do all things reasonably incident to the ac- complishment of its express objects and the performance of its express posvers". The objects of a Federal associa- tion are therein stated to be "to promote thrift by provid- ing a convenient and safe method for people to save and invest money and to provide for the sound atsd economi- cal financing of homes." The question of sohether a Fed- cml association may legally contribute funds to a guaranty-stock state-chartered association which is in financial difficulty, therefore, rests upon a determination of svhelher such action is "reasonably incident" to the accom- plishment of one of the express objects mentioned above. This office has asithorized Federal associations to make gifts to certain charitable organizations such as the Cern- munity Chest, colleges and hospitals. The theory has been that these expenditures are reasonably incident to the posoer to promote thrift and home oseneeship since they are likely to result in beneficial advertising. Hosceeer, a contribution of this type scould not encompass an expendi- ture designed to "save" a failing sister association. The latter expenditure does not qualify, under common par- lance or tax late, as a charitable contribution. Alto, such aeirxpee ditssce scould, for obvious reasons, not ho made knoscn to the general public and would not peodsice bene- ficial publicity. Resolution of the issue posed depends on certain factual considerations. Put another svay, the issue is judgmental in character.-there is no single rule to he derived from statutes, regulations, charters or case law that ss'ill provide the sasne answer cvery time the question arises. For in- stance, moderate contributions by strong immstitsmlions to assist effectively an association svhose failure svnsmld cause severe damage to the industry cosild be justified legally as being reasonably incident to the poscer to promote thrift and hence oscnecship. On the other hand, contributions toc)uld ho illegal if excessive; the same result could follow sshere contributions are moderate if potential damage to the iod.cstmy toes not sssbstantial. In short, elvtersssination of legality of contributions of this ape depends on a nsmmaher of factual considerations. `This office is not in a position to have the information smecesacy to resolve the key issues. Only those close to or familiar ssimh the centring situation of the association in - difficulty and the consequences reasonably to be antici- pated from its failure svoutd be in a good position to make this kind of judgment. The criteria for determining legality of such expenditures, outlined in this memorandum, are fully applicable to the case schece they take the ferm of an assessment insp med by a trade organization. Ojs. G.C., 3/19/65. - § 544.1 370 FEDERAL REGULATIONS ¶ 771 167 the association may distribute net earnings on its savings accounts on such other basis and in accord- ance with such other terms and conditions as may from time to titne be authorized by regulations mude by the Federal Home Loan Bank Board. All larsldems nf savings accounts of the association shall be entitled to equal distribution of assets, pro rota to the value of their savings accounts, in the event of voluntary or involuntary liquidation, dissolution, or seinding up of the association. 11. Amendment of charter, No amendment, ad- dition, alteration, change, or repeal of this charter shall be made unless such proposal is made by the board of directors of the association, and submitted to and approved by the Federal Home Loan Bank Board, and is thereafter submitted to and approved by the members at a legal meeting. Any amendment, addition, alteration, change, or repeal so acted upon and approved shall be effective, if filed ss4th and ap- proved by the Federal Home Loan Bank Board, as of the date of the final approval of, or as fixed by, mem em. FEDERAL Hosse LOAN BANK BOARD, By (Cholr,uan) Attest: PAGENO="0375" ANNOTATED MANUAL bcnelits accruing to the association. The payments amount to a form of compensation and the standard is whether the compensation is reasonable. Op. CC., 1/24/68. .20 A Fcdcral association has the implicd power to distribute coupons under the Federal Food Stamp Pro- tram. Op. CC.. 4/8/68. .21 A Federal association may charge a fee for cash- ing checks for its mcmbnrs, but may not engage in a check cashing business for the general public. Op CC., 6/24/68. .22 A Federal association may accept gifts of stock in corporations; if such stock is not otherwise an authorized investment or a Fcderal, the securities must be disposed of as expeditiously as possible. Op. G.C., 3/17/69. .23 A Federal association may receive a percentage of she gross rentals in addition to a specified rate of inter- rst. Such an agrccsucnt smould not constitute the associa- tion a holder of a prohibited equity interest in the project. Op. CC., 4/25/69. .24 A Federal savings and loan association is not authorized to issue surety bonds on behalf of the holder of a savings account in such institution. Op. CC., 8/14/69. .25 A Federal association has the incidental power to sell merchandise in connection with a promotional cam- paigta to open or increase accounts. Op. CC., 5/26/70. .26 Board regulations do not prohibit a Federal asso- ciation from imposing a fee for the handling of specific transactions relating to statvrr.ent accounts. Op. CC., 11/4/75. .27-29 [Reserved) Mcssnsums (Sec. 4) .30 See alto [i 969. .31 [Reserved) .32 [Ed. Note.) [The following opinion is quoted sub- stantially in full.) You state that you have a personal account of $5000, your wife has a personal account of $9000, you and your svife have a joint account of $10000, you have a $1,000 account as c,ssto3ian for your son, a joint $5,000 account for your scife atsi son, and a home loan of $16,000. You ask to be advised as to the number of votes to which th etc arcoonts are entitled. [Section 41 hat been interprcted by this 018cc to mean that each accomsnt held in a separate capacity is held by a separate member. With regard to the two joint ac- counts. jobs tenancy is rrecgntaed for many purposes as an entity seporate and distinct from she parties compris- ing such entity. It is our opinion, therefore, that for she purposes of voting, such a tenancy constitutes a separate member of a Federal association. With respect to the cus- todial account for your sun, it is held in a different right and capacity than your individual capacity. Accordingly, a different roemtacr would hold uris account for voting purposes. Therefore, to answer your questions specifically, yuu scould be entitlad so 50 votes for your $5,000 personal account; your wife could he entitled to 50 votes for her $9,000 personal account; the $10,000 joint account held by you and yasir wife wo,,ld entitle the joint holders to 50 votes; the $1,000 custodial account for your son would entitle you, as custodian, to 10 votes; and the $5,000 juint oecvant hold by your wife and son scoold entitle the joint hollers to 50 votes. Insofar as the $16,000 home loan is concerned, - - osrecoving . . . that the borroovce s's either you or your wife, iodicidutslly or jointly, no additional vote scould be per- mittcd since the charter limits to 50 the number of votes schich may be cast by any member. Op. G.C., 5/25/67, .33 How many votes may be cast by the oxcner-trustee of snverat testomnntacy trust accus,nts? In our opinion, since the ounce-trustee of such accounts retains full con- 371~ 168 .13 The sale of money orders and traveler's checks is s~ithin the implied poscers of an association. Op. CC., 11/24/65. .14 A Federal savings and loan association has no pco'er, express cc implied, to engage in the insurance busi- eros, cr to hold itself cat to the public cc cpncate as a gen- eral insar000e agent. Incidental to the creation of savings aocnat.s ned loan pnepal:nnnt plans, hnooexnr, a Federal saviecs and loon ason.oiatien way contract s, ith an in- saeace crenpany to insure the liars and health of its sommnbers and way charge the laovful premium rate from eacmobers participating irs the plan. In connection with sach insurance pregrams, the association may solicit sub- soeipeinn.s from and provide information from its mem- bers, way collect pserasuss 5 payments from the participants in the program and transmit such payments to the insur- ance cnmpanyi pruvidod, that subscription to such insur- ance prrgranss is voluntary; that any rebates, commissions, dividends or excess premiums returned to the association by the insurance company are proportionately distributed anoong tht participants after the association has wade dc dacticns to cover any eaepnnsns incurred in the administra- tion cl the insoeoene plan; and that proceeds collected freon ecoctgogor insurance plans are payable directly to the nosoobotico as beneflniary. Opa. CC., 4/4/66, 9/1/70. .15 ~Reeroned.] .16 An oreoointion has the implied autlonrity to Pur- chase po.nkig facilities, either by itself or in ccnjunction c:ber ba:_oeenr, f:~ the heooOt cf tier cconeoaomnity, if each action yncoontes totter pablin relotinos xi hich ran farther the rbjectinns ond parposos of thn association. This ececlosinn is strengthne.nd if the parking lot is located in close pecsimoity so the association, since it is reasonable to ossome that she association would receive some direct this action in addition to the good soil1 aspects Ilocanser, the association is required to obscene standards of reorooablnnnss in this matter so that the expenditures in'. TacO are not totally not of propeetinn to the b-neSts shut cc aid ho expected. Op. CC., 5/9/67. .17 Salvage powers nay be used to recoup investments on pnaporty ac; .ired as a result cf, cr in lieu of, forc- el care, best on assaciotion way not use these powers to :11 tt aeon ve'untonily oeqaired real estate by means ol a -n shot -avoId etieneoc'ieo not `oont the rcqoieemeats of In Pc/ceo1 Rnaa!xtioos. Op. CC., 12/8/67. .tP-t `t'°ar rncicaoce cf ccomooct., fcc the sale of real estate acquired throogh foreclosure for the concouno stock of a notional bank is an uscautheriond investment by a Fe/oral savings ond loan asseeiotian and nut part of the origioul salvage cpcratinn, in the absence of any showing of a need to saleage such contracts themselves. Op. G.C. 2/11/69. .17-2 A Federal association may utilize its salvage pose- ers to sell an ollice lotsilding site sehich site association is no longer using. Op. CC., 10/29/69. .18 An association has the imu,lied authority to donate fssnds, reasonable in amount and duration, to a private corporation formed to slecelop an ssrhan renewal area if such donation is likely to prodsscc beneficial advertising and a fuses re curcsn sssciby benefit in sohirh the association mill share. Op. CC., 12/12/67. .18-I Ass ossociatioso has the implied authority to make a doe ix to a nonprofit foundation oct sep for 4hc pssr- urban ccsleo's'lopoeent, if ouch dacoti n is ieI:o!y to in favorucle odo'vrmiobog and she e000reweut of a r,ue:nunity honeSt in sshich lee a sociation svill sl,ure. Op. CC., 12/21/67. .19 A Federal assnciatinn may pay premiums on life inss,rance policies of non.ofllcer mlirectors suhen the bene- ficiaries are the directors' scivcs so lung as the amounts of the pmesniusrn payoscnls are cososmrnsurate with the § 544.1 3rd ed a-78 PAGENO="0376" trol over the accounts, for voting purposes all such ac- counts arc rcgarded as the individual property of the owncr-trustce. Accordingly, unlike covcrage ol such ac- counts for the purpose of insurance, the owner of such ac- counts including any votes lao becomes entitled to as the holder of other testamentary trustee or individual accounts would be limited to 50 votes. Funds in any type of joint account with identical joint or co-tenants would be totalled-and co-tenants entitled to not more than 50 votes. If the joint or co-tenants are not identical, each such joint account would be entitled to not more than 50 votes. A bona /lde partnership ac- count of $5,000 of the same persons as the same persons as the joint account would be entitled to 50 votes in addition to any votes to which the joint account may be entitled Op. G.C., 1/7/72. .34 Ques:ton: "A and B have a joint account of a withdrawal value of $5,000. May either cast the 50 votes, may they split the votes, or does each have 50 votes?" Answer: For voting purposes, we consider that a joint account is held by a single entity in undivided possession. Therefore, only the entity may cast the 50 votes to which the account s entitled, rather than A or B individually. Thus, both joint owners must agree in order that they may cast the votes to which the account is entitled. However, there is nothing to prevent the joint entity from casting 25 votes one way and 25 voles another if they so agree. Question: "A has one account with $4,000 in it, and another account, also in his name, with $50 in it. Does he have 40 votes nr 41 votes?" Answer: Asuming that both accounts are held in the same rapacity, they would be added together for voting purposes, and A, as the holder of accounts totalling $4,050, would he entitled to 41 votes (1 vote for each $100, or fraction thereof). Question: ".Ss.ppose A has a series of accounts, each with.less than $100 in the account. Does he have as many votes as he has accounts?" Answer: As indicated above, all accounts held in the sasoe rapacity would be added together for voting pur- poses, and he ,aaud be entitled to one votu for each $100 or fraction thereof, up to a total of 50 votes. Question: "A and B have an account in the name of `A or B'. The withdrawal value of the account is $5,000. A and B do not agree as to which shall vole. May the Asso- ciatiots require the splitting of the vote? If so, on what - .4 steer: Assuming this lobe a valid joint account under state law, for voting purposes, as previously indicated, the account holder would be a single entity. Thus, the co- ossisers must agree on how to vote the entity. If they can- not, the entity cannot vote. Question: "Are we correct in assuming that the words `each holder of a saving account' estean the h'slder of legal title, as distinguished from ivacfcial owner?" Answer: Normally, yes. t-lorvcv:r, the power of a trustee to vote may be affected by any provision in the trust cr~ree- ment limiting tltat power. Op. c_c., 3/8/72. .35 In the absence of objection or dissent linen co- owners, one owner of a joint accostnt is permitted to vote for the account or sign the proxy for the acer-sot. Op. CC., 12/31/75. .36-39 `vserved] Dtaccvons (Sec. 5) .40 See also ¶ 961. .41 Directors of Federal sssociativns cannot be re- moved before the end of a lecn of specific l:egth except for coo5e. Op. cc., 3/1/66. .42 A joint account holder or a joint borrc.er is eligible or election as a director. Op. CC., 4/1. 6. .43 There is no legal ebjectien to the adoption of a bylaw ansendroent prohibiting the election or re-election of a person 70 years or older to the Board of Directors. While not essential, it is desirable, that the bylaw atnend- 3rd ed 0-79 WtTtIDOAWALS (Sec. 6) .50 See also ¶ 801. .51 A provision in a Christmas club account book that forbids withdrawals during the club year is irccnsistent with the charter of a Federal association. Op. Cc., 3/1 7/64. .52 A sis-strh rider withdraws all or part of his ac- count; tlse assoriotion issues a check for the arsrortnt oe~ecr.rwn; and before the check is cashed, the association dr-limIts and the receiver slops payment ott the cheek pursuant to his authority utrdcr § 549.3(b). Does FSI.IC insurance extend to the funds withdrasvn? Since tile check constitutes conditional payment only, the shareholder re- mains a shareholder its accordance with the last sentence of section 6 until final payment is made. lfen'ss, the ftinds would continue to be insured. Op. CC., 0/16/05. .53 A "trust agreement" provides that an isrelividital referred to as the "Beneficiary" is to pay to a Pranced embalmer or funeral director referred to as "Depositor" 1 514.1 372 FEDERAL REGULATIONS ¶ 771 169 ment be adopted by the members of the association rather than by its Board of Directors. Op. CC., 1/20/67. .44 The membert of a Federal savings and loan association may at a special menobership ~uceting vote to enlarge the board of directors of the association and, at such meeting, the members nay also elect directors to fill the newly created director positions. Iloscever, the members of a Federal association are without the power at a special toscmbrrship meeting to reutove: (1) a director elected by the association's board of directors to fill a vacancy castsed by the resignation of a director; or (2) directors elected by the board of directors to fill new vacancies created by valid action of such board of direc- tors to enlarge the directorate. Directors elected by the board of directors under the foregoing circumstances may be removed only for proper cause. Such nose directors elected by the board of directors continue to serve until the next annual meeting of the members. Op. CC., 11/1/68. .45 Directors of a Federal savings and loan associa- tion elected by the members at a special meeting, to fill vacancies created by action of the members at such spe- cial meeting to enlarge the directorate, nerve for a trees to expire at the third annual meeting follossing such special meeting, subject to the qualification inherent in section 5 of the association's charter that the terms of the newly created directorships be suitably staggered no that approxi- mately one-third of the full board of directors he elected each year. For illustration purposes, assume that the mem- bers of an association with a nine-man board of directors (the terms of three of which expire each year) at a special necting held in 1969, subsequent to the annual meeting for that year, vote to increase the directorate from nine to 15 directors and that the members at such special steeling elect six nesv directors to fill the ness'ly created vacancies. Under these circumstances, the terms of two of the newly created directorships would expire at the annual meeting in January 1970, the terms of two other nescly created directorships soould expire at the annual meeting in Janu- ary 1971, and the remaining Isso directorships scottld ex- pire at the annual meeting in January 1972. Op. CC., 12/5/68. .46 The members of a Federal savings and loan .s- sociation with a lO.man board of directors, all of solssot were validly elected, have no poorer at special ttscsnbcrolsip meetings to: (1) remove all the incumbent directors witlt. out caose; (2) decrease the ttsimber of directors frsstn 10 to seven; or (3) elect seven of the prior directors to the ness card. A di,ector cannot ho rctnoecd frsrm office, absv-s-.t comas-al for proper castse, prior to the expiration of his term. The original 10-man board rcntaitc-d tire duly constituted directorate of the association, antI tire as `sons taken by the members at the special memberl p nseeting were inralid. Op. C-C., 5/14/69. .47-49 [Reserved] PAGENO="0377" .60 [Reserved) .81 It is a violation of this section of the charter for esi association to have different dividend dctcrinio ation dates for differeot geographic areas. Op. G.C., 5/5/65, .82 Federal associations are without authority to de- viler earnings en savings accounts in advance. Op. CC., 2/16 `67. .83 [Drletedl .84 An association dies cot distribute earnings on snaings ~ccconts with lalanors of Its than $1, or on or- moats with balances of less than $20 cc hich have had no {544.1 activity for three years. This practice conflicts with the requirements of section 10. Since the association has es- tosblished $1 as the minimum balance upon which earnings will be distributed, holders of accounts smith balances ci $1 to $20 which have been inactive for three years do not participate on the same basis or rate as holders of other savings accounts. Op. CC., 7/26/68. (b) Charter K (rev.). If expressly re- qstested in the Petition for Citarter, or in the Application for Conversion to a Federal as- sociation, the Board will issste, in lieu of Char- ter N, a Charter K (rev.). The form of Charter K (rev.) is the same as the form of Charter N, except that the heading states "CHARTER K (RE\T.)" instead of "CHARTER N" and, in lieu of the provision in Charter N designated "6. Withdrawals", the following provision is substituted: [Rex'. cF 8-3-79) CHARTER K (Roy.) 1. Corporate title. The full corporate title of the Federal association hereby chartered is Federal Savings and Loan Association 2. Office. The home office shall be located at , in the County of , State of 3. Objects ant! powers. The objects of the asso- ciation are to promote thrift by providing a con- venient and safe method for people to save and invest money and to providd for the sound and economical financing of homes; and, in the accomplishment of such objects, it shalt have perpetual succession and pasver: (1) To act as fiscal agent of the United States when designated for that purpose by the Sec- retary of the Treasury, under such ~egulatinns as he may prescribe, and shall perform all such reason- able duties as fiscal agent of the Unitrd States as he may require and to act as agent for any other in- strumentality of the United States when designated for that purpose by any st,ch instrumentality; (2) To sue and be sued, complain and defend in any court of law or equity; (3) To have a corporate seal, atlixod lay t,oprisat, farsinaito or nih era4se; (4) To appoint ofliccrs and agents as its business slsall re- quire, and alloso them suitable compensation; (5) To adopt bylasos not inconsiste,st ioith the Constitution or laws of the United Stales and rules and regulations adopted thereunder and this charter; (6) To raise its capital, which shall be unlimited, by accepting payments on savings accounts representing share in- terests in the association; (7) To borroso money; (8) To lead and otherwise invest its funds; (9) To wind up and dissalve, merge, consolidate, convert, or reorganize; (10) To purchase, hold, and convey real and personal estate consiste,,t with its objects, purpases, and powers; (11) To nsortgage or lease any real and prrtonal estate and take such property by gift, devise, or bequest; and (12) To exercise all powers conferred by lose. In addition to the fore- going posoers expressly enumerated, this association shall have powcr to do all things reasonably incidont to the accomplithnsent of its espress objects and the performance of its espress passers. It shall exercise its posoers in conformity with all laws of the United States as they nose are, or as they may hereafter be amended, and with all roles and rrgnlatioos sohich are not in conflict ssith this chartrr nose or hireafter made thereunder. 4. Members. All holders of the association's savings accounts and all borrowers therefrom are members. In the consideration of all questions requir- ing action by the `menabers of the astociatton, each 373 170 ANNOTATED MANUAL a sum of money to be used fer the final disposition of the body of the "Beneficiary"; that the "Depositor" is to place the amount in the association referred to as "Trustee"; shut the funds cannot be svithdrasvn unless the "Depositor" delivers satisfactory proof of the death of the "Beneficiary" or the "Beneficiary" makes a demand in writing for the funds; and that, in the latter case, the "Trustee" is to pay the funds to the "Depositor" who is solely responsible for remitting the funds to the "Bene- ficiary". May a Federal association enter into this agree- ment? A Federal association does not have the authority to act as a trustee, as the agreement would probably require it to do. Even if the agreement were not held to be a trust under applicable law, the association woald lie a fiduciary duty beyond its corporate passers. Fu~theo, the ateo:ia'.ica could rot accept funds under the agreement beoaosee a Federal esenciatiato can accept with- drawable fends coly. Tee funds in question are non- since they are seithdrasrable by the "De- positor" sabject to cenditiens in addition to the 30-day period prcvided for in the charter. Op. CC., 2/3/66. .54 Ti-eve is no legal objection to a Charter N atsccia- tints's paying withdraseals without the presentation of a passbook or a savings certificate or to an association's voiding and returning to the customer a passbook or sav- ings certificate withdrawn in full. Op. CC., 3/6/68. .55 A borrosoer agrees to establish a savings account with the mortgagee-association for the payment of real estate taxes and insurance; regular payments are to be made into the account, the passbook is to be kept by the association, and the bnrrower signs a blanket seithdrasoal form that permits the assc-cciotinn to use the funds to make the required payments. This is a secovity device avd does not violate Federal Churter previsions. Op. CC., 4/24/69. .56-59 [Reserved) Rooceterton (Sec. 7) .53 See also 301. .51 k.'eder this section the board ef directors may nat cot for the redeo-ption ef icdicicfcral accounts within a glen clot., vS toning, eccoanto exccpt by lot. Tee board of diosctcre reny call fee redemption vS all the or crants within a gixen class as long as the class is selected by any rational procedure which does nat discriminate against ether classes. Op. CC., 10/20/66. .62 A Federal association proposes "to cod cm alt ac- counts of lets than X dollars ipon which no activity has been had for 36 months and thereafter to impose a service charge of $1.00 per calendar yvar and authorize lie giving of proper notice in the tame blanket rautice". Assuming that the association complies wish all the redemption re- quireenrots. its redemption proporal is within the author- ity granted by paragraph 7 of its charter. llosceser, the s-rice charge is eat allocable notice section 545.1 ld) since he porynse of tht eerier charge is to dcfray the astoria- trots's rvcnodicepteg eaponsos and the rfirct of redemption is to dccc the accoccot for reccedhecpiog porpoees. Forther, since the arcootatina soay not beth redeem and impose a octet charge on the vase accounts, blnoiet notice is in- c;.: eopriate. Op. CC., 1/2/68. .63-79 [Reserxedl Rcvcovcs, Strurcux, DtsTutnuatow OF F.Asnsxos (Soc. 10) 3rd ed 8-78 PAGENO="0378" 374 FEDERAL REGULATIONS ¶771 171 holder of a savings account shall be permitted to cast one vote for each $100, or fraction thercof, of the withdrawal value of his account. A borrossing member shall be permitted, as a borrower, to cast one vote, and to cast the number of votcs to which he may be entitled as the holder of a savings account. No member, however, shall cast more than 50 votes. Voting may be by proxy. Any number of members present at a regular or special meeting of the mem- bers shall constitute a quorum. A majority of all vote.s cast at any meeting of members shall determine any question. The members who shall be entitled to vote at any meeting of the members shall be those oscning savings accounts and borrowing members of record on the books of the association at the end of the calendar month next preceding the dite of such meeting. The number of votes which each member shall be entitled to cast at any meeting of the mem- bers shall be determined from the books of the asso- ciation as of the end of the calendar month next preceding the date of such meeting. Those who were members at the end of the calendar month next pre- ceding she date of a meeting of members but who shall have ceased to be members prior to such meet- ing shall not be entitled to vote thereat. All savings accounts shall be nonassessable. 5. Directors. The association shall be under the direction of a board of directors of not less than tine more than 15, as fixed in the association's by- lasvs or, in the absence of any such bylaw provision, as from time to time expressly determined by resolu- tion of the association's members. Each director of the association shall be a member of the associa- tion, and a director shall cease to be a director when he ceases to be a member. Directors of the associa- tiesi shall be elected by its members by ballot; Pro- tided, That in the event of a vacancy in the direc- torate, including vacancies created by an increase in the ns,:nber of directors, she board of directors may fill such vacancy, if the members of the astoria- tion fail so to do, by elcctisg a director to serve until the next annual meeting of the memobers. Directors shall be elected for periods of 3 years and until their successors are elected and qualified, but provision shall be made for the election of approximately ooe- third of the board of directors each year. 6. Withdrawals. The association si,all l,ave the right to pay the ssithdrassal value of its soxirgi ac- counts at any time upon application tiserefor cod so pay the holders thereof the ssithdrassal value tireof. Upon receipt of a written request from any holder of a savings account of the association for the with- drassal from such account of all or any part of the withdrassal value thereof, the association shalt with- in 30 days pay the amount requested; Provided, That if the association is unable to pay all withdrassals requested at the end of 30 days from she date of such requests, it shall then proceed in the fottosving manner while any soithdrassal request remains un- paid for more thin 30 days: Withdrawal requests sha't be paid in the order received and if any holder `f a savings account or accounts has requested tire s ithd rascal of more than $1,000, he shalt be paid $1,000 is order sshvn reached and his ssithdcassal request shall be charge d ss-ith such a,oant as paid and shall he reoosobrced and placed at the end of the list of ssithdcasral requests, and thereafter, upon 0gm being reached, si:atl be paid a like amount, but not exceeding the ssithdras,al value of his savings accoust, and until such s,-ith- dr;ssral request shall have been paid irs full, `hall continue to be so paid, rcoumbered, and repsced at she c,id of the witLdrawal requests on file: Pro- sided, That sshen any such request is reached for payo:cnt, the association shall so advise misc solder of such savings account by registered wail to his last address as recorded on the books of the associa- 3rd ed. 9-711 tinn and, unless such holder shall apply in person or in writing for the payment of such soithdrawal request soithin 30 days from the date of tire mailing of such notice, no paysssenm on ace(:iiii t of su,eh withdrawal request shall be made and ss,ch request shall be cancelled: led provided further, That the board of directors shall have absolute right to pay on an equitable basis an amousst not exceeding $200 to any holder of a savings account or accounts in any calendar month and without regard to any other provision of this section. When the association is unable to pay all with- drawal requests within a period not exceeding 30 days from the date of receipt of xsritten request there- for it shall allot to the payment of such requests the remainder of the association's receipts from all sources after deducting from total receipts appropriate amounts for expenses, required payments on indebted- ness, earnings distributable in cash to holders of savings accounts, aod a fund for general corporate purposes equivalent so not more than 20 percent of the association's receipts frees holders of its savings accounts and from its borrowers. Holders of savings accounts for sehich application for svithdrassal has been made shall remain holders of savings accounts until paid and shall not become creditors. 7. Redemption. At any time sufficient funds are on hand, the association shall have the right to re- deem, by lot or otherwise as the board of directors may determine, all or aIry part of any of its savings accounts on June 30 or December 31, by giving 30 days' notice of such redemption by registered mail addressed to the holder of each such savings acco:int at his last address as recorded on the books of the association. The association may 001 redeem any cf its savings accounts sohen there is an impairment of its capital or sohen it has any request for seithdrawal sohich has been on file and unpaid formore than 30 days. The redemption price of each savings accunt redeemed shall be the full value thereof, as mined by the board of directors; but in iso event shall the redemption price be less hum the seishdrascal amount of such savings aceosnt. if a savings account rohich is redeemed is entitled to participate in any reserve for bonus, tire amount in such reserve for bonus which is property attocabte to such savings account shill be paid as part of the redemption price thereof. If aisy notice of rcdc:option shail have been duly given, and if tl:e funds necessary foe such redemption shait have been set aside so as to be and to continue to be avail- able for that purpose, earnings upon such account shall erase to accrue from and after the date specified as the redemption date and all rights svith respect to each such account shall forthssiih, after suet: redetop' tion date, terminate, except only the ri~'t of the holder of record of such savings account to receive the redensption price thereof usithout eas.:ings. 8. Louno and investments. The association may make any loan or investment authorized by statute and the rs,Tes and regulations made by the Home Loan Bank Board and in effect on August 15, 1949; it may n:akr suich additional leans and investments as say thereafter he authorized by ameudnuenis of the said ruies and r. golations 9. Power to boTeo:u'. The association rosy bouroso nuoncy in an aggregate amount not exceeding one- half of its capital; the amount suhich may be bar- rosved from sources other than a Federal home nan bank shill not exceed one.teusth of such capital. Not- ss-ithstanding the foregoing limitations, the assc'ci- ation nay, with prior approval by the Fcmlmrai Hone Loan Bank Board, borroso from a Federal houne Icon bank or from any Fcdsral agency or instrumentality without ljmitation, upon such terms and conditisos as may be required by such hank mr agency. The § 544.1 PAGENO="0379" 172 ANNOTATED MANUAL association may pledge and otherwise encumber any of its assets to secure its debts. 10. flescrt'es, surplus, and diste,buiisn of mrr.ings. The association shall maintain general rcserves for she sole purpose of mocting losses; such reserves shall include the reserve required for insurance of ac- counts. Any lrsseu may be charged against general reserves. If and ssl:eoever the general reserves of the asso-oiatinn ore not equal to at least 10 percent of ins capital, it shall, as of June 30 and December 31 cf roth year, credit to such reserves on amount equiv- alent to at least 5 percent of its net earnings for the 6 months' period, or such amount as may be required by the Federal Savings and Loan Insurance Corpora- tion, whichever is greater, until such reserves are equal to at least 10 percent of the association's capi- tal. As of June 30 and December 31 of each year, after payment or provision for payment of all ex- penses, credits to general reserves and such credits to surplus as the board of directors may determine, and provision for bonus on savings accounts as authorized by regulations made by the Federal Home Loon Bank Booed, the board of directors of the association shall coo's the remainder of the net earnings of the associ- ation for the 6 months' period to be distributed promptly co its savings accounts, ratably, as declared Es' the hoard of directors, to t1m ssithdrasoal value thereof; in lieu of or in addition to such net earn- i-ce, any of the associotion's sssrplus funds may be ticvoiso d scibated. Such net eoesL'sgs shall be rred' iced to sua-incs accounts no peid, as directed by the Ày ~ of savings acccunts shall partici- pate at the some rate and on she some basis in the distribution of earnings: Provided, That the associa- tion is not required to distribute comings on short- term savings accounts or on accounts of $10 or less. Except as provided above, earnings shall be declared en all savings accounts of record at the close of each such 6 months' period, on the seithdrasval value of each such account at the beginning of the said 6 mouths' period, plus the payments made thereon dur- ing such period (lees amounts withdrawn, and, for purposes ef parti:ipatinn in earnings, deducted from the latest previous payments), computed at the de- clared rate for the time invested, determined as pro- `.ided below. The date of investment shall be the date of ec:ooi receipt of such paOsvvnts by the aecoicttoss, she hoard cf directors fives a date, rot later n-a the tenth of he mooth, for dotemsining the of :.:,o:t:eout of payments en savings accounts cod:i:oatodc!u:cstha:eof.Pc:nivs:'s,afrectedby `orb siecc:'oiouti°n date, receiscd b0 the association oaorboforesoschdvtercoicutinsdate,shlll receive earnings as if iavested on the first of such month. P.symvnts, sfl'cctvd by saris dctcr:aination date, re- rcivasl suh:vqucnt to such determination date, slsall receive earnings. as if investcd on the first of the nest succeeding snonth. Notwithstanding any other provision of its charter, the association may dis- tribute net earnings on its savings accounts on such other basis and in accordance with such other terms and conditions as may from time to time be author- iced by regulations made by the Federal Howe Loan Bank Board. All holders of savings accounts of the association shall be entitled to equal distribution of assets, pro rota to the value of their savings accounts, ~n the event of voluntary or involuntary liqaidcion, cissolation. or ssioding up of the o':ociatinn. II. Amenu'soev.t of churter. Noosneodment, addi- sloe, alteration, change, or repeal of this clsartrr shall be music ooloss sssrh proposal is srade by the :oard of directors of the association, and ssshmitted to. and approved by rise Federal Home Lnan Bsnk Buard, ad is thvreaftcr nsshsoitted to assd approved by the sr.r:ssbvrs at a legal meeting. Any amendment, addi- tion, alteration, change, or repeal so acted upon and 1 i44.1 approved shall be effective, if filed with and ap- proved by the Federal Home Loan Bank Board as of the date of the final approval of, or as fixed by, the members. Feonnat Ho-tn Loaw BANK Bouco, By (Ctsntr,onx) Attest: (Secretary) [Ed. Note] [See Note under ¶ 770.] 3rd rd 9.79 375 ¶ 773 [Reserved] ¶774 Cssz,xresn K Pursuant to the provisions of section 5 o~ the Home Owners' Loan Act of 1933; the following charter is hereby issued:' 1. Ncrstc. The name of the Federal savings and loan association hereby chartered (hereinafter re- ferred to as the "association") is Federal Savings and Loan Association 2. Office. The home office of the association shall be located at , in the County of , State of No office of the association shall be moved from its immediate vicinity except as may be pravided in regulations made by the Home Loan Bank Board. 3. Objects and powers. The objects of the asso- elation are to promote thrift by providing a con- venient and safe method for people to have and invest money and to provide for the sound and eco- nomical financing of honaex. The statute, this charter, and rules and regulations made thereunder provide for examination and supereision and at the .sam.e time for the protection of all private riglsts con- cerned, and shall be conslrued in keeping with the best practices of local mutual thrift and home financing institutions in the United States. The association shall act as fiscal agent of the Government sshcn designated for that purpose by sIte Secretary of the Terasnry, under such regsmlations on he may prescribe, and shalt perform all such rcas:oable duties as fiscal agent of the Govern- n:ont as he may require. The association may act as agent for any nlher inssrssmentulity of the United States when designated for that purpose by any such instrumentality. The association shall have perpnsual succession and posoer to sue and be sued, complain and defend in any corsrt of law or equity; to have a corporate seal, affixed by imprint, fascimile or otherwise; to appoint ofliceru and agents as its business shall re- quire, and allow them suitable compensation; to have bylasrs not inconsistent ssith the Conslitution or lanes of the Unised States, this charter, and rules and regulations of the Home loan Bank Board, pro- viding for the management of its property and reg- s,lasion and govcrnss:cnt of its affairs; to wind up and dissolve, merge, consolidate, or reorganize in tlsc n:anucr pros'ided by lose and rules and regstla- lions made theres,nder; and to conduct business in the territory of the United States except an other- noise lisnited in this charter. The association may purchase. hold, and convey real and personal estate consistent svith its objects, purposes, and pnssers, snay ,nnrtgage or lease any real and personal estate; and may take such property by gift, devise, or be- quest. Unless authorized by the Home Loan Bank Board, the association may not invest in an office building or buildings for the transaction of the PAGENO="0380" 173 upon share accounts and dividcnds credited thercto less redemption and-repurchase payments. The par- ticipation value in the share capital of each share account held by a member shall be the aggregate of payments upon such share account and dividends credited thereto less redemption and repurchase pay. ments. Share accounts of $100 or multiples thereof may be known as investment share accounts, con- sistireg of full-paid income shares. All other share accounts shall be known as savings share accounts. Payments upon share accounts shall be called share payments. Outstanding share accounts, if any, cre- ated pursuant to a previous charter of the associa- tion issued by the Fedcral Home Loan Bank Board, the Federal Home Loan Bank Ad,nitsistration, or the Home Loan Bank Board shall continue to be known and treated as provided in the Federal charter in effect at the time each such share account was created, until exchanged for investment or savings share accounts. Share accounts may be issued for cash, or property in which the association is author- ized to invest, and, in the absence of actual fraud in the transaction, the value of property taken in pay- ment therefor, as determined by the board of direc- tors, shall be conclusive. All share accounts shall be nonassessable, and no holder thereof shall be respon- sible for any losses incurred by the association beyond the loss of the participation value of his share ac- counts at the time the loss is determined. 7. Ownership of share accounts. All share ac- counts shall be represented by share account books containing a certificate of membership and evidenc- ing the participation value of the share account, except that investment share accounts may be rep- resented by separate membership certificates. Share accounts may be purchased and held absolutely by, or in trust for, any person, including an individual, male, female, adult or minor, single or married, a partnership, association, and corporation. The re- ceipt or acquittance of any ,ncmbee, including a minor person or a nsarried wonsan, echo holds a share account shall be a valid and sufficient release and discharge of the association for any payment to such person on any share account. Two or more persons may hold share accounts jointly in any manner permitted by law. Trustees and other fiduci- aries, including, but not limited to. fiduciaries em- poacred to invest in first mortgages, may incest in sisre accounts. Share accounts shall be transferable only upon the books of the association and upon proper application by the transferee and the accept- ance of the transferee as a member upon teems approved- by she board of directors. The association may treat the holder of record of share accounts as the owner for all purposes without being affected by any notice to the contrary unless the association has acknowledged in writing notice ef a pledge. The association shall not directly or indirectly charge any membership, admission, repurchase, ssithdeasval, or any other fee or sum of money, for the privilege of bs-coosing, remaining, or ceasing to be a member of the association. 8. Poser to obtain advances. The association shall have prover to obtain advances of not more lean an amossnt equal to one.lsalf of its slsare capital on rise date of she advance. A subsequent reduction of share capital shall not affect in any Cray outstand- ing obligations for advances. -The association shall not have power to obtain advances from any source other than a Federal home loan bank of more than an amount equal to 10 percent of its slsare capital on the date of the advance. The association may pledge or otherssise encumber any of its assets so secure its debts. The association shall not accept deposits from the public or issue any evidence of indebtedness except for advances. It shall not repre- sent itself as a deposit institution. 376 FEDERAL REGULATIONS ¶ 774 business of the association an amount representing the cost of land and buildings in excess of the sum of its undivided profits and reserve accounts In addition to the forcgoing passers expressly enu- merated, the association shall have power to do all things reasonably incident to the accomplishment of its express objects and the performance of its express powers. The association shall have such powers as are conferred by law and shall exercise its powers in conformity with the Home Owners' Loan Act of 1933 and all laces of the United States as they now are, or as they may hereafter be amended, and with the rules and regulations made thereunder which are not in conflict with this charter. 4. Members. All holders of share accounts of the association and all borrossers therefrom shall be deemed and held to be members thereof. In the consideration of all questions requiring action by the members, each holder of a share account shall be permitted to cast one vote for each $100, or fraction thereof, of the participation value of his share account. A borrowing member shall be per- mitted, an a borrosrer, to cast one vote, and to cast the number of votes to cohich he may be entitled as the holder of a share account. No member, however, shall cast more than 50 votes. Voting may be by proxy. Any number of members present at a regular or special meeting of the members shall constitute a quorum. A majority of all votes cast at any meeting of members shall determine any question. The mem- bers who shall be entitled to vote at any meeting of the members shall be those owning share accounts and borcossing members of record on the books of the association at the end of the calendar month next preceding the date of the meeting of members. 5. Directors and officers. The association shall be under the direction of a board of directors of not less than 5 nor more than 15, as determined and elected by the members. Directors shall be elected by ballot from the membership of the association, and a director shall cease to be a director cohen he ceases to be a membrr. At the first meeting of mem- bers of the association, directors shall be elected to serve until the first annual meeting and tintll their successors are duly elected and qualified. Thereafter directors shall be elected for periods of 3 years and until their successors are elected and qualified, but provision shall be made for the clection of approal- rcsatcly ooe.third of the board of directors each year. In the event of a vacancy, including vacancies created by an increase by vote of the snernbers of the number of directors svithin the boils hereinabove specified, the board of directors may fill the vacancy, if the mashers fail so to do, by electing a director to tcrve until the next oonsnal meeting of the- meson- bern, at sohich time a director shati be elected to fill the vacancy for the unexpired term. At he meeting, ~shich shall be held as soon as practicable after the annual meeting of members, the board of di- rectors shall elect a president, one or more vice presidents, a secretary, and a treasurer. It may ap- point such additional officers and employees as it may from time to time determine. The offices of sec- retary and treasurer may be held by the same per- son, and a vice president may also be either the secretary or tine treasurer. The term of oilier of all officers shall be one year or until their respective successors are elected and qoeliflrd; but any offlcer may be removed at any tinste by the hoard of di- rectors. In the absence of designation from ti,one- to time of powers and duties by the board of directors, the officers shalt leave sash possers and duties as generally pertain to their respective offices. 6. Share capital. The rlsore copied of the asso- ciation shall consist of the aggregate of payments 3rd ed §544.1 PAGENO="0381" 377 174 ANNOTATED MANUAL 9. Rosettes, ssndirided profits, and diridestds. As of June 30 and December 31 of each year, after pay- ment or provision for payment of all expenses and appropriate transfers to the reserve required below, and additional transfers to other reserve accounts, and provielen for an undivided profits account, the board of directors shall declare as dividends the rernuiner of the net earnings of the association for the 6 months' period. All dividends shall be declared as of said dividend dates. The board ol directors may declare dividends as of said dividend dates payable cat of the amounts remaining from previous periods in the undivided profits account. Profits to holders of share accounts shall be termed dividends (except bonus pa noonts) and shall not be referred to as interest. The association shall maintain the rrserse requi~ed for insurance of accounts by sufficieot credits en each dividend date. If and whenever the ozzregate reserves of the association (lets reserve for bonus) are not equal to 10 percent of the shore capital, the association shall, at each dividend date, transfer to reset-es (other than reserve for bonus) a credit eccaivolent to at least 5 percent of the net earroings of the association, until such aggregate re- sents are equal to 10 percent of the share capital. Any rnes may be charged against resrrves. Divi- dends upon investment share accounts shall be proocptiy paid in cash as of the dividend date. Divi- dends en sax-inca share accounts shall be credited to such shore ucccur.:s on the books of the association as of tire dividend date. All holders of share accounts participate eqoalir in dividends pro rota to the participation value of their share accounts; pro- sided that the association shall not be required to credit dividends oct inartive share accounts of 55 or less. Escept as provided above, dividends shall be declared en the participation value of each share acreaot at the bogiccing of the dividend period, plus the shore paycrects made during the dividend period floss amounts repurchased and noticed for repur- chase and, for dividecd purposes, dedoctcd from the latent previcas shore payments) computed at the di-.idevd rate for tire time invested, determined as provided bela-c. Tire date of iosestment shall be the date of ax:ool receipt of such share payments by the association, unions she board of directors fix a date, not later than the tooth of she month, for determining the date ofinves tment of payments on either investment or savings shore accounts or on both typos of share accounts. Share payments, af- fected by such detrrmination date, received by the association on or before such determination date. shall receive diyideods a s if invested on the first of such month. Share parmeoss, affected by such deter- rcicaticn date, recoised subsequent to such detor- ruination date, shall crony: dividends as if isoves ted en the first of the ru-st soccerdiog month. All holders ef share accounts, shall be entitled to equal distribu- tiur. of net ossrto, pro rota to the value of their share occcov.ts, in the event of volanta,y or iosoluntasy ::qid::tuo, dissoaticn, or svinding up of the If-Snout and boss a coerce. In order to stimu- lot systematic thrift and to provide regular funds for the financing of homes, the members, by bylaw provision, may obligate the association to pay a cash bonus as folloscs: (a) Shoes-term bonus. If, after the adoption of the bonus plan, a tnember desiring a short-term bonus shall agree to make regular monthly share payments of any specified amount on a savings share account until the participation value thereof shall equal tOO times the agreed ruosthly payment, and if the agreed monthly payments shall be made each and every month thereafter until the participation value thereof shall eqssal 100 tisnes the agreed monthly payment, svithosrt a delay of more than 60 days in the payment of any monthly payment and without any prepay- ment or more than 12 months and if during such period no application has been made for repurchase of any part of such savings share account, the bonus shall be payable on the date on schich the participa' don value of such ravings share account shall equal or exceed 100 tithes the agreed monthly payment. The bonus rate on such short-term savings share ac- count shall be ose-half of 1 percent per annum and the amount of the bonus shall be determined as fol- lows: Divide the dollar amount of each semiannual dividend declared on such savings share account by a figure equal to tsoice the annual rate of percent of such semiannual dividend declared. The amount of the bonus is the sum of the quotients obtained. (b) Long-term bonus. If, after the adoption of the bonus plan a member desiring a long-term bonus shall agree to make regular monthly share payments of any specified amount on a savings share account until the participation value thereof shall equal 200 times the agreed monthly payment, and if the agreed monthly payments shalt be made each and every month thereafter until the participation value thereof shall equal 200 times the agreed monthly payment, without a delay of more than 60 days in the payment* of any monthly payment and without any prepayment of more than 12 months, and if daring such period rio application has been made for repurchase of any part of such savings share account, the bonus shall be payable 00 the date on which the participation value of such savings share account shall equal or exceed 200 times the agreed monthly payment. The bonus rate on such long-term savings share account shall be 1 percent per annum and the amount of the bonus shall be determined as follows: Divide the dol- lot amount of each semiannual dividend declared on such savings share account by- a figure equal to the annual rate of parcent of such semi-annual dividend declared. The amount of the bonus is the sum of the quotients obtained. The members, by amendment of the bylaws, may abolish the bonus plan as to savings share accounts opened after the date of ouch repeal of the bonus Simultaneously with the declaration of each semi- annual dividend after the adoption of the bonus plan, she board of directors shall transfer out of net earn- ings to an account designated "reserve for bonus" an amount, salsich, together with existing credits to sssch reserve is sufficient to pay the bonus on all sav- ings share accounts then entitled to participation in such reserve in accordance scith the provisions of this section. The board of directors may transfer any ex- cess in such reserve to the undivided profits account. 11. Redemption. At any time funds are on Isand foe the purpose, the association shall have the right to redeem by lot, or otherssise as the hoard of directors may determioe, all or any part of any of its share accounts on a dividend date, by giving 30 days' notice by registered mail addressed to the holders at their last address recorded no the hooks of the association. The aesoeiotion shall not redeem any of its share accounts when there is an isopaireocot of share capi- tal or when it has applications for evpuechase ochich have been on file more than 30 days and nut reached foe paysneot. The cademption price of share accounts redeemed shall be the full valsie of the share account redeemed, as determined by the board of directors, hut in no cent shall the redemption price be less than the repurchase value. If a share account which is redeemed is entitled to participate in the reserve f~sr bonus, the amount of such accrued participation shall be paid as part of the redesssption peiee. If she aforesaid notice of redemption shall have bcen duly given, and if on or before the redemption date the funds necessary for such redemption shall have been set aside so as to htt and continue to be asailable 3rd ed. 544.1 PAGENO="0382" therefor, dividends upon the share accounts called for redcmption shall cease to accrue from and after the dividend date specified as the redemption date, and at! rights with respect to such share accounts shall forthwith, after such redemption date, termi- nate, except only the right of the holder of record to receive the redemption price without interest. 12. Repurchase. The association shall have the right to repurchase its share accounts at any time upon application therefor and to pay to the holders thereof the repurchase value thereof. Holders of share accounts shall have the right to file with the association their written applications to repurchase their share accounts, in part or in full, at any time. Upon the filing of such written applications to re- purchase, the association shall number and file the same in the order received and shall either pay the holder the repurchase value of the share account, in part or in full as requested, or, after 30 days from the receipt of such application to repurchase, apply at least one-third of the receipts of the association from holders of share accounts and borrowers, to the repurchase of such share accounts in numerical order, Provided, That if any holder of a share account applies for the repurchase of more than $1,000 of his share account or accounts, he shall be paid $1,000 in order when reached, and his ap- plication shall be charged with such amount as paid and shall be renumbered and placed at the end of the list of applications to repurchase, and thereafter, upon again being reached, shall be paid a like amount, but not exceeding the value of his account, and until paid in full shall continue to be so paid, renumbered, and replaced at the end of the list. `When an application to repurchase is reached for payment as above provided, a written notice shall be sent to the applicant by registered mail at his last address recorded on the books of the association, and, unless the applicant shall apply in person or in writing for such repurchase payment within 30 days from the date of mailing such notice, na payment on account of such application shall be made and such application shall be cancelled. The board of directors shall have the absolute right to repurchase not exceeding $100 of any one share account or accounts of any one holder in any one month in any order regardless of whether or not such holder has filed an application for repurchase. Holders of share accounts filing soritten application for repurchase shall remain holders of share accounts until paid and shall not become creditors. Dividends upon a share account, to the extent of the amount of the application to repurchase all or part thereof, shall be discontinued while such share :ccount remains upon the repurchase list. The repurchase value of share ac coats of the association shall be the participation value thereof. 13. Loans and incealsssrnto. The association may make loans to holders of share accounts on the sole security of their share accounts. To secure such loans tie association shall obtain a lien upon, or a pledge of, the sharc acc.unt. Upon any default on any such loan, the association may, scithout any notice to or vosent of the `isare.account holder, cancel on its hooks share acccssnts ~lrdgrd and apply such share accounts in payi.ent co account of the loan. No such loan shall exceed 90 precut of the repurchase value of the share account wearing such loon. No such loan shall be made nohen the association has applica- tions for repurchase schich have been on file more than 30 days and not reached for payment. The association may also lend its funds on the cecority of first liens upon homes, or combination of homes and business property, within 50 miles of its home oRce; provided, that not more than $20,000 shall be loaned on the security of a first lien upan any property; except that not exceeding 15 percent 378 FEDERAL REGULATIONS ¶ 774 175 of the assets of the association may be loaned on other improved real estate without regard to said $20,000 limitation, and without regard 10 said 50. mile limit, but secured by first lien thereon; and, provided further, that the association may lend, without the requirement of amortization of princi- pal, not exceeding 50 percent of the appraised value of the security of a first lien upon improved real estate, but the aggregate amount of such loans and of all other loans made pursuant to this sentence, without regard to the $20,000 limitation and without regard to the 50-mile limit, shall not exceed 15 per- cent of the assets of the association, without the prior written approval of the Home Loan Bank Board. The association, if converted from a State-chartered institution, may continue to make loans in the ter- ritory in which it made loans while operating under State charter. The association shall not make any loans to an officer, director, or employee, except loans on the sole security of share accounts owned by such officer, director, or employee, and except loans on the security of a first lien upon the home or combination of home and business property owned and occupied by such borrowing officer, director, or employee. The association may lend an amount not exceeding 75 percent of the value of the security of a home or combination home and butiness property, and may lend an amount not exceeding 50 percent of the value of the security of other improved real estate, provided that the association may lend a higher percentage of the value of any such security wheet authorized by the members of the association and by regulations mode by the Home Loan Bank Board. The association may invest as-ithout limit in ob- ligations of, or obligations guaranteed as to principal and interest by, the United States, in obligations of Federal home loan banks, and in other securities ap- proved by the Home Loan Bank Board. The associa- tion may also invest in stock of a Federal home loan bank. No loans shall be made upon the security of real estate until at least two qualified persons selected by the board of directors shall have submitted a signed appraisal of the real.estate security for such loan. No loan shall be made when the borrower is reqi. tied to pay ta the association or to another person in connection with the loan any unreasonable or `in- lawful charge or fee. The association shall ascert.iin the total amount paid by each borrower to it and to any other person in connection with sIte loan, and furnish to each borrower upon the closing of the loan a loan settlement statement, indicating in detail the charges or fees such borrower has paid fr obligated himself to pay to the association or to any other person in connection with such loan, and a copy of such statement shall be retained in the records of the association. 14. Lean plan. Loans on real estate shall c made on one of the following basest (a) Repayable in monthly installments, equal or ssnrqual beginning not later than 30 days after the date of the advance of the loan, sufficient to retire the debt, interest and principal, within 20 yearst pravisled, hosoever, that the loan contract shall not pros ide for any subsequent monthly installment of an amount larger than any previous monthly install- ment; and provided further, that in the case of con- struction loans the first payment shall not be later than 4 months after the date of the first advance. (b) To the extent permitted by this charter, re- payable within 5 years from date with or without any amortization of principal hut ss'ith interest pay- able at least se,niannually. The monthly payments required shall be applied first to interest on the unpaid balance of the debt and the remainder to the reduction of the debt until 3rd ml. § 544.1 PAGENO="0383" the same is paid in full. The primary obligation shall be secured by a mortgage or other instrument con- stituting a first lien or the full equivalent thereof upon the real estate secssriog the loan according to any tascful and well recognized practice which is deemed best suited to thu trsntsction. In ks-rping with she best loan practices in the territory, the instrument securing a loan on real estate shall provide for full protection to the association and shall be recorded. It thoU provide spociPoally for full protection with respect to lows-as-cr, taxes, assesses-rots, other gnv- es-coos-cool lee ins, rnoiv.tev.snce, and repairs. It may -ide foe cx a,scr.ment of rents ord for such other pectection as may be laseful or appropriate. The as- d~h~l hg f th p tactics cI it.s interest in the property on which it has loans. AU each pays-cents tony, when lawful, be added to the ucaaid balance of the loan. The association way require life insurance to be assigned to the as- sociation by its borross-ers as additional collateral for real-estate loans. The association may advance premi- ums on any life insurance held as additional collateral for rral-estate loans if the association has a first lien on the policy. Such premium advancen may, when lawful, be added to the unpaid balance of the lOan The association rosy require that the equivalent of coc-te. e::t:v cf the estiocated acoaal taxes, assess- iso vance preeso:aes-s, and other charges upon real-estate seccoecty, cc any of these be paid in advance he cse:-ciat:os in odd.tion to intoreet and pcincipal to pay sos-oh chcs-eces iso they becccse due from the cix ccl. The association shall keep a record and other charges cx all re~l rstate on ~vhich the oeev:cvics i-as wade vans or s,hich is cased by the a-ciatio-n. Toe board ef dieectaes shall from to eve dotes-es-one the rate cf ,eteroet, preset- fees, cs-ed ceher cheers-s en ho recede in coxnec- s-xe by the oseociatics. In Peseg such chac-s fs-s-ilcs-osideratioxehalibecivrntoeoaxdaod cccx- ecoeoi howe Ps-sos-inc in tier territory in which the ae'o:iatias operates. Baron `sees shall have the eicht to prepay their cans xcithout penalty; except that e,is-s-o the account perpoid rqnals or records 20 of the cvi rival principal vecoust of the loan, cot s-core ti-s-as Ui- days' interest vs the ores-os-set pee- yaid way be charged, provided the taco ccosvaxs wave peoo-feion for each penalty. i-Il cast on the eocaehe cf real estate thAi be sos-ode in accordance this sos-tics us-bee the lbs-ce Lvao feel. Beard cpyoe--es another loan plan ups-s appl;cation from the association for such approval 15. E:idence of reefs-sate ociotcece. This char- tm, or a ceetified copy hereof corder the sal of the Ncooov Lees Bank Bets-cl, eieafl foe c- ifs-ceo of the t6. Aeooe cloven t of ciwtee. No asccns-i-.s-csst, addi- tion, alteration, change, cr rcpcal of this charter shall be wade unless such peopasal is node by hr hoard of directors of the association, and subsaiterd to and appeos-od by the Home Loan Beck Based, and is thcroafeor submitted to a,sd appsovcd by the acm. es at a Irgal mooring. Any a ore nd,nc-sst, addition, ..!tveation chseage, or repoal so as-ted ups-sn and op. proved shall toe effective, if filcd cs-iris- a,ed approved by is-c Home Loan Bank Board, as of hr date of the final approval by the mcsehers. I, - , Secretary of the home Loan Bank Board, do hcrelsy certify tl,at the forego- ing is a troe and cors i-ct copy of the charter of she Federal Ssvis,gs and Los-sn Association issued by the Home Loan Bank Beard on the day of , 19__. This, the day of , 19__. - (Secrrtueyl l 544.1 ¶ 776 BYLAw'S (1936) coo CssAsorcn K I. Annual r-sseetings of members. The annual meet' log of the members of the association for the dec. tics of directors and for the transaction of any other business of the association shall be held at its home oilier at 2 o'clock in the ufternoon on the third \Vedoreday in January of each year, if not a lcgal holiday, or if a irgal holiday then on the next suc- ceeding day out a legal holiday. Tb e annual meet- ing may be hold at such other time on such day or at such other place in the same community as the board of directors nsay determine. At each annual meeting, the uflicers shall esuke a full report of the fins-social coadition of the oesnciation and of its prug- rest for the pecceding year, and shall outline a pro- gram for the succeeding year. 2. Special eseetings of meseslseeo. Spocial snect.ings of the mrmbrrs of the association may be called as any time by the president or the board of directors, and shall be called by the president, a vice y-es-sident, or the secretary upon the es-ritten request of oem- hors hol.fixg of record in the aggregate at is--osst one- trash ci rho share copied of the csscci.stiox. Such secittess request shall state the purposcs of tise meet- ng ocd shall be delivered at the home office of the association a,ldreseed to the poor dent. 3. Notice of meetiog, of s-:,-s.s-bees. (a) Notice of each s-s nays ci meeting shall ho citl,or published once a s,cek for the 1cm successive calvodar sceeks (in each isossaneo sn any clay of the serek) prior to the date c-n which such ensoul neortiog shall eunvosee, in a nes-ispapor printed in she English langssage and of general cieouls-stion in the city or county in svhich the hs-mc cfiice of the association is located, or mailed posts-ego peepaid at least 15 dr-san d rent more than 30 days ;s-s-inr to the date on es-huh such a,sonal nsret- iog shall convene to each of its ms-eohcrs of rreord at his last address appearing on the hooks of she association. Such ssntice shall state the naeoe of the association, the place of the anss,sul meeting and the tinse schrn it shall convene. A si,,sil or ounce sfsall be pested in a cossspicssnus place in each of the s-fBces of the assuciation during the 14 days imosodiately preceding the date on xehich s,sch a,enual rneetissg shall convene. If any ,ne,nber, in person or b1- at- snroey thereunto authoriaed, shall svaive in writing notice of any annesul mooring of snc-sssbers, notice thereof nerd cs-at be given 50 such sssv,uhcr. (b) Notice s-f each spvcis-sl es-s-eating shall be either published o,sce a es-cek free the teen covsfcsstive cal- endar sseel.s (in clch its-stance on assy day of the 3rd ed. 379 176 ANNOTATED MANUAL 1 [Reserved) 2 [Ed. Note) ~The folloscing amendment to Charter K is that refereed to in § 545.6-3.) 14.1 Additional Lending Potvers. All loans shall be made in accordance scith Sections 13 and 14 of this Charter unless the Home Loan Bunk Booed, upon appli- cation from the asenciation for such approval, approves another loan pian, practice or procedure or pormit.s a higher percentage of the appraised value of the security to be loaned. Such authority shall be in addition to, and not rs!abrcgatioet of, any existing authnrity or procedure pro' .3 The teem aggregate reserves, as it is used in Charter K, dues not inels,d e earned surplus, undivided profits, or reserves for accrued interest and deferred credits. Op. CC., 4/24/68. ¶ 775 [Reser-sed} 67-4~0 0 - 81. - 26 PAGENO="0384" weds) prior to the date on which such special meet- ing shall convene in a newspaper printed in the English language and of general circulation in the city or county in which the home office of the as- sociation is located, or mailed postage prcpaid at least 15 days and not moee than 30 dayt prior to tha date on which such special meeting shall convene to each of its members of rccord at his last address ap- pearing on the books of the association. Such notice shall state the name of the association, the purpose or purposes for which the meeting is called, the place of the special meeting and the time when it shall convene. A similar notice shall be posted in a con- spicuous place in each of the offices of the association during the 14 days immediately preceding the date on which such special meeting shall convene. If any member, in person or by attorney thcrcunto author- ized, shall waive in writing notice of any special meeting of members, notice thereof need not be given to such member, 4. Meetings of the board of directors. The board of directors skull meet regularly without notice at the home office of the association at least once each month at the hour and date fixed by resolution of the board of directors, provided that the place of meeting may be changed by the directors. Special meetings of the board of directors may be held at any place in the territory in which the association may make loans specified in a notice of such meeting and shall be called by the secretary upon the written request of the president, or of three directors. All special meetings shall be held upon at least 3 days' written notice to each director unless notice be waived in writing before or after such meeting. Such notice shall state the place, time, and purposes of such meeting. A majority of the directors shall con- stitute a quorum for the transaction of business. The act of a majority of the directors pretest at any meet- ing at which there is a quorum shall be the act of the board of directors. All meetings of tlse members and of the board of directors shall be conducted in ac- cordance with Robert's Rules of Order. 5. Resignation of directors. Any director may resign at any time by sending a saritten notice of such resignation to the office of the association delivered to the secretary. Unless otherwise specified therein, such resignation shall take effect upon receipt thereon by the secretary. More than three consecutive ab. sences from regular meetings of the board of direc- tors, tiniest cxcttsed by resolution of the board of directors, shalt automatically constitute a resignation, effective sehen such resignation is accepted by the board of directors. 6. Porters of the board. The board of directors shall have power--. (a) To appoint and rc;rove by rcsolu.tion she mcml)ers of an executive cc,nsnittee, the nacunhcrs of schick shall be directors, which committee shall have and exercise the powers of the board of directors between the meetings of the board of directors; (b) To appoint and cm ove by resolution the mrosbcrs of such other coerudttrcs as may be deemed necessary and prescribe the sl,,ties thereof; (c) To fist the compensation of d;rcctous, officers, and employees; and to rcu.cove any officer or em- ployee at any time with or without cause; (d) To extend leniency and indulgence to hoe- rosoing soembers who are is disteess and generally to compromise and settle any debts and claims; (e) To limit share payments sohich may be accepted; - (f) To reject any application for share accounts or membership; and (g) To exercise any and all of ,the posvers of the association not expressly reserved by the charter to the members. 177 7. Execution of instruments, generally. All docu- ments and instruments oe writ jogs of soy nature shall be signed executed, verified, aclunosnlrclgcd, and delivered imy such officers, agents, or employees of the association or any one of them and in stick manner as from time to tune may be determined by resolution of the board of dirictors. All notes, drafts, acceptances, checks, endorsements, stud all evidences of indebtedness of the association whatsoever shall be signed by such officer or officers or such agent or agents of the association and in such manner as the board of directors may from time to time determine. Endorsements for deposit to the credit of the asso- ciation in any of its duly authorized depositaries shall be made its such manner as the board of directors may from time to time determine. Proxies to vote with respect to shares or accounts of other associa- tions or stock of other corporations osoned by or standing in the name of the association may be exe- cuted and delivered from time to time on behalf of the association by the president or a vice president and the secretary or an assistant secretary of the association or by any other person or persons there- unto authorized by the board of directors. 8. Membership certificates. One of the officers or an employee designated by the board of directors shall manually sign and deliver a membership certifi- cate to each person upon the initial payment on a share account of the association or upon the making of a real-estate loan by the association. - 9. Seal. The seal shall be tsvo concentric circles betsveen which shall be the name of the association. The year of incorporation, the word "incorporated", or an emblem may appear in the center. 10. Amendment. These bylasss may be amended at any time by a tseo-thirds affirmative vote of the of the board of directors, or by a vote of the mem- bers of the association. Each and every amendment shall be subject to the approval of the Hotne Loan Bank Board, and shall be ineffective until such ap- proval shall be given, except that, setl,out site approval of the Home Loan Bank Board, section 1 of the bylasvs may be amended so that the time of day for convening the annual meeting may be fixed at any hour not earlier than 10 am. or later than 9 p.m., and a new section providing for a bonus may be added as provided in the rules and regulations for Federal savings and loan associations. We, the undersigned officers, respectively, of the Federal Savings and Loan Association , do here- by certify that the foregoing is a true and correct copy of the bylasvs of said association. 380 FEDERAL REGULATIONS 1 777 (President) ¶ 777 focAL) (Secretory) § 544.2 .4rncncfsutcnt of charter, This section constitutes approval by tIme Board of any of the following amncndsauetuts lii the chatter of a F~ icral mnumlumal association: (a) lPitltdra:t --she. Add tIme foilosving as tire first sentence of section 6, folloss-itug the section title "IVitlua'ratcals": "Each wilhdrass-al fsons a savings account shall be governed by this sec- tion except to (lie extent tlaat a tmucmnbcr's account book or oilier written evidence of the membcr'u savings account cotttains additional requirenactats in accordance smith regulations made by the Federal ((onto Loan Bank Board." § 544.2 3rd ed. 9-79 PAGENO="0385" (b) Rcservcs. (1) Delete from section 10 the following: "If and whenever the general re- serves of the association arc not equal to at least 10 pcrccnt of its capital, it shall, as of June 30 and December 31 of each year, credit to such reserves an amount eqsiivnlent to at least 5 per- cent of its net earnings for the 6 months' period, or such amount as may be required by the Federal Savings and Loan Insurance Corpora- mc.. whichever is greater, until such reserves are ecual to at least 10 percent of the associa- tion's capital. (2) Such sentence shall be deleted from any charter hereafter issued to a Federal mutual association. (c) Member's eligibility lo c-ole. Revise the eighth, ninth, and tenth sentences of section 4 to read as follows: `The membem who shall be entitled to vote at any meeting of the neenebem shall be those owning savings accounts and bor- rowing members of record on the books of the association at a date set by the board of directors not less than 20 days and not mccc than 50 days prior to the date of such meeting. The number of votes which each member shall be entitled to cast at any meeting 0y the rnentbem shall be deter- mined from the books of the association as of such record date. Any member at such record date who ceases to be a mem- ber prior to such mocting shall not be entitled to vote thereat." (d~ Borro:rirg towers. (1) Revise section 9 to read as folloss-s: 9. Power to borrow. The e'~ociation may borrow money in an oggregate omoc~nt sot rxcceding one-half of its capital; the asssosssst which nay be bor- rowed from sources other tissis a Federal home Loan Bank or a State-chartered central reserve institution sirider § 545.24a of the Rules and Regulations for tise Fed- eral Savings and Loan System shell not c'-cec-d one-tenth of ouch capital and an additional amount not cx~eeding one- twentieth of such capital through issuance of mortgage-hacked bonds pursuant to § 563.8-2 of the Rules and Regulations for Insurance of Accounts of the Federal Savings and loan Insurance Corporation. Notwithstanding the foregoing limitation, the association may, with prior approval by the Board, borrow from a Federal Ifome Loan Bank or from any Federal agency or instrumentality without limita- tion, upon ssicls terssss and conditions as may be reqsuired by such Bank or agency. The association may pledge sssd otherwise encumber any of its assets to secstre its debts. 05-53 (e) Members' maximum number of votes. Revise the fourth sentence of section 4 to read as follows: "No member, however, shall cast more than 400 votes." (f) Acceptance of savings deposits. Add at the end of section 3: Notwithstanding and without regard to any other provisions of this charter, the association may raise capital in the form of such savings deposits or other accounts as are authorized by regulations made by the Board, and the holders of such de- posits or accosints shall, to such extent as may be provided by such regulations, be members of the association and shall have such voting rights and such other rights as are thereby provided, and it may, to such extent as said Board may authorize by regulation or by other action authorized by or under Federal statute, exercise any asithority to borross- nioney, to give secu- rity, or to issue notes, bonds, debentures, or other obligations, or other securities, pro- vided by or under any provision of Federal statute as from time to time in effect. The Board may, in its discretion, include the provision in any Charter N or Charter K (rev.) hereafter issued. ¶ 778 [Revised cF 8-3-79) § 544.3 Adoption of Charter K (rev.) by a Charter N Federal association. If the board of directors of a Charter N as- sociation proposes to amend its charter to read in the form of Charter K (rev.), the charter may be so amended by a nsaiority vote of mem- bers present at any duly called regular or spe- cial fleeting of members. After ssich vote, the association shall sssbmit the following petition to the Board which will issue a Charter K (rev.) in the same name and showing the same location of home office shown in the associa- tion's present charter, sinless the Board wlsen petitioned appr.~ves a change in such tsame or location: FEDERAL Hos~e LOAN BANK Basso, Washington, D.C. The undersigned, under § 544.3 of the rules and regulations for the Federal Savings and Loan System, petitions the Board to issue to it an amended charter in the form of Charter K (rev.), fixing tlse name and home office of the undersigned which its present charter pre- scribes. The utsdersigncd, by its secretary, Isereby certifies tlsat tlse mensbem, at a meeting duly called and Iseld, adopted the following resolu- tion: 3rd ed 9-so 381, 178 ANNOTATED MANUAL PAGENO="0386" FEDERAL REGULATIONS ¶792 185 (2) No payment has been made and no earnings have been distributed on the account for 36 months preceding the date of the charge; and (3) Thirty days before making the fimt charge the association mailed to the holder of the account, at the accountholder's last known address, a notice that service charges will be made under this paragraph (c) [Amended 6-1-69; 1-27-75; 6-16-75; 8-3-79) .1 Srealso$9611;T8andT8-I. .2 Notice is required only in the fIrst year the sees-ice churgn is toad, against the holder of a dormant account. This is implied hy the toording "first soroire charge". Op. CC., 12/8/66. .3 A Federal association proposes "to redeem all ac- counts of lets than .o dollars upon sahich no activity has been hod for 36 months and thereafter to impose a service charge of $1.00 per calendar year and uuthorioe the gioing of proper notice in the same blanket entice". Assuming that the association complies mith all the redetnption re- quirements, its proposal so redeem is soithin the authority orant-d by oorogranh 7 of its charter. However, the serv- ice charge is not allosoable under § 545.1 since the pur- pose of she service charge is to defray the association's eecoedkeepiog eopenses and the effvct of redemption is to close the account for recnrdkeepiog purposes. Further, sioce the association may not both redeem andimpose a sect-i cc charge on the same accoun to, blanket notice is saappevnr:ate. Op. CC.. 1/2/68. 4. The ability of a Federal association to levy a service charge ia accordance with section 545.1 is oat affected by a coallictiog State law. Op. CC., 10/10/75. ¶ 792 (545.1-1 Rates of return on savings accounts, (a) Regular and various accounts. The board of directors of a Federal nautual associa- tion, having determined the rate at which earnings will be distributed on its regular sav- ings accounts for a distribution period (the regular rate) may provide for distribution as follosvs: (1) Tower rates. .&t a rate(s) lower titan the rcgalar rate on any designated ciass(cs) of ac- count; or (2) Higl:c rates. At a rate higher tls.n the regular rate, httt within the maximttm rate for regular accounts prescribed in Part 526 of this cisapter, on accounts evidenced by an accosint book and maintained at $1,000 or more for a continstous period of at least 12 months; or (3) Split rates, At a rate(s) higher than the regular rate, but osithin the ma.xitnum P~- scribed rate for regular accounts, on the bal- ance of an accottnt sshich cxcceds a tosinimttm balance(s) fixed by the board of directors, if: (i) tise lowest mininsuni so fixed is at least $200; and (ii)the account is evidenced by a certificate, in an accossnt book or printed as a separate .docstment, which is in a form prescribed ttnder (545.2(b) and beam on its face the words: "Earnings are distribsttabie on this ac- count as determined by tite board of direc- § 545.1-1 382 PosvrRu AND Daises 545.17 Fiscal Agency. 545.17-1 Trustee. Boost VALUE OC Assess 545.18 Adjustments to book value of assets. 545.19 Real estate'owned. Accoreersoo, Recooou sean Rcroors 545.20 Accounting; records. 545.21 IReserved] 545.22 Monthly reports. 545.23 Statcotcnl of cosditiono. Booooseixc, IssuANce or Oncscustoxs, AND Gtvtac 545.24 Boreotcitsg, Issuing Obligations, and Gising 545.24a Borroain~ front a State.chartrrrd central re- 545.24-1 Issuance of GNMAguaranteed, mortgage- backed securities. 545.24-2 Public deposits or investments. 545.24-2 Tao and loan depositories. 545.24-4 Eurocbllar decosits. Inorateatrtcursos or Assoctassox I'cOsoNNeL 545.25 Indemnification of directors, oflicers, and employees. 545.25-1 Employment contracts. 545.26 Advisory boards of committee. CooroouTr Ocrooioxrrv txvoLvtoc IxuvoAsce Ascoctos 545.27 Referral of insueance business. ANNUAL Mcossscs or Mcatncos 545.28 Comes ooicstion bvt:crrn members of a Fed- eral msttttal association. - Monvcccc FoscoEs 545.29 Morlgage.ftitorrs 5 rassic lions. Authority: §$ 545.1 to 545.27 issttrd ttndersec. 5, 48 Stat. 132. as amettdrd; 12 U.S.C. 1464, Reorg. Plan No. 3 of 1947, 12 F.R. 4981, 3 CFR, 1947 Sapp. ¶791 SAVINGS AccouNTs (545.1 Savings accounts, (a) General. A Federal mtttual association may raise capital throstgh payments on its sav- ings accounts its cash or in property in which tl:e s~ssciatiott may itas est. rIse valtte of such property, abortit frastd, sisal) be as the associa- tion's board of directors determines. [Paragraph (a) revised 6-16-75; 8-3-79) (b) Mett:bcrslzip fee. Except as expressly pcnttittcd by 545.4 or paragraph (c) of this section, no Federal association shall directly or indirectly charge any fee for bccomitsg, rensain- ing, or ceasing to be a holder of an accottnt (c) Service charge. A Federal association may charge one dollar ($1.00) in any calendar year against a savings account if, when the charges is tnade: (1) The association is sot required to dis- tribtite eamings on the account; 3rd ed 3-80 PAGENO="0387" 186 ANNOTATED MANUAL toes of the association subject to § 545.1-1 of the rules and regulations for the Fed- eral Savinps and Loan System." (b) F~xcd io!assec l'on,ao account. Tue board of directors of a Federal association which has adopted the bylaw in 544.6(c) of this sub. chr:nter maw determine that, in addition to earniups distributed on savings accounts, the association will distribute a bonus on accounts of a minimum ansount maintained for a mini- mum qualifying period (at least 3 months but rat more than 36 months), as folloss's: (1 Each such account shall be evidenced by a ceccif cute bused in the amount orieinolly in- u the account; (2' Each such certificate, whether in an ac- earn: b-uai: or a separate docussuent, shall be in a fcrr:s prescribed urder 545.2(b) and state ccc its face: "A baccus is distributable on the asu:curt of this certificate, as pros ided in, and subect to 545.1-1 (b) of the rsdes and regu- atienus for the Federal Savings and Loan Sys- teen, for which purpose the beginning of the qualifying period of months is (Date) (3) Earnings other than the bonus shall be paid to the accountholder in cash or credited to the bonus account or another account on regular distribution dates, acid after expiration of tht cualifving period, the bonus shall be rouse distributed. If ~ part cf a fixed-balance bonus ac- is of:i.d -: oforc cx::iratic'n of the ::ccu,.su guccabv p:crdccd is § 526.7(af of cn the rcccus:t cafore the with- il, dcc :cctcn shall Ice :uude from the at `.~ tic:!: cc-n to ad)":: for the sxealtv ccc!. i:-rcto. Sectisuss g26.7 fbi `hull apply ce:p.cct to acm-ruts ~sired befcua July 1, ic-il. Ito-ever, in lie circsuss'tas,ces pre. cc riled in 526.7(c) suds penalty shall riot be appf led. [Subparagraph (4) revised ~-2-79) (i) if the tenn or qualifying period is one year or less, the account holder shall pay a penalty on the amount ss-ithdrass-n of at least 90 days (3 months) earnings on the account. If tIre amount withdrass'n has remained on de- posit for 3 months or less, all earnings shall be forfeited. (ii) if Ice terre or qsralifrine period is more thr:~ c-sue `car, the account [solder slsull seam a cci the amount s,ithdra:u ci of at cast ill days (6 months) earnings on the a'cossnt. If the amount withdrawn Isas rcnsainccl on do- pad: for 6 tuonths or-less, all earninus sltall be forfeited. (iii! if asso' car,sirs:45 have been distrilsssted to the arcos:nt ltolder prior to such ss'ithdrass'al, a 1 515.1-1 deduction shall be ntude from the amount with' drassn to adjust for tire penalty' applicable to such earnings. (5) Until tire qstaiifying period expires, a reserve for the bonus shall he ,,,aiutains'd and appropriate credits atrd debits shall be made to such reserve on regular distribution dates. (6) The bonus rate shall not exceed 075 percent per year, and tire sum of the botsrss rate and other earnings on the bonus account shall not exceed tire applicable maximum rate on certificate acrosints tinder Part 526 of this chapter. For any distribution period when such sum would exceed such nsaxitnum rate, the bonus rate shall, in accordance ssith paragraph (b) (8) (iii) of this section, be reduced to such maxitnstm. (7) TIre association may offer more than one bonus plan tinder this paragraph butt, st-hen- ever its board of directors determines to offer such a plan, any- member whose sas-ings ac- count balamsce on the date of such deterrnina- tion c-cjsials the minimum required for such piams may exchange all or any qualified part of such account for bonus certificates dated tire date of exchange. The board of directors shall by reoulurticin determine a reasotsable period, at least 3 months from tire date the member is given notice of the plan, clueing which the exchange surest he made. Such notice shall state the plan in svriting and be given svithrin 30 days after the effective date of the plan's adoption, as provided in paragraph (h) of this section, (8) TIre association's board of directors nsay' by resolution: (i) Fix a sunifonu nuaximsim dollar amount svhirh any accoruntirolder nsay' hold tinder tins suragraph (bi; (ii) Dioror:tinrie i'ssuisug certificates tinder this purar:raph (b) exrept'forexciransges insider paragraph (b) (7) (iii) Reduce the rate or discontinue dis- tribution of any bonus on outstanding certifi- cates issued tinder this paragraph (bi by giving at least 30 days' svrittcn notice, nailed to all holders of suurh certifirates, hurt ssrrh reduction or disrontinusation shall not be effective for any * certificate until after a bouuus is next distribut- able run tIre rerlifirate; and (iv) Dc-tcrrisine that exiuting boosts accounts adopted under this section shah receive the re- turn provided be a higher-rate bonus plan ado;uss-d trader tins paragraph (b), froust mite d.rtc Ice lriaivr.rate plan seas adopted, if tire existing at counts nseet tire minimum amount reqsuireu,uent of tire inigirer.rate plan. (9) No bonus shall be distribsumed tumrder this paragraph (b) on amsy- savings account receiv- ing amsotiser bonus or earning a rate irigiser than the reguiar rate. 3rd ed 3-80 383 PAGENO="0388" 799 § 545.3 Timc and manner of distribution. (a) Monthly, quarterly, semiannually. A Fcderal association may distribute earnings on savings accounts or savings deposits, or desig- nated classes tisercof, as provided in its charter or, by resolution of its board of directors and while the resolution is in force, either tnonthly, quarterly, or semiannually on the last day or last business day of tlse month. Except for inter- est on savings deposits, no distribution of earn- ings may be made under this paragraph until provision has been made for payment of ex- penses and for the pro rata portion of credits to reserves required by the association's charter and by Part 563 of this chapter. (b) Fixed-term savings deposits and certifi- cate accounts. A Federal association shall, as determined by its board of directors, pay inter- est on fixed-term savings deposits, or designated classes thereof, or in accordance with the terms of certificate accounts accepted under § 545.1- 1(f) distribute earnings on the accounts, either annually, semi-annually, quarterly, at the end of tlse term, or as provided by the association's board of directors under paragraph (a) of this section. [Paracraph (b) rev. eff. 7-11-73; 8-3-79] (c) Distribution when eligibility require- ,nent is satisfied. When a time eligibility re- quirement applicable to a savings accosint is satisfied, any accrued and unpaid earnings on the account may be credited or paid to the owner thereof. (d) Higher rate accounts evidenced by ac- count books. A savings account evidenced by an account book and receiving a rate Isigher than the regular rate shall continue to receive such rate at each regsilar distribution date for that class of savings accos,nts, as long as the account is eligible to receive that rate and s,ntil the board of directors determines to discon- tinue the higher rate. (e) Earnings after expiration of certificate term. After expiration of the term of a savings account issued under 545.1-1 (f) of this sub- chapter, the accosint shall, on regular distri- bution dates for that class of account, eceive carnngs as long as it remains outstsnding, as follow's: (1) if the account is non-cenessahic and evi- denced by a certificate is~ued after Sei:tem- her 30, 1066, at the regular rate; or (2) if the account is evidcnccd by a ccm;ifi- cate issued before October 1, 1966, and if it remains eligible to receive, and the association continues to dist,ibute, earnings at a rate higlser than tlse regular rate, at a rate deter- mined from time- to time by the hoard of directors. - 3rd ed 9-79 197 (f) Reserve for undi.ctrihutcd earnings. While any certificate issued smnder 545.1-1 (f) remains outstanding, a reserve for smdistrib- used earnings on the account shall be main- tained and appropriate credits and delsits made to the reserve on each regular distribution slate for that class of savings account. (g) Small accounts. A Federal assoriation may, by resolution of its board of directors, determine not to distribste earnings on any savings accosmnt of less than a specified mini- mum amount, which shall be less than $50. It may also so specify a lower minimum for ac- cosmnts established under a plan offered by the association to children to encourage thrift. (h) Amounts withdrawn between distribu- tion dates. A Federal association may, by reso- lsstion of its board' of directors and while the resolution is in force, provide for distribution of earnings on amounts withdrawn from sav- ings accounts, or designated classes thereof, between regular distribution dates, but earn- ings so distributed shall not be for any portion of the dividend period - during which the amount was not in the association or at a rate greater than the rate at which earnings, exclu- sive of any bonus, are distributed on savings accosmnts for the distribsmtion period in which the withdrawal occurs. (i) Deternsisation date. By resolution of its board of directors, a Federal association may 1srescribe a dctermssin~tion date, not later tisan the 20tls of the month, and while the resolu- tion is in force, payments on savings accounts received on or before that date will receive earnings as if received on the first of the month, and payments received after that date will receive earnings from the first of the next month. However, if tise resolsmtion so provides and the leternsination date is not later than the 10th of the month, payments received after that date slsall receive earnings from tlse date of receipt. This paragraph (i) does not apply to savings accounts authorized by § 526.3 (a) (8) of this chapter. (j) Compounding of earnings. A Federal association may, by resolution of its hoard of directors and while the resolution is in force, compsste earnings for distribution on its savings arcosmnts, or designated classes thereof, as ~ough earnings had been credited to the ac- ant ssith a uniform freqssency prescribed in the resolution since the previosms distribution date. (k) Short.tersn savings accounts. A Federal association may, by resolution of its board of dim-ectors and while tlse resols,tion is in force, distribute earnings on ams~' designated class(es) of slsort-term savi,sgs account as of the date(s) prescribed in tIme resolution. 1 545.3 384 FEDERAL REGULATIONS ¶ 799 PAGENO="0389" may reduce such rotc during a di~tribution period only to conform with the prescribed maximum. [As smesded eff. 6-25-70; 7-11-73; 8-3-79] 800 § 545.3-1 (Deleted 8-3-79.) 385 198 ANNOTATED MANUAL (1) Cizangc of rate of rcturn. During a dis- tribution period, a Federal association may, by resolution of its board of directors, increase the rate of return on regular accounts announced for that period. The increased rate may be paid for any part of the period, but shall not exceed the applicable maximum rate prescribed in Part 526 of this chapter. A deposit association § 545.3-1 (The next page is 203) 3rd ed. 9-79 PAGENO="0390" 386 NATIONAL CREDIT Uxiox Am~rIxIsTR~vrIoN: LETTER TO SUBCOMMITTEE CONCERNING FEDERAL REGULATION OF DORMANT ACCOUNTS AT CREDIT UNIONS, AUGUST 1980 NATIONAL CREDIT UNIDN ADMINISTRATION WASHINGTON, D.C. 20456 GC/RJB/BAB :dlg 12320 Honorable Benjamin S. Rosenthal Chairman Subcommittee on Cemmerce, Consumer and Nonetary Affairs House of Representatives Washington, D.C. 20515 Dear Hr. Chairman: This is in response to your letter of August 7, 1980 requesting the National Credit Union Administration (NCUA) to respond to questions concerning federal regulations that apply to inactive or dormant accounts in credit unions. I am pleased to submit the following comments. 1. Your first question inquires as to whether federal regulations limit the amount of service charges that may be imposed on dormant accounts, and further as to whether such a limitation applies exclusively to Federal credit unions or whether it also covers state chartered credit unions that are federally insured. The assessment of a service charge against a Federal credit union member's share account or share certificate account, whether active or dormant, is not provided for either in the Federal Credit Union Act (12 U.S.C. §81751 et or NCUA's Rules and Regulations (12 C.F.R. Part 700 etggjj.). With respect to a member's share draft account, however, federal regulations do permit the assessment of a maintenance fee to cover the direct and indirect costs incurred by the credit union in offering the account (12 C.F.R. Part 701.34(c)(5)(xiii)). Although the regulation makes no express reference to costs associated with account inactivity, it is conceivable that such a service charge, provided that it is limited to direct and indirect costs, could be assessed pursuant to this provision. This regulation applies only to Federal credit unions. Credit unions chartered at the state level, whether or not federally insured, are governed in this area by applicable state law and regulation. In this connection, we are aware that at least one State (Georgia) has enacted into its escheat statute a provision allowing for the assessment of monthly charges against dormant accounts. The question of whether a Federal credit union located in that State may assess such a charge is currently under study by NCUA. 2. Your second question inquires as to the permissibility under federal regulations for credit unions to discontinue the payment or accrual of dividends on deposit accounts after a certain period of inactivity or dormancy. Federal credit unions have the authority to issue shares at varying dividend rates (see §107(6) of the Federal Credit Union Act, 12 U.S.C. §1757(6)). However, as a general rule, variations in dividend rates are a function of varying terms and conditions to which the account is made subject at the time of its issuance. All accounts within a particular class, whether dormant or active, must receive identical treatment. Therefore, dividends cannot be suspended or discontinued PAGENO="0391" 387 j~) NATIONAL CREDIT UNION ADMINISTRATION WASH!NGTON, D.C. 20456 because an account is inactive. (see NCUA Intirpretive Ruling No. 79-2, 12 C.Y.R. Part 701, ii P.R. 39382, July 6, 1979)~ These requirements apply only to federal credit unions. Credit unions chartered at the state level, whether or not federally insured, are governed in this area by applicable state law and reoulation. 3. Your third question inquires as to what regulatory obligation, if any, is incosed ucan a credit union to notify the individual customer of a service charge or dividend suspension. The Accounting Manual for Federal Credit at cage 5-25, (hereinafter the Accounting Manual') requires that a statenont of account be sent at least once eati year to owners of inactive accounts. Toe Accounting Manual is incorporated by reference into NCUA Rules and Reguiaticns. (12 C.P.R. Part 701.2). Since dividends cannot be suspended, no ;rc-is ion is made to notify account owners of such a suspension. Your fourth question is divided into five subsections, lettered a-e. Subsectfon `a" focuires as to whether credit unions are subject to Federal dfrection concerning the definition of dormancy. The Accounting Manual, at page 5-52, defines for accounting purposes only, a dormant account as a share account in which tnere has been no activity for 12 months or more. This provision, included fcc cost efficiency, allows Federal credit unions to segregate dormant accounts in a scecial ledger or separate section of the individual ledgers with a secarate suboontrol. It should be noted, however, that this action does not athe~ise affect the status of the account in any way. Subsection `b' of your fourth question inquires as to whether credit unions are ouh~sot to any federal direction concerning the suspension of statement on dnrnont accounts. All statenent mailings are governed by the Aozountfng :an_al, (cage 5-23) which requires that a statement of account be son: at least once each year to owners of inactive accounts. Sub seoticn `c' of your fourth question knquires as to whether credit unions are subject to any Federal direction concerning efforts to locate or contact the owners of dormant deposits or to return their deposit balance to then. NCUA has no regulation in this regard. NCUA policy, however, provides that Federal credit unions oust comply with the provisions of state escheat statutes, some of which may require such efforts. Subsection "d" of your fourth question inquires as to whether credit unions are subject to any Federal direction concerning segregation or special internal controls over dormant accounts. NCUA recognizes that dormant accounts, by their very nature, lend themselves to misuse with ~inimal likelihood of prompt discovery. Therefore, the Accounting Manual, at page 5-64, requires not only that the accounts be balanced at least monthly, but that changes in the accounts ho scrutiniced with great care by a managing employee. Dormant accounts are usually segregated in a special ledger or within a separate section of the individual ledgers. An acceptable alternative procedure is to remove the dormant accounts entfreiy from the individual ledgers and place then in the custody of a managIng employee who does not work on the individual accounts. The individual ledgers, in turn, would include a single summary control card showing the accounts which have been segregated and their balances. Caution dictates that PAGENO="0392" 388 NATIONAL CREDIT UNION ADMINISTRATION WASHINGTON. D.C. 20456 none of the segregated accounts be released by their custodian until the custodian is satisfied that release is proper. Subsection "e" of your fourth question inquires as to whether credit unions are subject to any Federal direction concerning the preservation of records on accounts closed or turned over to state authorities pursuant to state unclaimed property laws. The Accounting Manual, at page 5-84, advises that members' Individual Share and Loan Ledgers shall not be destroyed. Thus, if a Federal credit union has maintained its records in accordance with our direction, it should always be possible to determine the disposition of a given account. Normally after escheat to the state, a notation reflecting that will be made on the ledger and the record will be reduced to microfilm. In closing, I would add that while NCUA is cognizant of the possibilities for abuse which are inherent in this area, we have received no indications from consumer complaints or from other sources that such abuses are occurring in the credit union movement. Nevertheless, we will prepare a letter to all Federal credit unions reminding them of their responsibility to follow the applicable statutes in their state. Our Office of Consumer Affairs will monitor Federal credit union compliance in this area. I hope this letter has been responsive to your inquiry. Sincerely, / / .~ P.A.MAd~( Vice Chairman PAGENO="0393" 389 INTERNAL REVEXtTE SERVICE: SFBCOMMITTEE INQUIRY AND IRS RE- SPONSE CONCERNING TAX TREATMENT OF REINSTATED INTEREST Ac- CtRALS IN DORMANT ACCOUNTS NINETY-SIXTH CONGRESS - ~ongvt~ of tij~ ~inite~i ~tatt~ ~ou~e ct ~cprt«=tntattht~ COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OP 7MB COMMITTEE ON GOVERNMENT OPERATIONS July 21, 1980 Hon. Jerore Kurtz Comissioner Internal Revenue Service ~ashineton, D. C. 20224 Dear ~r. Cc-rissiorer: I a~- writing to request information on the treatment of certain types of bark account interest earnings under Internal Revenue Service regulations. The Correrce, Consurer, and Monetary Affairs Subcommittee has been investi- cuting for sore mcnths the handling of inactive and dormant savings accounts. Ore of the frequent bank practices identifi~d in the subcommittee's investigation is the suspension or discontinuance of interest accruals on savings accounts after a certain period of inactivity. When this is done, no interest is reported to the IFS and no forrr Form 1099s are sent to the owners of the accounts. Then when a depositor later reactivates or claims such an account on which interest accruals have been suspended, the bank corrinonly adds to the account the interest that would have been due if the interest accruals had never been discontinued in the first place. Hc~ is this `catch-up lump sum interest payment that is made when the account is reactivated or clained treated under IRS regulations? Is there any violation of IRS regulations involved when Form 1099 reports have not been filed during the intervening years when interest was suspended? Might this practice constitute in part an evasion of IRS reporting requirements? In responding to this inquiry, please keep in mind that interest payments on savings accounts are subject to regulatory ceilings under Regulation Q of the Federal Reserve Board, and consequently any lump sum "catch-up" payment can be construed as complying with Regulation Q only if it is presumed that the interest was never dis- continued in the first place but was always accrued on a regular periodic basis during the years of inactivity of the account. Sincerely, Benjamin S. Rosenthal Chairman SSR:tb PAGENO="0394" 390 Internal Revenue Service De~ .~- -. ._ - ~L. ~ l~. L C [~ V ~ Assistant Wash neW~LDC 20224 DOC Commissioner ________ (Technical) R~C # LThe Honorable Benjamin S. Rosenthal ~JG 14 i9*11C L~9 19B0 Chairman, Commerce, Consumer and Monetary Affairs Subcommittee -___________________ U . S. House of Representatives .- Washington, DC 20515 ~ flSL -~ Dear Mr. Chairman: In your letter of July 21, 1980, you Indicated that an investigation by your subcommittee has revealed that after a certain period of inactivity many banks suspend or discontinue interest accruals on savings accounts and also discontinue the reporting of any interest on Forms 1099. Upon reactivation of an account by the depositor the bank commonly adds to the account the interest that would have been due had accruals of interest, never been discontinued. You ask about the reporting requirements during the inter- vening years when interest was "suspended." Section 60149(a)(l) of the Internal Revenue Code pro- vides that every person who makes payments of interest aggregating $10 or more to any other person during any calendar year shall make a return according to the forms or regulations prescribed by the Secretary setting forth the aggregate amount of such payments and the name and address of the person to whom paid. Section l.60149-l(a)(1)(i) of the Income Tax Regula- tions provides that every person who makes payments of interest aggregating $10 or more to any other person during a calendar year after 1962 shall make an information return on Forms 1096 and 1099 for such calendar year showing the aggregate amount of such payments, the name and address of the person to whom paid, the total of such payments for all persons, and such other information as is required by the forms~ Section l.60~49-l(b) of the regulations provides that for purposes of section 60149, interest is deemed to have been paid when it is credited or set apart to a person without any substantial limitation or restriction as to th.e time or manner of payment or condition upon which pay- ment is to be made, and is available to him so that it may be drawn at any time, and its receipt brought within his own control and disposition. PAGENO="0395" 391 The Honorable Benjamin S. Rosenthal Section l.60149-l(b) of the regulations has been inter- preted to mean that information returns must be filed where there has been constructive receipt of interest by the deposItor, whether or not the bank has made a formal book- keeDing entry to the depositorTs account. In Rev. Ru?. 65-152, C.B. ~965-l, 5214, the Service held that interest payers were required to file Forms 1099 and 1096 `. . .showing the aggregate of earnings with respect to each shareholder for whose account earnings aggregating ~l0 or more during a calendar year have been credited, set apart for, or otherwise made available so that the share- holder may draw upon It at any time.. ." Under section 6652 of the Code, a person who fails to file a statement of the aggregate interest payments to another person required by section 60149, on the date pre- scribed therefor, shall pay $10: for each such failure (but not exceeding $25,000 per calenda~ year). However, no pen- at~ will be asserted if such failure was due to reasonable cause and not to willful neglect. Based on the above, there ~ould be a Form 1099 repor- ting requirement for the intervening years when interest reporting was suspended since the interest was available to the depositor to draw upon at any time, without any substantial limitations on its receipt, if the depositor bad chosen to make a claim against the account. However, in order for the Service to make a definitive interpreta- tion for a particular taxpayer,: we would have to consider all of the facts of the case. I hope this information satisfactorily answers your questions. If I may be of further assistance, please contact me. `~erald~y PAGENO="0396" APPENDIX 3.-REFERENCE AND BACKGROUND MATERIALS Congressional Research Service The Library of Congress 4'J * * S Washington, D.C. 20540 ESCHEAT OF UNCLAIMED DEPOSITS IN FINANCIAL INSTITUTIONS Henry Cohen Legislative Attorney American Law Division July 16, 1980 (392) PAGENO="0397" 393 CRS-ii CONTENTS Introduction Constitutional Requirements f or State Escheat Laws 2 Applicability of State Escheat Laws to Federally-Chartered Institutions.... 5 State Enforcement of Escheat Laws Against Federally-Chartered Institutions 8 Coaflicting State Claims 11 S=ary 15 PAGENO="0398" 394 ESCHEAT OF UNCLAIMED DEPOSITS IN FINANCIAL INSTITUTIONS Introduction Under state laws, unclaimed deposits in banks, savings and loan associa- 1/ tions, and credit unions generally escheat to the state; research has revealed 2/ no governing federal statutes or regulations. In Security Savings Bank v. California, 263 U.S. 282, 286 (1923), the Supreme Court wrote: The contract of deposit does not give the banks a tontine right to retain the money in the event that it is not called for by the depositor. It gives the bank merely the right to use the depositor's money until called for by him or some other person duly authorized. If the deposit is turned over to the state, in obedience to a valid law, the obligation of the bank to the depositor is discharged. 3/ However, as the Supreme Court indicated in Anderson National Bank v. Luckett, 321 U.S. 233, 243 (1944), if a statute is deficient in its provisions for notice and an opportunity for a hearing on the part of depositors, then depositors are not bound by any proceedings taken under it and the bank's obligation to its depositors is not discharged. As the Court wrote: !/ Escheat is the `reversion of property to the state in consequence of a want of any individual competent to inherit." Black's Law Dictionary 488 (5th ed. 1979). 2/ 12 U.S.C. §~25O1-25O3 governs disposition of abandoned money orders and traveler's checks. 3/ "Tontine" is "[a} financial arrangement (such as an insurance policy) in which a group of participants share advantages on such terms that upon the default or death of any participants~ his advantages are distributed among the remaining participants until only one remains, whereupon the whole goes to him; or on the expiration of an agreed period, the whole goes to those participants remaining at the time." Black's Law Dictionary 1334 (5th ed. 1979). PAGENO="0399" 395~ CRS-2 Apart from questions which may arise under the national banking laws in the case of national banks, it is no longer open to doubt that a state by a procedure satisfying constitutional require- ments, may compel surrender to it of deposit balances, when there is substantial ground for belief that they have been abandoned or forgotten, Security Bank v. California, supra, certainly when the state acquires then subject to all lawful dezands of the depositors. 4/ Constitutional Requirements for State Escheat Laws The Supreme Court has upheld three state laws providing for payment to the state of unclaimed deposits. In Provident Institution for Savings v. Malone, 221 U.S. 660, 664-665 (1911), whIch involved a Massachusetts law no longer on the books, the Court wrote: The statute here is reasonable in Its terms and is so frazed as to work injustice to no one. It only applies to cases where no deposit has been made, no interest added on pass book, no check drawn against the account for thirty years, and where no claimant is known and the depositor cannot be found. Before the money can be turned over to the receiver general, proceedings must be instituted in the probate court, and, under the decision of the supreme court of the state, personal notice must be given to the bank, and citation and notice, usual in probate court, published so as to give to the depositor, if living, and his heirs, If dead, opportunity to appear and be heard. Even then the property Is not escheated, but deposited with the treasurer, to hold as trustee for the owner or his legal representatives to whom it is payable when they establish their right. Security Savings Bank v. CalIfornia, 263 U.S. 282, 287, 289 (1923), concerned 4/ Id. at 240. "[Q]uestlons which may arise under the national banking laws" are considered beginning on page 5 of this report. 67_LtL~O 0 - 81 - 26 PAGENO="0400" 396 CRS-3 two California laws no longer in effect that required the attorney general to institute judicial proceedings in order to acquire dorsiant accounts. The Court wrote: [T]he essentials of jurisdiction over the deposits are that there be seizure of the res [the deposits] at the commencement of the suit; and reasonable opportunity and notice to be heard. . .. . These requirements are satisfied by the procedure pre- scribed in the statutes of California. There is seizure or its equivalent. And the published sum- mons to the depositors named as parties defendant is supplemented by notice directed to all claimants whomsoever. The statute only applies to deposits in the name of a person who is not known to the president or manag- ing officer of the bank to be alive, whose account has not been added to or drawn upon for twenty years, and who has not filed within that time any notice or claim giving his then residence. The legislature evidently assumed that it would be impossible to serve such depositors personally. . . . We cannot say that the view . . . was so unreasonable as to constitute a denial of due process. In Anderson National Bankv. Luckett, 321 U.S. 233, 241-242, 243-244 (1944), which involved a Kentucky law that has been amended since the decision, the Court wrote: With respect to the statutory rebuttable presumption of abandonment of demand deposits after inactivity of ten years and of non-demand deposits after inactivity of twenty-five years, we are unable to say that the legislative determination is without support in exper- ience. We have sustained like statutory presumptions that shorter periods of inactivity furnish the basis for state administration of unasserted claims or demands. . . In the present posture of the case we conclude, sub- ject to the requirements of procedural due process, that prior to a judicial decree of actual abandonment, PAGENO="0401" 397 CRS-4 the depositors will not be deprived of their property by the surrender of their bank accounts to the state. Prior to such a decree the present statute merely compels the summary substitution of the state for the bank, as the debtor for the depositors. It deprives the depositors of none of their rights as creditors, preserving their right to demand from the state payment of the deposits, and their right to resort to the courts if payment is refused. True, payment over of the deposits to the state may be the precursor of a decree of abandonment and the shorten- ing of the period within which a claimant may demand payment of his deposit. But, if the notice to depos- itors is adequate, we cannot, say that the period of five years allowed for that purpose after the decree, is an infringement of constitutional rights. The report of the bank, required to be posted on the court house door or bulletin board, lists the aban- doned accounts as defined by the statute and thus gives notice to the owners of all those accounts which, because of their inactivity for the periods and in the ways specified by the statute, are deemed abandoned and required to be paid to the state. This notice, when read in the light of the knowledge of the statute, with which allpersons baying such bank accounts within the state are chargeable, is suff i- dent to advise that the listed accounts are deemed presumptively abandoned and will at the end of six weeks from the date of filing be paid over to the state, and that both before and after that event the depositors will be afforded~opportunity to present their claims and to have them judicially determined, if rejected. On the basis of these three cases, it appears that various types of escheat laws may satisfy constitutional requirements. No specific minimum period of dormancy has been mandated by the Supreme Court, and dormancy, with or without proof of actual abandonment, has been found sufficient to permit a state to collect an account. Notice to depositors, by publication or posting has been upheld. One requirement that does appear~to existis that some adjudication of dormancy, appealable in the courts, although not necessarily initially PAGENO="0402" 398 CRS-5 occurring in the courts, be provided for. Escheat based upon a mere declara- tion by a state that an account after a certain period of time is dormant would appear to violate due process. See, Anderson National Bank, 321 U.S. at 246-7. Applicability of State Escheat Laws to Federally-Chartered Institutions State statutes that provide for payment of unclaimed deposits to the state generally are applicable to federally-chartered institutions, except that, as a result of the constitutional supremacy of federal law over state law, such state statutes may not infringe upon federal law or regulation or impose a burden upon performance of a federally-chartered institution's functions. In Anderson National Bank v. Luckett, 321 U.S. at 249, the Court wrote that Ken- tucky's power to collect unclaimed deposits in national banks cannot extend beyond its power under state law and the Federal Constitution to acquire control of deposit accounts from their ~ners. So long as it is thus limited, and the power is exercised only to demand payment of the accounts in the same way and to the same extent that the depositors could, we can perceive no danger of unlimited control by the state over the operations of national banking institutions. We need not decide whether, within the limit, the state's power over deposits in national banks is as simple as its like power over deposits in state banks. This case distinguished an earlier one, First National Bank of San Jose v. California, 262 U.S. 366 (1922), in which the Court held that two California laws providing for escheat to the state of unclaimed deposits were invalid as applied to deposits in national banks. These were the same statutes upheld as applied to state banks in Security Savings Bank v. California (see pages 2-3 of this report). In First National Bank of San Jose, supra at 368-370, the Court wrote that 12 U.S.C. §24 PAGENO="0403" 399~ CRS-6 confers upon national banks power to receive deposits. These banks are instrumentalities of the Federal government. Their contracts and dealings are subject to the operation of general and undiscriminating state laws which do not conflict with the letter or the gen- eral object and purposes of congressional legislation. But any attempt by a state to define their duties or control the conduct of their affairs is void whenever it conflicts with the lawé of the United States or frustrates the purposes of the national legislation or impairs the efficiency of the bank to discharge the duties for which it was created. Plainly, no state may prohibit national banks from accepting deposits or directly impair their efficiency in that regard. And we think, under circumstances like those here revealed,a state may not dissolve contracts of deposit, even after twenty years, and require national banka to pay to it the amounts then due; the settled principles stated above oppose such power. Does the statute conflict~ with the letter or general object and purposes of the legislation by Congress? Obviously, it attempts to qualify in an unusual way agreements between national banks and their customers, long understood to arise when the former receive deposits under their plainly granted powers. . The depositors of a national bank often live in many different states and countries; and certainly it would not be an immaterial thing if the deposits of all were subject to seizure by the state where the bank hap- pened to be located. In Anderson National Bank v. Luckett, supra at 250-252, the Court interpreted the above language narrowly: The decision of this Court in First National Bank v. California, supra, did not rest on any want of power of a state to demand of a national bank, payment of deposits which the state was lawfully entitled to receive. Decision there turned rather on the effect of the state statute in altering the contracts of deposit in a manner considered so unusual and so harsh in its application to depositors as to deter them from placing or keeping theirfunds innational banks. . . PAGENO="0404" 400 CRS-7 The unusual alteration of depositors' accounts to which the Court referred was plainly the statutory declaration of escheat of depositors' accounts merely because of their dormancy for a specified period, without any determination of abandonment in fact. Here [in the Kentucky statute] there is no escheat or forfeiture by reason of dormancy. Dormancy without more is made the statutory ground for the state's taking inactive bank accounts into its custody, the state assuming the bank's obligation to the depositors. And the deposits need not be surrendered, if the depos- itors or the bank make it appear that abandonment has not occurred. This is not confiscation or even an attempted deprivation of property. Escheat or forfei- ture to the state may follow, but only upon proof of abandonment in fact. We cannot say that the protective custody of long inactive bank accounts, for which the Kentucky statute provides, and which in many circum- stances may operate for the benefit and security of depositors, see Provident Savings Institution v. Malone, supra, 664, will deter them from placing their funds in national banks in that state. Considering Security Savings Bank v. California, supra, together with First National Bank of San Jose v. California, supra, it appears that escheat merely upon proof of dormancy, without proof of actual abandonment, does not violate due process and so may be the law with respect to deposits in state banks, but it does interfere with federal legislation and so may not be the law with respect to deposits in national banks. There have been several other federal and state court decisions on whether state escheat laws were applicable to national banks; they appear generally to have turned upon whether the state laws were deemed to interfere with federal law. See, Escheat of Deposits in National Banks, CCH Federal Banking Law Reporter, ¶r19,l20. PAGENO="0405" 401! CRS-8 State Enforcement of Escheat Laws Against Federally-Chartered Institutions Although the states in theory may apply their escheat laws to national banks (with the exceptions noted), the question arIses whether they in practice have the power to do so. The exercise of such power may require the states to compel reports by national banks to state authorities, or require visitorial powers by state officials to examine national bank records. The general ques- tion of compelling reports by national banks apparently was settled in Anderson National Bank v. Luckett, supra at 252-253, when the Court wrote: Since Kentucky may enforce Its statute requiring the surrender to it of presumptively abandoned accounts in national as well as state banks, it may, as an appropriate incident to this exercise of authority, require the banks to file reports of inactive accounts, as the statute directs. Of course, a state's reporting requirements in a particular instance conceiv- ably might be so burdensome as to interfere with a national bank's performance of its functions, in which case the requirements would be lmpermissible. The question of visitorial powers has the complication of a federal stat- ute, 12 U.S.C. §484, which restricts the exercise of visitorial powers against national banks to Congress and, in the wards of one case, "certain particular agencies of government." Bank of America Nat. Trust & Savings Ass'n v. Douglas, 5/ 105 F.2d 100, 105 (D.C. Cir. 1939). Specifically, 12 U.S.C. §484 provides: 5/ The Comptroller of the Currency reportedly "has vigorously denied access to state officials" under 12 U.S.C. §484. Rohner, Problems of Federalism in the Regulation of Consumer Financial Services Offered by Commercial Banks: Part I, 29 Catholic University Law Review 1, 39 (1979). PAGENO="0406" 402 CRS-9 No bank shall be subject to any visitorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed by Congress, or by either House thereof or by any committee of Congress or of either House duly authorized. In First National Bank of Youngstown v. Hughes, 6 F. 737 (N.D. Ohio 1881), a national bank challenged as a violation of 12 U.S.C. §484 a state subpoena issued in conjunction with a tax investigation. The subpoena ordered the bank's cashier to appear before an auditor with the bank's books showing the amount of deposits in the bank, the names of its depositors, and the amount deposited by each. The court upheld the subpoena on the ground that no visitation was contemplated: Visitation, in law, is the act of a superior or super- intending officer, who visits a corporation to examine into its manner of conducting business, and enforce an observance of its laws and regulations. Burrill defines the word to mean "inspaction; superintendence; direc- tion; regulation." The exercise of no such authority is contemplated by defendants. They do not contemplate inspection, supervision, or regulation of complainant's business, or an enforcement of its laws or regulations. On the contrary, their purpose is to ascertain, in a legal way, and by legitimate testimony, whether any person had, at the time mentioned, on deposit with com- plainant any money subject to taxation in said county which had not been returned by the owners thereof for that purpose. Hence, the subpoena commanding produc- tion of the complainant's books, in the manner and for the purpose stated, is not an exercise of "visitorial powers". Id. at 740-741. This quotation was relied upon by two state cases upholding the application of state escheat laws to national banks. In the later case, Clovis National Bank v. Callaway, 69 N.M. 119, 364 P.2d 748, 756 (1961), the New Mexico Supreme Court, speaking of a provision authorizing the state PAGENO="0407" 403 CRS-1O treasurer to examine a national bank's records, wrote: With the right to obtain the information there must be a means of enforcing valid demands, and under the authorities we are clear that so long as the same are reasonable and do not interfere with the purpose of the bank's creation, or impair or destroy its func- tioning and are not in conflict with some paramount federal law, there is no valid objection that can be voiced to the provision. In the earlier case, State v. First National Bank of Portland, 61 Ore. 551, 123 P. 712, 716 (1912), the Oregon Supreme Court concluded that national banks are only exempted from state leg- islation to the extent that such legislation impairs their efficiency to perform the functions which they were designed to serve. Although this case did not concern a -statute authorizing examinations, it did, as Clovis National Bank observed, "contain provisions whereby compliance by banks could be assured." 364 P.2d at 756. A federal court has held that states in the enforcement of their escheat laws may examine the records of federal credit unions. In United States v. State of Alabama, 434 F. Supp. 64 (M.D. Ala. 1977), the United States sued to have declared unconstitutional as applied to the National Credit Union Admin- istration the provision of the Alabama escheat statute authorizing the state camlisaioner of revenue to examine the records of any person the commissioner has reason to believe has failed to report property that should have been reported. There was no federal statute specifically limiting examination to the federal government;, only one specifically granting examination powers to the federal government (12 U.S.C. §1756). The court therefore fell back on general principles of federal preemption and found that Congress did not PAGENO="0408" 404 CRS-11 express a "clear and manifest" intention to preempt state law not inconsistent with federal law, and that the Alabama law was not "an obstacle to the accom- plishment and execution of the full purposes and objectives of Congress." The Alabama statute, the court wrote, is not an attempt to regulate the policies or practices of the NCUA. The [United Statesi government concedes that the state has a right to claim abandoned property within its boundaries and that federal credit unions must comply with the Alabama Uniform Disposition of Unclaimed Property Act. Given the admitted validity of the Alabama statute, it is hard to imagine how the state can enforce the provisions of the act without some limited right to audit the records of financial institutions in which the unclaimed property may exist. Id. at 67-68. Conflicting State Claims The question whether a state may collect an unclaimed deposit of a person whose last known residence was in another state has not arisen frequently. In In re Philadelphia Electric Co., 39 Pa. Dist. & Co. 53, 61 (1940), the court wrote: It has long been assumed that the State wherein a bank conducts its business has jurisdiction to take unclaimed bank deposits regardless of the missing owner's last known residence, a fact which is rarely mentioned in the cases. The case cites as support Security Savings Bank v. California, 263 U.S. 282 (1923), and an earlier Pennsylvania case, and notes one case to the contrary. Security Savings Bank contains the following dictum supporting the holding of In re Philadelphia Electric Co.: PAGENO="0409" 405 CRS-12 The unclaimed deposits are, debts due by a California corporation with its place, of business there. [cita- tions cxiitted.] The debts, arose out of contracts made and to be performed there. [citations omitted.] Thus the deposits are clearly intangible property within the state. Over this intangible property the state has the same dominion that it has over tangible property. Id. at 285. However, it should be noted that in this case "[t]he last known residence of the depositors are not stated." Id. at 284. The court in Inre Philadelphia Electric Co. could also have cited First National Bank of San Jose v. California, 262 U.S. 366, 370 (1922), in which the Supreme Court, in a pas- sage already guoted on page 6 of this report, assumed that the state in which a bank is located may escheat unclaimed deposits of residents of other states: The depositors of a national bank often live in many different states and countries; and certainly it would not be an immaterial thing if the deposits of all were subject to seizure by the state where the bank happened to be located. The case that In re Philadelphia Electric Co. cited as contrary was lore Lyons' Estate, 175 Wash. 115, 26 P.2d 615, 618 (1933), in which the Washington Supreme Court held: The debt cs.~ing by the Seattle bank was a credit belong- ing to the decedent Lyons~before and at the time of his death, and, applying the rule mobilia sequuntur personam [movables follc~i the person], the situs of this property was at the domicile of the ~ner and therefore it was not property within this state at the time of his death and not subject to escheat under the statute. In support of its holding the court cited Farmers Loan & Trust Co. v. Minnesota, 280 U.S. 204 (1930), in which the Supreme Court declared unconstitutional the application of a Minnesota inheritance tax to an obligation owed by a Minnesota debtor to a New York decedent. The Court wrote: PAGENO="0410" 406. CRS-13 We have determined that in general intangibles may be properly taxed at the domicile of their owner and we can find no sufficient reason for saying that they are not entitled to enjoy an immunity against taxation at more than one place similar to that accorded to tan- gibles. Id. at 212. Farmers Loan & Trust Co. did not refer to the dictum in Security Savings Bank (quoted at the top of page 12 of this report), with which it arguably is inconsistent. In two more recent cases the-Supreme Court addressed the issue of which - state may escheat an unclaimed debt in which the creditor and debtor reside in different states. Although the debts in question were not bank deposits, there appears to be no reason why the Court's ruling in these cases would not be applicable to cases involving bank deposits. In the first case, Texas v. New Jersey, 379 U.S. 674, 675 (1965), Texas sued New Jersey, Pennsylvania, and the Sun Oil Company for a declaration of rights to settle a controversy as to which State has jurisdiction to take title to certain abandoned intangible personal property through escheat. . . . The property in question here consists of various small debts totalling $26,461.65 which the Sun Oil Company . . . has owed to approximately 1,730 small creditors who have never appeared to collect them. The Court stated the issue as follows: With respect to tangible property, real or personal, it has always been the unquestioned rule in all juris- dictions that only the State in which the property is located may escheat. But intangible property, such as a debt which a person is entitled to collect, is not a physical matter which can be located on a map. The creditor may live in one State, the debtor in another, and matters may be further complicated if, as in the case before us, the debtor is a corporation which has connections in many States-and each creditor is a per- PAGENO="0411" 407 CRS-14 son who may have had connections with several others and whose present address is unknown. Since the States separately are without constitutional power to provide a rule to settle this interstate controversy and since there is no applicable federal statute, it becomes our responsibility in the exercise of our original jurisdic- tion to adopt a rule which will settle the question of which State will be allowed to escheat this intangible property. . Ed. at 677. After considering four different possible rules, the Court held that each item of property in question in this case is subject to escheat only by the State of the last known address of the creditor, as shown by the debtor's books and records. In. at 682. The Court then noted: This leaves questions as to what is to be done with property owed persons (1) as to whom there is no record of any address at all, or (2) whose last known address is in a State which does not provide for escheat of the property owed them. Id. In both situations, the Court held, the State of corporate domicile should be allowed to [escheat, buti cut off the claims of private persons only, retaining the property for itself only until some other State comes forward with proof that it has a superior right to escheat. Id. Concluding, the Court wrote: We realize that this case could have been resolved otherwise, for the issue here is not controlled by statutory or constitutional provisions or by past decisions, nor is it entirely one of logic. It is fundamentally a question of ease of administration and of equit~. We believe~ that the rule we adopt is the fairest, is easy to apply, and in the long run will be the most generally acceptable to all the States. Id. at 683. The other recent Supreme Court case was Pennsylvania v. New York, 407 U.S. 206 (1972), which involved unclaimed funds due from Western Union PAGENO="0412" 408 CRS-15 for undelivered money orders and unpaid drafts. These sums accumulated as a result of persons paying Western Union to telegraph money orders that were never paid. What happened was that after receiving payment, Western Union would transmit a message to its office nearest the payee directing the office to pay the money order to the payee. Sometimes, the payee could not be located; when this occured the sender would be given a refund, but sometimes he could not be located. Other times either the payee would fail to cash the money order or the sender would fail to cash the refund. The Supreme Court decided that the rule it had adopted in Texas v. New Jersey was appropriate in this case too. Summary Escheat of unclaimed deposits in financial institutions is generally a matter of state law. Such law, however, must meet the due process require- ments of the United States Constitution, which in this instance appear to require that there be provided an opportunity to adjudicate a state determin- ation that a bank account is dormant. State escheat laws are applicable to federally-chartered institutions, except that they may not infringe upon fed- eral law or burden the functioning of a federally-chartered institution. This apparently also holds true for provisions in state escheat laws providing for bank examinations. A statute under which a determination of dormancy without proof of actual abandonment is sufficient for escheat apparently would not violate due process bet apparently would interfere with federal legislation. PAGENO="0413" 409 CRS-16 A state apparently may not escheat unclaimed deposits of a person whose last known residence was in another state,, except that if there is no record of any address or if the state of last known residence does not provide for escheat, then the state in which the bank is located apparently may escheat the deposits subject to the claims of the state of last known residence. /~ ~ Henry Cohen Legislative Attorney PAGENO="0414" 410 MEMORANDUM OPINIoN IN BANK OF AMERICA VS. KENNETH CORY, JUNE 20. 1976. ENUNCIATING "CHUTZPA PRINCIPLE" ~: ~m 1 L 2 tj~fl1 20~91o 3 J.r~;s P-SON, * . 4 ~.` Oep-i~y 5 6 7 - 8 ID THE SUPERIOR COURT OF THE STATE OF CALIFORDIA 9 * IN ~D FO~ THE COUNTY OF SACPJi~-1ENTO 10 11 EANR OF A~-1ERICA NATIONAL TPUST ) NO. 257509 DEPT. 13 *& SAVINGS ASSOCIATiON and~ 12 SECURITY PACIFIC NATiONAL BANE, 13 Plaintiffs, 14 vs. 15 YENNCT}1 COPY, State Controller, ) NENORANDW1 O?INION and DOES I through XX, 16 ) Dafendants. ) - 17 ______ ____________________________ --18 - KENNETH CORY, Stats Controller, * 19 Cross-Complainant, 20. vs. ) 21 BAI!K OF A!-IERICA NATIONAL ThUST & SAVINGS ASSOCIATION and 22 SECUHITY PACIFIC NATIONAL ~ANK, 23 Cross-Dofendants. 24 25 The Court is inprezsed by the scholarship and acumen 26 displayed by counsel for bOth sides in the lengthy briefs they 27 have filed. - 1-11th all respect, horev~r, one cannot helm but - 28 uander ~ihy ~-~ltat appears to be a fairly s1Ti~71e matter has become 29 so complc-x. 30 Thiu ju because the Court believes that there arc t~o 31 baaic gu.idaiines rhich arc to be applied here. PAGENO="0415" 411. 1 T.~e first is the specific ho)dii~g in rnkof~j~i.orjc~,, 2 Crar.ston (1967) 252 Cal. Jtpp. 2d 208, 211, that the Controller's 3 riyh~s under the Unclairuecl Prop.~rty Law (sections 1500-1582 of 4 the Code of Civil Procedure) are derivative and that he succeeds, 5 subject to the Law's provisions, to whatever rights the owners 6 of abm~:doned property may have ~7e will call thin the `Derivative 7 Principle.' 8 The second is that it simply is inconceivable that the 9 plaintiff banks, having used the depositors' money to earn I~ney 10 for themselves, truly believe that they not only should not pay 11 intereet on the accounts involved but that they arc entitled to 12 irpree a service charge when the funds are turned ever to the 13 Controller, even though no such charge is made to a depositor. I 1/ 14 we `~`ill call this the "Chuztpa Principle.~ 15 Thus, the Court bo1iewe~ under the `Derivative Principle' 16 that the Controller stands e:actly in the shoes of the ds~neitor 17 end he is entitled to all tho b~nefits to which a depositor is 18 entitled. - 19 It follows that unless there are valid contracts to the 23 contrary between the banks and their depositors, the banks nay 21 not make service charges or step the accrual of interest on 22 dormant savings accounts when the accounts are paid to the 23 Controller. 24 Noreover, even if the depositors and the banks entered 25 - into such contracts, the banks nay not seek to implement the 26 terms of the contracts against the Controller when they do not 27 against depositors who claim the deposits briore they arc paid 26 to the State. 29 Lco P,aatcn in the `ioys o. Yiddish" (l9(,~) 92, defines 30 "chut:~so" as "gall, brazen nerve, effrontery, inr.rr'dib~c `cjuis', prenwr:ption - plus - arrogance such an no othc'r word end no 31 other language can do justice to." - - -2- 67-~40 0 - 81 - 27 PAGENO="0416" 412 i The phrases "reasonable service charge" and ~may be 2 lawfully withheld" as set forth in the Law do not seen vague to 3 thc Court. Reasonable scrvice charge' would seem to sean a 4 charge that is appropriate in relation to the service performed, 5 while `may be lawfully withheld" requires that the service charge 6 be based on contract or statute since this clearly is the only 7 charge a depositor could be required to pay. The "Derivative 8 Principle" again is in point. 9 The Court believes further that if there were any 10 administrative practices to the contrary by the Cent-rollers in 11 the past, they clearly were erroneous and iray be disregarded. 12 (See People v. Union Oil Co. (1957) 48 Cal. 2d 476, 480.) 13 Plaintiffs seek to apply the doctrine of equitable 14- estoppel. Here the "Chutzpa Principle" is directly applicable, 15 for the banks used the depositors' money to make money. They 16 hardly are in a position to say that in equity the Controller 17 may not now seek to collect service charges the banks have 18 impreperly made or interest they improperly have failed to 19 accrue on such accounts. 20 It also follows from the application of the "Derivative 21 Principle" that the Controller is not barred by the statute of 22 limitations because a depositor is. not~ 23 - A motion for judgment on the pleadings nay be used in an 24 action for declaratory relief to obtain a declaratory judgment on 25 the merits in favor of the defendant (See 4 Witkin, California 26 Procedure (2d ed., 1971) 2017). It is proper here, and defendant' 27 motion for partial judgment on the pleadings is granted. - . 25 D~TED:.~~'~ ` .~,;`,2 ~- ~ 29 `-" 7 30 /4~.,. ~ COURT 31 -3- PAGENO="0417" 413 STATEMENT OF INTENDED DECISION IN BANK OF AMERICA VS. KENNETH CORY, JULY 17, 1980 ENDORSED: JUL 17 1983 J.A. SIMPSON, CLERK ~. D. HAYES IN THE SUPERIOR COURT OF THE STATE OF CALIFOR~NIA IN AND FOR THE COUNTY OF SACRAMENTO 2 3 4 5 6 7 8 9 l0~ Ii 12~ 13 14 151 16 17 18 19 20 21 22 24 `26~ 27 28 RANK OF AMERICA NATIONAL TRUST ) No. 257509 Dept. 16 & SAVINGS ASSOCIATION, Plaintiff and Cross-Defendant, vs. KENNETH CORY, State Controller, Defendant and Cross-Complainant. V.ARGARET SLETTLAND and HANNAH ) No. 250500 H. KERNER, Plaintiffs, vs. ) STATEMENT OF INTENDED ) KENNETH CORY, in his official ) DECISION - (Rule 232] capacity as Controller of California, RANK OF.AMERICA, etal., Defendants. ) . 1. INTRODUCTION An outline of these consolidated cases which includes a description of (A) the Pleadings and Prayers, (B) the history PAGENO="0418" 414 ~ of these cases and (C) the parties involved, is set forth in 2 Exhibit A attached hereto and incorporated herein. 3 2. DEFINITIONS 4 As used herein, the following terms have the following 5 meanings: 6 (1) The Bank - The Bank of America National Trust & Savings Association; 7 (2) ç~ - State Controller Kenneth Cory in his 8 óUicial capacity as Controller; 9 `(3) Demand account - a checking or commercial iccount with a banking organization; 10 (4) Dormant account - any deposit, account, 11 exchange item or written instrument which a bank or other holder is required to report 12 to the State Controller under CCP Sl530; [section 1510 of the 1959 ActJ because of 13 inactivity as defined in, and for the length of time set forth in sections 1513(a) and (d) 14 [sections 1502(a) and (d) of the 1959 Act];1 15 (5) Exchange Items - written instruments which may be negotiated for money or money's worth, such 16 as money orders, as defined in section 1513(d) [1502(d)]; does not include travelers checks; 17 (6) Interest withheld - or withheld interest - the 18 amount of interest that the bank normally credits to an interest-bearing deposit but 19 ceases to do so because of inactivity; 20 (7) 1959 Act - the Uniform Disposition of Unclaimed Property Act (Stats. 1959, Ch. 1809; CCP SS1500 21 through 1527, effective 9/18/59); section references are enclosed in brackets [ ]; 22 23 1/ The testimony is somewhat confusing because the words 24 "dormant" and "inactive" are sometimes used interchangeably. Also, since the Bank did not consider an account "inactive" 25 for the purpose of imposing an `~Sinactivity charge" until five years had elapsed from the date of last customer activity 26 in the account, some testimonial use of the words "dormant account" or "inactive account" by Bank officials refers to 27 accounts inactive for such a period of time rather than the statutory period. 28 -2- PAGENO="0419" 415 1 (8) 1968 Act - the Unclaimed Property Law (Stats. ~ 356; CCP §51500 through 1582, 2 * effective 1/1/69); section references other than in brackets are to the 196w ~`\ct; 3 (9) Penalty - 25~ damages and 10% annual intereut 4 on accounts stated by the State Controller as provided by Government Code Sl24l9(b); 5 (10) Saving& Account - an interest-bearing account 6 in which an owner deposits money and from which such owner may withdraw funds at a time 7 which may or may not be specified; 8 (11) Service charges - charges made against deposits ~nd exchange i~ems by Bank by reason of in- 9! activity; 1O~ (12) The Taxpayers - Slettland and Kerner in their standing capacity as taxpayers; Ii (13) UPL - the Unclaimed Property Law or the Uniform 12 ~Thposition of Unclaimed Property Act; 13 (14) Other terms - shall have the meanings set ¶~~h in tE~e UPL unless otherwise noted. 14 15 3. ISSUES PRESENTED 16~ a. Bank of America v. Cory and cross-action, Cory v. Bank 17~ of America. (The Dank Case) 1S,~ The issues presented in this matter pertain to acts 19H undertaken by the Bank with respect to allegedly escheated 2&l property. These issues are cosraon to both actions. 21 (1) Whether the Bank has a right to impose 22 service charges, and if lawfully withheld, whether such charges 23 were reasonable. 24 (2) Whether the Bank has a right to withhold 25H interest or~ savings accounts. 261 (3) Whether the State Controller has a derivative 27!~ right to waiver of service charges and to receive interest 28 withheld. -3~- PAGENO="0420" 416 (4) Whether federal banking laws preempt state laws 2 with respect to the Bank's alleged right to withhold service 3 charges and interest. 4 (5) Whether the State Controller's dame are barred 5 by laches, or by the Statute of Limitations. 6 b. Slettland and Kerner V. Co~y. (The Taxpayers' Case) 7 The issues presented in this matter pertain to the 8 duties of the State Controller with respect to the collection 9 and disposition of unclaimed property: 10 (1) Whether the State Controller failed or refused 11 to enforce the UPL by taking proper steps to recover service 12 charges and interest withheld by banks. 13 (2) Whether the State Ccntroller failed or refused 14 to take proper steps to reunite owners with their unclaimed 15 property. 16 (3) Whether the State Controller failed to seek 17 penalties and interest from holders ?f.dePoSits and exchange 18 items pursuant to the UPL. 19 (4) What remedies would be appropriate to compel 20 the State Controller to perform his statutory duties, including 21 supervisory powers of the Court. 22 (5) Whether the Bank has the right to withhold 23 interest and levy service charges and the related issues outline 24 under the Bank Case above. 25 (6) Whether plaintiff is entitled to an award of 26 attorney fees and, if so, in what amount and against either or 27 both other parties. 28 /// -4- PAGENO="0421" 417 1 4. PERLUSS DECISION 2 On June 20, 1976, Judge Irving H. Perluss of this Court 3 issued a memorandum opinion granting the Controller's motion for 4 partial judgment on the pleadings in the Bank Case No. 257509. 5 A copy is attached hereto as Exhibit B. Based on said opinion, 6 on July 19, 1976, this Court entered its "Order Granting Motion 7~ For Partial Judgrent on the Pleadings," which provides as ~ follows: 9 `IT IS ORDERED, ADJUDGED AND DECREED THAT: 10 `I. Atsent a valid and enforceable contract between plaintiff banks and their customers, 9ank 11 of America and Security Pacific National Bank are not entitled to: 12 "(a) Withhold service charges from 13~ dormart demand and savings deposits and H unclaimed exchange items that escheat to the j4H State of California; and "(b) Discontinue the accrual of interest on dormant savings accounts that escheat to ICi the State of California. 17H `II. Sections 1513(a) and (d) [1502(a) and ~d) of the 1959 Act] of the Codeof Civil Procedure 181 preclude Bank of America and Security Pacific National Bank from withholding service charges from exchange items and demand and savings deposits that escheat to the State where it is the bank's policy 2O;j to waive such charges in favor of their customers if they appear prior to the property becoming 2i~i reportable and payable to the State Controller as 1 escheated property. "III. S'There the banks' policy ic to post sums 22~ representing interest to dor~nt savings accounts when the customers appear, the banks are compelled 24 as a matter of law to also post sui~ representing interest to savings accounts which become reportable 25 and payable to the State &ntroller as eacheated property. 26 27 2/ The cross-actions between Cory and Security Pacific National 28 Bank were dismissed on 2/8/78. - 5-~ PAGENO="0422" 418 I "IV. The phrase `reasonable service charges' contained in sections 1513(a) of the Code of Civil 2 Procedure [1502(a) of the 1959 Act) andthe phrase `may be lawfully withheld' contained in sections 3 1513(a) and (d) of the Code of Civil Procedure [1502(a) and (d) of the 1959 Act) are not vague 4 and ambiguous and therefore not void for vagueness. 5 "V. Any prior practice of the Controller's office in the enforcement of the Unclaimed Property 6 Law does not constitute an administrative regulation authorizing the service charge policies of the 7 plaintiffs. Moreover, any prior adsiinistrative practices by the Controllers in the past which were 8 inconsistent with pronouncements I, II and III above were erroneous and may be disregarded. 9 "VI. The Controller is not estopped from 10 demanding from plaintiffs sums representing service charges and interest from escheatable 11 property. 12 "VII. The Statute of Limitations does not bar the Controller's claim to sums that are report- 13 able and payable to the State pursuant to the Unclaimed Property Law. 14 "VIII. The Controller's demand upon Bank of 15 America for damages and interest is not barred by the one-year statute of limitations set forth in 16 section 340 of the Code of Civil Procedure." 17 The Court adopts the Perluss Order (and the reasoning for 18 said Order contained in said memorandum opinion (Ex. B)) as part 19 of its Intended Decision in these consolidated cases. In con- 20 nection with said Order, the Court finds that it has been proven 21 that it is the Bank's policy to waive service charges in favor 22 of the Bank's customers if said customers appear at the Bank 23 prior to the property (account or item) becoming reportable and 24 payable to the State Controller as escheated property and that 25 it is the Bank's policy to postTMinterest withheld when the 26 1/1 27 /1/ . 28 //, * -6- PAGENO="0423" 419 I customer appears before said time.3 2 5. RIGHT TO WITHHOLD 3 Common to both actions is~ the question of the Bank's right to withhold service charges and/or interest from dorrnaat 5I~ accounts prior to reporting and payriont to the State Controller 6h ~der the 7 a. Service Charges - The~ UPL authorizes banks to exclude 8 from the amount of dormant accounts turned over to the State 9 `...rehsonable service4 charges which may lawfully be withheld 10 ...." (SS1513(a) and (d) [1502(a) and (d)]). (underscoring n! supplied.) To be "lawfully withheld" (i.e., before the Bank 12 may lawfully withhold service charges from dormant demand 13 deposits, matured time deposits, savings accounts and exchange 14 items) the Bank must be authorized to do so by statute or by 15 contract provision. 16 (1) No Statute Authorizes: The Court finds that 17;! neither the UPL nor any other statute specifically authorizes 18~ such charges. The language of~the UPL itself gives no such There was some testimony by Bank officials that in spite of 20 language in the Bank's Standard Practice Manual (SPM) establish- ing the above policy, that each Bank officer had the ability to 21 change the policy depending upon whether or not in the officer's opinion the customer was worthy of benevolence on the part of 22 the Bank, i.e., was the customer likely to be a "profitable" customer. It is easy to see that the customers of the Bank who 23 could least afford the service charges or withheld interest are the ones most likely to be adversely affected by such practices. 24 Surely the State of California would be classified as a "good" customer. 25 The word "service" is used in subsaction (a) dealing with. 26~ bank accounts and deposits but~not in subsection (d) dealing with exchance items. 27~~ 28 /// -7- PAGENO="0424" 420 i authority and to so interpret CCP sections 1513(a) and (d) would 2 render the word "lawfully unnecessary. Therefore, if any 3 authority for withholding exists, it must be found in a contract (2) No Contractual Basis: The Bank contends that it 5 has a valid contractual right to impose service charges on 6 dormant (inactive) accounts and exchange items. The basis of 7 this claimed right is the incorporation clause which appears on 8 both the signature card which accompanies the opening of a savinç 9 or cheeking account and the customer receipt which is attached 10 to the exchange item. That clause provides, in essence, that the 11 account or item shall be governed by the rules, regulations and 12 bylaws of the Bank.. 13 (a) Signature Card. Contrary to the claims of 14 the Bank5, the signature card does not authorize witholding by 15 contract provision for the following reasons: First, the primarl 16 and purported purpose of the signature card is not to form a 17 18 ~, This right "...rests on the signature card which the customer executes when an account is opened, and on custom and practice in 19 California." (Page 14, lines 1-3 of Bank"s first trial brief filed December 3, 1979.) Primary reliance is placed by the 20 Bank on the "signature card" with the argsrnent on "custom and practice" used to bolster the signature card argwnent. The Bank 21 does not purport to argue and did not attempt to prove, and the Court finds that it has not proven, that there is any implied 22 in fact or implied in law contract authorizing Bank to service charge dormant savings and demand accounts apart from contract 23 in which the "signature card" is an integral part. We are not in this case concerned, however, with ALL the rights and duties 24 between a customer and a bank relating to demand account, saving: account or exchange item relationships, bot merely whether that 25 relationship gives a bank a contractual right to service charge dormant demand and savings accounts, gives the bank a right to 26 service charge dormant exchange items and/or gives the bank a right to discontinue the payment of interest on dormant savings 27 accounts. 28 /1/ -8- PAGENO="0425" 421 I contract but rather to provide the Bank with the customer's 2;~ specir~en signat~ure. 6 ~~cnd, t~e customer is not actually or 3~ ~ 6/ The Bank's Exhibit 1 contained various signature cards used by the Bank over the years. The early signature cards contained 5 language substantially as follows: 6 "The undersigned depositor agrees with... (Bank) that this account is to be carried by said 7 bank as a... (corvnercial__savings)...account and all funds which the undersigned depositor has or 8; may have on deposit therein with said Bank shall be governed by its By-Lava, all future amendments thereof, all regulations passed or hereafter to be passed by its Board of Directors pursuant to 10 said By-Laws, and by all rules and practices of said Bank relating thereto including interest, U service charges. etc." 12 In later years the signature card read substantially as follows: 13~ "The undersigned entered into this Bank-depositor agreement with... (Bank). . .and agree that this 14 account shall be carriedby said Bank as a... (checking--savings)...acèount and all funds on 15; deposit in said account shall be gorerned by said Bank's by-laws, all future amendments thereof, all 16 regulations passed or hereafter to ~e passed by its Board of Directcrs pursuant to 3aid by-laws, 17; and by all rules and practices as t~ interest and service charges of said Bank relating to said 1S~ account. Undersigned authorizes said Bank to 1 endorse checks, when presented for deposit to 19 said account, if presented unendors~ad. Bank is authorized to mail or hold statements as indicated 20 on reverse hereof. Undersigned agree that this agreement shall be governed by the ~ational Bank- 21 ing laws and the law of the State of California. Undersigned further agree... (provisions with 22~ respect to ownership of account and authorization for withdrawals, authorized signat~es on checks 23~ and deposits)...." In 1976, after this suit was filed (see ~hibit 1-04016-7),. the Bank substantially changed its signature card. It was then 25 called a "Bank-Depositor Agreer~csnt" (altt~ugh a little stamp at the top says "complete both sides of the signature card and 26 return with your deposit,") and did not irriude any reference to by-laws, rules and regulations, etc.; does not mention 27 service charges; and merely states in pertinent part as follows: 28~I I/i -9- PAGENO="0426" 422 I constructively notified at the time of executing the ccird that 2 the Bank will impose service charges if the account becomes 3 inactive7 or dormant. Third, the customer has insufficient 4 5 (Footnote 6 continued) 6 "By signing this agreement, I open a... (checking- savings). ..account with you. I understand that you 7 will handle my deposit according to your arrange- ments for services of this type. 8 `The publication which you give me as part of this 9 agreement tells me how these services now work. I understand that you will inform me of any changes 10 in these services that affect my rights and obliga- tionsas a depositor." II In other words, the Court finds that the primary p~'rpese 12 of the "signature card" was not to set forth the terms arid conditions, or the rights and liabilities of a contractual 13 relationship between the Bank and its customer. The primary purpose and use of the "signature card" was, as its name 14 signifies, to provide the Bank with a specimen of the customer's signature so that it could verify that signature on withdrawals 15 and checks. 16 In addition, the Court finds that prior to the change in 1976, the customers were not automatically given a copy of the 17 "signature card"; the 1976. "Bank-depositor agreement" has a carbon which is given to the customer when the account is opened 18 The old "signature card" type did not come with carbons and copies were not furnished to a customer unless the customer aske 19 for a copy. Even if a customer asked for a copy, a copy was given only reluctantly (which is understandable if the primary 20 purpose of the signature card was to furnish a specimen signature in order to prevent forgeries). 21 The Court finds that it has been proven by a preponderance of 22 evidence that a customer is not actually notified at the timeth customer opens a savings or checking account or ~urchasesan 23 i~hange item that if such accounts become inactive ordorrnant or such exchange items are not cashed within a certain period of 24 time, that the Bank will impose a service charge thereon. The Court further finds that there ,4~s no uniform custom anUpractice 25 in the banking industry which is known to or reasonably should b known to a customer of a bank that such charges are customarily 26 made by banks. (Although the bank sometimes issues brochures which it gives to customers advising customers as to service 2i charges--no such brochures were available advising customers of 28 charges against dormant accounts.) -10- PAGENO="0427" 423 1 notice of or access to the Bank's by-laws and regulations 2 relating to service charges on inactive or dormant accounts.8 3 Fourth, the fact that the Bank may unilaterally amend or modify 4 its by-laws and regulations without notice to the customer would 5 render a supposed contract created by the signature card illusorl 6 Finally, the signature card, if~ a contract at all, is an adhesio~ 7 crntract which this Court finds~ to be unenforceable to the 8 extent it purports to authorize the Bank to service charge or 9 withhold interest from dormant accounts)~0 10 11 The evidence is clear and the Court finds that a bank custome: is not given, and as a practical matter cannot obtain, a copy of 12 the Bank's by-laws, rules and regulations and practi~es pertain- ing to its service charge practices on dormant accounts. The 13 Court finds that the regulation of the Bank of America which set~ forth its service charge practice on dormant accounts is contain j4~ in its Standard Practice Manual (SPM). Said SPM is an internal bank document not available to its customers. The incorporation 151 by reference in this case, considering all the facts (including ij the small G-tc-8-point-size type on the signature card--see 16l~ stipulation filed April 17, 1980 and çg~~v. Golden State Bank (1979) 95 CA3d 360, 366-367), was insufficient. Richardsv. 17 Merrill Lynch Pierce Fenner&Srnith, Inc. (1976) 64 CA3d 899. 9/ 1 Corbin on Contracts, section 98, page 311. Under the facts 19H in this case the general rule applies and not the exception foun in Automatic Vending Co. v. Wisdem (1960) 182 CA2d 354 or Powell 20 v. Central Cal. Fed. Say. & Loa~Kss'n. (1976) 59 CA3d 540, 549. H See also footnote 3, supra. 21.; 10/ The evidence establishes and the Court finds, that the relationships in question between the Bank and its customers are ,,,~ between two parties of unequal bargaining power, that to the extent it may be considered a contract the signature card is a 4)4 standard form which the customer may not alter and it is offered to the customer on a "take-it-or-leave-it basis." Accordingly, to the extent it is a contract,~it is strictly construed against the Bank and to the extent the incorporation clause might be ~ interpreted to give the right ~o the Bank to service charge dormant accounts or exchange items and withhold interest, the Court finds that it defeats the reasonable expectation of the customer, and since the custo~r has insufficient notice thereof, 28 such provisions are unenforceable. See Steven v. Fidelit~y& Casualty Co. (1962) 58 C2d 862; 11 Loyola L.Rev. 297, 324 (1978). -11- PAGENO="0428" 424 1 (b) Exchange item Reç~p~s, etc. For the same 2 reasons, except the first, the incorporation language in exchang 3 item receipts and savings account passbooks does not authorize 4 withholding by contractual provision. Cory v. Golden State Bank 5 (1979) 95 CA3d 360. 6 Cc) Larrus Case Distinguished - The Bank argues 7 that the case of Larrus v. First National Bank (1954) 122 CA2d 8 884, 889 controls, and that since that case held the incorporat- 9 ing cZause valid, it is controlling in this case. The Court 10 does not agree. The Larrus case ca~i readily be distinguished. 11 In Larrus, it was the bank which was faced with a forfeiture, 12 not the customer. There, the Court did not hold that the 13 language in the signature card incorporating the by-laws, rules, 14 regulations and practices of the bank was sufficient for 15 the purpose of charging the customer with obligations 16 not specifically disclosed to him, but rather, that such 17 incorporation language was sufficient to notify the customer 18 of a procedure authorized by statute by w?iich the Bank could 19 avoid having to suffer a forfeiture due to the customer's 20 dishonor of a deposit. 21 * (3) Reasonableness of charges. In order for the 22 Bank to exclude service charges, they must not only be such 23 charges as "may lawfully be withheld~ but they must also 24 be "reasonable.~ Having found that service charges have not 25 been lawfully withheld, the Cotfft need not reach the question 26 /// 27 /// 28 /,i/ -12- PAGENO="0429" 425 of the reasonableness of such s~rvice charges.11 2~ * (a) Interest. Section 1502(a) of the 1959 Act presumes abandoned, and section 3513(5) of the 1968 Act declares 4~ escheated, any demand, savings, or matured time deposit made wit. 5 a banking organization, "together with any interest or dividends 6 thereon." In 1975, section 1513(a) was amended to provide that 7 interest may not be discontinued because of inactivity [dormancy! S of such accounts. 9~ ~he above-stated reasonin~ applied to service charges 1O~ applies with equal force to the~question of withholding interest 11j from dormant savings accounts and matured time deposits. The 12 Court finds that such interest has not been "lawfully" withheld 13 from such dormant accounts pursuant to statute or valid contract 14 provision. The lack of reasonable foreseeability on the part 15! of a customer that a bank which is using his or her money would 1G~ 17~ 117 To the extent it might be nccessary to determine whether or not the charges wore reasonable, tho Court finds that the Bank ma IS:, r.~t take into consideration the pricing practices of other Banks and the ccmpetitive status of the market for such services in 19! order to determine the amount of charges to be imposed on dormant savings accounts since it is clear that "market price" cannot be 20 relevant when the customer is unaware of the charge. A market price becomes a relevant factor in determining reasonablenesses 21' of charge only when that market price is fixed by competition. Since none of the customers of the Bank were aware there was any 22!! charge at all, how can it be said that competitive factors went into the fixing of the price? 23 This leaves as factors to be considered in the question of the 24 reasonableness of the charges, the expenses the Bank incurs by reason of the maintenance of th~ accounts which are dormant in 2z~ comparison with the revenue produced by such accounts. The Bank did not produce any evidence which took into consideration both 26 factors. The testimony of the Bank's expert, Dr. Buckley, might have been more persuasive if it had not been justifying a result 27 previously reached by some other method. Accordingly, the Court finds that the Bank has not proven by a preporderance of the 28 evidence that its service charges are "reasonable" within the meaning of the UPL. -13- PAGENO="0430" 426 I stop paying interest because the customer didn't for instance, 2 withdraw some of the funds, applies with even greater force to 3 the withholding of interest. 4 (b) Derivative Rights. Even if the interest 5 could be lawfully withheld or the service charges lawfully 6 imposed, the Court finds that the Bank's policy was to credit 7 the withheld interest and reverse the service charges if the 8 customer claimed the account before it was reported or paid to 9 the Sthte. Thus, under the reasoning of Bank of America v. 10 Cranston (1967) 252 CA2d 208, the Controller stands in the shoes II of the customer and is entitled derivatively to receive the same 12 treatment. (See Footnote 3.) 13 (c) Conclusion. The Court concludes that the 14 Controller is entitled under California law to recover withheld 15 interest and service charges from the Bank, unless barred by 16 federal preemption, statute of limitations, or laches. 17 6. PREEMPTION BY FEDERAL LAW 18 The Bank argues that the escheat provisions of the tJPL 19 Sl513 have been preempted by Federal Banking Regulations and 2() thus are not applicable to national banks such as Bank of 21 America. 22 The following passage from State of North Dakota v. 23 Merchants National Bank and Trust (1979) 466 F.Supp. 953 outline 24 the preemption issue being raised here: 25 "Congress. in enacting the"National Bank Act, 12 U.S.C., did not specifically preempt the regula- 26 tion of national banks. But the lack of an express provision of preemption in the Act is 27 not determinative of the issue of whether in fact there is preemption. (Citation) The intention 28 of Congress to preempt a field, assuming it has -14- PAGENO="0431" 427 1 power to do so, may be evidenced in several ways~ * . . the scheme of federal regulation may he so 2 pervasive as to make reasonable the inference that Congress left no room to supplant it. . .or 3 the federal Act may touch a field in which the federal interest is so dominant that the federal 4 system will be assumed to preclude enforcement of laws in the area. . . or the state policy may 5 produce a result inconsistent with the objective of the federal statute." 6 7 The Bank argues that the National Bank Act and curtain 8 other provisions of federal law Mest exclusive control over 9 intere~t payable by national banks in the Federal Reserve System. 10 They also argue that since 12 C.F.R. section 7.7515 explicitly 11 states that national banks may impose service charges on dormant 12 accounts, a California law (CCP section 1513 [1502]), which 13 atter'pts to prohibit such a practice, is clearly preempted. 14 The Bank also cites two recent cases, State of North Dakota v. 15~ Merchants National Bank and Trust (1979) 466 F.Supp. 953 and 16~ Conf. of Fed. Savings & Loan Assns. v. Stein (1979) 604 F.2r~ 125 17~ (aff'd. U.S. Sup. Ct. 1980) as ~uthority for their contention 18 that federal law preempts California law in this area. 19~ The Bank concedes that incertain situations states have 20 lir~ited authority to regulate n~tional banks. As recognized by 21~ the U. S. Supreme Court in Anderson National Bank v. Luckett 22 (1944) 321 U.S. 233, one of these situatiens is a state escheat 23 statute relating to personal property held by a national bank 24 which is presumed to have been abandoned. In Luckett, the Court 25 noted that: 26~. (1) The Kentucky statute had a rebuttable presumptio~ 27:~ of abandonment if the owner of :the bank account made no with- 28~ drawals, deposits or other transactions for a 10-year period; -15- 67-4L~0 0 - 81 - 28 PAGENO="0432" 428 (2) That the statute provided a method for the owner 2 to rebut the presumption of abandonment and tg appeal adverne 3 rulings; and 4 (3) The bank had an obligation to provide record 5 owners with notice and an opportunity to be heard before their 6 property would be presumed abandoned. 7 The Court found these statutory procedures sufficient to overcom~ 8 the argument that the escheat proceeding violated the property 9 owners~right to due process. Further, the Court held that the 10 ~entucky statute did not infringe upon the national banking laws 11 because the law was applied to both state and national banks 12 egua~y. The Court found no express or inplied language in the 13 national banking law which conflicted wit~ the Kentucky statute. 14 The Bank seeks to distinguish Luckett on the basis of 15 12 C.F.R. section 7.7515, which provides that "A national bank 16 may, consistent with contracts of deposit, impose such service 17 charges on dormant accounts as its board of directoro determines 18 to be reasonable." The UPL, however, prorides that "reasonable" 19 service charges lawfully withheld are exsnpt from the reporting 20 and payment provisions of the statute. Thus, 12 C.F.R. section 21 7.7515 and the UPL are not in conflict. In addition, the 22 provisions of 12 C.F.R. section 7.7515 do not raise any conflictr 23 based upon the facts of this case. The imposition by the Bank 24 of the service charges in question is not "consistent with 25 contracts of deposit" as this C~urt has ~1d that there are no 26 enforceable contracts of. deposit to which the imposition of 27 service charges could be consistent. 28 In Luckett, the Court also distingoished an earlier opinion -16- PAGENO="0433" 429 I in which it had held that provisions of California law ((former] 2 CC? section 1273 and Bank Act section 15, which required escheat 3 to the state of all bank deposits which remained unclaimed and 4 inactive for a period of twenty years) were illegal as being in 5 conflict with the policies of the national banking legislation. 6 First National Bank v. State of California (1922) 262 U.S. 366. 7 The Luckett Court explained the decision in First National Bank 8 by pointing to the fact that theCalifornia statute required no 9 proof `that the account had in fact been abandoned or that the 10 owners' whereabouts were unknown and unascertainable--all the 11 statute required was the requisite period of time to elapse and 12 the accounts would escheat to the state. Thus, the fact that tht 13 accounts were subject to escheat under the statute mere~y for 14 steeting the specified period of dormancy without any determina- 35 tion of abandonment was the crux of the reason why the statutes 16 were declared invalid. Under the UPL there are explicit require- 17 ments that owners of accounts w1~ich may be subject to eacheat 18 be notified of that fact and be provided with forms which will 19 allow then to maintain a viable interest in their account. (CC? 20 section 1513.5.) Thus, the present law In California avoids 21 the problems of lack of notice and the conclusive presumption 22 present in First National Bank. Instead, the UPL requirements 23 of reasonable notice and opportunity to renew a dormant account 24 are similar to the provisions of the Kentucky statute upheld in ~5! Luckett as reasonable state re~1ilation of national banks located 2G~ within the state. This position is strer~gthened by the fact that 27 the California escheat laws are applied equal~y to state and 28 national bank deposits as in Luckett and there is no apparent -17- PAGENO="0434" 430 I inconsistency with provisions of notional banking law. 2 Since there is no pervasive federal banking regulation in 3 this area and the U. S. Supreme Court has indicated that nationa. 4 banks can be subject to state escheat laws where reasonable and 5 properly drawn, the Court finds that federal law does not preempt 6 the application of the UPL to the Bank. 7 7. STATUTE OF LIMITATIONS; PREJUDGMENT INTEREST; RETROACTIVITY. 8 Some of the most difficult problems presented by this 9 case ihvolve questions of time. To the extent that the Bank is 10 liable for service charges and for withheld interest, what limit 11 if any, are imposed upon that liability? 12 a. Statute of Limitations - Paragraphs VII and VIII of 13 the Perluss Order held that there is no statute of limitations 14 which bars Coryts claim to sums reportable and payable pursuant 15 to the UPL and that Cory's claim for damages and interest 16 pursuant to Government Code S124l9 is not barred by the one-year 17 statute of limitations set forth in CCP S340. 18 The Court, having adopted that Order and the reasoning 19 therein, is bound by its terms. Accordingly, the Court finds 20 that there is no applicable statute of limitations, as to amount. 21 required to be reported and paid by the Bank to Cory, which 22 provides for a time within which Cory must file an action to 23 compel the Bank to report and pay such sums. 24 Implicit in Paragraph VIII of the Perluss Order is the 25 finding that neither the 25% dastagesnorthe 10% interest claims 26 arising out of Government Code Sl2419 is a penalty or forfeiture 27 within the meaning of CCP S340. The Order is silent with respect 28 to any other statute of limitations which may apply to such -18- PAGENO="0435" 431 1 damages and interest. It follows, then, that the provisions of 2 Government Code Sl2419 create a st~atutory liability subject to 3 the three-year statute of limitations set forth in CCP S338(l), 4 and the Court so finds. Thus, Cery's action to recover 25% dam- 5 ages and 10% interest is limited to noney (which belongs to the 6 State by escheat) which was payable within six months of the 7 final date for filing the report for the year ending June 20, 8 1972 (or the fiscal year end next preceding) plus any extensions of the~fina1 filing date granted by the Controller. 10 b. Prejudgment Interest - The action as to amouflts reportable and payable not being barred, the Court finds that 12H Cory's claim for prejudgment interest is not barred and that 13 Cory is entitled to prejudgment interest. Civil Code S3288 14 provides that prejudgment interest mey be given in the discretion 15 of the jury, in an action for the breach of an obligation not 16 arising from contract. The trial court, when acting as the 17 trier of fact, may award prejudgment interest under this section. 18 Nordahi v. Department of Real Estate (1975) 48 CA3d 657, `665. 19 Prejudgment interest is awarded tb compensate the party for the 2U~ loss of use of his or her property. Bullis v. Security Pacific 21~I National Bank (1978) 21 C3d 801, 815. Judge Perluss, in his merr~randum opinion of June 20, l9~76, der~ying application of the 23H doctrine of equitable estoppel, noted that the Bank has used 24 depositor's money (and derivatively the State's money) to make 25 money. The Court finds that anTMaward of prejudgment interest 26 from the dates uponwhich moneys were payable would compensate 27 Cory (and any owners who may claim escheated funds from him) for 28 the loss of use of the money. -19- PAGENO="0436" 432 c. Available Records - Subdivision (g) of Sl510 of the 2 1959 Act prescribes that the initial report to the Controller 3 under the Act ". . . shall include all items of property held for 4 another person which are ascertainable from the available record 5 of the holder, which items of property would have been presumed 6 abandoned if this chapter had been in effect at and after the 7 time such property first became payable, demandable or return- 8 able...." (Underscoring supplied.)12 9 ~ 10 /// 11 /// 12 /// 13 /// 14 /// 15 16 12/ Subdivision (g) goes on to further state as follows: provided that only such moneys which first becaise unclaimed 17 funds as that term is defined in this chapter within three years preceding the effective date of this chapter must be 18 included within the initial report and any other moneys consti- tuting unclaimed funds as thus defined may be included within 19 the initial or any subsequent report and if so included the holder shall be entitled to the protection afforded by Section 20 1513. All items of property, less proper charges and offsets, other than unclaimed finds, which on January 1, 1949 appeared 21 from the available records to be held for another person and were thereafter without notice to the owner or without prior 22 approval of any regulatory or licensing authority of this State transferred or credited by the holder directly to capital or 23 surplus or undivided profits shall be deemed to be subject to the provisions of this chapter and shall be included within the 24 initial report." The parties agreed that the words "unclaimed ~ refers to funds held and..owing by a life insurance 2o corporation as defined in Sl503 so that the three-year pro- vision in the second sentence of §1510(g) above did not apply 26 to this case. Although the last sentence would appear to be applicable, the Court cannot recall any evidence or argument 2i with respect thereto and, accordingly, makes no finding thereon. 28 -20- PAGENO="0437" 433 I The Court interprets the term "available records" to mean 2 the Bank's records which were available on the effective date 3 of the 1959 Act, i.e., September 18, 1959.13 4 7. DEFENSE OF LACHES 5 a. Application of the Defense - The defense of laches 6 applies only in equitable actions. Bagdasarian v. Gragon (1948) 7~ 31 C2d 744, 752; Perez v. Singh (1971) 21 CA3d 870, 872; ~ 7 Witkin Sui~mary of California Law, 8th Ed., 5240 (Equity, 9 aectioh 14(a)(2)). The Controller's cross-complaint seeks 10 several rez~dies: Declaratory relief, statutory damages, 11 penalties and interest, and an acãounting. Where the action 12 seeks declaratory relief and damages, the defense is not 13 - 14 13/ The Court interpets the last clause of the quoted language to mean that the items of property reportable included all items 15 of property which appeared on the~ Bank's records at that time, upon which the seven-year or fifteen-year periods prescribed 16 by Sl502, subdivisions (a) and (d) had e~ired, regardless of when such property ~came payable to, demandable by or returnable 17 to the owner. Thus, ~lf such items of pr~erty were payable, demandable, or returnable at any time prior to the applicable 18 seven-year or fifteen-year period before September 18, 1959 and were ascertainable from the Bank's records on that date, j9; they were required to be reported and paid to the State Con- troller. 20 Evidence was introduced to indicate that in its SPM the 21 Bank has guidelines for retention of records. There was no direct evidence that records available on September 18, 1959 are no longer available. There is evidence that the Bank conducted an audit which produced an amount certain representing 23 service charges, interest, and charges against exchange items, all of which were withheld and unreported for the period 1960 24 through 1974. This amount was adopted as the basis of the Controller's demands upon the Bank for payment prior to the ~ filing of the cross-complaint i't~ this action. While no evidence was introduced to show the actual existence or nonexistence of 26 such records, they may be in the Bank's possession in some form. Cory's recovery will necessarily~be limited by the availability 27 of those records which have not, in the ordinary course of business, been destroyed by the Bank.. 28 -21- PAGENO="0438" 434 I available as to the cause of action for damages. McCullough v. 2 Jones (1970) 11 CA3d 270, 275. 3 The Controller's cross-complaint is not readily divided 4 into equitable and legal causes of action on the basis of the 5 numbered causes of action. It is more readily categorized by 6 the relief sought which the cross-complaint does not segregate b 7 causes of action. The sixth cause of action, however, is for an 8 account stated, which the Court finds is an action at Law to 9 which `the defense of laches does not apply. In addition, the 10 defense of laches does not apply to the Controller's claimed II relief for damages for amounts claimed to be due to the State 12 under the UPL or for statutory penalties and interest thereon. 13 b. Burden of Proof - Doctrine in General - The buruen of 14 proof to establish the defense of laches is on the Bank. The 15 elements to the defense have been stated to be "...unreasonable 16 delay, plus either acquiescence in the act about which the 17 plaintiff complains or prejudice to the ~fendant resulting 18 from the delay. Conti v. Board of Civil Service Commissions 19 (1969) 1 C3d 351, 359. (Underscoring supplied.) 20 c. Lack of Prejudice - It is clear that the defense of 21 laches is normally dependent not only on the delay, but also 22 upon the injury it causes. It may be invoked only where refusal 23 to do so would permit an unwarranted inj~tice to be done to the 24 defendant. McCullough v. Jones (1970) 11 CA3d 270 at 275-276. 25 "If the delay has caused no mat~rial change in statu ~ ante, 26 i.e., no detriment suffered by the party pleading the laches, 27 his plea is in vain. Conti v. Board of Civil Service 28 Commissioners, ~ at 360. - ., *)_ PAGENO="0439" 435 I The Court finds that evidence of prejudice to the Bank 2 in this case is substantially lacking. The fact that the Bank 3 retained full use and enjoyment of the sums withheld as servic~ 4 charges and unallocated interest negates prejudice. In addition, 5 no change of position in reliance on asserted delay by the 6 Controller was to the detriment of the Bank, but rather W~S to 7 its substantial benefit. 8 ci. Acciuiescence - The Bank's primary reliance in 9 asserting its laches defense is on the claimed acquiescence of 10 the Controller. A literal reading of the language from the Conti 11 case quoted above supports the Bank's claim. This Court agrees 12 with the taxpayer that such reliance on Conti is misplaced and 13 adopts the reasoning of the taxpayer on pages 69-72, inclusive, 14 of the taxpayers' "Post-Trial Memorandui~ of Points and Authoritie 15 Equity evolved from an attempt to soften the harsh results 16 obtained from a strict reading of co~on-1aw pleading forms. 17 The Bank asks this Court to rigidly apply the language from 18 Conti without viewing that language in the context of the Conti 191i case and in light of the basic equitable rules undergirding the 2O~ laches doctrine. The Court, in Conti, relied in part upon ~p~or 21~ v. Nat'l. Union, etc. Cooks & Stewards (1953) 116 CA2d 320, 326. 22 In the Hopson case the Court's language shows that "acquiescence' 23! is only one element to be taken into consideration by the trier 24 of fact in exercising equitable principles to decide if the 25 granting of the relief prayed fer would be unjust. 26 e. public Interest - In addition, this Court is of the 27 view that even if the Bank could be said to have proven sufficier. 28 facts to invoke laches against a private party, it must also prov -23- PAGENO="0440" 436 ~ that the injustice which would result to it from a failure of 2 this Court to sustain its laches defense is sufficient to justif 3 the adverse effect upon public interest or policy which would 4 result from the upholding of such a defense. City of Lggg Beach 5 v. Mansell (1970) 3 C3d 462, 496-497. Taking into consideration 6 the policy objectives of the tJPL, the mischief which could resul 7 from a rigid application of an acquiescence doctrine when the 8 State, acting as a fiduciary for the people, fails to exercise 9 its po9iers to carry out that public interest, and the necessity ~O that people have confidence not only in their public officials 11 but also in private corporations such as the Bank which is imbue 12 with massive influence upon the public, any injustice to the 13 Bank by reason of the delay and any acquiescence on the part of 14 the State is far outweighed by the public's interest in the - 15 proper enforcerr~nt of the UPL. Accordingly, the Court finds 16 that the Bank has not established laches as a defense to the 17 portion of the relief prayed for which is equitable in nature.14 18 14/ 19 It is clear from the evidence and the Court so finds that thc Controller knew or should have known shortly after the enactment 20 of the UPL in 1959 that the Bank was not reporting the gross amounts of unclaimed accounts and items before the deduction of 21 service charges. In other words, the Controller knew or should have known that the Bank was only reporting the net amounts 22 after the service charges had already been deducted. It is also clear that at the time of the passage of the UPL the Controller 23 knew or should have known that the Bank was not reporting some accounts at all since some had already been service charged to 24 extinction during the dormant period. The evidence is not nearly so clear as to when the Controller knew or should have 25 known that the Bank was withhol~ing interest on dormant savings accounts during the inactivity period and with regard to such 26 practice the Court specifically finds that there was no acquiescence on the part of the Controller. To the extent that 27 the Controller could be said to have ~acguiesced in the Bank's service-charc3e practice, it was not so much based upon any lack 28 of knowledge en the part of the Controller, but upon erroneous -24- PAGENO="0441" 437 II 8. CONCLUSION (The Bank Case No. 257509) 2 Bank shall account for and pay over to the Controller all 3 service charges imposed upon dormant accounts and exchange items 4 and all interest withheld from dormant accounts ascertainable 5 from its available records as of September it, 1959, and subre- 6 quent thereto, plus interest at the legal rate frcm the date 7 such accounts and items were fir~t payable. Th'~ Bank shall 8~ further furnish to the Controller the names and addresses of such a~count and item o~ers as ascertainable from its availnble 10~ records. 11~j 9. REMEDIES (The Taxpayers' Case No. 250500) 12~J The taxpayers seek orders compelling the controller to 13 carry out his statutory duties pursuant to the UPL. The Court 14 15 (Footnote 14 continued) 161 assumptions on the part of the Cbntroller as to the law. In 1 this connection, to find acquiescence as a basis for granting 1/~ a defense of laches would, in effect, contradict Judge Perluss' Order to the extent that it determined as follows: 18~ ~V. Any prior practice of the Controller's 10~ office in the enforcement of the Unclaimed Property Law does not constitute an admin- 20 istrative regulation authorizing the service charge policies of the plaintiffs. Moreover, 21 any prior administrative practices by the Controllers in the past which are inconsistent 22 with Pronouncements I, II and III, above, are erroneous and may be disregarded.~ 23 The essence of the Controller~s inaction was the Controller's 24 erroneous assumption that the B~nk had some "right'S to service - charge these accounts and it wajn't until jostled by the 2~i~ taxpayers' suit that the Controller began to effectively question that assumption. This is not to say that the neglect 26~ of the Controller and the Controller's, staff was in any way venal. Such neglect appears from the record to be based more 2ii on a lack of budgetary resources and the Controller's inactivity should be viewed in its historical perspective. -25- PAGENO="0442" 438 1 has heretofore found that the practices of the Bank (served in 2 thetaxpayers' action as DOE I), are in violation of the statute 3 The evidence shows that since the opinion was rendered in 4 Farley V. Cory (1978) 78 CA3d 583, and the temporary emergency 5 regulations were enjoined, the Controller has carried out his 6 statutory duties to secure payment of amounts from banking 7 organizations, and has issued valid regulations under the OPt. 8 The Court finds that Cory is in substantial compliance with thos 9 provis~ions of the UPL requiring him to secure accounting and 10 payment of those amounts. However, the evidence shows, and the 11 Court finds, that Cory has failed to ascertain the names and 12 last-known addresses of owners whose accounts and exchange items 13 have been collected from various banking organizations, whether 14 by litigation or by demand without litigation. Without taking 15 reasonable steps to ascertain this infor~ation, Cory is unable 16 to perform his statutory duty (see S1531) to reunite the rightfu) 17 owners with their property and thus fails to perform one of the 18 two main purposes of the Act. 19 The Court will, therefore, order Cory to continue to 20 perform his statutory duties prescribed ty the UPL, including 21 discovery of the names and last-known addresses of those owners 22 whose property has been or may in the future be paid to the 23 Controller, whether by legal action or pwrsuant to demand by 24 Cory to a banking organization without litigation. 23 Taxpayers have relied upo'~i Knoff v. City and County of 26 San Francisco (1969) -l CA3d 184 in support of their prayer that 27 the Court retain jurisdiction to supervise the carrying out of 28 its orders. In Knoff, the Court retained jurisdiction to modify -26- PAGENO="0443" 439 I the peremptory writ of mandate and~required that defendants 2 report to the Court periodically concerning the steps beiog take~ 3 to comply with the writ. There, the Board of Supervisors declin 4 to review assessments and to determine the nature and extent to 5 which various properties had been underassessed, while the 6 criminal prosecution of Russell Wolden was pending. The result 7 of such delay would have been the irreparable loss of property tax revenue due to the failure of the Board to corry out it~ duties'. 10 Here, the situation is different. The Controller is now 11 substantially performing his statutory duties with respect to 12 the UPL. There is no threat of loss to the State Treasury of 13 unclaimed funds due to inaction by the Controller or t~-e lapse of j4 time. The Court finds that retention of jurisdiction to super- 15 vise the execution and enforcement of its orders is neither 16~~ necessary nor warranted. The findings as to the duty of the Bard: 17 to pay withheld funds to the Controller, and as to the inappli- 18~ cability of the statute of li~itations,except as to penalties, 19~ preclude the possibility of loss of funds because of inaction or 20~ the passage of time. 2l~ 10. ATTORNEY FEES 22 It is clear from the evidence that, but for the action by 23~ the taxpayers, the Controller woild not have adequately pursued 24 the recovery of the amounts due from banking organizations. 25 As Justice Reynoso noted in his"dissenting opinion of May 25, 26 l979,in which the Court of Appeal refused to order consolidation 27 "Since they filed the seminal complaint in the Farley action, petitioners [taxpayers] have carried 28~ forth the interest of the people in. thi!; matter; .-27~~ PAGENO="0444" 440 I whereas, the State Controller has demonstrated a reluctance to do likewise. Indeed, after 2 petitioners' initial complaint, the Controller's office atteipted to issue regulations px~eserving 3 the challenged bank practices. Only petitioners' procurement of a preliminary injunction forbidding 4 the issuance of such regulations protected the people's interests.' 5 6 This Court concurs in Justice Reynoso's observations. 7 The taxpayers assert-several theories upon which an award 8 of attorney fees can be based. * - .9 ~rhe first is that provided by S1021.5 of the Code of Civil 10 Procedure whièh provides that the Court may award attorney's fee ~ to a successful party where a significant benefit has been 12 conferred on the general public, where the burden of private 13 enforcement makes such award appropriate, and where such fees 14 would not, in the interest of justice, be paid out of the 15 recovery. This statute embodies the "private attorney general 16 theory. Prior to its enactment, California permitted an award 17 based on this -theory only where a constitutional right is 18 vindicated. Serrano v. Priest (1977) 20 C3d 25, 46-47 (Serrano 19 III). The statute has been held to expai~I the application of 20 this theory to vindication of important statutory rights. 21 Woodland Hills Residents Assn., Inc. v. City Council (1979) 22 23 C3d 917, 925. There, the Court said: 23 "An award on the private attorney general theory is appropriate when the cost of the claimant's 24 legal victory transcends his personal interest, that is, when the necessity for pursuing the - lawsuit placed a burden dh the p~.aintiff `out of proportion to his individual stake in the matter. 26 (Woodland Hills, supra, at 941 quoting from Cou~~ 2~ ~~yo v. City of L.A. (1978) 78 cA3d 82, 89.] 28 /1/ - -28- PAGENO="0445" 441 I The second is the "substantial benefit" rule. When a 2 class action results in conferral of substantial benefits upon 3 the defendant, the defendant may he required to yield some of 4~ those benefits in the form of ar award of attorney's fees. 5 Serrano v. Priest (1977) 20 C3d 25, 31 (Serr~ino III); Knoffv. 6 City and County of San Francisco (1969) 1 CA3d 184. This rule 7 of equity has been applied to tax~ayers' suits for declaratory 8 relief, such a suit being, by its very nature, a class action. 9 Card v'. Community Redevelopment Agency (1976) 61 CA3d 570, 583. 1O~ See also, Mandel v. Hodges (1976) 54 CA3d 596, 583. The third is the "common fund" theory wherein fees are 12!~ awarded on the basis that all who, participate in a common fund 13 created or preserved by plaintiff:'s action should pay the cost 14j1 of its creation or preservation. This is best achieved by 15 taxing the fund itself for attorney?s fees. Serrano v. Priest, 16 ~ at 35. Estate of Stauffer (1959) 53 C2d 124. The fourth theory, which the Court declines to discuss ISjI because it does not apply, is the so-called "obdurate behavior" 19~ doctrine w~.erein attorney's fees may be awarded as a punitive 2O~j ~easure. 21: The Court finds that the taxpayers are entitled to an 22~ award of attorney's foes under the provisions of CCP §1021.5 23 and the common fund doctrine. The Court further finds that the 24 substantial benefit rule is inapplicable because the benefit 25:, derived from the action is not ~, benefit of the Controller or 26J the Bank, but rather is conferred on the People of the State of 27~ California and the owners of unclaimed property. 28~ * The Court finds, adopting Justice Reynoso's above-quoted 29T PAGENO="0446" 442 I reasoning, that a significant pecuniary benefit has and will 2 in the future be conferred upon the general public, the recovery 3 of millions of dollars of unclaimed property by the State 4 Treasury. The taxpayers in this action are not owners of un- 5 claimed funds and will derive no direct benefit from the result 6 of their action. Whatever benefit they may derive will be 7 indirect and only as a result of recovery of the unclaimed 8 property by the State. Clearly the necessity of pursuing this 9 action (and the appellate proceedings involved) place a burden 10 on the plaintiffs "out of proportion to Etheir) individual stake 11 in the matter." County of Inyo v. City of L.A. (1978) 78 CA3d 12 82. 13 Here, as well, the taxpayers' action has created or pre- 14 served an identifiable, ascertainable fund for the benefit of 15 owners who may claim their property, and for the benefit of the 16 general public where such funds remain unclaimed. The Court 17 finds that an award of attorney's fees payable from that fund 18 is appropriate in this action. 19 The Court agrees with the argument of the Bank that 20 plaintiff taxpayers have proved no facts justifying direct relief 21 in the form of attorney's fees from the Bank. The payment of 22 fees from the common fund will adequately compensate the tax- 23 payers, and, accordingly, any direct payment of attorney's fees 24 to plaintiffs by the Bank will not be required. 25 ii. CONCLUSION (The Taxpayers' Case No. 250500) 26 The Controller shall take such steps as are necessary to 27 enforce the provisions of the UPL in conformity with the law, 28 this decision and the Controller's regulations. The Controller -in- PAGENO="0447" 443~ I shall pay to the taxpayers' attorneys, out of the property 2 recovered pursuant to this action, and that recovered without 3 litigation pursuant to demand by the Controller since the date 4 this action was filed, fees and costs in such amount, and upon 5 such terms, as the Court shall or~1er upon motion by plaintiffs. 6 DATED: July 17, 1980. JUDGE OF THE SUP RIOR COURT A. RICHARD BACKUS 10 11 12 13. 14 15 IGL 17~ 18 19 2O;~ 21~ 22 2.3 24 2.5 26 27 28 -31- 67-~P4O 0 - 81 - 29 PAGENO="0448" 444 JOE J. ROBY, JR., MEMORANDUM TO DAVID EPSTEIN CONCERNING Visi- TORIAL POWERS OVER NATIONAL BANKS, MARCH 21, 1979 STATE OF MINNESOTA DEPARTMENTState Treasurers Office Office Memorandum TO : David Epstein DATE: 3/21/79 FROM : Joe J. Roby, Jr. PHONE: SUBJECT: Visitorial Powers Over National Banks I. Question Presented: Does 12 U.S.C. ~ 484, "Limitation on Visitorial Powers,' prohibit the state from examining the records of a national bank for the purpose of enforcing the state's unclaimed property act? ii. conclusion: No, that statute does not prohibit the state from conductin~ such an examination. III. Facts and Discussion: The comptroller of the currency has cited ITiTs.c. § 484 to support his claim that states may not examine the records of a national bank for unclaimed property. That statute says: No bank shall be subject to any visitorial powers other than such as are authorized by law, or vested in the courts of justice or such as shall be or shall have been exercised or directed by congress, or by either House thereof or by any cozsnittee of congress or of either House duly authorized. The comptroller claims that this statute gives the federal government exclusive visitorial powers which include the power to examine for unclaimed property. - The foundation for a state's right to examine a national bank for unclaimed property is the state's power over unclaimed property held by national banks. The Supreme court of the United States has held that national banks must comply with state unclaimed property laws. Anderson National Bank v. Luckett, 321 U.S. 233 (1944). In Anderson, the Supreme court said that a state "... may enforce its statute requiring the surrender:to it of presumptively abandoned accounts in the national as well as state banks . . ." Id. at 252. The court sanctioned the requirement of filing forms as an appro- priate incident to this exercise of authority. Id. at 252-53. The examination of bank records is an invaluable tool in the enforcement of an unclaimed property act, and the Supreme court's acknowledgement that a state may enforce its act against a national bank surely did not rule out state examinations. More likely, the allowance of state examinations is consistent with Anderson. The disallowance of state examinations renders the court approved enforcement very weak. PAGENO="0449" 445 The question presented above was decided in Clovis National Bank v. ~ 69 N.M. 119, 364 P. 2d 748 (1961). The Supreme Court of New Mexico overruled a lower court's decision that the section of New Mexico's unclained property act authorizing state bank examinations was unconstitutional as applied to national banks. The lower court had relied on section 484, quoted above. The Supreme Court cited Anderson as giving New Mexico jurisdiction over unclaimed property in national banks and expressed concern about the same enforcement obligations suggested in Anderson: with the right to obtain the informOtion there must be a means of enforcing.valid demands, and under the authorities xe are clear that so long as the same are reasonable and do not interfere with the purpose of the bank's creation, or impair or destroy its function- ing and are not in conflict with some paramount federal law, there is no valid objecti~n that can be voiced to the provisions (for state bank examinations). Id. at 364 P. 2d at 756. An Oregon case, State v. Portl~nd National Bank, 61 Or. 551, 123 P. 712 (1912), beT ca~theexh~dise ofthi~T~Tt of the state to escheat bank deposits was not an attempt to exercise a prohi- bited visitorial power over a national bank. While not specifically addressing the question of state examinations, the Oregon court said: "ye conclude, therefore, that national banks are only exemp- ted iron state legislation to the extent that such legislation in- their efficiency to perfo thefunctions, which they were to serve, and that the legislation here proposed does not have this effect." Id. at , 123 P. at 716. The New Mexico S~orama Ccvrt, in Clovis, supra, coented on this Oregon case saying: "Aithough~~ao not perceive that the Oregon statute had a Provision (for examinations), it did contain provisions whereby ccmoiiance `ow banks could be assured.' Clovis National Bank v. Calawav, 69~ ~.N. 119, , 364 P. 2d 74W~75~ fl96IJT TBI, PcrtIi~~ impliedly appr3~s state examinations of national banks. Both the New Mexico and Oregon Supreme Courts cited First ~aticnsl Bank of Youngsto~ v. ~g~ies, 6 F. 737 (C.C.N.D.~ET~ ~ Huthes interpreted a statute similar to section 484 in deciding wnetner the statute prohibited state taxing authorities frrv examining deposits in a national bank.- The court said: do the defendants, or either of them, propose the exercise of visitorial authority? We think not. visitation, in law, is the actof a superior or super- intending officer, who visits a corporation to examine into its manner of conducting business, and enforce an observance of its laws and regulations. Burrill defines the word to mean "inspection; superintending; direction; regulation." The exercise of no such authority is contemplated by defendants. They do not contemplate inspection, supervision, or regulation of complainant's business, or an enforcement of its laws or regulations. On the contrary, their purpose is to ascertain, in a legal way, and by legitimate testimony, whether any person had, at the time men- tioned, on deposit with complainant any money subject PAGENO="0450" 446 to taxation in said county which had not been returned by the owners thereof for that purpose. Hence, the subpoena corrsnanding the production of the complainant's books, in the manner and for thepurpose stated, is not an exercise of "visitorial powers;" and it follows that the witness is not protected by said section from amen- ability to the probate court for his contempt in dis- obeying its mandate. Id. at 740-41. It is important to note that Hughes is a federal decision inter- preting the federal statute and persuasively suggests that a federal court would arrive at a similar result regarding state unclaimed property examinations. Furthermore, the highest courts of two states, following Hughes, agree. These cases demonstrate that national banks are subject to state unclaimed property acts; that a state's power over unclaimed property held by a national bank is ineffective without the right to examine the bank's records; that a state examination of a national bank for unclaimed property is not a visitation proscribed by section 484. Although Anderson, Clovis, Portland, and Hughes together have laid to rest the question presented above, there are other cases which suggest the same result. The term visitorial power, as used by a predecessor statute to section 484, does not include the coon law right of a shareholder to inspect the books of the corporation. Guthrie v. Harkness, 199 U.S. 148 (1905). State courts have jurisdicti3~ to compel officer of a national bank to permit a stockholder's examination of its records and documents for a proper purpose. Woodworth v. Old Second National Bank, 154 Mich. 459, 117 N.W. 893 (1908). The use by the Securities and Exchange Coimnission of reports of bank examiners made to the Comptroller of the Currency with reference to a bank under inves- tigation by the S.E.C. was not an exercise of visitorial powers. Bank of America National Trust & Savings Assn. v. Douglas, 105 F. I~(5D.C. 1939). - _______ - _______ PAGENO="0451" 447 Prather, William C. SAVINGS ACCOUNTS, 5th ed. (Chicago: Institute of Financial Education, 19714), pp. 627-36. INACTiVE OR DORMANT ACCOUNTS I Need for an established corporate policy dealing with inactive accounts I Inactive or dormant savings account defined I Redemption of inactive or dormant savings accounts I Certain precautions in the administration of inactive or dormant accounts I Statutes of escheat as applied to accounts in savings associations Inactive or dormant savings accounts, especially those of small denomi- nation, have proved bothersome to many savings associations from the security and administrative standpoint, and from the expense standpoint in that earnirsits must be distributed on such accounts. Savings associa- tions often inquire if it is possible either to avoid the payment of earnings or to levy a service charge upon such accounts. In the case of a federal association, the imposition of a service charge on a savings account is governed by the federal regulations. No federal association, for example, can impose a service charge on a savings ac- count in excess of $1 in any calendar year, and may impose this charge only if, at the time the charge is made: (1) The association is not required to distribute earnings on such ac- count (as in the case of accounts of less than $50, or short-term accounts such as Christmas or Vacation Club accounts); (2) No payment has been made and no earnings distributed on such account for a period of at least 36 months preceding; and (3) Thirty' days prior to making the charge, the association has mailed a notice that such charge is to be made to the account- holder at his last known address. It will be noted, however, that these specifications, and similar speci- fications found in state laws apply to savings accounts in the institution, 627 PAGENO="0452" 448 628 SAVINGS ACCOUNTS whether active or inactive, so long as they remain savings accounts. In this statement, however, is provided the clue to solving the earnings and administrative problem. If an account becomes something other than a savings account, earnings need not be paid. REDEMPTION OF DORMANT ACCOUNTS The federal association charter and the laws of most states provide a method for disposing of dormant accounts by the redemption of such accounts. This means simply that the savings association may choose to. pay the full value of the savers' accounts in cash and close out their ac- counts. Section 7 of both Charter N and Charter K (revised) exemplifies most state law provisions as well as the federal position on the subject of the corporate right of the association to redeem savings accounts: At any time sufficient funds are on hand, the associatiOn shall have the right to redeem, by lot or otherwise as the board of directors may determine, all or anypart of any of its savings accounts on June 30 or December 31, by giving 30 days' notice of such redemption by regis- tered mail addressed to the holder of each such savings account. The association may not redeem any of its savings accounts when there is an impairment of its capital or when it has any request for withdrawal which has been on file and unpaid for more than 30 days. The redemption price of each savings account redeemed shall be the full value thereof, as determined by the board of directors, but in no event shall the redemption price be less than the withdrawal value of such savings account. Proper corporate procedure for the redemption of savings accounts, in- cluding provision for giving notice to the savers involved, is set out fully in Chapter 4 under the specified heading. To effect such redemption, the board of directors must adopt a carefully worded resolution (preferably one quoting the pertinent section of the charter or the law) to redeem such classes of inactive savings accounts as are defined in the resolution, setting forth detailed reasons for making the redemption. Following such redemption, the aggregate funds are set aside in a special fund and no earnings need be paid thereafter on such accounts. (Account 2440, other liabilities, subaccount 2440-1). A bona fide effort, of course, must be made to seek out the owners of the accounts or their successors and to refund such moneys to them, again as described in the earlier chapter. After a prescribed period, in many states unclaimed moneys will escheat by law to the state-meaning that following the period prescribed they are paid over to and become the property' of the state. It is important that any association adopting a policy of eliminating PAGENO="0453" 449- INACTIVE OR DORMANT ACCOUNTS 629 -: small dormant accounts do so by formal action and with close observance of all of the formal redemption procedures prescribed by the charter or statutes. Any unilateral action of an informal nature would be classified as arbitrary and contrary to law and regulation. This is the substance of a Federal Home Loan Bank Board ruling affecting federal associations: A federal association may not arbitrarily cancel out dormant accounts, no matter how small, and transfer the amounts to income. This would be tantamount to a service charge in violation of- Section 545.1 which prohibits the making of any service charge for either active or dormant savings accounts. The ruling makes good sense, not only for federal associations but for state-chartered associations as well. It should be remembered, however, that where the specified formal procedure of redemption is used, the account as of that time becomes something other than a savings account. Inasmuch as inactive accounts provide the greatest single opportunity for dishonest employees to defraud the institution, it is believed to be good corporate policy to redeem inactive accounts at periodic intervals. Many of the largest defalcations have occurred through manipulation of inactive or dormant accounts. Perhaps the most notorious example of this form of manipulation was the multimillion dollar defalcation of Minnie Mangurn, the long-trusted corporate secretary of a savings institution in Virginia. Even before inactive accounts are redeemed as set out above, however, steps may be taken to minimize the exposure to fraud through their manipulation. -~ SEGREGATION OF DORMANT ACCOUNTS First, a practical definition of an inactive account must be adopted by the institution. Many define this to be an accOunt which has had no trans. action for a specified number of years. In this respect, notations on the ledger of earnings creditings may be disregarded as transactions. In deter- mining what is a transaction, reference may be made to the Model Sav- ings Association Act where an inactive or dormant account is defined as meaning "a savings account with respect to which there has been an absence for at least years of (1) additions to the account, other than creditings of earnings, (2) withdrawaLs from the account, and (3) writ- ten communication from the holder thereof." Ordinarily the term of years is a matter which the association itself must decide, based on its own estimates and experience. Some institutions adopt a three-year measure; PAGENO="0454" 450 630 SAv1NqS ACCOUNTS others may find that five or ev~n 10 years is a more realistic measure in light of their particular institutional experience. Savings account ledgers, once accounts arc determined to he inactive, should be segregated and placed in the charge of a special custodian, or- dinarily an officer of the association. From this point on, the segregated accounts must be sul);ected to strict, constant and meticulous controls, including periodid reports and periodic and special au(lit verifications. If a saver, having a hitherto inactive account, desires to make an addi- tion to or withdrawal from the account, or to have the earnings entered in his passbook, the teller serving him should prepare a requisition, and present it together with the passbook to the o~cer or employee who has custody of the inactive account ledger cards. This custodian should retain the requisition for use in adjusting the controls, since the account involved then is transferred back to the active controls. The requisition should be retained until released by the auditor. A trial balance of inactive account records should be prepared periodi- cally by the custodian. The first verification should he across-the-hoard. Strict control over such records should be maintained until verification of the balance has been completed. If the auditor is satisfied that the con- trols are being maintained properly, later verifications might include only those accounts which have been reactivated or closed out since the cus- todian's previous report. MINIMIZING THE POSSIBILITY OF DORMANCY Perhaps the majority of dormant accounts results from either the saver's forgetfulness or the saver's death. it happens quite frequently, for example, that a savings accountholder forgets that he has an account at a particular association. A move to another community, a change of office location (either his own or the association's), loss or destruction of personal rec- ords, press of business, illness -and many other factors contribute to this forgetfulness, and thus a dormant account is created. The second major factor contributing to dormancy is the death of a saver and the failure of his estate representatives to locate his saving~ account. A large shire of the blame for dormancy can be laid directly at the door of many savings institutions. A circular letter sent out at least once a year to all members would reach mo~t such savers, even at ~i new ad- dress, and serve to remind them of the existence of their savings account. Such letters also are more likely to reach the attention of the estate rep- resentatives of a decedent saver. Not onl~' will a consistent policy in this connection serve to reduce the nulnl)cr of potentially dormant accounts, PAGENO="0455" 451 INACTIVE OR DORMANT ACCOUNTS 631 but such letters also can he designed to serve some timely advertising or public rela too ons purpose. STATUTORY ESCHEAT OF DORMANT ACCOUNTS Savings associations, like other financial institutions, until recently have been relatively free from the problems associated with escheat to the stare of personal property such as savings accounts. In a growing number of states, however, freedom of~such institutions from the appli- cation of eschcat laws no longer exists, and it is a safe prediction that in a few years all savings associations will face the problem of statutory eschear of dormant savings accounts. ln~leed, since 1946, at least 38 states have enacted a new escheat law or have enlarged the coverage of an exist- ing law, and numerous other states currently are studying the possibili- ties of either course of action. Since familiarity with these laws and the existence of adequate procedures withio~ the associations for compliance must exist now or in the immediate future, the subject merits considera- tion by management of both federal and state associations and their counsel. Escheat of "abandoned" property to the sovereign has been an incident of Anglo-Saxon law since early feudal times. Origin;illv, the term meant the reversion of lands to the lord of the fee upon the absence of heirs capable of inheritance under the original grant. In modern days, the term "escheat" has become more enconipassing and now is applied indis- criminatelv to personalrv and realty. Indeed, in actual practice, the term applies almost solely to pcrsonaltv since abandonment of real estate gcnerall~ is followed up by local ad valcorem tax sales of such real estate. State eseheat statutes arc usually of two types: (1) The true escheat statute which provides that the property reverts in full ownership to the state and that the former owner thereafter has no right or title to the properv or its value, and (2) the "custodial" type of statute which pro- vides in essence that when a property hiis been dormant (the true owner not having been heard from nor having corresponded in writing) for a specified period of years, the legal custo~dy of the property is then trans- ferred to the state. The state may have custody in perpetuity, but the former owner at any time may reassert his claim to the property. If such claim is proved, the state will honor and pay the claim from a special fund reserved from the proceeds of escheated properties. A nunther of states have adopted the Uniform Disposition of Un- claimed Property Act, a statute of the custodial type. The period of dormancy under the Uniform Act is seven years. Other provisions of the PAGENO="0456" 452 632 SAVINGS ACCOUNTS act compel the financial institution or holder of property to make an annual report in writing to the state as to any property or accounts, interest, earnings, dividends, etc., in its hands which belong to persons who have not been heard from for a seven-year period. Under the Uni- form Act, failure to make reports or to perform prescribed duties carries with it penalties, including criminal penalties. Under the Uniform Act, the state actually sets apart the funds col- lected through escheat and the proceeds from sales of escheated proper- ties in a separate account which is maintained with a balance of about 15 percent of the total amount of all eschcated property. \Vhcnever the moneys in the account exceed the 15 percent level, the surplus is paid into the state's general funds to be used to meet the costs of general services and obligations. As a practical matter, the record shows that only 12 percent to 15 percent of the total escheated properties ever are redeemed by the owners. Accordingly, although there is no statute of limitations preventing an owner at any time from making a claim to his property or its value, a state which has adopted the Uniform Act (or a similar comprehensive statute) materially has added, as a practical matter, to its revenues. Difficult legal questions have been presented to the courts for de- cision in the area of escheat. For example, for a number of years it was uncertain whether a national bank need respond to a state escheat statute which sought to recover dormant accounts in the bank. One or two cases seemed to hold that such a state escheat law could not -prevail against a national bank. However, the Supreme Court later held that national banks were subject to the~tate escheat statutes in a proper case (321 U.s. 233). Although all aspects of the issue may not be completely free from doubt, it is safe to assume that deposits in national banks now can be sub- jected to escheat laws. .WThile the assumption might follow that deposits in federal savings associations likewise can be subjected to such state stat- utes some attorneys tend to disagree, pointing out that federal associations are organized under a different law than national banks, and that Section 7 of the federal charter, relative to account redemption, might amount to a federal preemption under certain circumstances. Another serious legal question was the possibility of multiple liability of the holder of unclaimed property tc' more than one state through the processes of escheat. Under at least one federal court decision, the state of legal residence of an account owner was held to have jurisdiction to escheat unclaimed property located in other states. However, the same court held approximately three years later that the state of domicile of the holder (an association, for example) has juri~diction to escheat the unclaimed accounts of nonresidents. When one considers the possibilities PAGENO="0457" 453 INACTIVE OR DORMANT ACCOUNTS 633 of multiple residencies of savings account owners, and the fact that cor- porate holders of such property may have branch offices in several states, it is easy to perceive the chance of great confusion and even chaos were. each state to make its claim to the fullest extent. However, in a decision by the Supreme Court of the United States in 1965 much of the confusion existing in the field of escheat law where decedents and unclaimed property involve more than one jurisdiction was ended. Choosing among several alternate solutions the high court held that intangible property such as savings accounts, bank deposits and si~ni1ar credits would be subject to escheat only by the ~fate of the credi- tor's (saver's) last known address as shown by the books and records of the debtor association or bank. Adoption of the "last known address" rule, however, left unanswered the questions as to what would be done with property owed to psons~ (1) as to whom there was no record of any addrës~at all, or (2) whose last known address was in a'~fate which did not provide for escheat of the~ property owed them. The court suggested as to the first situation, that the property be subject to escheat by the state of the debtor's corporate domicile. The same rule, the court thought, could apply to the second * situation. In such a case the state of the debtor's corporate domicile could escheat the property subject to the right of the state of the last known address of the creditor to recover it at some future time when its law made provision for escheat of such property. In both situations the state of the debtor's corporate domicile should be allowed to cut off the claims of private persons only, retaining the property only until some other state came forward with proof of a superior right to escheat. The court rec- ognized that its decision easily could have been different: \~Te realize that this case could have been resolved otherwise, for the issue here is not controlled by statutory or constitutional provi- sions or by past decisions, nor is it entirely one of logic. It is funda- mentally a question of ease of administration and of equity. \Ve be- lieve that the rule we adopt is the fairest, is easy to apply, and in the long run will be the most generally acceptable to all the states. `exas~ v. New Jersey, 379 U.s. 674.' As noted, the court submitted that the rule which it adopted was the fairest and easiest of application, and in the long run would be the most generally acceptable to all of the 50 state jurisdictions. In general, the steps that a savings association may take to avoid dormancy and the escheat of savings accounts to the state would be as set out earlier in this chapter under the heading, "Minimizing the Possibility of Dormancy." PAGENO="0458" 454 634 SAVINGS ACCOUNTS Finally, however, all such measures may fail to accomplish their purpose, and some savings accounts may become dormant and subject to escheat. In these cases, savings associations in those states having comprehensive statutes will have no other alternative except to report them and turn them over to the state. A notice on the order of that appearing in Figure 52 ordinarily is sent to the last known address. In some cases the savings association may consider the redemption of dormant accounts, as pointed out earlier. If the association has exhausted all means and methods to contact the owner of a dormant account and is convinced that the owner either cannot be found or truly has abandoned the account, it may avail itself of the privilege granted by its charter (or state law in the case of most state-chartered associations) to redeem all such dormant accounts. FIGURE 52 Notice That Savings Account Funds Will Escheat to the State NOTICE THAT SAVINGS ACCOUNT FUNDS WILL ESCHEAT TO THE STATE Village Savings Association Our records indicate that a savings account in your name has been inactive for a period of years, and under the Escheat Laws of the State of ______________________ these funds must be turned over to the State. In order that the funds in your savings account d~ not escheat to the State, it will be necessary for you to present your savings account passbook or other evidence of the account at any of our offices before January 31, 19__. Thank you for your cooperation. Very truly yours, John Jones, Savings Officer In the case of federal associations, this usually may be done by giving 30 days' notice of redemption to the owner of the dormant account, sending the notice by registered mail to the Owner's last address as shown on the association's books. Many state savings a~sociation laws make similar provisions. The funds necessary for such redemption then should PAGENO="0459" 455~ INACTIVE OR DORMANT ACCOUNTS be set aside in a special account and frOm that time fonvard no earnings need be paid on such funds. Both federally and state-chartered associations today should be aware of the potential dangers in state eschéat laws since it is estimated that up to 1 percent of an institution's total savings may be escheatable to the state upon the enactment of a comprehensive statute. Savings associations also would do well to institute procedures designed to keep at a minimum the number of dormant accounts which may arise. At the present rate of enactment of escheat laws by the various state Jegislatures, such proce- dures for dormant accounts, inevitably, must be developed by all savings associations. PROBLEMS 1. In what manner may an association act to avoid paying earnings on inactive savings accounts? 2. At what point does a savings account become "inactive" in your association? 3. `Why is it good policy to redeem inactive savings accounts at periodic intervals? 4. Distinguish between a formal redemption of accounts and an "in- formal cancellation." 5. What effect, if any, does the formal redemption of an account have upon the membership of the saver? (Refer to Chapter 4.) 6. Describe the procedure used by your institution in the segregation and control of inactive accounts. - 7. If the institution receives a letter of inquiry from a saver whose savings account has been segregated in the inactive file, what action should be taken by the association? 8. In addition to periodic mailings to all savers, what measures may an institution take to minimize the possibility of accounts becoming dormant? 9. Does your state have the Uniform Disposition of Unclaimed Proper- ty Act? If not, is there another form of statute covering the matter of escheat of savings accounts? 10. What is the period of dormancy specified in the escheat law of your state? BIBLIOGR/PHY CRENSHAW Jit, ROBERT \V. "Escheat of Dormant Accounts," Legal Ru!- letin, XXIX (May, 1963), 106-116. PAGENO="0460" 456 636 SAVINGS ACCOUNTS "Federal Law Held to Prevail Over State Escheat Law," Legal Bulletin, XXXVI (March, 1970), 87-90. "Multistate Escheat Controversy Resolved by Supreme Court," Legal Bulletin, XXXI (July, 1965), 219-226.. "Redemption of Accounts~" Legal Bulletin, XXIV (September, 1958), 221-225. . RUSSELL, HORACE AND WILLIAM PRATHER. "Members and Their Right to Control," Legal Bulletin, XXIV (January, 1958), 12-15. PAGENO="0461" APPENDIX 4.-STATE RESPONSES TO UNCLAIMED PROP- ERTY QUESTIONNAIRE QUESTIONNAIRE TEXT NINETY SIXTH CONGRESS Congve~ of tbe~niteb ~tatc~ ~ou~e of i~rpre~entatibe~ COMMERCE, CONSUMER, AND MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS TO: All State A±iinistrators of Unclaimed and Escheated Property FROM: Benjar~in S. Rosenthal, Chairman Commerce, Consumer, and Monetary Affairs Subcormnittee The Commerce, Consumer, and Monetary Affairs Subcomittee, which I chair, conducts legislative oversight over the regulatory and administrative programs of a number of federal agencies, including the banking regulatory agencies (Co-ptroller of the Currency, Federal Reserve, FOIC, Federal Home Loan Bank Board, and National Credit Union Administration), the SEC, the U.S. Treasury and Internal Revenue Service, and the Federal Trade Cornission. In carrying out this oversight responsibility, the subcommittee staff has been investigating the extent and handling of unclaimed financial property belonging to the public bit held by banks, other financial institutions, and the Federal Government. The purpose of the investigation has been to determine (a) to what extent the dormant accounts and other unclaimed property held by these institutions are being handled in ways that do not adequately protect the rights of the owners, and (b) whether the subcommittee should hold an oversight hearing to learn the extent of any problems and to consider possible federal regulatory steps and the need for corrective legislation. The staff investigation has convinced me that serious problems may exist in this area, and I have instructed the staff to prepare the necessary background for a hearing. One of the essential elements of background that will be needed for the hearing is general survey information from the state authorities with responsibility for the unclaimed property programs of the states. Consequently, the subconmiittee staff has prepared the attached questionnaire dealing with several different aspects of unclaimed financial property, and I am writing to request your cooperation in providing information on as many of the questions as possible. Please note that in several instances I have requested descriptions of in- dividual cases, together with supporting documents. I want to emphasize that concrete illustrations and supporting documents will be especially valuable to this investigation. If you feel it is necessary to delete or withhold from these illustrations or documents the identity àf the individual owners involved, that would be acceptable. In the case of the institutions involved in the illustrative cases, however, I would prefer to have the actual names of the institutions in- volved wherever possible. If for any reason the identity of the institution can- not be given, then please specify the type of institution (e.g., national bank, state bank, federal savings and loan, securities broker, etc.). As the subcomittee may wish to hol~i hearings on this subject at the end of October or in early November, it would be most helpful to have your response promptly to enable us to analyze the responses in advance of the hearings. I recognize, however, that preparing a careful response to this questionnaire will take considerable time, and if it is not possible to complete the work before Nover~ber 1, then please do the best you can. I will understand the delay. If you or your staff have any questions concerning the questionnaire or the subcommittees investigation and prospective hearings, please feel free to con- tact Don Tucker, the subconinittee's chief economist. BSR:tb (457) PAGENO="0462" 458 Unclaimed Property Questionnaire (Please send response to Comerce, Consumer, and Monetary Affairs Subcomittee; B-377 Rayburn Building; Washington, D.C. 20515.) 1. Unclaimed property statute, regulations, and administrative program: a. How does the state unclaimed property or abandoned property statute apply to banks and other financial institutions (including trust com- panies, savings and loan associations, securities brokerage firms, mutual funds, credit unions, and insurance companies)? In particqlar, please specify: (i) the types of property and institutions covered (ii) any types of property or institutions specifically excluded (iii) the holding period which must elapse before the property is reported to the state (iv) whether the role of the state is purely custodial, or whether the state assumes ownership of the property (v) whether the state pays interest on funds under its custody (vi) any other important characteristics of the law as it applies to financial institutions. b. What administrative rules or regulations of your office or agency apply to the handling and reporting of unclaimed property to the state by banks and other financial institutions? Please attach a copy of any such admin- istrative rules. c. Are there any provisions of your state's other banking, insurance, or general comerce laws or regulations that impose certain requirements on how banks and other financial institutions must handle dormant de- posit accounts or other unclaimed property, especially requirements for the protection of the rights of the owners of the property? (This and the previous question would cover limitations on service charges, requirements of prior notice to owners, requirements con- cerning efforts to locate owners, for example.) d. What is the practice in your state as regards advertising the names of owners of unclaimed property being turned over to the state? In parti- cular: (i) In which newspapers and in which other media are the names advertised? (ii) Who places the advertisements, the state or the individual institutions holding the property? (iii) Are addresses given in the advertisements, or only names? (iv) Do the advertisements cover all amounts of unclaimed property, or only property whose value exceeds a certain minimum? If there is a minimum, what is the minimum? (v) Do the advertisements include only the owners of unclaimed property that is being reported for the first time, or do they include also owners of property still unclaimed from reports of one or more earlier years? IF AVAILABLE, PLEASE SUPPLY A COPY OF YOUR STATE'S MOST RECENT ADVERTISING NOTICE. e. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance with state requirements) to locate the owners of unclaimed bank accounts and other financial property? f. Are there any state limitations on the actions of "bounty hunters" who seek out the advertised owners of unclaimed property in the hope of getting a share of the property? g. What is the definition of "abandoned"or "unclaimed" in your state? In financial institutions, is property presumed abandoned when there has been no "contact" for a certain number of years? How is "contact" de- fined? If mail addressed to the owner is not being returned by the Post Office as undeliverable, can the bank or other institution presume that there is still "contact" and that the property is not abandoned? PAGENO="0463" 459~ h. Does your office (or some other state office acting in cooperation with your office) conduct field audits or~on-site compliance investigations devoted exclusively to checking compliance with the unclaimed property laws? If so (i) How many such field audits or investigations are conducted each year? (ii) How large is the staff assignedto this function, and what is the budget available for this work? (iii) What types of institutions havebeen given field audits within the past three years? (iv) What types of institutions, if any, have not been checked for com- pliance in this way because of lack of au~F~rity to conduct field examinations or because of some other legal impediment? Please elaborate. (v) What items are checked in such a field audit? (A copy of your audit program or instructions would be satisfactory.) (vi) If the field audits are performed by another state office or agency, which office or agency is that? i. Whet is your state's budget for administration of the unclaimed property program? Hm~ many full-time (or full-tine-equivalent) persons are assigned to the unclaimed property program? 67-4'tO 0 - 81 - 30 PAGENO="0464" 460 2. Amounts of unclaimed property reported and delivered to owners: [WHERE EXACT FIGURES ARE NOT AVAILABLE, PLEASE PROVIDE AN ESTIMATE IF AT ALL POSSIBLE. ESTIMATED FIGURES MAY BE MARKED WITH "e". FOR YOUR CONVENIENCE, A BLANK FORM IS ATTACHED ON WHICH THE REQUESTED INFORMATION CAN BE ENTERED.~ For each of the most recent three years for which information is available, please report, by type of institution: a. The numbers of institutions filing unclaimed property reports in which some unclaimed property was reported. b. The dollar amounts of unclaimed property reported. c. The dollar amounts of unclaimed property remitted to the state. d. The numbers of individual unclaimed property accounts reported with values in excess of $500. (Even rough indications of numbers, such as "none", "less than five", "more than 20", etc., would be helpful if exact figures cannot be given.) The types of institutions to be reported separately above are (i) banks (including savings banks and trust companies), (ii) securities brokerage firms, (iii) insurance companies, and (iv) all other firms. (If infor- mation is available separately for savings and loan associations, credit unions, mutual funds, and nonfinancial corporations, that would be of interest.) In addition, for each of the most recent three years, please report the totals of the following (a breakdown by types of institution is not re- quested here): e. The number of names or unclaimed accounts advertised by the state or (if relevant) by the holders. f. The dollar amounts of unclaimed property reported to your office that has subsequently been returned to the owners, either by the holders or by the state. g. The delivery percentage, showing what percentage of reported funds was later returned to the owners. h. The net dollar amounts of unclaimed property remitted to the state in that year, minus claims paid ~ythe state in that year. PAGENO="0465" 461 2. A-o~ints of unclaired property reported and delivered to owners: a. ~ir~5ers of institutions reporting: All institutions Banks Brokers Insurance co~panies All others b. A-~.int of property reported: All institutions Banks Brokers Insurance co-panies All others ,~-o~mt of property r~itted: All institutions Banks Brokers Insurance cor'panies All others d. Nurber of individual in excess of $500 All institutions Banks Brokers Insurance co~rpanies All others e. Niimh~r nf n~m~c ~dv~ f. accounts Dollar amounts returned to owners: g. Delivery percentage: h. Amounts remitted minus claims paid: c. PAGENO="0466" 462 3. Brokerage firm reports; For each of the most recent three years, a. Please identify the names of the individual securities brokerage firms that filed unclaimed property reports showing positive amounts of un- claimed property. b. For the aggregate of all reporting bokerage firms and for each reporting brokerage firm, please give the dollar amounts of cash, dollar values or listings of securities reported, and numbers of individual accounts reported. c. If these figures are available, or if an estimate can be constructed, please give the breakdown of the aggregate cash reported by all broker- age firms as between cash belonging to individual named owners and cash without names. [Copies of the actual brokerage firm reports, with the names and addresses of the individual account holders deleted or blacked out for privacy, would be a satisfactory response to this question.] 4. ~ppgfla~ce a. How would you describe the degree of compliance with your state's unclaimed property laws and related regulations by (i) national banks, (ii) state banks, (iii) federal savings and loan associations, (iv) state savings and loan associations Cv) federal credit unions, (vi) state credit unions, (vii) securities brokerage firms, (viii) mutual funds, (ix) insurance companies, and Cx) nonfinancial corporations? For each type of institution, please indicate whether you find that these institutions are in substantially complete compliance, show fair compliance, or show poor or no compliance, and please indicate what factors contribute to this evaluation. b. How have field audits, investigations, or litigation altered the amounts reported to your office? Please cite individual cases of audits or in- vestigations performed or litigation conducted a [the additional amounts of unclaimed property reported as a result of audit, investigation, or litigation. WHERE POSSIBLE, IDENTIFY BY NAME THE INSTITUTION INVOLVED IN EACH CASE CITED; IF FOR ANY REASON THE IDENTITY OF THE INSTITUTION CANWOT BE GIVEN, THEN PLEASE SPECIFY THE TYPE OF INSTITUTION. c. If possible, please give a rough estimate of (or indicate in some other way the probable amount of) the additional unclaimed property in (i) banks and other depository institutions, (ii) brokerage firms, (iii) insurance companies, and (iv) nonfinancial corporations that is not being reported but that would be reported if there were substantially complete compliance with the letter and intent of the law. PAGENO="0467" 463 5. Service Charges a. Have you infor~ation about service charges imposed by banks and other financial institutions on dormant accounts and other unclaimed property? Hhat sources does this information come from: customer complaints, re- ports filed with the state, audits or investigations, or other sources? b. A~ong banks, does the imposition of service charges on dormant accounts and other unclaimed property appear to occur only occasionally or to be a general practice? c. k-ong which other types of institutions do you find that service charges have been irposed on dormant accounts or unclaimed property? d. In rost cases are the customers properly notified in advance that service charges will be imposed if their accounts remain dormant? e. Hcw larce are the typical service charges imposed by banks? by other institutions? f. How large have the service charges been in unusual or extreme cases? PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER 000UMEUTS THAT SHOW THE SERVICE CHARGES IMPOSED IN UNUSUAL OR EXTREME CASES. g. Have there been any cases in which unclaimed property that would normally have been reportable to the state after a certain number of years was entirely taken into income by the financial institution holding it, either through service charges or in some other way? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF BASK RECORDS, REPORTS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT iLLUSTPRTE THIS SITUATION. h. If possible, please estimate in rough magnitude the total dollar amount of service charges that you believe ~ias imposed by all banks in your state on the unclair-ed property they reported to you in 1978 rthe most recent year for which figures are available). i. If possible, please estimate also (or give some statement of probable ragnitude) of bank service charges taken on unclaimed property that would have been reportable but was wiped oCt by the service charges prior to reporting. ~* Does state law limit in any ~iay the service charges that banks or other institutions may impose on dormant accounts or other unclaimed property? k. Has your state asserted a claim for refund of any service charges imposed on dormant accounts or other unclaimed property? If so, please explain, including an explanation of the legal basis for the claim. PAGENO="0468" 464 6. Other Practices a. Have there been any cases in which a bank or other savings institution has stopped paying interest on dormant savings accounts, or has reversed or taken away interest that had previously been credited to dormant savings accounts, before reporting these accounts to the state? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THIS SITUATION. b. Have there been any cases in which a dormant account of substantial size (severa~ hundred dollars or more)was turned over to the state even though the owner of the account was living and receiving mail at the same address as shown in the records of the institution? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. c. Have there been any cases in which banks or other savings institutions have treated their certificates of deposit as exempt from the unclaimed property laws by automatically rolling them over into new certificates whenever they mature? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. d. Have there been any other significant cases in which banks or other depository institutions have failed to classify certain property as unclaimed or dormant because (i) automatic crediting of interest or dividends was treated as customer activity; (ii) the property was believed to be exempt from the law; or (iii) of any other reason? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. e. What other practices have been observed by which banks or other financial institutions seek to evade the intent of the unclaimed property laws or evade their responsibilities to the owners of the property? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THESE SITUATIONS. f. Can you identify any other particular banking services or programs that appear to be particularly vulnerable to service charge abuse or other abuse of public trust by the banks? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. 7. Unclaimed property held by federal government: Has your state made any claims, or contemplated making any claims, for unclaimed property held by any agencies of the federal government? Please explain, cover- ing the following points: a. How much money or other property was claimed, and with which agency or agencies was the property claim filed? b. What was the federal agency response to this claim? c. What did your state rely upon as the legal basis for this claim? PAGENO="0469" 465 8. Suggestions for federal action: a. What regulatory steps by the federal regulatory agencies would you suggest, if any, to Ci) enhance cm~ipliance with state unclaimed property laws and! or (ii) protect the rights of the owners of dormant bank accounts and other ur:lair-ed property? (The federal regulatory agencies that could be relevant here include the Comptroller of the Currency, Federal Reserve, FDIC, Federal H~-~e Loan Bank Board, National Credit Union Administration, Securities and Exchange Comission, and Federal Trade Conriission.) b. What corrective federal legislation, if any, would you suggest that Congress should consider in order to (i) enhance compliance with state unclaimed pro- perty laws and/or (ii) protect the rights of the owners of dormant bank accounts and other unclaimed property? (If you wish to devote extra time to this question, you may wish to send in your other responses first and then reply to this question separately by letter.) PAGENO="0470" 466 ARIZONA QUESTIONNAIRE RESPONSE cArizona .2~epartment of I?evenue November 6, 1979 Commerce, Consumer and Monetary- Affairs Subcommittee of the Committee on Government Operations Rayburn House Office Building, Room B-377 Washington, D. C. 20515 Attention of Mr. Benjamin S. Rosenthal Chaiznan Re: Unclaimed Property Dear Mr. Rosenthal: Pursuant to your request in your letter of October 3, we are returning your questionnaire relating to unclaimed property. The Unclaimed Property Section is one of the functions of the Estate Tax Division. We have made some notations and are enclosing a copy of Arizona's Unifonn Disposition of Unclaimed Property Act and Regulations, which answers many of your questions regarding the statute, regulations and administration. We are also enclosing copies of our most recent advertising notices. We regret that we are understaffed just now and do not have the personnel to do an in-depth study. Sincerely, Jean Dunn Acting Administrator Estate Tax Division JD: d Enclosures PAGENO="0471" 467 Unclaimed Prop~~y~uestionnajre (Please send response to Conmierce, Consumer, and Monetary Affairs Subcormnittee; B-377 Rayburn Building; Washington, D.C. 2D5l5.) 1. Uncisired Drccerty statute, regulations, and administrative orqgram: a. Pc~' does the state unclaimed property or abandoned property. statute apply to banks and other financial institutions (including trust com- panies, savings and loan associations, securities brokerage firms, mutual funds, credit unions, and insurance companies)? In particular, please specify: (i) the types of property and institutions covered (ii) any types of property or institutions specifically excluded (iii) the holding period which must elapse before the property is reported to the state (iv) whether the role of the state is purely custodiaj~ or whether the state assures ownership of the oroperty (v) ?:nethor the state pays intereston funds under its custody Nc' (vi) cmv other irportant characteristics of the law as it applies to financial institutions. b. What adriristrative rules or regulations of your office or agency apply to the handling and reporting of unclaimed property to the state by banks end other financial institutions? P)ease attach a copy of any such admin- istrative rules. c. Are there any provisions of your state's other banking, insurance, or general connerce laws or regulations that impose certain requirements on how banks and other financial institutions must handle dormant de- posit accounts or other unclaimed property, especially requirements for the protection of the rights of the owners of the property? (This and the pre,'ious question would cover limitations on service charces, recuirerents of prior notice to owners, requirements con- cernim: effcrts to locate owners, for example.) d. Wrat is the practice in your state as regards advertising the names of owners of unclaimed property bein~ turned over to the state? In ,parti- cular: ~ G 7'(ih~c"?~ C f~7#~ (i) In which newspapers and in which other media are the names advertised? (ii) Who places the advertisements, the state or the individual institutions holding the property? (iii) Are addresses given in the advertisements, or only names?~~~~ (iv) Do the advertisements cover all amounts of unclaimed property, or only property whose value exceeds a certain minimum? If there is a minimum, what is the minimum? 2S~c'~' ~/"C'~ci~' (v) Do the advertisements include o~nly the owners of unclaimed property that is being reported for the first time, or do they include also owners of property still unclaimed from reports of one or more earlier years? ~ c~~c'p~'~ IF AVA1LA3LE, PLEASE SUPPLY A COPY OF YOUR STATE'S MOST RECENT ADVERTISIWG WOTICE. £~c~ e. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance witn state requirements) to locate the.owners of unclaimed bank accounts and other financial property? ~ ~y LI~TT~C~ f. Are there any state limitations on the actions of "bounty hunters" who seek out the advertised owners of unclaimed property in the hope of getting a share of tne property? ~ ~ c'~ ~ - 7 A ~` , ~ p F~'# P~.. r, AL C ,~7~f'O ,ph £ L ~I#4'C P `C,Ph `1~C(C~ / ~ ~ a g. What is the definition of "abandoned" or "unclaimed" in your state? In financial institutions, is property presumed abandoned when there has hoer mc `contact for a certain runcer of years? How is "contact" de- `c' w~r,~iO if rail addressed to th~ c~ner is not being returned by the Post Office so urdaijvrrsbla, can the bank or other institution presume that there is still `contact" and that the proporty is not abandonee? ~ PAGENO="0472" 468 h. Does your office (or some other state office acting in cooperation with your office) conduct field audits or on-site compliance investigations devoted exclusively to checking compliance with the unclaimed property h" laws? If so (i) How many such field audits or investigations are conducted each year? (ii) How large is the staff assigned to this function, and what is the budget available for this work? (iii) What types of institutions have been given field audits within the past three years? (iv) What types of institutions, if any, have not been checked for com- pliance in this ~iay because of lack of authority to conduct field examinations or because of some other legal impediment? Please elaborate. (v) What items are checked in such a field audit? (A copy of your audit program or instructions would be satisfactory.) (vi) If the field audits are performed by another state office or agency, which office or agency is that? i. What is your state's budget for administration of the unclaimed property program? How many full-time (or full-time-equivalent) persons are assigned to the unclaimed property program? r,,'a.~" I ~PP ~ PAGENO="0473" 469, 2. Pmounts of unclaimed property reported and delivered to owners: [WHERE EXACT FIGURES ARE NOT AVAILABLE, PLEASE PROVIDE AN ESTIMATE IF AT ALL POSSIBLE. ESTIMATED FIGURES MAY BE MARKED WITH "e". FOR YOUR CONVENIENCE, A BLANK FORM IS ATTACHED ON WHICH THE REQUESTED INFORMATION CAN BE ENTERED.] For each of the most recent three years for which information is available, please report, by type of institution: a. The n~-:ers of institutions filing unclaimed property reports in which sc~e unclaired property was reported. b. The dollar arvounts of unclaimed property reported. c. The dollar amounts of unclaimed property remitted to the state. d. The numbers of individual unclaimed property accounts reported with values in excess of $500. (Even rough indications of numbers, such as none, less than five, "more thar~ 20', etc., would be helpful if exact figures cannot be given.) The types of institutions to be reported separately above are (i) banks (ir.clvdin: savincs barks and trust companies), (ii) securities brokerage firra, (iii) insurar.ce ccrpanies, and (iv) all other firms. (If infor- roticr is available separately for savings and loan associations, credit unicns, rvtvai funds, and nonfinancial corporations, that would be of interest.) In addition, fcr each of the most recent three years, please report the totals of the following (a breakdown bytypes of institution is not re- quested here): e. The nurber of names or unclaimed accounts advertised by the state or (if relevant) by the holders. f. The dollar amounts of unclaimed pro~erty reported to your office that has subsequently been returned to the owners, either by the holders or by the state. c. The delivery percentaae, showing what percentage of reported funds was later returned to the owners. h. The net dollar amounts of unclaimed~ property remitted to the state in that year, minus claims paid by the state in that year. PAGENO="0474" 470 2. Amounts of unclaimed property reported and delivered to owners: Fiscal 1975 - 1976 1976-1977 l977j~7~ a. Numbers of institutions reportipg: All institutions Banks B~ekecs Savings & Loan Insurance companies All others - b. Amount of property reported: All institutions 370,853.10 438,098.52 356,584.51 Banks 81,161.76 248,807.34 170,784.96 Q4(~4'.5 Savings &Loan 44,727.81 12,746.90 20,137.74 Insurance companies 27,922.67 45,091.91 42,842.86 All others 217,040.86 131,452.37 122,818.95 c. Amount of property remitted: All institutions Banks Brokers Insurance companies All others d. Number of individual accounts Tifexcess of 3500 All institutions Banks Brokers Insurance companies All others e. Number of names advertised: - 1,532 2,906 2,364 1. Dollar amounts returned to owners: 49,089.44 62,422.85 73,310.63 g. Delivery percentage: h. Amounts remitted minus claims PAGENO="0475" 471 3. Brokerage firm reports: For each of the most recent three years, a. Please identify the names of the individual securities brokerage firms that filed unclaimed property reports showing positive amounts of un- claimed property. b. For the acaregate of all reporting bokerage firms and for each reporting brckerace firm, please give the dollar amounts of cash, dollar values or listincs of securities reported, and numbers of individual accounts re:mrted. c. If these ficures are available, or if an estimate can be constructed, please give the breakdown of the aggregate cash reported by all broker- age firms as between cash belonging~to individual named owners and cash without names. [Copies of the actual brokerage firt~i reports, with the names and addresses of the individual account holders deleted or blacked out for privacy, would be a satisfactory response to this question.] f/~ ~`c1cF,?Aci ~,AC1~ REP~-c!7~1~ 4. Ccoiiar:e a. Hm~ wcuid you describe the degree of compliance with your state's unclaimed prc:arty ia~:s and related regulations by (i) national banks, (ii) state banks, (iii) federal savings and loan associations, (iv) state savings and lcan associations (v) federal credit unions, (vi) state credit unions, (vii) securities brokerage firms, (viii) mutual funds, (ix) insurance companies, and (x) nonfinancial corporations? For each type of institution, please indicate whether you find that these institutions ard in substantially complete compliance, show fair compliance, or show poor or no compliance, and please indicate what factors contribute to this evaluation. b. How have field audits, investigations, or litigation altered the amounts reported to your office? Please cite individual cases of audits or in- vestigations performed or litigation conducted and the additional amounts of unclaimed property reported as a result of audit, investigation, or litigation. ~"-~ERE POSSIBLE, IDENTIFY BY NA~iE THE INSTITUTION INVOLVED IN EACH CASE CITED; IF FOR ANY REASON THE IDENTITY OF THE INSTITUTION CANNOT BE GIVEN, THEN PLEASE SPECIFY THE TYPE CF INSTITUTION. c. If possible, please give a rough estimate of (or indicate in some other way the probable amount of) the additional unclaimed property in (i) banks and other depository institutions, (ii) brokerage firms, (iii) insurance companies, and (iv) nonfinancial corporations that is not being reported but that would be reported if there were substantially complete compliance with the letter and intent of the law. -~ ~/ CC-. (i) ~ ~` e p~.- A 7 ~.` C 70 ~ CC (C 7 ,L / -~ ~` ~ / ~ 7 A' ~/ /.7 CC £ 7 -~ .7 ~ ~ ~ 7 (C 0 .7 #5' G £~`#~` i, (i) `Ic e~1'I-.7r~ (.i,) fYi- t~'r" r-~ (iC) G~,c'~ ~ (C) ,~P-jp ~ii'~ `o,'-c~ (VI) tI(~ ?~/~( A (v,,) `ic' I?a-P5T (Viii) Ni' ig~P'wr-s (iic) ,7ii,~i' `,-ipLii~"i'5 (~) NO -3 Me CA' 3 iI~ ~ i'c' A' 7~- 5~ ~/A'~~ic5.(C,,f PAGENO="0476" 472 5. Service CharQes a. Have you information about service charges imposed by banks and other financial instituticns on dormant accounts and other unclaimed property? What sources does this information come from: customer complaints, re- ports filed with the state, audits or investigations, or other sources? C'~hy ~/I1'~'j #~ C'~'ST/)M~~ C ~ ~9~tE)' ~ .4~1~5 a, ,-~ iw~- .s I' F? ~ * r'//~ F? ~ (`i'~' b. Among banks, does the imposition or service c~arges on dormant accounts and other unclaimed property appear to occur only occasionally or to be a general practice? c. Among which other types of institutions do you find that service charges have been imposed on dormant accounts or unclaimed property? HF., ~ d. In most cases are the customers properly notified in advance that service charges will be imposed if their accounts remain dormant? £~~,1F?c~"/ e. How large are the typical service charges imposed by banks? by other institutions? w,~ trmC~F?F? f. low large have the service charges been in unusual or extreme cases? ~ PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT SHOW THE SERVICE CHARGES IMPOSED IN UNUSUAL OR EXTREME CASES. g. Have there been any cases in which unclaimed property that would normally have been reportable to the state after a certain number of years was entirely taken into income by the financial institution holding it, either through service charges or ig some other way? ~ ~c~~F?'~ ~ñN#1 S R a PF/~ F ,~`F F./ ~N L( F/.9~ F? /~ C'. C & C 7FF /~` 71/ CII I_~ C1I~ ~? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF BANK RECORDS, REPORTS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THIS SITUATION. h. If possible, please estimate in rough magnitude the total dollar amount of service charges that you believe was imposed by all banks in your state on the unclaimed property they reported to you in 1978 T~Tne most recent year for which figures are available). `~nc'c"~ i. If possible, please estimate also (or give some statement of probable magnitude) of bank service charges taken on unclaimed property that would have been reportable but was wiped out by the service charges prior to reporting. (J%fl'NOL//.1 j. Does state law limit in any way. the service charges that banks or other institutions may impose on dormant accounts or other unclaimed property? k. Has your state asserted a claim for refund of any service charges imposed on dormant accounts or other unclaimed property? If so, please explain, including an explanation of the legal basis for the claim. ,ye i'/ft~~ ~ C~~~RC'/N~ /.~ r'1~i~a `.`~-,9a PAGENO="0477" 473 6. Other Practices a. Have there been any cases in which a bank or other savings institution has stopped paying interest on dormant~savings accounts, or has reversed or taken away interest that had previously been credited to dormant savings accounts, before reporting these accounts to the state? bt'~" PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THIS SITUATION. b. Have there been any cases in which a dormant account of substantial size (several hundred dollars or nore)was turned over to the state even though the cwner of the acccunt was living and receiving mail at the same address as sh in the records of the institution? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. c. Have there been any cases in which banks or other savings institutions have treated their certificates of deposit as exempt from the unclaimed property laws by automatically rolling them over into new certificates whenever they mature? "~ PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. d. Have there been any other significant cases in which banks or other depository institutions have failed to classify certain property as unclaimed or dormant because (i) automatic crediting of interest or divideris was treated as customer activity; (ii) the property was believed to be exempt from the law; or (iii) of any other reason? PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. e. I-That other practices have been observ~d by which banks or other financial institutions seek to evade the intent of the unclaimed property laws or evade their responsibilities to the owners of the property? /~ -"~ 7- ~ PP.~ CC T )CEy ~ N~ r ~E 5 `1 NP, c'!E77 r N pftCF? r 7C C CE 7~ C' 7 ~ ~p -~C'~p7NET ~CCCL,,-C7~* PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THESE SITUATIONS. f. Can you identify any other particular banking services or programs that appear to be particularly vulnerable to service charge abuse or other abuse of public trust by the banks? #i~. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. 7. Unclaimed property held by federal government: Has your state made any claims, or contemplated making any claims, for unclaimed property held by any agencies of the federal government? Please explain, cover- ing the following points: NC. a. How much money or other p~operty was claimed, and with which agency or agencies was the property claim filed? b. What was the federal agency response to this claim? c. I-That did your state rely upon as the legal basis for this claim? PAGENO="0478" 474 ADVERTISEMENTS GCADDER. WALLACH *361965 UJRGH August 23, 1579 BREWERY GULCH GAZETFE 5 JOHNSON, ARIEL AddlYss UTKSCRT C.RFJs. C$R#f3. CAP~OLE. JIM D. AUJIYRs UTI.TCRT ~RAWFCRD, BRUCE AUJIUsU UT*TCRT DICCER«=UN,JAMESL. ACOTRRRUTHIICus pICRISIRIs Cf HI. UTI7CIT DISpCSIfllff Cf UTUI$IITBC PICp,Ify ACI, 44-363 ARS, 936. F9pREfSfIISdRIththI$CWC,lRdICZ97E41 759 p 91fy 9Td H$T~ RITZ ddIUss Cf HR hHdCf 7f D.p*'IT DC? Cf ~ AC?I15 Ad- pGBIIRSCR? Cf thIS ffCtiC,, fR .bRTdRud pfRpSfty DIII $4 pI~d. fRt GtE ttI9f *Ighty-fICSd9yS Cf?., 5)11 pIINIIC$CIRt dOt., If ftI CCSIRUY Cf fIf ARE TQ AUH ITI$tI$fR' RC P5699 IC, *11967916907 ABERCROMRIE. JAMES B. AdW~ ALLEN, STEVEN R. CCC LISASA ~& EC ALLIG000 HANSEL ARIdTSs$ UTEHRIR9 ARMISTEkD, PHILLIP D. AddlISs MARTIN, DAVID EDWIN P.O. BRR 223, SAIT9 V1632, *H SIERZ, KENNETH AddIDSS Uh*I1CKT DCC5I$s, AZ - - STRCDA,MATTCEW J. Add,,ss UTEfRRT THCRPE,JCSEPC E. HRCO USAEPG, Ff. WASNIDGE, WILLIAM Ft. CG$CtIIA& AZ VIS?9. AC WRITE, ALICE 36. 13Sj$~C CRfRIIUdC Cf.., MERRITT, JEFFREY A1kH.Ss CIfEHRRT D9651s, AZ - - MORALE$, JESSA. JR. AddI9sS CHEHRRT WOOD. JAMES D. Add'.ss UTEHCRf - MC RREAL F, FRANCES G. AddI,S$ WYNN, CALVIN W. AddIss UHHHHRI1 - YOUNG, BEATRICE IRENE 9CR $41, MOSELEY, LIONEL H. *36955 UY)VCCRT YOUNG, CHARLES E. AddlsSs Uf1IR~R - P51,44G. FRANK V. 639 16CC St., RCGQI$s, YOUNG, NEAL C. AddI955 UT*fC.H 53919 ViSsU. AZ MENDCZA. RICHARD A. AddT9SS ASRY. LAMCNT AddI.s$ CREHCRT ATOLRUE FEED 96. AddfCSs UTUfICEH RARRAZO, CARLOS C. AddICsS UTKRP*T UT*RRRH - GRISHAM. R. Addssss UTHfCET RE~TLEY.GEORGE J. AddtsSs CHICIC*T GUMAI. JCHNNIE AddI'RR CHICCRRT BC. DO LA 21643. CE AZ PRI o~. CO W dO 955 RCRT 79 46 V. 23 979 PAGENO="0479" PAGENO="0480" r a r 0 C) PAGENO="0481" PAGENO="0482" 00 PAGENO="0483" PAGENO="0484" 480 UNCLAIMED PROPERTY LAW AND REGULATIONS AREZONA DEPARTMENT OF REVENUE ESTATE TAX DMSEON CAPITOL BUILDING 1700 WEST WASHINGTON PHOENIX. ARIZONA 85007 UNIFORM DISP~S~T~ON OF UNCLAIMED PROPERTY ACT and RE3U LAT~QN5 NEAL G. TRASENTE DIRECTOR GERALDINE C. SWIFT ADMI NISTRATOR ESTATE TAXES SUPERVISOR UNCLAIMED PROPERTI' JULY 1. 1976 PAGENO="0485" 481: UNIFORM DISPOSITION OF UNCLAIMED PROPERTY ACT Sec. 44-351. Definitions and use of terms. 44-352. Property held by banking or financial organizations. 44-352.01. Abandoned travelers checks. 44-353. Unclaimed funds held by life insurance corporations. 44-354. Deposits and refunds held by utilities. 44.355 Undistributed dividends and distributions of business associations. 44-356. Property of business associations and banking or financial organizations held in course of dissolution. 44-357. Property held by fiduciaries. 44-358. Property held by state courts and public officers and agencies. 44-359. Miscellaneous personal property held for another person. 44-360. Reciprocity for property presumed abandoned or escheated under the laws of another state. 44-361. Report of abandoned property. 44-362. Notice and publication of lists of abandoned property. 44363. Payment or delivery of abandoned property. 44-364. Relief from liability by payment or delivery. 44-365. Income accruing after payment or delivery. 44-365.01. Periods of limitatibn not a bar. 44-366. Sale of abandoned property. (1) PAGENO="0486" 482 44-367. Deposit of funds. 44-368. Claim for abandoned property paid or delivered. 44-369. Determination of Claims. 44-370. Judicial action upon determinations. 44-371. Election to take payment or delivery. 44-372. Examination of records. 44-373. Proceeding to compel delivery of abandoned property. 44-374. Penalties. 44-375. Administration; rules and regulations. 44-376. Effect of laws of other states; certain funds exempted. 44-377. Uniformity of interpretation. 44-378. Short title (2) PAGENO="0487" 483 44-351. DEFINITIONS AND USE OF TERMS In this chapter, unless the context otherwise requires: 1. "Banking organization" means any bank, trust company, savings bank, industrial bank, land ank, safe deposit company or a private banker engaged in business in this state. 2. "Business association" means any corporation other than a public corporation, joint stock company, business trust, partnership or any association for business purpbses of two or more individuals. 3. "Department" means department of revenue. 4. "Financial organization" means any savings and loan association, building and loan association, credit union, cooperative bank or investment company, engaged in business in this state. 5. "Holder" means any person in possession of property subject to this chapter belonging to another, or who is trustee in case of a trust, or is indebted to another on an obligation subject to this chapter. 6. "Life insurance- corporation" means any association or corporation transacting within this state the business of insurance on the lives of persons or insurance appertaining thereto, including, but not by way of limitation, endowments and annuities. 7. "Owner" means a depositor in case of a deposit, a beneficiary in case of a trust, a creditor, claimant or payee in case of other choses in action, or any person having a legal or equitable interest in property subject to this chapter, or his legal representative. 8. "Person" means any individual, business association, government or political subdivision, public corporation, public authority, estate, trust, two or more persons having a joint or common int~rest, or any other legal or commercial entity. 9. "Utility" means any person who owns or operates within this state, for public use, any plant, equipment, property, franchise or license for the transmission of communications or the production, storage, transmission, sale, delivery or furnishing of electricity, water, steam or gas. (3) PAGENO="0488" 484 44-352. PROPERTY HELD BY BANKING OR FINANCIAL ORGANIZATIONS The following property held or owing by a banking or financial organization is presumed abandoned: 1. Any demand, savings, or matured time deposit made in this state with a banking organization, together with any interest or dividend thereon, excluding any charges that may lawfully be withheld, unless the owner has, within seven years, increased or decreased the amount of deposit. 2. Any funds paid in this state toward the purchase of shares or other interest in a financial organization in this state and any interest or dividends thereon, excluding any charges that may lawfully be withheld, unless the owner has within seven years: (a) increased or decreased the amount of the funds or presented an appropriate record for the crediting of interest or dividends; or (b) Corresponded in writing with *the financial organization concerning the funds; or (c) Otherwise indicated an interest in the funds or deposit as evidenced by a memorandum on file with the financial organization. 3. Any funds or other personal property, tangible or intangible, removed from a safe deposit box or any other safekeeping repository or agency or collateral deposit box in this state on which the lease or rental period has expired due to nonpayment of rental charges or other reason, or any surplus amount arising from the sale thereof pursuant to law, that have been unclaimed by the owner for more than one year from the date on which the lease or rental period expired. 44-352.01. ABANDONED TRAVELERS CHECKS Any property held or owing by a banking or financial organization or business association, representing any sum payable on a travelers check issued or sold in this state that has been outstanding for more than fifteen years from the date of issuance shall be presumed abandoned. Such property shall not be presumed abandoned if within such fifteen year period the owner has either: (4) PAGENO="0489" 485 1. Corresponded in writing with the banking or financial organization or business association concerning such check or the funds; or 2. Otherwise indicated an interest in such check or the funds as evidenced by a memorandum or other record on file with the banking or financial organization or, business association. 44-353. UNCLAIMED FUNDS HELD BY LIFE INSURANCE CORPORATIONS A. `Unclaimed funds", as defined in this section, held and owing by a life insurance corporation shall be presumed abandoned ~f the last known address, according to the records of the corporation, of the person entitled to the funds is within this state. If a person other than the insured or annuitant, is entitled to the funds and no address of such person is known to the corporation or if it is not definite and certain from the records of the corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known address of the insured or annuitant according to the records of the corporation. B. "Unclaimed funds", as k~sed in this section, means all monies held and owing by any life insurance corporation unclaimed and unoa~d for more than seven years after the monies become due and payabie as established from the records of the corporation under any life or endowment insurance policy or annuity contract which has matured or terminated. A life insurance policy not matured by actual proof of the death of the insured is deemed to be matured and the proceeds thereof are deemed to be due and payable if such policy was in force when the insured attained the limiting age under the mortality table on which the reserve is based, unless the person appearing entitled thereto has within the preceding seven years assigned, readjusted, or paid premiums on the policy, or subjected the policy to loan, or corresponded in writing with the life insurance corporation concerning the policy. Mbnies otherwise payable according to the records of the corporation are deemed due and payable although the policy or contract has not been surrendered as required. 44-354. DEPOSITS AND REFUNDS HELD BY UTILITIES The following funds held or owing by any utility are presumed abandoned: (5) PAGENO="0490" 486 1 Any deposit made by a subscriber with a utility to secure payment for, or any sum paid in advance for, utility services to be furnished in this state, Ies~ uny lawfui deductions, that has remained unci~imed by the person ~ppearing on the records of the utility entitled thereto for more then seven years after the termination of the serv~ces for which the deposit or advance payment was made. 2. Any sum which a utility has been ordered to refund and which was received for utility services rendered in this state, together with any interest thereon, less any awful deductions, that has remained unclaimed by the person appearing on the records of the utility entitled thereto for more than seven years after the date it became payable in accordance with the final determination or order providing for the refund 44-356. UNDISTRIBUTED DIVIDENDS AND DISTRIBUTIONS OF BUSINESS ASSOCIATIONS Any stock certificate cr other certificate of ownership, or any dividend, profit, distribution, interest, payment on principal, or other surr. ftjr to~ich a n~jotbble instrument has not been issued and dehvered ri oaymer~t held or o~~'inq by a business association fur or to a shareholder, ~ert{cate holder, member, bondholder, or other security holder, or a participating patron of a cooperative, who has not claimed it, or corresponded in writing with the business association concerning t, within seven years after the date prescribed for payment or delivery, is presumed abandoned if: 1. It is held or owing by a business association organized under the laws of or created in this state; or 2. It is held or owing by a business association doing business in this state, but not organized under the laws of or created in this state, and the records of the business association indicate that the last known address of the person entitled thereto is in this state. 44-356. PROPERTY OF BUSINESS ASSOCIATIONS AND BANKING OR FINANCIAL ORGANIZATIONS HELD IN COURSE OF DISSOLUTION A!! intangible personal property distributable in the course of a voluntary dissolution of a business association, banking organization, or financial organization organized under the laws of or created in this state, that is unclaimed by the owner within two years after the date for final distributon, is presumed abandoned. (6) PAGENO="0491" 487 44-357. PROPERTY HELD BY FIDUCIARIES All intangible personal property and any income or increment thereon, held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has, within seven years after it becomes payable or distributable, increased or decreased the principal, accepted payment of principal or income, corresponded in ~vriting concerning the property, or otherwise indicated an interest as evidenced by a memorandum on file with the fiduciary: 1. If the property is held, by a banking organization or a financial organization, or by a business association organized under the la~vs of or created in this state; or 2. If it is held by a business association, doing business in this state, but not organized under the laws of or created in this state, and the records of the business association indicate that the last known address of the person entitled thereto is in this state; or 3. If it is held in this state by any other person. 44-358. PROPERTY HELD BY STATE COURTS AND PUBLIC OFFICERS AND AGENCIES All personal property, tangible or intangible, held for the owner by any court, public corporation, public authority, or public officer of this state, or a political subdivision thereof, that has remained unclaimed by the owner for more than seven years is presumed abandoned. 44-359. MISCELLANEOUS PERSONAL PROPERTY HELD FOR ANOTHER PERSON All personal property, tangible or intangible, not otherwise covered by this chapter, including any income or increment thereon and deducting any lawful charges, that is held or owing in this state in the ordinary course of the holder's business and has remained unclaimed by the owner for more than seven years after it became payable or distributable is presumed abandoned. 44-360. RECIPROCITY FOR PROPERTY PRESUMED ABANDONED OR EXCHEATED UNDER THE LAWS OF ANOTHER STATE If specific property which is subject to the provisions of sections 44-352, 44-355, 44-356, 44-357 and 44359 is held for or owed or (7) PAGENO="0492" 488 distributable to an owner whose last known address is in another state by a holder who is subject to the jurisdiction of that state, the specific property is not presumed abandoned in this state and subject to this chapter if: 1. It may be claimed as abandoned or escheated under the laws of such other state; and 2. The laws of such other state make reciprocal provision that similar specific property is not presumed abandoned or escheatable by such other state when held for or owed or distributable to an owner whose last known address is within this state by a holder who is subject to the jurisdiction of this state. 44-361. REPORT OF ADANDONED PROPERTY A. Every person holding funds or other property, tangible or intangible, presumed abandoned under this chapter shall report to the department with respect to the property not previously reported as herein provided. B. The report shall be verified and shall include: 1. The name, if known, and last known address, if any, of each person appearing from the records of the holder to be the owner of any property of the value th t~ve dollars or more presumed abandoned under this chapter; 2. ln case of unclaimed funds of life insurance corporations, the full name of the insured or annuitant and his last known address according to the life insurance corporations records; 3. The nature and identifying number, if any, or description of the property and the amount appearing from the records to be due, except that items of value under five dollars each may be reported in aggregate; 4. The date when the property became payable, demandable or returnable, and the date of the last transaction with the owner with respect to the property. C. If the person holding property presumed abandoned is a successor to other persons who previously held the property for the owner, or if the holder has changed his name while holding the property, he shall file viith his report all prior known names and addresses of each holder of the property. (8) PAGENO="0493" 489 D. The report shall be filed before November 1 of each year as of June 30 next preceding, but the report of life insurance corporations shall be filed before May 1 of each year as of December 31 next preceding. The department may postpone the reporting data upon `ritten request by any person required to file a report. E. Verification, if made by a partnership, shall be executed by a partner; if made by an unincorporated association or private corporation, by an officer; and if made by a public corporation, by its chief fiscal officer. F. The initial report filed under this chapter shall include all items of property that would have, been presumed abandoned if this chapter had been in effect during the seven-year period preceding its effective date and provided that no items of a value of twenty-five dollars or less shall be included in such initial report. 44-362. NOTICE AND PUBLICATION OF LISTS OF ABANDONED PROPERTY A. Within one hundred twenty days from the filing of the report required by § 44-361, the department shall cause notice to be published at least once each week for two successive weeks in an English language newspaper of general circulation in the county in this state in ~vhich is located the last~ known address of any person to be named in the notice, If no address is listed or if the address is outside this state, the notice shall be published in the county in which the holder of the abandoned property has his principal place of business within this state. B. The published notice shall be entitled "Notice of Names of Persons Appearing to be Owners of Abandoned Property", and shall contain: 1. The names in alphabetical order and last known addresses, if any, of persons listed in the report and entitled to notice within the county as hereinbefore specified. 2. A statement that information concerning the amount or description of the property and the name and address of the holder may be obtained by any persons possessing an interest in the property by addressing an inquiry to the department. 3. A statement if proof of claim is not presented by the owner to the holder and if the owner's right to receive the property is not established to the holder's satisfaction within sixty-five days from the ~(9) PAGENO="0494" 490 date of the second published notice, the abandoned property will be placed not later than eighty-five days after such publication date in the custody of the department to whom all further claims must thereafter be directed. C. The department is not required to publish in such notice any item of less than twenty-five dollars unless he deems such publication to be in the public interest. 0. Within one hundred twenty days from the receipt of the report required by § 44-361, the department shall mail a notice to each person having an address listed therein who appears to be entitled to property of the value of twenty-five dollars or more presumed abandoned under this chapter. The mailed notice shall contain: 1. A statement that, according to a report filed with the department, property is being held to which the addressee appears entitled. 2. The name and address of the person holding the property and any necessary information regarding changes of name and address of the holder. 3. A statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the published notice, the property will be placed in the custody of the department to which all further claims must be directed. 44-363. PAYMENT OR DELIVERY OF ABANDONED PROPERTY Every person who has filed a report as provided by § 44-361 shall within twenty days after the time specified in § 44-362 for claiming the property from the holder pay or deliver to the department all abandoned property specified in the report, except that, if the owner establishes his right to receive the abandoned property to the satisfaction of the holder within the time specified in §44-362, or if it appears that for some other reason the presumption of abandonment is erroneous, the holder need not pay or deliver the property, which will no longer be presumed abandoned, to the department, but in lieu thereof shall file a verified written explanation of the proof of claim or of the error in the presumption of abandonment. 44-364. RELIEF FROM LIABILITY BY PAYMENT OR DELIVERY The payment of money or the delivery of property to the department by any holder shall terminate any legal relationship (10) PAGENO="0495" 491 between the holder and the owner and shall release and discharge such hoide~ from any and all liability to the owner, his heirs or assigns by reason of such delivery or payment, and such delivery and payment may be pleaded as a bar to recove~y and be a conclusive defense in any suit or action brouGht by such owner, his heirs or assigns or any claimant against the holder by reason of such delivery. The state shall reimburse any holder who cannot be relieved of such liability by this section for all liability to the owr~er, his heirs and assigns incurred by reason of compliance with this chapter, but nothing contained in this section shall be deemed or construed as an assumption by the state or the department of any liability of the holder to the owner u~on a cause of action arising prio~ to such delivery, nor as depriving sucn owner, his heirs or assions of the right of redemption provided for in this chapter. 44-366. INCOME ACCRUING AF~1ER PAYMENT OF DELIVERY When property is paid or deli~'ered to the department under this chapter, the owner is not entitled to receive income or other increments accruing thereafter. 44-365.01. PERIODS OF LIMITATION NOT A BAR The expiration of any period of time specified by statute or court order, during which an action or proceeding may be commenced or enforced to obtain payment of a claim for money or recovery of property, shall not prevent the money or property from being presumed abandoned property, nor effect any duty to file a report required by this chapter or to pay or deliver abandoned property to the department. 44-366. SALE OF ABANDONED, PROPERTY A. All abandoned property other than money delivered to the department under this chapter shall within one year after delivery be sold by it to the highest bidder at public sale in whatever city in the state affords in its judgment the most favorable market'for the property involved. The department may decline the highest bid and reoffer the property for sale if it considers the price bid insufficient. It need not offer any property forsale if, in its opinion, the probable cost of sale exceeds the value of the property. B. Any sale held under this section shall be preceded by a single publication of notice thereof, at least three weeks in advance of sale in an English language newspaper of general circulation in the county where the property is to be sold. (11) 67-'4'40 0 - 81 - 32 PAGENO="0496" 492 C. The purchaser at any sale conducted by the department pursuant to this chapter shall receive title to the property purchased, free from all claims of the owner or prior holder thereof and of all persons claiming through or under them. The department shall execute all documents necessary to complete the transfer of title. 44-367. DEPOSIT OF FUNDS A. All funds received under this chapter, excepting funds provided for by section 8, article II, constitution of Arizona, but including the proceeds from the sale of abandoned property under §44-366, shall forthwith be deposited with the state treasurer to be credited to a clearing account from which he shall make prompt payment of claims duly allowed by him as hereinafter provided. Before making the deposit he shall record the name and last known address of each person appearing from the holders' reports to be entitled to the abandoned property and of the name and last known address of each insured person or annuitant, and with respect to each policy or contract listed in the report of a life insurance corporation, its number, the name of the corporation and the amount due. The record shall be available for public inspection at all reasonable business hours. The funds remaining in the clearing account shall be credited to the general fund of the state at the end of each fiscal year unless the constitution or some other law specifically provides otherwise for the disposition of ~the particular proceeds. B. Before making any deposit to the credit of the general fund or other fund, the department may deduct: 1. Any costs in connection with sale of abandoned property, 2. Any costs of mailing and publication in connection with any abandoned property, and 3. Reasonable service charges. 44-368. CLAIM FOR ABANDONED PROPERTY PAID OR DELIVERED Any person claiming an interest in any property delivered to the state under this chapter may file a claim thereto or to the proceeds from the sale thereof on the form prescribed by the department. (12) PAGENO="0497" 493 44-369. DETERMINATION OF CLAIMS A. The department shall consider any claim filed under this chapter and may hold a hearing and receive evidence concerning it. If a hearing is held, it shall preparea finding and a decision in writing on each claim filed, stating the substance of any evidence heard by it and the reasons for its decision. The decision shall be a public record. B. If the claim is allowed, ~he department shall make payment forthv.'ith. The claim shall be paid without deduction for costs of notices or sale or for service charges. 44-370. JUDICIAL ACTION UPON DETERMINATIONS Any person aggrieved by a decision of the department or as to whose claim the department has failed to act within ninety days after the filing of the claim, may commence an action in the superior court to establish his claim. The proceeding shall be brought within ninety days after the decision of the department or within one hundred eighty days from the filing of the claim if the department fails to act. 44-371. ELECTION TO TAKE P~YMENT OR DELIVERY The department, after receiving reports of property deemed abandoned pursuant to this chapter, may decline to receive any property reported which it deems to have a value less than the cost of giving notice and holding sale, or it may, if it deems it desirable because of the small sum involved, postpone taking possession until a sufficient sum accummulates. Unless the holder of the property is notified to the contrary within one hundred twenty days after filing the report required under § 44-361, the department shall be deemed to have elected to receive the custody of the property. 44-372. EXAMINATION OF RECORDS A. The department may at reasonable times and upon reasonable notice examine the records of any person that relate to property that has been reported pursuant to this chapter. B. If any person refuses to permit the department to examine such records, the department may request the attorney general to commence an action in the superi~r court to enforce the examination. 44-373. PROCEEDING TO COMPEL DELIVERY OF ABANDONED PROPERTY If any person refuses to deliver property to the department as required under this chapter, it shall request the attorney general to (13) PAGENO="0498" * 494 bring an action in the superior court to enforce such delivery. 44-374. PENALTIES A. Any person who willfully fails to render any report or perform other duties required under this chapter shall be punished by a fine of not less than twenty-five nor more than three hundred dollars. B. Any person who willfully refuses to pay or deliver abandoned property to the department as required under this chapter shall be punished by a fine of not less than twenty-five dollars nor more than one thousand dollars, or imprisonment in the county jail for not more than six months, or by both such fine and imprisonment. 44.375. ADMINISTRATION; RULES AND REGULATIONS The department of revenue shall administer this chapter and shall make necessary rules and regulations to carry out the provisions of this chapter. 44-376. EFFECT OF LAWS OF OTHER STATES: CERTAIN FUNDS EXEMPTED A. This chapter shaU not apply to any property that has been presumed abandoned or escheated under the laws of another state prior to the effective date of this chapter. B. All funds the disposition of which is provided for under the terms of section 8, article 11, of the constitution of Arizona, shall be exempt from the provisions of section 44-367, and shall be deposited, when collected under the provisions of this chapter or otherwise, in the permanent school fund. 44-377. UNIFORMITY OF INTERPRETATION This chapter shall be so construed as to effectuate its general purpose to make uniform the law of those states which enact it. 44-378. SHORT TITLE This chapter may be cited as the Uniform Disposition of Unclaimed Property Act. ~For Amendments after date of this publication please consult Arizona Revised Statutes) (14) PAGENO="0499" 495 REGULATIONS UN! FORM DISPOSITION OF UNCLAIMED PROPERTY ACT (Authority: A.R.S. § 44-351 et seq.) Sec. R15-6-O1. Purpose. R15-6-02. Property Subject to the Law. R15-S-03. Items Defined. R15-6-04. Report of Abandoned Property. R15-6-05. Exceptions tb Report. R15-6-06. Who Must Report. R15-6-07. Classification, of Property to be Reported. R15-6-OB. Presumption of Abandonment. R15-6-09. Presumption of Ownership. R15-6-iO. Change of Ownership Rights. R15-6-1 1. Negotiable Instruments. F15-6-12. Delivery of Property. Ri5-6-13. Relief for Liability of Holder. R I 5-6-14. Claims for Recovery of Property Delivered to State. R 15-6-15. Claim for Corporate Assets Upon Dissolution. R15-6-16. Hearings on Claims. R15.6*17. Appeal Frodi Decision of Manager of Estate Taxes. (15) PAGENO="0500" 496 R15-6-O1. PURPOSE The Unclaimed Property Act provides that custody of abandoned property, as defined, shall be acquired by the State when the owner cannot be located and does not appear to be aware of its existence. Except for certain types of abandoned property - funds which Constitutionally escheat to the Permanent School Fund of the State - the acquisition of custody of abandoned property by the State does not deprive the owner of title. R15-6-02. PROPERTY SUBJECT TO THE LAW The Act primarily relates to money and intangible property generally but in certain cases includes personal property. When custody of tangible personal property is delivered to the State, provision is made for the sale of such property and for the deposit of the funds derived from the sale in the General Fund of the State. Generally the Act deals with bank and other financial institution deposits, insurance proceeds, utility deposits, corporate dividends and assets held for distribution, funds held by fiduciaries, and miscellaneous funds and personal property held by public agencies and individuals. R15-6-03. "ITEMS" DEFINED `Items of property", ~s used in the Act, with respect to money or funds, generally means amounts in a single account. An account in a financial institution is an "item', regardless of the number of deposits by the owner or accruals thereon. Interest or earnings are part of the principal which is the "item of property". However, unclaimed dividends declared but held for payment, annually or otherwise, for an absent owner of stock certificates are separate "items". Ownership certificates of a corporation held for distribution to an owner, singly or jointly, also is an "item". Individual accounts comprising public utility deposits or refunds each constitute an "item". R15-6-04. REPORT OF ABANDONED PROPERTY A verified report on forms provided by the Department of Revenue. Manager, Office of Estate Taxes shall be made on or before November 1 of each year, commencing November 1, 1956, by all persons (except life insurance corporations) holding property which is presumed abandoned. The report shall cover property held on June 30 of the year of the report. For good cause shown, the time for reporting may be extended by the Manager of Estate Taxes. (16) PAGENO="0501" 497 Life insurance corporations must make their reports on or before May 1 of each year as to funds held on December 31 of the preceding year. R15-6-05. EXCEPTIONS TO REPORT The 1956 report, only, need not include items of a value of S25.00 or less. Items of $25.00 or less which are excluded by the Act from the 1956 report are thereafter not to be reported in subsequent years. However, any item of $25.00 or less which meets the statutory definition of abandonment after June 30, 1956, must be reported in subsequent years. Subsequent to the 1956 report, all items of $5.00 or less may be reported in aggregate amounts. R15*6-06. WHO MUST REPORT A. Banking or financial organizations. These institutions are defined in the Act as any bank, trust company, savings bank, industrial bank, land bank, safe deposit company, private bank, savingc and loan association, building and loan association, credit union, cooperative bank, or investment company, engaged in business in this State. B. Life insurance companies transacting business within this State. C. Public utilities engaged in business within this State in the transmission of communications, the production, storage, transmission, sale, delivery, or furnishing of electricity, water, steam, or gas. D. Business associations. Includes businesses organized under the la~vs of this State or businesses doing business in this State. E. Fiduciaries which include banking or financial institutions or business associations generally which are organized under the laws of the State or which are doing business within the State. F. State courts and public officers and agencies, including the governing bodies of political subdivisions such as utility and fire di~tricts, as well as municipalities. R 1 5-6-07. CLASSIFICATION OF PROPERTY TO BE REPORTED A. Banks and financial inistitutions. Three general classes of property are required to be reported. These are deposits, payments for purchase of shares of financial institutions, and contents of safe deposit boxes. In addition, any interest or dividend increases are to be included. (17) PAGENO="0502" 498 B. Life insurance companies are required to report all funds due and payable according to their records upon any life, endowment, or annuity insurance policies which have matured or terminated, even though the policy itself has not been surrendered or claim made. C. Public utilities are required to report sums ordered to be refunded plus interest less lawful deductions, and sums deposited to secure payment for, or paid in advance for, public utility service, less any lawful deductions, except that amounts of less than $5.00 need not be separately stated and may be reported as an aggregate sum. D. Business associations are required to report any funds which are due and payable for which a negotiable instrument has not been issued. In addition, business associations are required to report stock and other certificates of ownership held for an owner. Funds held by business associations in connection with dissolution and distribution of assets are in a special category and are required to be separately classified and reported under the Act. E. Fiduciaries are required to report all intangible assets held for an owner, providing the fiduciary is a business organized under the laws of this State or, if not so organized, is doing business within this State, and the records of the fiduciary show that the last known address of the owner is in this State. In addition to businesses organized to conduct fiduciary operations, any person who is a fiduciary within this State, or any business holding miscellaneous tangible or intangible property for another in the regular course of business, is required to report such property. F. State courts and public officers and agencies are required to report both tangible and intangible property held for another. G. When the stock records of a corporation are maintained by a transfer or disbursing agent located within this State, such agent shall report the abandoned stock or stock dividends. R15-6-08. PRESUMPTION OF ABANDONMENT A. Generally, property held for more than 7 years which has not been claimed or concerning which the holder has had no correspondence with the owner is presumed to be abandoned and must be reported as provided for in the Act. Property held for 7 years prior to June 30, 1956, is presumed abandoned and must be reported exclusive of the $25.00 value limitation for the first report only. Property held for 7 years as of June 30, of the annual report shall be included in the report and need not thereafter be reported except any property previously reported but which was not paid or delivered (18) PAGENO="0503" in connection with that report to the Manager of Estate Taxes because of a claim to the holder by an alieded owner or not paid or delivered for any other reason. If, however, the claim of ownership is not estabUshed for property reported end withheld from payment to the Manager of Estate Taxes, then upor~ the determination that the claim was invalid, or for any other reason the presumption of abandonment is zean applicable, such property shall he reported again in the next succeeding C000E: report as if it had not previously been reported. E. Toe annual report forms supplied by the Manager of Estate Te\es conren a coumn needed "Date of Last Transaction . In making in this column the holder of property shall enter the date money v-as last deposited or broperty last received. With respect to banks end financial organizations, the date of last transaction will ordinarily be the date of the last deposit or withdrawal, whichever is most recent The crediting of interest to an account on the business recoros does not constitute a transaction for the purpose of establishing the commencement of the 7-year ~eriod of abandonment unless the ceoos:t~ presenrec his passbook to receive interest credit. If this was cone, eon r~-~ foancia; organization records so show, that date is a ,`.`c~,1 nba intent of the Act, arr if the most recent one, the 7-~ear cn~ on abandonment s~ia!l rLn from that date. If any any time once the dst deposit or ~`ithdrawai or entry of interest in toe deon';.tors oassbook, the depositor or his successor in interest has notified the financial organization of his whereabouts or present residence, and if the business rec~rds of the organization show the date of receipt of such notice, such notice shall constitute the most recent transaction, and the 7-year period of abandonment shall run from roan date. C. For financial organizations as well as other classes of ;c:(clers of property, the period of abandonment generally will commence to run from the date of the last correspondence, inquiry, communication from or on behalf of the owner concerning the property (or, in the case of utilities, the date of the last use of service for which the deposit was made), providing that the records of the holder show such correspondence or inquiry. For banks, as distinguished from financial organizations, the presumption of abandonment is overcome by an increase or decrease in the deposit or by other activity or interest concerning the account shown by the bank records. D. The exception to the 7-year presumption of abandonment pertains to assets held in connection with the dissolution of business organizations, including financial institutions. Assets distributable in the course of voluntary dissolution which have been held without claim for more than 2 years from the dath for final distribution are presumed (`19) PAGENO="0504" 500 to be abandoned and must be reported. When assets held for distribution upon dissolution have been delivered to the State, they are no longer recoverable by the owner because of special constitutional provisions, in the same manner as provided for recovery of funds and other properties delivered to the State which are presumed abandoned because of the 7-year non-claim period. R15-6-09. PRESUMPTION OF OWNERSHIP It shall be presumed that the stock book of a corporation shows the owner of the stock certificate or other certificate of ownership of the corporation, and the amount of ownership interest in the corporation. Presumption of ownership of other intangible and tangible property required to be reported to the Manager of Estate Taxes, and thereafter delivered to the State, shall arise from the records of the person reporting showing ownership or entitlement to such property. R15-6-1O. CHANGE OF OWNERSHIP RIGHTS When the owner's right to claim property held by another has been barred either by a statute of limitations, the contract under which the property was held, or under the terms of the instrument, or the law under which entitlement arose, prior to the time the holder is required to report and deliver abandoned property to the Manager of Estate Taxes under this Act, it is not necessary to report such property. For example, unclaimed merchandise held by a merchant on a lay-away or other hold-for-buyer plan, which reverts to the seller within a seven-year period, need not be reported. Likewise, money held in trust for redemption of capital stock of a corporation wherein the charter or by-laws provide for reversion for non-claim within seven years is not to be reported. The rule is applicable generally to situations where the holder for an owner becomes an owner because the original owner's claim is barred by operation of law. R15-6-11. NEGOTIABLE INSTRUMENTS Money due on a claim for which a negotiable instrument has been issued, suchas a bank check, bond, or negotiable note, is excluded from the presumption of abandonment unless the issuer likewise is the holder of the instrument. Upon presumption of abandonment, the instrument itself is to be reported and paid to the Manager of Estate Taxes. R15-6-12. DELIVERY OF PROPERTY Within 85 days after the publication of notice by the Manager of Estate Taxes to the owner or claimant of abandoned property, a (20) PAGENO="0505" 501 copy of which notice of publication will be promptly forwarded after the second publication to the reporting person or business organization, and the person or business organization which has reported the abandoned property to the Manager Of Estate Taxes shall pay or deliver to the Manager of Estate Taxes the property so reported and notice published. if the money or property is not paid or surrendered to the Manager of Estate Taxes in accordance with the annual report of abandoned property, the person making such report shall report the reason for failure to make such payment or delivery. The holder of property who has reported to the Manager of Estate Taxes may determine within the 65-day period following publication of notice that the presumption of abandonment is erroneous, and that the owner or claimant has not abandoned the property. The basis for such determination shall be reported to the Manager of Estate Taxes in order to warrant the retention of the property by the holder. R15.6-13 RELIEF FOR LIABILITY OF HOLDER Within the 65-day period after publication of notice by the - Manager of Estate Taxes, the owner or claimant may establish entitlement to the property held with the holder, but thereafter, and within the 20 days following the 66-day period, the holder must pay or surrender the property held to the Manager of Estate Taxes. Upon such payment or surrender, the liability of the holder to the owner or clainant terminates. After payment or surrender, all claims for recovery of the property by the owner or claimant shall be made to the Manager of Estate Taxes. R15-6- 14. CLAIMS FOR RECOVERY OF PROPERTY DELIVERED TO STATE An owner or claimant of property which has been delivered to the Manager of Estate Taxes because of the presumption of abandonment shall claim such property or the proceeds of such property after its sale by the Mthlager of Estate Taxes upon forms supplied by the Manager of Estate Taxes and with the claim shall submit verified copies of documents in support of the claim. If the claim is for personal property and, is made within one year or prior to sale by the Manager of Estate Taxes, the personal property itself may be recovered. After advertising and sale of the personal property by the Manager of Estate Taxes, the claim may be submitted for the proceeds of the sale only. R1S-6-15. CLAIM FOR CORPORATE ASSETS UPON DISSOLUTION When assets held for distribution to stockholders upon dissolution of the corporation are paid to the Manager of Estate Taxes, (21) PAGENO="0506" 502 after 2 years presumption of abandonment, claim for recovery of such funds shall be made to the Manager of Estate Taxes for the purpose of establishing entitlement only. Article 11, Section 8, of the Constitution of Arizona, requires that all funds from estates, or distributive shares of estates, that escheat to the State, and all unclaimed shares and dividends of any corporation incorporated under the laws of Arizona, shall be paid into the Permanent State School Fund for the use of the common schools. After payment into the common school fund and upon the establishment of entitlement to such funds has been made with the Manager of Estate Taxes, recovery of such funds may be made only through legislative action. This constitutional provision is applicable only to corporations organized under the laws of the State of Arizona and not to other forms of business organizations or to corporations organized outside of the State but doing business within the State. Claims for funds paid in by other types of business organizations and foreign corporations may be established with the Manager of Estate Taxes and recovered from the Manager of Estate Taxes without special legislative enactment. R15-6-16. HEARINGS ON CLAIMS A. An owner or claimant of property paid or delivered to the Manager of Estate Taxes may make application at the time of filing the ciaim for recovery for an administrative hearing on the claim. Such application shai set forth the grounds for recovery and the nature of the evidence to be presented at a hearing. Whether or not a hearing is authorized is within the discretion of the Manager of Estate Taxes. B. In the event the claimant fails, without .good cause, to appear at the time and place set for hearing, the Manager of Estate Taxes may take such action as he deems proper for the disposition of the hearing. He may adjourn the hearing to such time and place as he may specify. Notice of time and place of any adjourned hearing shall be given to the claimant. A claimant, in lieu of a personal appearance, may submit a deposition or brief under oath or affirmation setting forth the facts of the case, provided that such brief or deposition is submitted to the Manager of Estate Taxes prior to the hearing. C. The Manager of Estate Taxes shall make findings of fact and conclusions of law together with the proposed decision thereon. The proposed decision, if adverse to the claimant, together with the findings of fact and conclusions of law, shall be served upon the claimant who shall have 15 days within which to file exception to the findings of fact and conclusions of law and the proposed decision. Upon the receipt of such exception, the Manager of Estate Taxes may cause the hearing to be reopened to obtain additional evidence (22) PAGENO="0507" 503 pertaining to the exceptions. In the event the hearing is not reopened, the findings of fact and conclusions of law and the proposed decision shall be the final decision of the Manager of Estate Taxes, D. All hearings conducted by the Manager of Estate Taxes will be held to ascertain the substantial rights of the claimant involved. The Manaoer of Estate Taxes may admit and give effect to evidence which shall possess probative value commonly accepted by reasonably prudent men in the conduct of their affairs. A full and complete record shall be kept of all proceedings in connection with claims. E. Any claimant may appear before the Manager of Estate Taxes by an attorney or by any other person qualified to represent him. R15-6-17. APPEAL FROM DECISION OF MANAGER OF ESTATE An appeal to the Superior Court from the decision of the Manager of Estate Taxes adverse to a claimant may be taken in accordance with Article 6, Chapter 7, Title 12, Arizona Revised Statutes, except that the jurisdictional period for instituting an appeal to the Superior Court shall be 90 days from the date of the decision of the Manager of Estate Taxes or 180 days from the date of filing the claim with the Manager of Estate Taxes if the Manager of Estate Taxes fails to act on the claim. (23) PAGENO="0508" 504 QUESTIONNAIRE RESIPONSE ARKANSAS ARKANSAS DEPARTMENT OF FINANCE AND ADMINISTRATION REVENUE DIVISION P.O. Box 1272 Little Rock, Aekaxs~s 72203 D~. RL Qoolts Dkectxe October 26, 1979 The Honorable Benjamin S. Rosenthal House of Representatives Commerce, Consumer, and Monetary Affairs Subcommittee of the Committee on Government Operations Rayburn House Office Building, Room B-377 Washington, D.C. 20515 Dear Sir: The attached answers to the questionnaire have been made to the best of our ability. The State of Arkansas passed Act 256 of 1979 on March 5, 1979. We are in the process of implementing this Act and for the most part can not answer your questionnaire. We have granted a ~blanket extension for our first report to the 31st of December, 1979. We do not feel qualified to even make suggestions as to the need for federal regulations since we are not aware of the problems your committee is addressing itself in relation to the disposition of Unclaimed Property laws as enacted by the various states. If you can see in any way that we can be of further assistance, please do not hesitate to contact us. HWR/plc Respectfully, Herbert W. Reinhardt, Manager Corporation/Franchise Tax Section Unclaimed Property Administrator am camxe Enclosures PAGENO="0509" 505, Unclaimed Property Questionnaire 1. Unclaired prooerty statute, regulations, and administrative program: Question a. How does the state unclaimed pr~perty or abandoned property statute to banks and other financial institutions (including trust cocoanies, savinss and loan ass~oiations, securities brokerage firms, mutual funds, credit uni~ns, and insurance companies)? Property held by Bankins- or Financial Organizations or by Business Associations. The followins property held or owing by a banking or financial organization or by a business association is presumed abandoned: (a) Any demand, savings, or matured time deposit made in this State with a banking organization, together with any interest or dividend thereon,~ excluding any charges that may lawfully be withheld, unless the owner has within seven (7) years: (1) increased or decreased the amount of the deposit, or presented the passbook or other similar evidence of the deposit for the crediting of interest; or (2) corresponded in writing with the banking organization concerning the deposit; or (3) otherwise indicated an interest in the deposit as evidenced by a memorandum on file with the banking organization or, unless the banking or financial organization has corresponded with the owner of the property by mail and said correspondence has not been returned unclaimed or undelivered to the banking or financial organization by the postal service. (b) Any funds paid in this State toward the purchase of shares or other interest in a financial organization, or any deposit made therewith in this State, and any interest or dividends thereon, excluding any charg~ that may lawfully be withheld, unless the ewner has within seven (7) years, (1) increased or decreased the amount of the funds or deposits, or presented an appropriate record for the crediting of interest or dividends; or PAGENO="0510" 506 (2) Corresponded in writing with the financial organization concerning the funds or deposit; or (3) otherwise indicated an interest in the funds or deposit as evidenced by a memorandum on file with the financial organi- zation or, unless the banking or financial organization has corresponded with the owner of the property by mail and said correspondence has not been returned unclaimed or undelivered to the banking or financial organization by the postal service. (c) Any sum payable on checks ~certified in this State or on written instru- ments issued in this State on which a banking or financial organization or business association is directly liable, including, by way of illustration but not of limitation, certificates of deposit, drafts, money orders, and traveler's checks, that, with the exception of traveler's checks, has been outstanding for more than seven (7) years from the date it was payable, or from the date of its issuance if payable on demand, or, in the case of traveler's checks, that has been outstanding for more than fifteen (15) years from the date of its issuance, unless the owner has within seven (7) years, or within fifteen (15) years in the case of traveler's checks, corresponded in writing with the banking or financial organization or business associa- tion concerning it, or otherwise indicated an interest as evidenced by a memorandum on file with the banking or financial organization or business association or, unless the banking or financial organization has corresponded with the owner of the property by mail and said correspondence has not been returned unclaimed or undelivered to the banking or financial organization by the postal service. (d) Any funds or other personal property, tangible or intangible, removed from a safe deposit box or any other safekeeping repository or agency or collateral deposit box in this State on which the lease or rental period has expired due to nonpayment of rental charges or other reason, or any surplus amounts arising from the sale thereof pursuant to law, that has been unclaimed by the owner for more than seven (7) years from the date on which the lease or rental period expired. *provided, property held or owing by a banking or financial organization which is part of a fund established by any organization or individual to provide perpetual care for a cemetery or to provide funds to pay the burial expanses of one or more persons shall not be deemed abandoned and need not be reported as provided in this Act. Unclaimed Funds Held by Life Insurance Corporations (a) Unclaimed funds, held and owing by a life insurance corporation shall be presumed abandoned if the last known address, according to the records of the corporation, of the person entitled to the funds is within this State. If a person other than the insured or annuitant is entitled to the funds and no address of such person is known to the corporation or if it is not definite and certain from the records of the PAGENO="0511" 507 corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known address of the insL'red or annuitant according to the records of the corporation. (b) `Unclaimed funds", means all zooneys held and owing by any life insurance corporation unclaimed and unpaid for core than seven (7) years after the noneys became due and payable as established from the records of the corporation under any life or endowoent insurance policy or annuity contract which has natured or tezoninated. A life insurance policy not oatured be actual proof of the death of the insured is deemed to be natured and the proceeds the~eof are deeced to be due and payable if such volice was in force when the insured attained the limiting age under the nortality table on which the reserve is based, unless the person aunearing entitled thereto has within the preceding seven (7) (1) assimned, readjusted, or paid premiums on the policy, or subjected the policy to loan, or (2) corresponded in w~iting with the life insurance corporation concerning the oolicy. `ioneys other,'ise payable according to the records of the corporation are deemed due and payable although the policy or contract has not been surrendered as recta ret. that aoninistrative rules or regulations of your office or agency apply to the handlung and reporting of unclairued property to the state by banks mnd other financial institutions? Please attach a copy of any such Ad-ninistrative rules and regulations have not as yet been completed. c. Are there any sroeisions of yourstate's other banking, insurance, or scoeral cornnerce laws or ret-ulaticns that irrpose certain requirements on how banks and other financial institutions trust handle dormant deposit accounts or other urolaiced property, especially requirements for the protection of the rights of the ~wners of the property? (Ohis and the previous suestion would cover limitations on service charges, reguaraconts of prior notice to owners, requirements con- cerning efforts to locate owners, for example.) tone that -c are aware of or know of. 67-~f'4O 0 - 81 - 33 PAGENO="0512" 508 Question d. What is the practice in your state as regards advertising the names of owners of unclaimed property being turned over to the state? In parti- (i) We will be advertising in a newspaper of general circulation in this State in which is located the last known address of any person to be named in the notice. (ii) The State places the advertisement. (iii) Addresses, name and account number will be given. (iv) The Administrator is not required to publish in such notice any item of less than One Hundred Dollars ($100.00) unless he deems such publication to be in the public interest. (v) We will include only the owners of unclaimed property that is being reported for the first time. Question e. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance with state requirements) to locate the owners of unclaimed bank accounts and other financial property? After advertising the names in newspapers and other media, within one hundred and twenty (120) days from receipt of report, the Attorney General shall mail a notice to each person having an address listed therein who appears to be entitled to the property of the value of One Hundred Dollars ($100.00) or mere presumed abandoned. The mail notice shall contain: 1. A statement that, according to a report filed with the Administrator, property is being held to which teh addressee appears entitled; 2. The name and address of the person holding the property and any necessary information regarding changes of name and address of the holder. 3. A statement that, if satisfactory proof of claim is not presented by the owner to the holder on the date specified in the published notice, the property will be placed in the custody of the Administrator to whom all further claims must be directed. Question f. Are there any state limitations on the actions of "bounty hunters" who seek out the advertised owners of unclaimed property in the hope of getting a share of the property? None to the best of our knowledge. PAGENO="0513" 509 Question g. What is the definition of "abandoned" or "unclaimed" in your state? In financial institutions, is property presumed abandoned when there has been no "contact" for a certain number of years? How is "contact" defined? If mail addressed to the owner is not being returned by the Post Office as undeliverable, can the bank or other institution presume that there is still "contact" and that the property is not abandoned? First Question Everything of value held by a person but owned by another person and aandonei for seven years is considered abandoned or unclaimed. Semoni Quest~cn Presumed abandoned after seven (7) years. Third Question Contact is defined as owner rurponding to holders trying to conrnunicate with then, by nail or telephone or in person, etc. Fcurth Question Funanmial Institutions, if mail is not returned by Post Office, it is presumed thu property is not aband~nei. h. Dues cour office (or some other state office acting in cooperation with your office) conduct field audits or on-site compliance investigations ~evotei exclusively to checking compliance with the unclaimed property This phase of our Uniform Disoosition of Unclaimed Property has not been established, however; in the near future field audits will be carried out. The Department of Finance & Administration has its own field audit sectio~i. ues:iun i. What is your state's budget for administration of the unclaimed property How mane full-time (or full-time-emuivalent) persons are assigned the unclaimed property program? to present date this section has not been budgeted. We have been loaned two people to administer this section under the management of the Corporate! Franchise Tax Section. 2. 2meunts of unclaimed property re~rted and delivered to owners: None of the questions under this section (reference Section Question #2) are applicable at this time. PAGENO="0514" 510 3. Brokerage firm reports: Not applicable at this time. 4. Compliance Not applicable at this time. 5. Service Charges Not applicable at this time. 6. Other Practices Not applicable at this time. 7. Unclaimed property held by federal government: Not applicable at this time. 8. Suggestions for federal action: a. What regulatory steps by the federal regulatory agencies would you suggest, if any, to (i).enhance compliance with state unclaimed property laws and/or (ii) protect the rights of the owners of dormant bank accounts and other unclaimed property? (The federal regulatory agencies that could be relevant here include the Comptroller of the Currency, Federal Reserve, FDIC, Federal Some Loan Bank Board, National Credit Union Adminis- tration, Securities and Exchange Commission, and Federal Trade Commission.) b. What corrective federal legislation, if any, would you suggest that Congress should consider in order to (i) enhance compliance with state unclaimed property laws and/or (ii) protect the rights of the owners of dormant bank accounts and other unclaimed property? (If you wish to devote extra time to this question, you may wish to send in your other responses first and then reply to this question separately by letter.) Due to our lack of experience in administering Act 256 of 1979, we do not feel qualified to make any suggestions for federal action. PAGENO="0515" 511 CALIFORNIA KENNETH CORY ~oittroUrr of ff~a aif (jIu1ifor~u O~VISION OF UHCLAIMEO PROPERTY December14, 1979 Hon. Benjamin Rosenthal, Chairman Comerce, Consumer, and Honetary Affairs Subconriittee 5-377 P.ayburn Buildina Washinctom, D.C. 20515 -t. mohert . iatsu~ Pt:- 502 Cam::: Etilding ~oshir.:tc:, D.C. 20515 Homorable Sirs: Pecemtiy you asked for information concerning California's Unclaimed Property Procram. Your questionnaire dealt with problems where California has more experience than any other state. It would have taken several volumes to give you complete documentation and individual details where you have requested those things. We have answered the questionnaire in a èoncise way not wishing to burden you with thousands of pages of documants~ In any area where you desire additional information, we will be happy to provide it. The entire U:ciair~d Property Division is at your disposal to help with your project and all of the records are available if you wish to come and review them. if you want us to come to Washington to provide counsel, we are also prepared to do that. in a letter to follow in the week of December 31, 1979, the State Controller will outline specific reconmendations for Federal legislation which will help not only the states but also the business conxxunity in this newly glamorous field of unclaimed property. Very truly yours, KENNETH CORY, STATE CONTROLLER Thomas F. Holland, Jr., Chief Division of Unclaimed Property cc: 0':n Tucker, Special Consultant to Comrerce, Connumer, and Honetary Affairs Subcoimittee PAGENO="0516" 512 UNCLAIMED PROPERTY QUESTIONNAIRE 1. Unclaimed property statute, regulations, and administrative programs: a. (i) All intangible property held by commercial enterprises in the course of doing business or by financial institutions as depositories. (ii) Only property held by local governments or municipal corpora- tions or is held or issued in a foreign country is excluded. (CCP 1502) (iii) Seven years except for travelers checks, which have a holding period of fifteen years. (iv) Purely custodial. Cv) California pays interest at 5% computed annually on all property which is received in an investable form or which is converted to an investable form. (CCP § 1540(c)) (vi) State law requires financial institutions to attempt to notify owners of potential escheat during a period from 6 to 12 months before such escheatment occurs. (CCP 1513.5) b. California will promulgate rules and regulations pertinent to the Unclaimed Property Law in the next calendar year. A copy of present regulmtions is attached, but these are not in line with the law as it has been amended. c. California law prohibits service charges on savings accounts, but permits charges on demand accounts if a schedule of such charges has been filed with the State Controller. d. (i) The state advertises the names and last known addresses of all owners of unclaimed property in excess of $50 in the newspaper of largest general circulation in the county where the owner is located. (ii) The state places the advertisements. (iii) Addresses ARE part of the ads. (iv) Only property in excess of $50. (v) Ads include names of owners being published for the first time. The ad appears one time in two consecutive weeks. California has more than 250,000 names of unlocated owners of property in excess of $50; it would not be economically feasible to repeat names. -1- PAGENO="0517" 513 You did not ask for cost data on advertising. In fiscal `79 California spent $l.l+ million in advertising costs. a. After a holder of unclaimed property reports to the state, a notice is sent by the state to the last known address of the owner, irrespective of amount or type of property. Three full-time employees spend all of their time attempting to locate owners where no response is generated by notice or advertise f. California CC? 1582 limits the amount an heir-finder may charge an owner to 10%. g. The copy of the Unclaimed Property Law that is enclosed here defines abandoned and `unclaimed'. Property is presumed abandoned when there has been no contact with the owner for seven consecutive years. "Contact" may be defined or demonstrated in a number of ways: 1) a passbook may be presented for crediting of interest; 2) a deposit or withdrawal may be made; 3) the holder may have a written record of contact; C) the owner may have an active account of another kind at the sums financial institution. California follcws the view that no presumption may be made by a ~oider cm the basis of mail. Eo~perience has shown that such presumption is more often wrong than right. h. The Unclaimed Property Division of the State Controller has a fully staffed field audit force of 30 performing enforcement examinations at all times. Note that this is a law enforcement activity, not a compliance investigation. (i) The number of audits perfo~ed each year varies because of the diversity in size and business magnitude of holders. On the average we complete about 150 audits each year. (ii) Thirty pecple with an approximate budget of $892,000. (Cii) Namufacturers, banks, department stores, insurance companies, savings and looms, motor carriers, finance companies, recreation companies, consumer cooperatives, credit unions, and large grocery chains. (iv) None. This does not mean that we have audited all forms of business enterprises, onlythat we have not yet gotten to some. (v) A sample audit program is enclosed. i. The State budget for administration of the unclaimed property program is $3,377,895. California employes 87 full-time equivalents in Unclaimed Property. PAGENO="0518" 514 2. Amounts of unclaimed property reported and delivered to owners: a. Numbers of institutions reporting: c. Amount of property remitted: All institutions Banks Brokers Insurance companies All others d. Number of individual accounts in excess of $500 All institutions (15%) Banks Brokers Insurance companies All others e. Number of names adver~4pgd: 1221 1221 All institutions Banks Brokers Insurance companies All others b. Amount of property reported:. All institutions Banks Brokers Insurance companies All others 2,218 2,360 270 311 218 214 1,730 1,835 1976 1,708 216 301 1,191 $ 14,547,471 9,446,545 600,786 4,500,140 $ 10,643,170 9,149 ,249 612 ,259 881,662 $ 62,027,500 42,752,003 1,024,949 18,250,548 $ 23,550,590 13,804,230 875,428 8,870,932 $ 36,176,039 24,237 ,946 (est) 1,085,281 est) 10,852,812 est) $ 32,131,736 15,436,325 1,768,498 14,926,913 13,200 (est.) 67,042 $ 6,264,849 24% 5,588(est.) 1B,839(est.) 32,533 f. Dollar amounts returned to owners: $ 4,316,320 g. Delivery percentpgg~: 33% h. Amounts remitted minus claims - $15,037,888 124,109 $ 39,269,243 64% $ 21,965,924 $ 27,690,645 PAGENO="0519" 515 3. Brokerage firm reports: California is just now beginning its program to examine reporting practices of brokerage firms. The information we have now is too fragmented to be of value and too widely disbursed as to be readily retrievable. Ft-on our limited review of reporting by brokerage firms, indications are that names and amounts have appeared in such small numbers as to be statisticall; improbable. a. Ccmmliamce with California's law by all forms of business enterprise is fairly good and definitely on the upswing. The degree of compliance seems to be improving with better kisowledge of the law by holders and enhanced enforcement activities by the State Controller. Yes. California has so many audit changes, and such elaborate and comprehensive documentation that we could not possibly list individual is not able to provide an estimate that would not be a. California has nearly complete information on service charges assessed by banks and other holders. The information has coniC from reports filed by holders, from field examinations, and from discovery procedures employed in litigation. 5. At one tine bank service charges on dormant accounts was a general practice. In 1976, California enacted legislation prohibiting such charges charges on dormant savines account~. Charges on dormant demand accounts are a general practice. remercpe ::rms and escrcw ccmpamies. a. Sc--a eat foand what could be called a typical service chsrge. ye Sc--a found charges ranging from $10 to $180 over a holding period. f. SIEC, an at-aunt which effectively wiped out all small accounts. g. Nany cases. It would not be practical to provide all the information we have in this area. h. Banks in California no.longer are permitted to service charge dormant savings accounts. We do not track charges on dormant demand accounts except for the infrequent situation where we observe an aberration. PAGENO="0520" 516 i. About $30 million. j. Already discussed. k. Yes. We now have in progress a lawsuit with the Bank of America where we allege that more than $15 million has been taken by the bank at the expense of unlocated owners. Our basis for the claim is that no enforceable contract existed between the bank and the depositor and that once the depositor became unlocatable no legal notice could have been provided. It is our position further that if such a contract ever did exist, subsequent waiver by the bank for one or more depositors was a waiver for all. 6. Other Practices a. Before California changed its law, it was general practice for banks to stop paying interest on dormant savings accounts and to service charge those accounts. This practice of course had the effect of reversing previously credited interest. Service charges generally were taken only from accounts less than $500 but interest stopped accruing on any account after a period of inactivity. b. Yes. We have returned accounts in excess of $20,000 to owners who never changed residence. c. Yes. This is a practice no longer followed in California. The institutions have agreed to make a positive contact with an owner prior to roll over. d. There have been several cases where institutions have claimed customer contact via automatic crediting of interest. When California challenged the procedure, the institutions reclassified the property as dormant. e. None. f. Service charges are taken from money orders, cashiers checks, and certified checks. 7. Unclaimed Property held by Federal government a. More than $200,000 mostly in U. S. Savings bonds. b. The U. S. Treasury ~efused to honor any of the claims. c. That the State Controller stands in the shoes of the owner in his capacity as Custodian. 8. Sugg~estions for Federal action Specific recommendations for legislation and regulation will follow in a letter that will be completed during the week of December 31, 1979. * * * PAGENO="0521" 517 AUDIT PROGRAM OFFICE OF ThE STATE CONTROLLER AUDIT BUREAU AUDIT PROGRAM 1.C Audit Progran Index 1.1 Purpose and Objective 1.2 Pie-Audit Steps 1.3 Prelininary Field Audit Steps 2.0 F~iity at Dividend Paying Conpanies at ~nn-ividend Paying Conpanies 2.2 Mergers, Aor~isiticns, Licuidations, etc. L.a Savings Accounts L.l Accounts Receivable Credit Balances L.2 Merchandise Certificates, Scrip, and Layaway Dep. 5.0 C~eo-ins Accounts LentLfie:~.eosts :ersona.~. _rust Banks S & L Ins.Co. Ind. Dept.Store x *x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x x 8.0 Safe Derosit Boxes and Safekeeping 8.1 Escrow Deposits 8.2 Collateral File x x x x x x x x x x 3.0 Exo~.ange, Payroll, Vendors, and Exrense Checks X x x x x x x x x x x x 9.0 Closing the Audit x x x x x PAGENO="0522" 518 AUDIT PROGRAM Purpose The purpose of this audit program is to set forth the policies and procedures to be complied with by all field auditors in the performance of their official duties. Such policies and procedures shall be in compliance with the policies of the office of the State Controller and the Division of Unclaimed Property and shall be consistent with fulfifling the requirements of the California Code of Civil Procedure, Sections 1300 through 1615 inclusive. ~j~ctive The objective of the audit program is the examination of records of any person in accordance with the California Code of Civil Procedure, Section 1571. General Although the objective of the audit program is to determine whether or not such person has unclaimed property escheatable to the State to report, or has re- ported accurately unclaimed property escheatable to the State, it is not in- tended to place unreasonable restraints on such person. In light of this, it is expected that all audito~s, both in the office and in the field, will comply with Sections 19250 and 19572 of the Government Code. The audit program is not intended to be all inclusive, as there is nothing that can take the place of an auditor's judgement. Where and when necessary, dis- cretionary judgement must be used. PAGENO="0523" 519 AUDIT PROGRAM Pre-Audit Stepe Initial Date 1. Cosplete Audit Scope Sheet _______ 2. Set up audit file _______ 3. Cbtain end review cones of reports filed with the Division of Unclained Pronerty ~. Obtain and review holder's corresrondence file 5. Obtain and review prior audit work papers and findings. 6. Send the audit entrance letter to an officer of the holder conpany. If necessary, include the Law, Regulations, and report forns to cónpanies that have not reported. 7. Schedule by phone a cutually agreeable field audit starting tine. Request working space for the nurber of auditors who will be on the audit. Peruest that snecific records needed for the evaninatjcn be r.ade available: (a) The Oonpa.ny's copies of prior years Unclaiaed Property Reports with supporting workpaters and corre epondence. (b) Copies of policy and procedure canuals. (c) A general ledger Chart of Accounts. (d) A list of subsidiaries and divisions. Ce) Most current general ledger trial balance. PAGENO="0524" 520 OFFICE OF THE STATE CONTROLLER DIVISION OF UNCIJ~I PROPERTY AUDIT BUREAU AUDIT PROGRAM Prelimin5FF~ie]d Audit Stepe Initial Date 1. Hold an Audit Entrance conference to: A. Discuss the audit approach, scope of the audit and related sections of the Code of Civil Procedure. B. Rave an officer assigned as contact person and source of company records. C. Complete the Internal Control Questionnaire. D. Get assigned work space. 2. Obtain and review the records requested in pre-audit Step #6. 3. Obtain and review copies of relevant forms and customer contracts. k. Request excerpts of corporate board minutes and internal auditor' a working papers for financial matters and account- ing treatment concerning unclaimed property if there is sufficient audit evidence to indicate a need for this step. ___________ 5. Review the rules, regulations and bylaws of the Company relating to reportable eacheatable property. __________ 6. Obtain and review audited financial statements and read all notes relevant to unclaimed property. __________ 7. Investigate findings of other governmental agencies. ___________ 8. Prepare a supplemantsl audit program to record question- able areas and items for subsequen.t review. 9. Complete Audit Plan. __________ PAGENO="0525" * 521 AUDIT PROGRAM Preliminary Field Audit ~ Initial Date 10. Unclaimed Property Report Analysis: A. Review and evaluate internal control including a flow chart of the transaction cycle. B. Test internal ccntrcl by rrccedural test of at least one transaction cycle. (1) Ca a selected basis test the a~ithoetic accuracy of the workrapers and filed reports. (2) Trace the ~nrknarera to the so~irce docunents and test for: (a) Proper inclusion of all escheatable itens at the proper accunt. (b) Deteraine if any service charges have been arplied against unclained property or if any arorerty has been charged off canaletely. 1) if holder states that service charges are leral, get citation and/or copy of contract. C. Test the validity cf clams on ~ithheld iters. PAGENO="0526" 522 AUDIT PROGRAM Paying Companies Initial Date 1. Determine if the holder or a corporate trust department does the stock and dividend accounting. (a) Request authorization letter from the holder to examine the accounting records of the outside agent, if necessary. (b) If the agent files Annual Unclaimed Property Reports: (1) Review and evaluate internal control including a flow chart of the transaction cycle. (2) Test internal control by procedural test of at least one transaction cycle. (c) Review agency contracts 2. Review and evaluate the internal control maintained over the dividend disbursement system and procedures for maintaining contact with shareholders, including of flow chart of the transaction cycle. 3. Test internal control by procedural test of at least one transaction cycle. ~. Trace the transferrals into and out of the unclaimed dividend account control to determine the nature of such transactions, i.e. undeliverable cash and stock dividends and outstanding cash dividends. 5. Analyze selected accounts to determine whether unclaimed dividends have been credited to income or retained earnings accounts. PAGENO="0527" 523 AUDIT PROGRAM Equity at Non-Dividend Paying Companies Initial Date 1. Review and evaluate the internal control~ for naintaining contact with shareholders, including a flow chart of the tranaaction cycle. 2. est internal control by procedural test of at least cne tra~sacticn cycle. 3. Deternine fron the holder's or agent's stock records, which undeliverable ehareholder~intangib1e intereete eacheat per Section 1516(b), CC?. 67-440 0 - 81 - 34 PAGENO="0528" 524 AUDIT PROGRAM Mergers, Acquisitions, Liquidations, etc. Initial Date 1. Research outside sources such as ~Moodytsf and/or the "Commerce Clearing House Leaflet Services-Capital Changes Report" for: (a) dates of nergers, acquisitions, or liquidations over seven years old. __________ (b) exchange ratio __________ __________ (c) cash in lieu of fractional shares or liquidation rates __________ (d) merged or acquired company's predecessor corporate trust department. (a) dividend history of merged company if a public corporation prior to acquisition (f) and, disposition of unclaimed dividends after merger. 2. Review the agents equity document files or coryorate files. 3. Determine whether any unexchanged shares are held in trust with cash-in-lieu and accrued dividends to date for any unlocated shareholders. k. Determine whether funds are being held in trust for shareholders of voluntary or involuntary liquidations per Section 1517, CCP. 5. Document and evaluate the agents carry forward and subsequent reporting of unclaimed property to the holder or to the State Controller. 6-30-78 2.2 PAGENO="0529" 525~ AUDIT PROGRAM Debt Issues Initial Date 1. Review end evaluate the internal control including a flow chart of the transaction cycle for: (a) debt redenptions and r.aturitiee, and (h) diebursarente of interest paynents for registered and bearer debt instrunents. 2. Teat internal control by procedural teat of at least one transaction cycle. 3. Review the debt indenture for clauees relating to: (a) return of outstanding and undeliverable interest checks to holders after a stipulated period of tine, and (b) registration requirecents of the security. PAGENO="0530" 526 ~ j~;~ r~ Exchange, Payroll, Vend~, aiO t~ee C~.rck~ Initial Date 1. Review and evaluate internal ~~.trol ioclumirg a flow chart of the transaction cycle. 2. Teat internal control by ~ tmtm of at leant one transaction cyc)~. 3. Examine all cloned torraaiisJ. ur~echin~ accounte to determine the amount of te~ñO~C~ checks at the time of closing, trace any teronair.g checks to control total(s). 1+. Examine liability accounts to wnicr. cntctaociiog or undeliverable checkrr are trnafeireo: (a) Evaluate aging procecure (b) Teat debit entriem to Oate,inne their nature (c) Reconstruct any checks service charged or written off to an income or aurpiom account. 5. Analyze selected accounts to determine whether any outstanding checks have beer taI~en directly into income or credited to surplus. Also, examine the contra or related expense accounts to determine whether outstanding checks are rebated to the account for which they were drawn. PAGENO="0531" 527, AUDIT PROGRAM Merchandise Certificates, Scrip, and Layawa) Deposits Initial Date 1. Peview and e7aluate internal control including a flow chart of the transaction cycle. 2. est'internal control by procedural test of at least cne transaction cycle. 3. Exanine listing of outstanding itens: (a) Deternine snounts (b) Evaluate aging procedures (c) Test debit entries to deternine their nature (d) Reconstruct any itens written off to an incone or related expense account. L~. Analyze selected accounts to deter-nine if arounts have been taken into incone or used to offset exnenzes. PAGENO="0532" 528 AUDIT PROGRAM Accounts Receivable Credit Balances Initial Date 1. Review and evaluate internal control including a flow chart of the transaction cycle. 2. Test internal control by procedural test of at least one transaction cycle. 3. Exsmine listings of outstanding items: (a) Determine smounts (b) Evaluate aging procedures (c) Test debit entries to determine their nature (d) Reconstruct any items written off to an income or related expense account ~ Analyze selected accounts to determine if smounts have been taken into income or used to offset expenses. PAGENO="0533" 529 AUDIT PROGRAM SavinKs Accounts 1. Review and evaluate internal control including a flow chart of the transaction cycle. 2. Test internal control by procedural te~t of at least one transaction cycle. 3. Prenare a proof or teat control totals of dormant account certifications or listing and trace the totals to the gen- eral ledger. li, Trace transferrals into and out of the dorsant accounts control on a test basis to determine the legitarcacy of such transactions. 5. Review and test the controls for segregating assigned, blocked and pledged accounts frcn escheat. 6. Analyse any service charges imposed or~ dormant savings accounts and reconstruct such accounts as considered necessary. 7. Review procedures related tc the safekeeping of customer 8. Review resolutions related to redeemed accounts and the method of giving notice to the depositor. 9. Recalculate interest on dormant savings acccunts end reconstruct such accounts as considered neceseary. 10. Analyse accounts to determine whetherany accounts have been taken directly into income or credited to surplus. 11. Trace clams by owners and by the business organization on renorted savings accounts: a) Note documentation required b) Verify name and amount. 12. Perform the following tests of accounts reported: a) Name and address b) Balance when transferred into dormancy c) Method of accruing interest on dormant accounts d) Balance of account when reported e) Date of last transaction. (Caveat - common dates) f) Test closed savings account signature cards for attributes 13. Exerine transactions and the documents relating to reactivated or paid dormant savings accounts. Initial Date n-3~D-78 1f.0 PAGENO="0534" 530 AUDIT PROGRAN Checking Accounts Initial Date 1. Review and evaluate internal control including a flow chart of the tranaaction cycle. _________ ________ 2. Teat internal control by procedural teat of at least one transaction cycle. 3. Prepare a proof or test control totals of dormant account certifications or hating and trace the totals to the general ledger. 1+. Trace transferrals into and out of the dormant accounts control on test basis to determine the legitamacy of such transactions. 5. Reconstruct accounts improperly service charged off prior to becoming reportable and add back excess service charges not charged on like active accounts. 6. Analyze accounts to determine whether any accounts have been taken directly into income or credited to surplus. 7. Trace claims by owners and by the business organization on reported checking accounts: a) Note documentation required b) Verify name and amount. 8. Perform the following tests of accounts reported: a) Name and address. b) Balance when transferred into dormancy c) Balance of account when reported. d) Date of last transaction. (Caveat - common dates) a) Test closed checking account signature cards for attributes. 9. Examine transactions and the documents relating to reactivated or paid dormant checking accounts. PAGENO="0535" 531 AUDIT PROGRAM Unidentified Deposits 1. Review and evaluate internal control including a flow chart of the transaction cycle. 2. Test internal control by procedural test of at least one transaction cycle. 3. Prenare a croof or teat control totals of t~nidentified depcsits, etc. ~. Trace transferrals into and out of control accounts to deternine the nature of the transactions and note dccarentation. 5. ~ any service charges ioposed on unidentified itena and reconstruct anounts as required. 6. Analyze accounts to deternirie whether unidentified items have been credited to expense, income, or surplus. Initial ~ PAGENO="0536" Personal Trust 532 AUDIT PROGRAM 1. Review and evaluate internal control including a flow chart of the transaction cycle. 2. Teat internal control by procedural test of at least one transaction cycle. 3, Examine dividend and interest disbursement accounts: A. Trace items fron control accounts to active files. B. Trace dormant items from active files to control accounts. ~ Prepare schedules of unclaimed cash dividends, stock dividends, interest checks, etc. 5. Obtain a list of general ledger suspense accounts and select accounts containing escheatable property. A. Trace items from suspense accounts to active files. B. Trace active files to suapense accounts. C. Reconstruct amounts offset to unrelated debit items. D. Reconstruct amounts improperly service charged off or taken into fees. E. Reconstruct stock dividends taken out of suspense accounts, sold and taken into income. 6. Analyse the control account for unpaid stock dividends and the disposition of same. 7. Analyze suspense stock and bond positions for unclaimed stock and bonds that cannot be matched to individual trust accounts. Initial PAGENO="0537" 533 AUDIT PROGRAM Safe Deposit Boxes and Safekeeping Initial Date 1. Review and evaluate internal control including a flow chart of the transaction cycle. __________ __________ 2. rest internal control by procedural teet of at least one transaction cycle. ___________ ___________ 3. Exanine all contents of forced boxes held in eafekeecing to deter~ne if any of these iters are reportable. li. Review correspondence to deternine if any contact has been nade with the owner of the safe deposit box contents. ___________ ___________ 5. Teat the current file on safe-deposit boxes for attributes and to verify the Business Association's aging procedures. 6. Exanine all other itena in safekeeping that cay be aged or unclaired not included in regular safe- deposit boxes. ___________ ___________ PAGENO="0538" 534 AUDIT PROGRAM Escrow Deposits Initial Date 1. Review and evaluate internal control including a flow chart of the tranaaction cycle. __________ __________ 2. Test internal control by procedural test of at least one transaction cycle. __________ __________ 3. Review escrow files to determine if contact has been maintained with the escrow depositor. 1+. Determine the amount of unclaimed escrow deposits that have remained unclaimed for seven years or more. 5. Analyze any service charges imposed on outstanding escrow deposits and reconstruct amounts as required. 6. Analyze selected accounts to determine whether any escrow deposits have been credited to income. PAGENO="0539" 535 AUDIT PROGRAM Collateral File Initial Date Review and evaluate internal control including a flow chart of the tra~aaction cycle. 2. Test internal control by procedural test of at l~aat one transaction cycle. 3. Exanine collateral register for aged itens. Prenare a schedule of itens held 7 years or longer. 2. race collateral to loan file. 3. Review corresoondence files. ~. Inspect all collateral held by bank: Prepare a schedule of aged iters. 2. ~ace aged itens to collateral register. 3. Deternine the status of collateral being held on fully paid loans. ~. Deternine if collateral was renosed by owner. PAGENO="0540" 536 AUDIT PROGRAM Closing the Audit Initial Date 1. Auditor In Charge review audit package for: (a) Adequate documentation for audit findings (b) Work papers prepared in conformance with Division standards. (c) Workpaper package completed, indexed, and assembled. 2. Prepare a summary of audit findings. 3. Submit audit package to the supervisor for review. ~. Hold a conference to provide a copy of the summary of audit findings to the holder's representatives. 5. Set a specific time and place for an exit conference and notify si~pervisor of tine and place. 6. Hold the exit conference. 7. Prepare a draft of the audit report. 8. Submit the audit package to the supervisor for final review process. 9. Foot and cross foot the final Audit Report draft and Lead Schedules. PAGENO="0541" 537 INTERNAL CONTROL QUESTIONNAIRE OFFICE OF THE STATE CONTROLLER AUDIT BUREAU 1.0 INTERNAL CONTROL QUESTIONNAIRE Banks S&L Ins. md. Dent. Store l*0 Internal Control Questionnaire Index X X X X X P~r ace and Cbjective X X X X X General X~ X X X X 2.0 ivendPavingStock X~ X X X X 2.1 Hon-Dividend Paying Stcc~ X X. X X X 3.0 xchance tens X 3.1 Payroll, Vendor, and Excense Checks X X X Saviors and Tine Derosits X F 5.0 eoani ercsits X X 5.1 Onidentified Lerosits F X 7.0 Personal Trust X 8.0 Safe Deposit Boxes and Safekeeping X X PAGENO="0542" 538 Internal Control Questionnaire 1.1 Purrose and Objective "An internal control quectionnaire is designed to ask a series of questions about the controls in each audit area as a oeans of indicating to the auditor aspects of the system that may be inadequate."~" This questionnaire also includes questions related to management controls over pronerty subject to the Unclaimed Property Law. And, it is designed to cross reference to the same areas covered in the Audit Program (AB - 2) by assigning the same page number to each type of property. Although the advantage of this approach is the relative completeoess of coverage of each audit area that a good instrument affords, it must be remembered that there are also disadvantages, such as, individual parts of a system are examined without providing an overall view of the entire cycle, and a standard questionnaire may be inapplicable to some auditees. In order that the auditor get an understanding of the entire system, a flowchart should also be made. The combination of the two, when properly used, should provide an excellent description of the system. It is important that the auditor determine whether the controls which management believes to exist are actually being followed. In line with this it is most important that the auditor be discreet and diplomatic in questioning both management and the personnel actually performing each procedure. Management's time should not be taken up by asking questions the answers to which may be determined prior to the entrance conference. Care should be taken to avoid offending management by asking questions the answers to which are self-evident, or which may properly be developed by observation or knowledge of the industry. The auditor is a professional, and should act accordingly. 1/ Arens, Alvin A. and Loebecke, James K. Auditing: An Integrated ~,pproach: Prentice Hall, Inc., Englewood Cliffs, New Jersey; 1976, 688 Pp. PAGENO="0543" 539 OFFICE OF THE STATE CONTROLLER AUDIT BUREAU INTERNAL CONTROL QUESTIONNAIRE NdE OF CONPANY ADDRESS 1.3 GENERAL Yes No 1. Tate of incorroration. ___________________________ a. ~..s tm.o a paremt: :f ~, ~ sutsidiaries ____________________ 3. Name amd title of rersom resmunsible for reporting Title __________________________ L* Name amd title of officer to whom audit report should be addressed, Name __________________________ itle _________________________ a. ae~arate1y _____________________________ Cnmrmlidated _____________________________ G. Deem the Corramy have file copies of ita reports amd aurmorting vorking papers? Location ____________________________________ 7. Has the Board of Directors adopted by resolution any policies relating to unclaimed property? 8. Dams the Comrany have written policies/procedures am to umclaimed trorerty? 9. Name of mersom interriewed. _______________________ Title ________________________________________ 10. Name of person conducting interview ______________ 11. Date of interview _______________________________ 12. Others in attendance Name Title present~pg 67-440 0 - 81 - 35 PAGENO="0544" 540 INTERNAL CONTROL QUESTIONNAIRE UNCLAIMER DIVIDENDS AND UNLOCATED SHARENOLDERS 2.0 DIVIDEND STOCK Yes No 1. Where are records maintained: a. for unclaimed dividends? __________________________ b. for unlocated shareholders? _______________________ 2. Does the Company have a procedure to determine the date of last contact for unlocated shareholders? 3. Does the Company conduct annual shareholders' meetings? ~ If the answer to #3 is yes, does the Company notify all shareholders by first class mail? 5. Does the Company have a follow up procedure as to a. unclaimed dividends? b. unlocated shareholders? 6. Does the Company credit unclaimed dividends a. to an income account? b. to retained earnings? - - c. to a liability account? - - 7. If the answer to #6 is yes, how long after the date of last contact is the entry effected? 8. Name of person interviewed _____________________________ title ___________________________________________________ 9. Name of person conducting interview title ________________________________________________________ 10. Date of interview ____________________________________ 11. In attendance Name Title Remresentji~g PAGENO="0545" 541 INTIVNAL CONTROL QUESTIONNAIRE TJNEOCATTR SHARENOLDEPS 2.1 NON-DIVIDEND STOCK Yes No the Corrara raintair records on un1o~ated share an, ~here are they located? ________________________ 2. Enes the Coroany conduct annual shareholders' reetings? 3. the ans~er to ~2 is yes. . . Does the Conpany notify all shareholders ~y first-class rail? ~. Does the Cozasny have a arocedure ta dete~nine the date 5. Unes the Corrany have a fcllo~.up rrccedure as to unlocet- a: snarenoiders: None of carson interviewed ____________________________ 7. Nane cf rerson conducting interview 8. Date of interview __________________________________ 9. In attendance Rare Title Reoresen~pg PAGENO="0546" 542 AB - ~+ (REV 3-79) 3B1 ) INTERNAL CONTROL QUESTIONNAIRE 3.0 EXCHANGE ITEMS Yes No 1. Are reconciliations of outstanding exchange items prepared by persons having no cash receipts or disbursement functions with respect to the accounts being reconciled? 2. Are exchange items imprinted with a statement such as `Not Good After 90 Days"? 3. If the answer to # 2 is yes, how does it read? I~. When, after issuance, is an exchange item considered dormant? 5. Does the Company have a follow up procedure when an exchange item becomes dormant? 6. Are dormant exchange items separated form the active files? - - 7. Does the Company service charge dormant exchange items? - - 8. If the answer to #7 is yes, what is the service charge? 9. Are any service charges rebated if an outstanding exchange item is presented for payment? 10. Does the Company credit or reverse dormant exchange items to: a. an income account? b. a liability account? PAGENO="0547" 543~ ITENNAL CONTROL O~STEONNAIRE 3.1 P ROLI~ VENDOR AND ~(PENSE CRECKS OR DRAFTS Yes No 1* Does the Cczcany issue: a. checks? 2. Are ban~: reccncil±aticr.s arenared by persons having no cash receirt cc disburacoent functions with resrect to the ac- courts beire reconciled? 3. ;r~ bark reconciliaticna reviewed by oanagerent? L. Are the Ccrrany'a checks or drafts ioprinted with a state- cent sizilar to "not good after XX days"? so, ho~ does the inorint read? 5. At age four date cf issuance does an outstanding check 5. Does canarecent review stale checks or drafts? 7. Toes the Conoany credit or reverse stale checks or drafts a. to the account frs= which they were drawn? to an incoce account? to a liability account? to an exuense account? any cart of cuesticn °7 is answered yes, at what age fran iccuarce of the check or draft is the entry effected? 9. Does the Coopany send follow up letters on outstanding checks or drafts? If so, at what age from date of issuance? ________________ PAGENO="0548" 544 INTERNAL CONTROL QUESTIONNAIRE k.O SAVINGS AND TINE DEPOSITS 5.0 DEMAND DEPOSITS Demand Savings Accounts Accounts Yes No Yes No 1. Are all inactive accounts segregated and considered dormant? 2. What is the length of inactivity before classified as dormant? Demand deposits? Savings accounts? _______________________________ 3. Under what circumstances are accounts considered inactive for: Number(s) a. Demand deposit? other-specify b. Savings and Time deposits? other-specify No customer contact because 1. No deposit, no withdrawal 2. No passbook posting 3. No telephone or written communication k. Is there a followup procedure when an account becomes dormant? 5. Are service charges imposed on accounts classified as dormant? a. What is the period of dormancy before the service charge is imposed? 1. Demand deposits? - 2. Savings accounts? ________________________ b. What is the amount of the service charge on the following accounts? 1. Active demand deposits? __________________ 2. Dormant demand deposits? 3. Dormant savings accounts? _______________ PAGENO="0549" 545~ interna. Control Q-esticnnaire -.0 Savinra and Tire Deorsits 5.0 erand Dercs±ts Yes No Yes No c. Now is the custcrer advised of the ~ervice charge: 1. Derard deorsits? ____________________________ 2. Savings accounts? __________________________ d. Are the service charges refunded to the cuatorer the account is reactivated? Are tellero inierendent of bookkeeping functions reatong to corrant accoonts~ 7. ?cr interest tearing accounts, does th~ bank continue or rost interest to dorrant accounts? 8. Are rericdic cooparison's nade of inactive or dornant savings account rooters with aledged, blocked, and arancoed covinos account nurbera? 9. Has the Corrany filed service charge schedules fror tire no tire in coorliance with Sectior~ 1513(a) of PAGENO="0550" 546 INTERNAL CONTROL Q~STIONNAIRE 5.1 UNIDENTIFIED DEPOSITS Yes No 1. Are unidentified deposits transferred to a separate liability or suspense account? 2. If the answer to #1 is yes. . . Are all entries to the account reviewed or approved by a supervisor? 3. Are service charges or fees charged against unidentified deposits? 1~~ If the answer to #3 is yes . a. Are the service charges or fees charged against unidentified deposits credited to: 1. An income account? 2. An expense account? b. When is the service charge or fee imposed? c. What is the amount of the service charge or fec? d. Are the service charges or fees refunded to the owner when the account is identified? PAGENO="0551" 547 OFFICE OF THE STATE CONTROLLER DIVISION OF UNCLAIM~ PROPERTY AUDIT BUREAU INTERNAL CONTROL QUESTIONNAIRE 7.0 PEASONAL TRUST YES NO 1. ~~ere are records caictained: a. for unclaired trust checks? b. for unclaiced suspensed itecs? 2. Does the Trust Departoent have a follow up procedure as urclaneo susrersec tters? 3. Are reccociliations of cutstasding trust checks prepar- ed by persons having no cash receipt or disbursecent functions with respect to the accounts being reconciled? 4. Are trust checks inprinted with a statecent such as Not Gccd After 93 Dave"? the asewea to reis yes, how does it read? 6. Does the Trust Departoent service charge unclaiced trust checks? 7. If the answer to #6is yes, what is the service charge? 8. Does the Trust Departeent credit old outstanding trust checks to: a. a suspense account? an incone account? 9. Does the Trust Departoent credit old suspensed itens to: a. a liability account? b. an income account? c. other account? PAGENO="0552" 548 Internal Control Questionnaire 7.0 Personal Trust Page 2 10. If the answers to #8or #9 are yes, how long after the date of last contact is the entry effected: a. for outstanding trust checks? b. for suspanaed items? ______________________________ 11. Nane of person interviewed? _______________________ Title? 12. Name of person conducting interviec? __________________ Title? 13. Date of interview? ____________________________________ 1k. In attendance? Name Title Represent~ PAGENO="0553" 549 INTERNAL CONTROL QTJ~TIONNAIRE 8.0 SAFE-DEPOSIT BOXES AND SAFEKEEPING (Reference Section 1660 through 1679, F.C.) Yes No a. Safe derosit boxes? Safekeering service? 2. How rar.y days after rent beccres delinquent is a boxholder first notified of the delinquency? 3. rany delincuent notices are sent to the boxholder? rent tecones delinquent are safe deposit boxes 5. ~re two officers oreseot when safe detositboxes are forced? 6. ~re the contents of forced safe derosit boxes inventoried? - - 7. ~re ohe contents of forced safe desosit boxes placed under dual control? 3. ~re iters niaced under dual control periodically inventoried? 5. re sianature and recard cards far fereed safe desasit boxes fron the active file? PAGENO="0554" 550 UNCLAIMED PROPERTY LAW STATE OF CALIFORNIA UNCLAIMED PROPERTY LAW CODE OF CIVIL PROCEDURE 1979 KENNETH CORY SlATE CONTROLLER STATE CONTROLLER'S OFFICE DIVISION OF UNCLAIMED PROPERTY P.O. BOX. 1019 SACRAMENTO, bALIFORNIA 95805 PAGENO="0555" 551 UNClAIMED PI~PE1~t LAW ~BLE of l~E~IS ~ECTI~ p~ A~ICl~El SHO~ TraE; rEFrNITIc~Ts; ~PPLIC~TI~ 1500. Citation of Chapter. 1 1501. Definitions. 1 1502. Exerrptions. 2 1503. Exetption: Property not subject to old act. 3 1504. Property escheated to other states * 3 1505. D~ities arising prior to 1969 unchanged. 4 1506. ~.statErent and continuation of provisions 4 prior to 1969. ARTIClE 2 ~~AT of UNClAThED PEPSOI~ThL P~P~ 1510. Intangible Personal Property: Conditions 4 for Escheat. 1511, Travelers check or rroney~ order: State of 5 purchase. 1513, De~sits with banks and other financial 6 institations: `I~av~1~rs checks, rr~ney orders, and instnrrent~ on which banking and financial institutions are directly liable, 1513,5 Notice to custoirer. 8 1514, Safe deposit box and safekeeping repository. 8 1515. Life insurance and annuities. 8 1516, Dividends, profit, distributions, interest, etc. 9 1517. Liquidating distributions. 10 1518. Fiduciaries, agents. 10 1519. Coverr~ent or Governmental agencies. 11 1520. Property held in ordinar~ course of business: U Charges. 1521. ~r~loyee benefit trust distribution. 11 1522. Charges: Limitation. 12 1528. Scholarship funds held by sane life insurance 12 corporations. PAGENO="0556" 552 s~cric~ ARrIcr.LE 3 IFI~TI~ of E~CHEA!IED PI~DPER~Y 1530. ~port by holder: 1~quirerrents. 12 1531. Notice ccntent: Publication: Mailing. 14 1531.1 Procedure to locate ~ners. 15 1532. Payrrent or t~1ivery: Claims prior to payrrent 16 or delivery: Travelers checks or troney orders: Securities: Place of payrrent or delivery. 1533. Tangible property: Notice of refusal to 17 accept custody. ARTICLE 4 PAYMENT OF CL~I~ 1540. Claim: Tine for adjudication: Payrrent of 17 interest. 1541. Claim: P~edy: Tine and place of filing 18 action. 1542. Claims: Other states. 19 AR~I~EE 5 At~4INISTRP~TIG~ of UNCLAIMED PIOPERTY 1560. Custody: Relief frcm liability: Safe 20 deposit and repository ccntents sub- ject to lien: Reimbursaient claims, and claim for return of personal property by holder. 1561. Defense of holder by State Controller: 21 Payrent or delivery because of mistake. 1562. Ino~re on unclairred property. 21 1563. Sale of unclairred property by State 22 Controller. 1564. Dispositon of ironey received. 22 1565. Destruction of valueless property. 24 1566. Limitation of liability of State and 24 officers. 1567. Use of pr~rty by Director of Parks and 24 Recreations. PAGENO="0557" 553 sD'ric~ A~IcLE 6 LI~CE ~M) OItE~T 1570. No time limitation for action against holders. 25 1571. ~nination of records. 25 1572. Actions to enfor~ Unclaimed Property Law. 25 1573. Agre~nts with other states. 26 1574. Ccoperation with other states in enforc~rrent. 26 1575. Cartoensation to other st.ates bringing re- 27 qLiested action on behalf of State Controller. 1576. Penalties. 27 1577. Interest. 27 ARTILE 7 MLSCEL~IEOt~ 1580. Rules and Regulations. 28 1581, Records: Travelers ~neàks and r~ney Orders: 28 Penalty. 1582. Restriction on agre~rent to locate reported 28 property. PAGENO="0558" 554 QiP2TER 7 UNaJATh~D P~JPERW L~W ARll~E 1 SHO~ ~ETIE; DEFINITIC~S; APPLI~TIC~ § 1500. [Citation of Chapter.] This chapter rray be cited as the Unc1airr~d Property Lacy. § 1501. [t~finitions. I As used in this chapter, unless the cxntext otherwise requires: (a) "Apparent ~iner" neans the person who appears fran the records of the Folder to be entitled to property held by the holder. (b) "Banking organization" ireans any national or state bank, trust axnpany, banking oDrrpany, land bank, savings bank, safe deposit conpany, private banker, or any similar organization. (c) "Business association" rreans any private corporation, joint stock coirpany, business trust, partnership, or any association for business purposes of t~x or n-ore individuals, whether or not for profit, including, but not by way of limita- tion, a banking organization, financial organization, life insurance corporation, and utility. (d) "Financial organization" rreans any federal or state savings and loan association, building and loan association, credit union, invesbrent carpany, or any similar organization. (e) "Governrrent or governrrental subdivision or agency" ~es not include the United States governnent or any officer, departhent, or agency thereof. (f) "Holder" neans any person in possession of property subject to this chapter belonging to another, or who is trustee in case of a trust, or is indebted to another on an obligation subject to this chapter. PAGENO="0559" 555 2- (g) "Life insurance o~rpomtion" rreans any association or c~rpDration transacting the business of insurance on the lives of persons or insurance appertaining thereto, including, bit not by wey of limitation, endc~rents and annuities. (h) TTC~ner" rreans a depositor in case of a deposit, a beneficiary in case of a trust, or creditor, claimant, or payee in case of other choses in action, or any person having a legal or ~uitable interest in property subject to this chap- ter, or his legal representative. (i) "Person" rreans any individual, business association, geverrrrent or gDverrirrental sub3ivision or agency, t~o or irore persons having a joint or o~ron interest, or any other legal or c~rrrercial entity, ~.thether such person is acting in his ~n right or in a representative or fiduciary capacity. (j) TTfli~loyee benefit trust distribution" maans any r~ney, life insurance, end~rrent or annuity policy or proceed.s thereof, securities or other intangible property, and any tangible property, distributable to a participant, fonr~r participant, or the beneficiary or estate or heirs of a participant or fonier participant or beneficiary, fran a trust or custodial fund establishud under a plan to provide health and welfare, pension, vacation, severance, retir~rent benefit, death benefit, stock purchase, vacation, profit sharing, erployee savings, suppl~ntal unerployrrent insur- ance benefits or similar benefits. § 1502. [Ex~nptions.] (a), This chapter does not apply to: (1) Any property in the official custody of a municipal utility district. (2) Any property in the official custody of a local agency if such property may be transferrel to the General ~nd of such agency under the provisions of Sections 50050- 50053 of the ~vernrrent Code. (3) Any instnrrent issi.~d in a foreign country. (4) Any funds held only in a foreign country. (b) None of the provisions of this chapter applies to any type of property received by the state under the provisions of Chapter 1 (cx~inencing with Section 1300) to Chapter 6 (~rrrencing with Section 1440), inclusive, of this title. 67-'~4O 0 - 81 - 36 PAGENO="0560" 556 -3-- § 1503. [Exerrption: Property not subject to old act.] (a) As usëd~in this section: (1) "Old act" rre.ans this chapter as it existed prior to January 1, 1969. (2) "Nec~r act" means this chapter as it exists on and after January 1, 1969. (3) "Property not subject to the old act" means property that was not presurred abandoned under the old act and ~~xu1d never have been presurred abandoned under the old act had the old act continued in existence on and after January 1, 1969, without change. (b) The helder is not required to file a report concerning, or to pay or deliver to the State Controller, any property not subject to the old act if an action by the owner against the helder to recover such property was barred by an applicable statite of limitations prior to January 1, 1969. (c) ~e helder is not required to file a report concerning, or to pay or deliver to the State Controller, any property not subject to the old act, or any property that was not required to be reported under the old act, unless on January 1, 1969, such property has been held by the holder for less than the escheat period. "Escheat period" means the six-rronth or seven-year or fifteen-year period referred to in Sections 1513 to 1520, inclusive, of the naw act, whichever is appli- cable to the particular property. [SI~uld also include Sections 1511 and 1521.] § 1504. [Prcpe~y escheated to other states. ]~ (a) As used in this sectiôh~ (1) "Old act" means this chapter as it existed prior to January 1, 1969. (2) "Naw act" means this chapter as it exists on and after January 1, 1969. (3) "Property not subject to the old act" means property that ~s not presurred abandoned under the old act and would rever have been presused abandoned under the old act had the old act continued in existence on and after Januray 1, 1969, without change. (b) This chapter does not apply to any property that was escheated under the laws of another state prior to Septartber 18, 1959. PAGENO="0561" 557 -4-. (c) This chapter does not require the ~xD1der to pay or deliver any property r~t subject to the old act to this state if the property ~as escheated under the laws of another state prior to January 1, 1969, and was delivered to the custody of that state prior to January 1, 1970, in carpliance with the laws of that state. Nothing in this subdivision affects or limits the right of the State Controller to recover such prop- erty frcrn the other state. § 1505. [Duties arising prior to 1969 unchanged.] This chapter &)es nct affect any duty to file a report with the State Controller or to pay or deliver any property to him that arose prior to January 1, 1969, under the provisions of this chapter as it existed prior to January 1, 1969. Such duties rray be enforced by the State Controller, and the penalties for failure to perfonr~ such duties n~y be irrposed, under the provisions of this chapter as it existed prior to January 1, 1969. The provisions of this chapter as it existed prior to January 1, 1969, are continued in existence for the purposes of this section. § 1506. [Restat~nt and ~ntinuation of~provisions prior to 1969.) `I~ provisions Of this chapter as it exists on after January 1, 1969, insofar as they are substantially the sate as the provisions of this chapthr as it existed prior to January 1, 1969, relating to the sare subject rratter, shall be construed as restaterrents and continuations ther~f and nct as new enactrrents. I~RTItLE 2 ESGIEAT OF U~CU½IMED PEI~ONPJJ PIOPE1~Y § 1510. [Intangible PersOnal Property: Conditions for Escheat.] UnIë~ othetwise provided by sta~üth of this state, intangible personal property escheats to this state under this chanter if the conditions for escheat stated in Sections 1513 through 1521 exist, and if: PAGENO="0562" 558 -5- (a) ~ last known address, as shown on the records of the holder, of the apparent owner is in this state. (b) No address of the apparent owner appears on the records of the holder and: (1) The last known address of the apparent owner is in this state; or (2) The holder is domiciled in this state and has not previously paid the property to the state of the last known address of the apparent c~iner; or (3) The holder is a goverrnt~nt or governmental sub- division or agency of this state and has not previously paid the property to the state of the last known address of the apparent owner. (c) The last known address, as shown on the records of the holder, of the apparent owner is in a state that does not provide by law for the escheat of such property and the holder is (1) domiciled in this state or (2) a govern- rrent or govemriental subdivision or agency of this state. Cd) The last known address, as shown on the records of the holder, of the apparent owner is in a foreign nation arid the holder is (1) domiciled in this state or (2) a government or governmental subdivision or agency of this state. § 1511. [Travelers check or rroney order: State of purchase.] (a) Any stnit payable on a rroney ord~, travelers check, or other similar written instriinent (other than a third-party bank theck) on which a business association is directly liable escheats to this state under this chapter if the conditions for escheat stated in Section 1513 exist and if: (1) The books and records of such business association show that such rroney order, travelers check, or similar writ- ten instrt~nt was purchased in this state; (2) The business association has its principal place of business in this state and the books and records of the busi- ness association do not show the state in which such rr~ney order, travelers check, or similar written insthmient was purchased; or (3) `11Fe business association has its principal place of business in this state, the books and records of the business association show the state in which such rroney order, travel- ers d~eck, or similar written instri.m~nt was purchased, and PAGENO="0563" 559 -6- the laws of the state of purchase do not provide for the escheat of the sun payable on such instrurrent. (b) o~dthstanding any other provision of this cbapter, this section applies to suns payable on rroney orders, travel- ers checks and similar written instrurrents de~ned abandoned on or after February 1, 1965, except to the extent that such suns have been paid over to a state prior to January 1, 1974. For the purposes of this subdivision, the words "deai~d aban- doned'7 have the sarre rreaning as those words have as used in Section 604 of Public Law Nurftër 93-495 (October 28, 1974), 88th Statutes at large 1500. § 1513. [i~posits with banks and other financial institu tions: TraveI~rs checks, rr~ney orders, and ±nstrurrents on which banking and financial institutions a~e directly liable.1 Subject to Sections 1510 and 1511, the foll~iing pr~erty heI~[ or c~ng try a business association escheats to this state: (a) Airy d~3nd, savings, or matured tire deposit made with a banking organization, together with any interest or divi- dends thereon, excluding, fran derrend deposits only, any reasonable service charges which may lawfully be withheld and which do not (where made in this state) exc~d those set forth in schedules filed by the banking organization fran tire to tire with the State Controller, when the owner, for n-ore than seven years, has not: (1) Increased or decreaserl the airount of the deposit, or presented the passlxok or other similar evidence of the deposit for the crediting of interest; or (2) Corresponded in writing with the banking organization concerning the deposit; or (`3) Otherwise indicated an interest in the deposit as evidenced by a trerrorandurn or other record on file with the banking organization. No banking organization nay discontinue any interest or dividends on any savings deposit because of the inactivity conterrplated by this section. (b) Any funds paid toward the purchase of shares, or any rratured investhent certificate, or other interest in a financial organization or any deposit made therewith, and any interest or dividends thereon, excluding any ser- vice charges the arrount of which is specifically provided PAGENO="0564" 560 -7- by federal statute or regulation of a federal agency and which do not (where paid or wade in this state) exceed those set forth in schedules filed by the financial organi- zation fran titte to tirre with the State Controller, when the owner, for more than seven years, has not: (1) Increased or decreased the amount of the funds or deposit, or presented an appr~riate record for the crediting of interest or dividends; or (2) Corresponded in writing with the financial organiza- tion concerning the funds or deposit; or (3) Otherwise indicated an interest in the funds or deposit as evidenced by a n~torandizn or other record on file with the financial organization. No financial organization rray discontinue any interest or dividends on any funds paid toward purchase of shares or other interest, or on any deposit, because of the inactivity content- plated by this section. (c) ~ny strn payable on a travelers check issued by a busi- ness association that has been outstanding for sore than 15 years fran the date of its issuance, when the owner, for more than 15 years, has not corresponded in writing with the busi- ness association concerning it, or other wise indicated an interest as evidenced by a rrErorandum or other record on file with such association. (d) ~ny sun payable on any other written instrurrent on which a banking or financial organization is directly liable, including, by way of illustration but not of limitation, any draft, certified check, or money order, that has been outstand- ing for more than seven years fran the date it was payable, or fran the date of its issuance if payable on d~nand, when the owner, for more than seven years, ha~ not corresponded in writing with the banking or financial organization concern- ing it, or otherwise indicated an interest as evidenced by a rreuorandun or other record on file with the banking or finan- cial organization. (e) ~rxy sun payable on a money order issued by a business association (other than a banking or financial organization) that has been outstanding for sore than seven years fran the date it was pa~jable, or fran the date of its issuance if pay- able on d~nand, when the owner, for more than seven years, has PAGENO="0565" 5th 8- not corresponded in writing with the business associatic~ concerning it, or otherwise indicated an interest as evidenc~ by a rrErcrandurn or other record on file with the business association. § 1513.5 [Notice to cUstaT~r.] (a) Every banking or finan- cial organization shall nake reasonable efforts to notify any oustcxrer that the custarer' s deposit, shares, or other interest in the banking or financial organization will escheat to the state pursuant to subdivision (a) or (b) of Section 1513 not less than six nor rrore than 12 rronths before the tixre such deposit, shares, or other interest will escheat. (b) ~ notice re~ired by this section shall specify the tizre that the deposit, shares, or other interest will escheat and the effects of escheat, including the necessity for filing a claim for the return of the deposit, shares, or other interest. It shall also include a form, as prescribed by the State ODntroller, by which the custarer nay declare an intention to rraintain the deposit, shares, or other interest. If that form is filled out, signed by the custorre.r, and returned to the banking or financial organization, it shall satisfy the requir~nt of paragraph (3) of subdivision (a) or paragraph (3) of subdivision (b) of Section 1513. ~Ihe banking or financial organization nay inpose a service charge on such deposit~ shares, or other interest for such notice in an arroimt not to exceed the administrative cost of nailing the notice and form and in no case to exceed one dollar ($1). § 1514. [Safe deposit box and safekeeping repository.] The contents, of any safe deposit box or any other safe- keeping repository, held in this state by a business association, eschea'c to this state if unclairred by the ~ner for n~re than seven years fran the date on which the lease or rental period on the box or other repository expired. § 1515. [Life insurance and annuities.) (a) Subject to Section 1510 ,, funds held~or ~iing by a life insurance corporation under any life or endo~rent insurance policy or annuity contract which has natured or terminated escheat to this state if unclaiired and unpaid for n~ore than PAGENO="0566" 562 -9- seven years after the funds becaire due and payable as estab- lished frce~ the records of the corporation. (b) If a parson other than the insured or annuitant is en- titled to the funds and no address of such person is known to the corporation or if it is not definite and certain fran the records of the corporation what person is entitled to the funds, it is presurred that the last known address of the person entitled to the funds is the sarre as the last known address of the insured or annuitant according to the records of the cor- poration. This presumption is a presumption affecting the burden of proof. (c) A life insurance policy not matured by actual proof of the death of the insured according to the records of the cor- poration is de&ted to be matured and the proceeds due and pay- able if: (1) The insured has attained, or would have attained if he ware living, the limiting age under the irortality table on which the reserve is based; (2) ~ policy was in force at the tine the insured attained, or would have attained, the limiting age specified in paragraph (I); and (3) Neither the insured nor any other person appearing to have an interest in the policy has, within the preceding seven years, according to the records of the corporation (i) assigned, readjusted, or paid premiums on the policy, (ii) sub- jected the policy to loan, or (iii) corresponded in writing with the life insurance corporation concerning the policy. (d) I~ny funds otherwise payable according to the records of the corporation are deemred due and payable although the policy or contract has not been surrendered as required. § 1516. [Dividends, profit, distributions, interest, etc.] (a) Subject to Section I5IO7~any dividend, profit, distribuT- ton, interest, payrrent on principal, or other sun held or owing by a business association for or to its shareholder, certificate holder, riEnber, bondholder, or other security holder, or a participating patra~ of a cooperative, who has not clairred it, or corresponded in writing with the business association con- oerriing it, within seven years after the date prescribed for payrrent or delivery, escheats to this state. PAGENO="0567" 563 - 10 (b) Subject to Section 1510, any intangible interest in a business association, as evidenced by the stock records or rr~rbersbip records of the association, escheats to this state if (1) the interest in the association is c~s~ned by a person who for rrore than seven years has neither clain~ a divider~ or other si~rn referred to in subdivision (a) nor correspond~ in writing with the association or otherwise indicated an interest as evidenced by a rr~roran&rri or other record on file with the association, and (2) the association does not kn~i the location of the ~er at the end of such seven-year period. With respect to such interest, the business association shall be dea~ed the hclder. (c) Subject to Section 1510, any dividends or other distri- butions held for or owing to a person at the tine the stock or other security to which they attach escheats to this state also escheat to this state as of the sane time. § 1517. tLiquidating distributions.] All property distri- butable in the cou±~ of a voluntary or involuntary dissolution or liquidation of a business association that is unc1ain~ by the owner within six rrr~nths after the date of final distribution or liquidation escheats to this ~tate. This section applies to all tangible personal property located in this state and, sub- ject to Section 1510, to all intangible personal property. § 1518. {Fiduciaries, agents.] (a) All tangible personal property iocat~in this state ~ñd~ subject to Section 1510, all intangible personal property, and the incx~re or incr~nt on such tangible or intangible property, held in a fiduciary capacity for the benefit of another person escheats to this state if after it beccxres payable or distributable, the ~ner has not, within a period of seven years, increased or decreased the principal, accepted payment of principal or inccrre, corresponded in writing concerning the property, or otherwise indicated an interest as evidenced by a rr~rorandizn or other record on file with the fiduciary. (b) For the purpose of this section, when a person holds property as an agent for a business association, he is de~red to hold such property in a fiduciary capacity for the business association alone, unless the agrea~rent bet~en him and the PAGENO="0568" 564 - 11 - business association clearly provides the contrary. P~r the purposes of this chapter, if a person holds property in a fi&iciary capacity for a business association alone, he is the lolder of the property only insofar as the interest of the business association in such property is conosrned and the asso- ciation is deen~1 to be the holder of the property insofar as the interest of any other person in the property is concerned. § 1519. [GoverlllEnt or Govemnenta]. agencies.] ~U tangible personal property located in this state, and, subject to Section 1510, all intangible personal property, held for the ~`ner by any goverr~nent or governmental subdivision or agency, that has rEtained unclaimed by the c~~iner for rrore than seven years escheats to this state. § 1520. [Property held in ordinary course of business: C2iarges.] AU~àngib1e personal property located in ~EHLI state ~ia, iü1~ject to Section 1510, all intangible personal property, except property of the classes mentioned in Sections 1511, 1513, 1514, 1515, 1516, 1517, 1518, 1519 and 1521, including any incone or increment thereon and deducting any lawful charges, that is held or cwing in the ordinary course of the holder' s business and has rEtained unclaimed by the ~ner for irore than seven years after it became payable or distributable escheats to this state. For purposes of this section, "lawful charges" means charges which are specifically autlx)rized by statute, other than the Unclaimed Property Law, or by a valid, enforceable contract. § 1521. [E~loyee benefit trust distribution.] (a) Except as provided ii~ subdivision (b), and~~ject to Section 1510, all eaployea benefit trust distributions and any incxre or other increrrent thereon escheats to the state if the c~ner has not, within seven years after it becares payable or distributable, accepted such distribution, corresponded in writing concerning such distribution, or otherwise indicated an interest as evi- denced by a iremrorandwrt or other record on file with the fidu- ciary of the trust or custodial fund or administrator of the plan under which such trust or fund is established. As used in this section, "fiduciary" and "administrator" shall have the meaning provided in Section 28002 of the Corporations Code. PAGENO="0569" * 565 - 12 - (b) ~n arployee benefit trust distribution and any inocrre or other incr~rent ther~r~ shall not esoheat to this state if, at the tirre such distribution shall becone payable to a parti- cipant in an e-rployee benefit plan, such plan cxDntains a pro- vision for forfeiture or expressly aut1~rizes the trustee to declare a forfeiture of a distribution to a beneficiary thereof ~o cannot be found after a period of tine specified in such plan, and the trust or fund established under the plan has not terninated prior to the date on which such distribution ~ould beccrre forfeitable in accordance with such provision. § 1522. [Charges: Limitation.) No service, handling, rraintenance or other charge or fee of any kind nay be deducted or withheld fran any property subject to escheat under this chapter, unless specifically permitted by this chapter. Even ~then specifically permitted by this chapter, such charges or fees rray not be excluded, withheld or deducted fran prc~erty subject to this chapter if, under its policy or proc~ure, the holder would not have excluded, withheld or deducted such charges or fees in the event the property had been clairred by the ~ner orior to being reported or remitted to the State Controller. § 1528. [Scholarship funds held~y sane life insurance corporations.] This chapter does not apply to uncla.irred funds beld by a life insurance corporation which is organized or ad- mitted as a danestic fraternal benefit society urx3er Chapter 10 (~rrrencing with Section 10970), of Part 2 of Division 2 of the Insurance Code, so long as such funds are used for sclx)larship funds, exclusive of costs of administration thereof. AR~I~LE3 IDENTIFIC7~TION OF ESCHEZ~ P~PERP~ § 1530. [Report by holder: Req~uirerrents.J (a) Every person holding funds or other property escheaEëd to this state under this chapter shall report to the State Controller as provided in this section. (b) ~ report shall be on a form prescribed or approved by tbe Controller and shall include: PAGENO="0570" 566 - 13 - (1) Except with respect to travelers checks and noney orders, the name, if known, and last kr~*m address, if any, of each person appearing fran the recxrds of the holder to be the owner of any property of value of twenty-five dollars ($25) or mere escheated under this chapter. (2) in case of escheated funds of life insurance corpora- tions, the full name of the insured or annuitant, and his last kmwn address, according to the life insurance corporation's records. (3) In the case of the contents of a safe deposit box or other safekeeping repository or in the case of other tangible property, a description of such property and the place where it is held and nay be inspected by the State ODntroller. The report shall set forth any arrounts owing to the holder for unpaid rent or storage charges and for the cost of opening the safe deposit box or other safekeeping repository, if any, in which the property ~s contained. (4) The nature and identifying number, if any, or descrip- tion of any intangible property and the arrount appearing fran the records to be due, except that itare of value under twenty- five dollars ($25) each rray be reported in aggregate. (5) Except for any property reported in the aggregate, the date when the property became payable, d~nandable, or returnable, and the date of the last transaction with the owner with respect to the property. (6) Other information which the State O~ntroller prescribes by rule as necessary for the administration of this chapter. (c) If the holder is a successor to other persons who pre- viously held the property for the owner, or if the holder has changed his name while holding the property, he shall file with his report all prior known narras and addresses of each holder of the property, Cd) The report shall be filed before ~varnber 1st of each year as of June 30th or fiscal year-end next preceding, but the report of life insurance corporations shall be filed before ?~~y 1st of each year as of t~cember 31st next preceding. The State Controller nay postpone the reporting date upon his own notion or upon written request by any person required to file a report. Ce) The report, if made by `an individual, shall be verified by the individual; if made by a partnership, by a parther; if PAGENO="0571" 567 - 14 rrade by Sri unincorporated association or private corporation, by an officer; and if rrade by a public corporation, by its chief fiscal officer. § 1531. [Notice content: Publication: Mai1inc~.] (a) Within 120 days fran~he final date for filing the re- ports required by Section 1530, the State Controller shall cause a notice to be cublished at least once each week for i~ successive weeks in an ~g1ish language n~spaper of ger~ra1 ciroulaticn in each county in this state in which is located: (1) `fl~ last ki~n address, as listed in the reports, of any person narred in the reports as the apparent ~ner of property escheated to this state under this chapter; or (2) If no address of any apparent ~r~r narred in the re- ports is listed, or if the address listed in the reports for any enparent ~r narred therein is outside this state, the principal place of business within this state of the holder of the escheated property. (b) Each published notice shall be entitled "notice of narres of persons appearing to be c,~*iners of unc1ain~ property," and shall contain the nmres in alphabetical order and last 1c~n addresses, if any, of: (1) ~se apparent ~~iners listed in the reports as having a last kr~in address within the county; (2) `I~se apparent ~rers listed as having a last known address cxitside this state or as having no last known address in a report filed by a holder with his principal place of business within the county; and (3) ~ insured or annuitant in the case of funds describ~1 in Section 1515 if: (i) `I~ report does not list the narre of the apparent ~ner of the funds and his last known address; and (ii) ~ last knci,~n add±ess of the insured or annuitant is within the county. (c) Each published notice shall also contain: (1) A statenent that inforiration concerning the arrount or description of the property and the nane and address of the holder nay be obtained by any persons possessing an interest in the property by addressing any ir~uiry to the State O~ntroller. (2) A statenent that, if proof of claim is not presented by the ~iner to the holder and if the cwner' s right to receive PAGENO="0572" 568 15 - the property is not established to the holder's satisfaction before a date specified in the notice (which shall be the date five rr~nths fran the final date for filing the report), the prop- erty will be placed, not later than one nonth after such date, in the custody of the State Controller and all further claims must thereafter be directed to the State Controller. (d) The State Controller is not required to publish in such notice any itEn of less than fifty dollars ($50) unless he deens such publication to be in the public interest. (e) Within 120 days fran the final date for filing the re- port required by Section 1530, the State Controller shall mail a notice to each person having an address listed therein who appears to be entitled to property of the value of twenty-five dollars ($25) or rrcre escheated under this chapter. (f) The mailed notice shall contain: (1) A stat~nt that, according to a report filed with the State Controller, property is being held to which the addressee appears entitled. (2) The name and address of the person holding the prop- erty and any necessary information regarding changes of name arid address of the holder. (3) A stateaent that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the published notice, the property will be placed in the custody of the State Controller and all further claims rrn.ist be directed to the State Controller. (g) This section is not applicable to strris payable on travelers checks, rr~ney orders, and similar written instru- ments that escheat under Section 1511. § 1531.1 tProcedure to locate owners.) The State Controller shall establish and maintain a procedü~ to locate the owners of unclairred property received pursuant to this title. The State Controller shall report to the Joint Legislative Budget Cawnittee by Decamber 31, 1979, regarding the effectiveness of this procedure. Notwithstanding any other provision of law, upon request of the State Controller, any state or local goverrmental agency shall furnish to the State Controller from its records the address, or other identification or location informa- tion which could reasonably be used to locate an owner of PAGENO="0573" 569 - 16 - unclairr~ property. If the address or other identification or location infor- ration reauested by the State Controller is de~red confiden- tial under any laws or regulations of this state, it shall nevertheless be furnished to the State Controller. However, neither the State Controller nor any officer, agent, or ~rloyee of the State Controller may use or disclose any such information except as may by necessary in attaspting to locate the owner of unclaimed property. In the case where a fee or charge is customarily made by the agency for the information requested by the State Controller, the State Controller shall pay such customary fee or charge. ~ 1532. [Pa~rent or t~livery: Claims prior to paymant or delivery: Travelers checks or rr~ney orders: Securities: Place 5?~oayrrent or delivery. I (~) E~ce'ot as otherwise provided in subdivisions (b) and (c), every ~rson who has filed a reooi±t as provided by Section 1530 shall, within six rronths fran the final date for filing reports as required by Section 1530, pay Or deliver to the State Controller all escheated property specified in the report. (b) If any person establishes his right to receive any orooertv specified in the report to the satisfaction of the holder before such property has been delivered to the State Controller, or if it anpears that for sar~ other reason the~ oronerty is not subject to escheat under this chapter, the holder need not pay or deliver the property to the State Controller, but in lieu thereof shall file with the State Controller a written explanation of the proof of claim or of the reason the property is not~ subject to escheat. (c) In the case of sims payable on travelers checks, rr~oney orders, arid similar written instrurrents, which escheat under subdivisions Cc), (d), and (e) of Section 1513, such simns shall be paid to the State Controller not later than 20 days after the final date for filing the report. (d) The holder of any interest, under subdivision (b) of Section 1516 shall deliver a &iplicate certificate to the State Controller. Upon delivery of a duplicate certificate to the State Controller, the holder and any transfer agent, registrar PAGENO="0574" 570 - 17 - or other person acting for or on behalf of the holder in ~cecuting or delivering such duplicate certificate shall be relieved fran all liability of every kind to any person incleding, but not limited to, any person acx~uiring the original certificate or the duplicate of such certificate iss~d to the State Controller for any losses or damages resulting to such person by the issuance and delivery to the State Controller of such duplicate certificate. Ce) Payrrent of any intangible property to the State Controller shall be made at the office of the State Controller in Sacrairento or at such other location as the State Controller by regulation may designate. Except as otherwise agreed by the State Controller and the holder, tangible personal property shall be delivered to the State Controller at the place where it is held. § 1533. [Tangible pro~~y: Notice of refusal to accept custody.] Ta~ible personal property may be excEided fr~i Ee i~iäës required by Section 1531, shall not be delivered to the State Controller, and shall not escheat to the state, if the State Controller, in his discretion, determines that it is not in the interest of the state to take custody of the property and notifies the holder in writing, within 120 days fran receipt of the report required by Section 1530, of his determination not to take custody of the property. TICLE 4 PAYMENT OF CLAI~ § 1540. tClaim: Tirre for adjudication: P~yrrent of interest.) (aT ~ny person, excludi~g another state,~k claims an interest in property paid or delivered to the State Controller under this chapter may file a claim to the property or to the r~t proceeds from its sale. The claim shall be on a form pre- scribed by the State Controller and shall be verified by the claimant. (b) The State Controller shall consider each claim within 90 days after it is filed. He may hold a hearing and receive evidence. He shall give written notice to the claimant if he PAGENO="0575" 571 18 - denies the claim in whole or in part. Such notice may be given by mailing it to the address, if any, stated in the claim as the address to which notices are to be sent. If no such address is stated in the claim, the notice may be mailed to the address, if any, of the claimant as stated in the claim. No notice of denial need be given if the claim fails to state either an address to which notices are to be sent or an address of the claimant, (c) The State Controller shall add interest at the rate of 5 percent compounded annually or the current interest rate received unon deposits held in the Pcoled ~oney Inves~nent 2~ccount, which- ever is lower, to the ~itunt of any claim paid the owner under this secticn for the period the property was on deposit in the Ulaired Prorerty Ru~d, No interest shall be payable for any teriod prior to January 1, 1977e (d) Any holder who pays to the owner, property which has eschizted to the state and which, if claimed from the State Controller~ would be subject to subdivision (c) may add interest as provided in subdivision Cc). Such added interest shall be repaid to the holder by the State Controller in the. s~re manner as the principal, (e) For the purposes of thi~ section, "owner" means the person who had legal right to the property prior to its escheat, his hairs~ or his legal represthitative. § 1541. tClaim: P~nedy: ~`ime and place of filing action.] Any ~arson ag~~reä by a~c on~f~i~e State Controller or as to whose claim the Controller has failed to make a deci- sion within 90 days after the filing of the claim, may commence an action, naming the State Con~roller as a defendant, to estab- lish his claim in the superior Oourt in any county or city and county in which the Attorney Gtheral has an office. The action shall be brought within 90 days after the decision of the State Controller or within 180 days from the filing of the claim if the State Controller fails to make a decision. The ~urmions arid a cony of the ~nplaint shall be served upon the State Controller and the Attorney General and the State Controller shall have 60 days within which to respond by answer, The action shall be tried without a jury, 67-'~'~O 0 - 81 - 38 PAGENO="0576" 572 - 19 - § 1542. (Claims: Other states.] (a) At any tirre after property has beëh p~i~ ô±~ delivered to the State Controller ur~3er this chapter, another state is entitled to recover the property if: (1) ¶Lhe property escheatecl to this state under subdivision (b) of Section 1510 because no address of the apparent owner of the property appeared on the records of the holder when the property was escheated under this chapter, the last klxMn address of the apparent owner was in fact in such other state, and, under the laws of that state, the property escheated to that state; (2) The last known address of the apparent owner of the property appearing on the records of the holder is in such other state aixi, under the laws of that state, the property has es- cheated to that state; (3) The property is the s~in payable on a travelers check, rroney order, or other similar instr'irent that escheated to this state under Section 1511, the travelers check, ironey order, or other similar instrurent was in fact purchased in such other state, and, unc~r the laws of that state, the property escheated to that state; or (4) The property is funds held or owing by a life insurance corporation that escheated to this state by application of the presurptIon provided by subdivision (b) of Section 1515, the last known address of the person entitled to the funds was in fact in such other state, arid, under the laws of that state, the property escheated to that state. (b) `fte claim of another state to recover escheated property under this section shall be presented in writing to the State Controller, ~o shall consider the claim within 90 days after it is presented. He rray 1~ld a hearing and re~ive evidence. He shall allow the claim if he detezrnines that the other state is entitled to the escheated property. (c) Paragraphs (1) and (2) of subdivision (a) do not apply to property desci~i±~d in paragraph (3) or (4) of that subdivi-~ sion. PAGENO="0577" 573 - 20 A~I~E 5 ~~NISTR~TION OF U ~1~IMED P~PE~Y § 1560. [Custody: Relief fran liabilit~: Safe deposit and repository contents ~übject to lien: Reimburs~r~nt claims, and~ claim for return of per~àhal prop~~_~j~1der.) (a) Upon the payment or de~Ivery of escheated property to the State Controller, the state shall assur~e custody and shall be responsible for the safekeeping of the property. Any person ~o pays or delivers escheated property to the State Controller under this chapter is relieved of all liability to the extent of the value of the property so paid or delivered for any claim `~thich then exists or ~thich thereafter may arise or be made in res~ect to the prolerty. Property rEToved from a safe deposit box or other safekeeping repositbry shall be received by the State Controller subject to any valid lien of the holder for rent and other charges, such rent and other charges to be paid ont of the proceeds r~ining after the State Controller has deducted therefrom his selling cost. (b) Any holder who has paid meneys to the State Controller ursuent to this chaoter may make payment to any person appear- ing to such holder to be entitl~ thereto, and upon filing proof of such pa~crent and proof that the payee was entitled thereto, the State Controller shall forthdth reimburse the holder for the oayr~ent without deduction of any fee or other charges. Where reimaburs~nent is sought for a payment made on a negotiable instnrnent (including a travelers check or noney order), the holder shall be reiir~ursed under this subdivision upon filing. proof that the instrument was duly presented to him and that payment was made thereon to a person who appeared to the holder to be entitled to payment. (c) The holder shall be reimbursed under this section even if he made the payment to a person whose claim against him was barred because of the expiration of any such period of time as those described in Section 1570 (d) Any holder who has delivered personal property, including a certificate of any interest in a business association, to the State Controller pursuant to this chapter nay reclaim such persona]. PAGENO="0578" 574 - 21 property if still in the possession of the State Controller with- ait payirent of any fee or other charges upon filing proof that out payrrent of any fee or other charges upon filing proof that the ~ner thersof has clianed such personal property fran such holder. The State Controller nay, in his discreation, accept an affidavit of the holder state the facts that entitle tha holder to reirr~urserent under this subdivision as sufficient proof for the purposes of this subdivision. § 1561. ft~fense of holder by State Controller: Payirent or delivery because of xnistake~1 (a) If the holder pays or delivers escheated property to the State Controller in aaxrdance with this chapter and thereafter any person claims the property fran the holder or another state claims the property fran the holder under that state's laws re- lating to escheat, the State Controller shall, upon written notice of such claim, defend the holder against the claim and ixx~raiify him against any liability on the claim. (b) If any holder, because of mistake of law or fact, pays or delivers any property to the State Controller that has not escheated under this chapter and thereafter claims the property fran the State Controller, the State Controller shall, if he has not disposed of the property in accordance with this chapter, refund or redeliver the property to the holder without deduc- tion for any fee or other charge. (c) As used in this section, "escheated property" rreans pro- perty which this chapter provides escbeats to this state, whether or not it is determined that another state had a superior right to escheat such property at the thre it was paid or deliv~red to the State Controller or at sate tine thereafter. § 1562. (Incorre on unclairred prpperty.1 When property other than rra-iey is delivered to the State Controller under this chapter, any dividends, interest or other incranents realized or accruing on such property at or prior to liquidation or conversion thereof into troney, shall upon receipt be credited to the ~irer' s account by the State Controller. Except for anounts so credited the c~rer is not entitled to receive macire or other incr~rents on ironey or other property paid or delivered to the State Controller under this chapter. All interest received and other macire derived fran the invest- rtent of rroneys deposited in the Unclained Property Fond under PAGENO="0579" 575 - 22 the t~rovisicns of this chapter shall, on order of the State Controller, be nsferred to the General Fund. [Except as provided for in Section 1540 (c) o] § 1563, [Sale of uriclair 4propertyJ~y State Controller.] (a) Except as provided in su Evi~ionb), all escheated~ property delivered to the State Controller under this chapter shall be sold by the State Controller to the highest bidder at public sale in whatever city in the state affords in his judgmsnt the rrcst favorable rrarket for the property involved. The State Controller ray decline the highest bid and reoffer the prOperty for sale if he considers the price bid insufficient. He need not offer any property for sale if, in his opinion, the probable cost of sale exceeds the value Of the property. Any sale of escheated property held under this section shall be preceded by a single publication of notice thereof, at least one week in advance of sale, in an English language n~spaper of general circulation in the county where the property is to be sold. (b) Securities listed on an established stock exchange shall be sold at the prevailing prices on such exchange. Other Securities ray be sold over the counter at prevailing prices orr ~th prior approval Of the State Board of Control, by such other rrethcd as the Controller ray determine to be advisable. United States Governirent Savings Bonds and United States War Bonds shall be presented to the United States for payrrent. Subdivision (a) does not apply to the property des- cribed in this subdivision, (c) The purchaser at any sale conducted by the State Controller pursuant to this chapter shall receive title to the property purchased, free from all claims of the owner or prior holder thereof and of all persons claiming through or under than. The State Controller shall execute all docurrents necessary to ~rplete the trahsfer of title. § 1564. Disposition of rr~ney received.] (a) All rroney received und~ i~.his chapter, including the proceeds from the sale of property under Section 1563, shall be depesited in the Unclained Property Fund in an acc~unt titled t1Abandoned Property," PAGENO="0580" 576 - 23 (b) All rroney in the abandoned property account in the Unclairred Property Fund is hereby continuously appropriated to the State Controller, without regard to fiscal years, for ex- penditure in accordance with law in carrying out and enforcing the provisions of this chapter, inclt~3ing, but not limited to, the foll~dng p~rposes: (1) For payrrent of claims allc~ied by the State Controller under the provisions of this chapter. (2) For refund, to the person making such deposit, of amounts, including overpayrrents, deposited in error in such fund. (3) For payr~nt of the cost of appraisals incurred by the State Controller covering property held in the naire of an account in such fund. (4) For payrrent of the cost incurred by the State Controller for the purchase of lost instr'irent indarLnity hort3.s, or for payrrent to the person entitled thereto, for any unpaid lawful charges or costs which arose from holding any specific property or any specific funds which ~re delivered or paid to the State Controller, or which arose fran ~rplying with this chapter with respect to such property or funds. (5) For payrrent of amounts required to be paid by the state as trustee, bailee, or successor in interest to the preceding c~~ner. (6) For payrrent of costs incurred by the State Controller for the repair, rraintenance, and upkeep of property held in the nane of an account in such fund. (7) For payrrent of costs of official advertising in con- nection with the sale of property held in the nane of an account in such fund. (8) For transfer to the General Fund as provided in sub- division (c). (9) For transfer to the Inheritance Tax Fund of the airount of any inheritance taxes determined to be d~ and pay- able to the state by any claimant with respect to any property clairred by him under the provisions of this chapter. (c) At the end of each month, or oftener if he deans it advisable, the State Controller shall transfer all money in the abandoned property account in excess of fifty thousand dollars ($50,000) to the General Fund. Before making this transfer, he PAGENO="0581" 577 - 24 shall record the name and last kn~wn address of each person appearing from the holders' report to be entitled to the escheated property arid the name and last known address of each insured person or annuitant, and with respect to each policy or contract listed in the report of a life insurance corporation, its niinber, and the name of the corporation. The record shall be availa- ble for public inspection at all reasonable business hours. ~ 1565. [Destruction of valueless_property.) Any croc~erty~deuivered to the State Controller pursuant to this chanter ~thich has no aoparent carrr~ercial value shall be retained by the State Controller until such time as he determines to destroy or otherwise dispose of it. If the State Controller determines that any property delivered to him pursuant to this chaoter has no apparent carinercial value, he may at any time thereafter destroy or otherwise dispose of the property, and in that event no action or proceeding shall be brought or maintain- ed against the state or any offiàer thereof or against the holder for or on account of any action taken by the State Controller pursuant to this chapter with respect to the property. § 1566. [Limitation of liability of State and officers.] (a) when payment or delivery of money or other property has been made to any claimant under the provisions of this chapter, no suit shall thereafter be maintained by any other clai~nt against the state or any officer or err~loyee thereof for or on account of such property. (b) Except as provided in Section 1541, no suit shall be maintained by any person against the state or any officer or ~r~loyee therecf for or on account of any transaction entered into by the State Controller pursuant to this chapter. § 1567. [Use of_pro tyj~y Director of Parks and Recrea tion.) The Director of parks ar~ Recreation may examine any tangible personal property delivered to the State Controller under this chapter for purposes Of determining whether such property ~uld be useful under the provisions of Section 512 of the Public Resources Code. If the director makes such a determ- ination with respect to the property, the State Controller may deliver the property to the dize~tor for use in carrying out the purposes of Section 512 of the Public Resources Code. Upon the termination of any such use, the director shall return the property to the State Controller. PAGENO="0582" 578 - 25 ARTICLE 6 C~LIANCE AND I~F~E~T § 1570. [No time limitation for action a~ainst holders.] The expiratiön of any period of time specified by statute or court order, during which an action or proceeding tray be ct~rrrenced or enforced to obtain payment of a claim for meney or recovery of ~troperty fran the holder, does not prevent the noney or property fran being escheated, nor affect any duty to file a report required by this chapter or to pay or deliver escheated property to the State Controller. § 1571. [Examination of records.) (a) The State Controller tray at reasonable times and upon reasonable notice examine the records of any person if he has reason to believe that such person has failed to report property that should have been reported pursuant to this chapter. (b) When reqi~sted by the State Controller, such examination shall be conducted by any licensing or requlating agency other- wise et~owered by the laws of this state to examine the records of the holder. For the purpose of determining conpliance with this chapter, the Superintendent of Banks arid the Savings and Loan Caririissioner are hereby respectively vested with full authority to examine the records of any banking organization and any savings and loan association doing business within this state bet not organized under the laws of or created in this state. § 1572. [Actions to enforce Unclaimed Property Law.] (a) ~ State Controller tray bring an action in a court of appropriate jurisdiction, as specified in this section, for any of the foll~zing purposes: (1) To enforce the duty of any person under this chapter to permit the examination of the records of such person. (2) For a judicial determination that particular property is subject to escheat by this state pursuant to this chapter. (3) To enforce the delivery of any property to the State Ccrttroller as required under this chapter. (b) `I~ State Cczitroller nay bring an action under this chapter in any court of this state of appropriate jurisdiction PAGENO="0583" 579 - 26, - in any of the following cases: (1) Where the holder is any person domiciled in this state, or is a government or governmental subdivision or agency of this state. (2) Where the holder is anj person engaged in or trans- acting business in this state, although not domiciled in this state. (3) Where the property is tangible personal property and is held in this state. Cc) In any case ~there no court of this state can obtain jurisdiction over the holder, the State Controller may bring an action in any federal or stath court with jurisdiction over the holder, § 1573. [Agreements with other states.] The State Controfler may enter into an agreement to provide infonration needed to enable another state to determine Un- claimed property it may be entii~led to escheat if such other state or an official thereof agrees to provide this state with infermetion needed to enable this state to determine unclaimed ~rccerty it rray be entitled to escheat. The State Controller mey, by regulation, require the, reporting of information needed to enable him to ~rrp1y with agreements made pursuant to this section and may, by regulation, prescribe the form, incli~5ing verification, of the information to be reported and the times for filing the reports. § 1574. j~peration with other states in enforcement.] At the request of~ñöther state, the Attorney C-enera]~öfthis state may bring an action in the name of the other state, in any court of appropriate jurisdiction of this state or federal court within this state, to enforce the uncla~ied property laws of the other state against a holder in this state of property subject to escheat by the othei~ state, if: (a) The courts of the other state cannot obtain jurisdiction over the holder; (b) The other state has agreed to bring actions in the name of this state at the request of the Attorney General of this state to enforce the provisions of this chapter against any person in the other state belidved by the State Controller to PAGENO="0584" 580 - 27 - hold property subject to escheat under this chapter, where the courts of this state cannot obtain jurisdiction over such person; (c) The other state has agreed to pay reasonable costs in- curred by the Attorney General in bringing the action. § 1575. (Catçensaticri to other states bringir~ requested action on behalf of State Controller.] (a) If the State Controller believes that a person in another state holds property subject to escheat under this chapter and the courts of this state cannot obtain jurisdiction over that person, the Attorney General of this state tray request an officer of the other state to bring an action in the narre of this state to enforce the provisions of this chapter against such person. (b) This state shall pay all reasonable costs incurred by the other state in any action brought under the authority of this section. The State O~tro1ler tray agree to pay to any state bringing such an action a reward not to exceed fifteen percent of the value, after deducting reasonable costs, of any property recovered for this state as a direct or indirect re- suit of such action. Any costs or rewards paid pursuant to this section shall be paid fran the Abandoned Property account in the Unclairted Property Fund and shall not be deducted fran the ar~ount that is subject to be claiiied by the owner in accor&- ance with this chapter. S 1576. [Penalties.] (a) Any person who willfully fails to render any report or perform other duties required under this chapter shall be pun- ished by a fine of ten c~1lars ($10) for each day such report is withheld or such duty is rot perforned, but riot nore than ae thousand &ilars ($1,000). (b) Any person who willfully refuses to pay or deliver es- cheated property to the State Controller as required under this chapter shall be punished by a fine of not less than five hundred &,llars ($500) ror irore than five thousand dollars ($5,000), or iirprisorirent for rot rrore than six ironths, or both. § 1577. [Interest.] In addition to any damages, penalties, or fines for which a person may be liable wider other provisions of law, any person who fails to report or pay or deliver unclained property with- in tie tine prescribed by this chapter, shall pay to the State PAGENO="0585" 581 - 28 Controller interest at the rate of 12 percent per annum on such property or value thereof from the date such property should have been paid or delivered. ARPI~LE 7 MISCELLT~NEOUS § 1580. [Rules and Regulations.] The State Con~E±5I1er is h~by au1~ized to make necessary rules and regulations to carry out the provisions of this chapter. § 1581. [Records: Travelers Checks and Mon~y Orders: ?enal~ (a) Any besiness association that sells in this state its travelers checks, rrcney orders, or other similar written instru- rents (other than third-party bank checks) on which such business association is directly liable, or that provides such travelers checks, rroney others, or similar `written instruments to others ~or sale in this state, shall maintain a record indicating those travelers checks, rroney orders, or similar written instruments that are purchased from it in this state. (b) The record required by this section nay be destroyed after it has been retained for such reasonable time as the State Controller shall designate by regulation. (C) Any business association ~` that willfully fails to comply with this section is liable to the state for a civil penalty of five hundred dollars ($500) far each day of such failure to ccr~ly, ~ich penalty may be recàvered in an action brought by the State Controller. § 1582. [Restriction on agre~nent to locate reported_p qp.] No agreement to locate, d~Iiv~ recover, or assist in the recovery of property reported under Section 1530, entered into between the date a report is filed under subdivision (d), of Section 1530 and six menths after the date payment or delivery is required under Section 1532 is valid. Such an agreEnent made rrore than six menths after payment or delivery is re- quired under Section 1532 is valid if the fee or compensation acreed uoon is not in excess of 10 percent of the recoverable PAGENO="0586" 582 - 29 - property and the agre~rent is in writing and signed by the ~ner after disclosure in the agre~ent of the nature and value of the property and the r~re and address of the person or entity in possession of the property. Nothir~ in this section shall be o~nstrued to prevent an ~ner fran asserting, at any tine, that any agreesent to locate property is based upon an excessive or unjust ocnsideration. PAGENO="0587" 583 REGULATIONS STATE OF CALIIORNIA u1:cLAI~D PROPER~i L1~ REGUlATIONS CALIFORNIA ADMINISTRATIVE CODE - TITLE 2 SUBCHAPTER 8 I~UTLTE CORY, STATE CONTROLLER DIVISION OF UNCLAIMED PROPERTY P. 0. BOX 1019 SACPJ~HEHTO, CALIFORNIA 95805 PAGENO="0588" 584 TITLE 2 STATE CONTROLLER (Register 76, -No. 25 6-19-76) SUBCHAPTER 8. UNCLAIMED PROPERTY LAW Article 1. General 1150. Purpose and Statutory Authority. The rules and regulations contained in -this Subchapter are for the purpose of implementing provisions of the Unclaimed Property Law and are authorized by Code of Civil Procedure Section 1580. NOTE: Authority cited: Section 1580, Code of Civil Procedure. Reference: Sections 1500-1582, Code of Civil Procedure. History: 1. New Subchapter 8 (Sections 1150-1176 not consecutive) filed 9-25-74 as an emergency; effective uppn filing (Register 74, No. 39). 2. Repealer of Subchapter 8 (Sections 1150-1176, not consecutive) pursuant to Order for Preliminary Injunction (Slettland and Kerner vs. Plournoy) (Register 75, No. 5). 3. ~ew Subchapter 8 (Sectioni 1150-1176, not consecutive) filed 8-15-75; effective thirtieth day thereafter (Register 75, No. 33). 1151. Charges. The term "charges" means any type of charge deducted by a holder (as defined in subdivision (f) of Code of Civil Procedure Section 1501) from property subject to the Unclaimed Property Law, including, but not limited to, service charges, handling charges, and administrative costs. 1152. Ptope~y~. The term "property" means any property that is reportable to the State Controller under the Unclaimed Property Law, or would be reportable if charges had not been deducted therefrom. 1153. Inactivity. The term "iv.activity" means non-occurrence of any of the events or acts described in (1), (2) or (3) of subdivision (a) or subdivision (b) of Code of Civil -Procedure SectIoif 1513. A period of inactivity canmet be terminated by the unilateral act of the holder. History: 1. Amendment filed 6-15-76; effective thirtieth day thereafter (Register 76, No. 25). -1- PAGENO="0589" 585 1154. Deducted. The term "deducted" is synonymous with the terms "excluded'1 and "withheld". Article 2. Charges Lawfully Withheld 1160. Authority for Charges. Charges shall not be deducted from property unless: (a) Expressly permitted by provisions of the Unclaimed Property Law; and (b) Authorized by a statute other than the Unclaimed Property Law or by a valid, enforceable contract. 1161. Substantiation of Deductions. If charges are deducted from property, a holder shall include or attach as part of the report filed pursuant to Code of Civil Procedure Section 1530: (a) The citation of the statute or a copy of the form of contract authorizing such charges. (b) The value or amount of each item of property, before any charges are deducted therefrom. (c) The Omount of charges deducted from each item and the date or dates on which such charges were deducted. (d) Such other information or documentation as the State Controller may require after review of the report to substan- tiate the deduction of. charges. 1162. Non-Enforcement of Right. Charges may not be deducted from property pursuant to a contract or statute if the holder would not have deducted such charges in the event the property had been claimed by the owner prior to being reported or remit- ted to the State Cbntroller. Article 3. Reasonable Charges 1165. Substantiation of Reasonableness. As to any item of property subject to subdivisions (a) or (b) of Code of Civil Procedure §1513 on which charges have been deducted, other than demand deposits, a.bank or financial organization shall include the following information as part of the report filed pursuant to Code of Civil Procedure §1530: (a) An estimate of the gross amount of income earned from use or investment of the property during the period of inactivity; -2- PAGENO="0590" 586 (b) A description and itemization of all costs directly theurred for purposes of maintaining and safeguarding the property during the period of inactivity and which would not have been incurred except for such inactivity; and (c) Such other information or documentation pertaining to the reasonableness of the charges as the Controller may require after review of the report. Article 4. Interest or Dividends 1170. Authority for Discontinuafl~. If payment of interest or dividends on property subject to subdivisions (a) or (b) of Code of Civil Procedure Section 1513 is discontinued at any titan during the period of inactivity, the holder shall include or attach as part of the report filed pursuant to Code of Civil Procedure Section 1530: (a) A copy of the form of a valid, enforceable contract which authorized such discontinuance of payment of interest or dividends; or (b) The citation of the statute which authorized such discontinuance of payment of interest or dividends. 1171. Non-Enforcement of Rig~,. A contract or statute shall not be considered as authorizing discontinuance of payment of interest or dividends if such payment would not have been dis- continued, or would otherwise have accrued to the benefit of the owner, in the event the property had been claimed by the owner prior to being reported or remitted to the State Controller. Article 5. Miscellaneous 1173. ~ort of No Reportable Proper~y. On written request a holder who does not have property which is reportable under the law shall report that fact. NOTE: Authority cited: Section 1580, Code of Civil Procedure. Reference: Sections 1500-1582, Code of Civil Procedure. History: 1. New Section filed 6-15-76; effective thirtieth day thereafter (Register 76, No. 25). ~ Information Contained in Report. In addition to the information required by Section l53~ of the Code of Civil Pro- cedure and by other rules of this Subchapter, the report filed pursuant te Section 1530 shall contain the following information -3- PAGENO="0591" 587 on a form prescribed by the State Controller: (a) The type of organization filing the report (corporation, partnership, etc.). (b) If the report is filed by a corporation: (1) the date of incorporation; (2) the state of incorporation;~ and (3) the state in which the corporation has its principal place of business. (c) The date that the organization filing the report commenced operations. (d) If the report is prepared by an agent of the holder (for example, a transfer agent), the name and address of the agent. Ce) The name and title of the person who actually prepared, or van directly responsible for preparing, the report. 1175. Records. Any parson or holder shall retain all records pertaining to property for a period of seven (7) years after such property is reported, or would have been repOrted except for the deduction of charges, to. the State Controller. Such records shall contain the information required by Section 1530 of the Code of Civil Procedure and this Subchapter. The State Controller may, in writing, consent to the destruction of any such records prior to expiration of the above period. 1176. States Without Unclaimed Property Laws. In accordance with the requirement of subdivision (b) of Section 1580 of the Code of Civil Procedure that the State Controller designate those states that do not provide by law for the escheat of unclaimed or abandoned intangible property of any kind described in Sections 1513 through 1520, the State ContrOller finds that presently all states provide for the -escheat of some kind of abandoned or unclaimed intangible property. Holders having questions concern- ing the unclaimed property laws of particular states may direct inquiries to the State Controller, Division of Unclaimed Property, Sacramento, California, 1180. ~p~pplicabiljty of Articles. Articles 2, 3 and 4 of Subchapter 8, do not apply to property which is first required to be reported after January 1, 1976. NOTE: Authority cited: Section 1580, Code. of Civil Procedure. Reference: Sections 1500-~15B2, Code of Civil Procedure. History: 1. New section filed 6-15-76; effective thirtieth day~ thereafter (Register 76. N~ 25). -4- 67-~i4O 0 - 81 - 37 PAGENO="0592" 588 CoLom~Do RECEiVED NUV 2 ~9I9 CUMMLrL:, CUisiD:V1L~ AND MOiI~IA2Y A~FARS SUOCOMM,TTFr Roy Romer ~IatC 131 OIOIxfl?81b13 Deputy Treasurers: State Treasurer DEPARTMENT OF THE TREASURY James C. Weissman OFFICE OF STATE TREASURER STATE CAPITOL DENVER, COLORADO 80203 (303) 839-2441 Octobe~'t 29, 1979 Corame.1u~e, Con.ownex, and Mone,t.a/Ly A~aLN~5 Stthaomm.Lttea 5-377 Ray~u/ut 8uAJ~d.Lng Ula.ohington, V.C. 20515 Ge.n,t.L amen: ThLs .L6 .Ln `.epZy to yoWL "UncLoJ~nied PtopaA.~y QaetA.onnaAJLe" o~ 0cu~obe.t 3, 1979. CoLon.ado doe,~ not have the'Un.L~o'un Coda o~ Abondonad P'wpe'i-ty Law'. Attathed a.'z~e cop.Lei~ o~ VLspo4-i..tLon o~ UncY~o.umed A64e,ts Law 15-12-914 Co.Lo'r~ado RevL~ed Sta.twte4 1973, LIVL4 geneutUy pa t'~ to .Lnd.Lv.Ldaa.C. e tate.6 and 7-8-123 CoLo.'tado Revi.~sed SLot~e,5 1973, th,~ pe.)LtaJ~n4 ~o d.L44o.P~Ved coJLpoJl.C~tOfl.4. CoLo/Lado had appiothaa.~e2tj 950 Lnd Lduaf_ wwY~ai~med accou,n.t.6 at Jane 30, 1979 ~otcLLng $2, 172,604.38 and 125 coxpon.a.te accowvt.o totaLLng $344, 423. 12. Vwr~.Lng ~the ~Loc.aL yeax endLng Jane 30, 1979 we xece~ved $190, 989.00 ,LncLLv.LdaaL and coxpoxwte e~c.hea.t.n and pa.u~d oui $110,617.00 and ,tJLan.~evLed ~o ~he Sta;te PabLLc SchooL Fu.nd ~9r.om .Lnd.Lv.LdaaL accowvt4 $27,912.00 and to the genoxaL ~w~d $267.00 (~n.om coxpon.aLe accowvt.~, a~ xeqwiited by Low, a(~Lex Lhe e.schea-t .1.4 heLd 21 yeaxs, a6chectt.o become StaLe Fand6 and axe L n.~e'txed accon.d~LngLy. Banfeo and F.LnaneLaL In4 twt-1.on.4 axe noL xeqwlited -to depo&Lt donmaaL accouivt4 au~th u4, howeven. .~ ome In4uxance Compan-Leo do voLaIv~wr)iy depo4Lt ancWmed d.cv.'_dend4 14DL.th U4. The Sta~te Txeo~u/r~y doen no advenLL4e on. ptthLL4h he LLeL o~ ancLa-lmed 1~and4, howevex, .they axe open ~ox pabLLc .Ln.4pect-Lon and we do have "pxo~e44i~onoJ_ ~.Lndex4" tha.t axe Loo!zLng a.t the £~L&t con.tLnuow!sLy. Thexe .1.4 no bu.dget ~ox the ope.4.a.tLon o~ the eochea.t sand, -~ -~ adreLnLoLoAed by .the accouivtA~ng dLv.1.4.Lon o~ the SLo-te Txea.4uxy Vepax.tmen-t. I~ .thexe .1.4 any ~an.thex .Ln~onma.tLon we can £uxn~L4h yoa, pLea4e LeL u4 know. ,i'ltO.Thach Ch.Le~ Accoan.tan.t JOT! cnih Enc: 1 PAGENO="0593" 589 Probate of Wills and Administration 15-12-914 l~j~d or a security interest therein is acquired by a purchaser, or lender, value from a distributee who has received an instrument or deed of distri- bution from the personal representative, the purchaser or knder takes title free of any claims of the estate and incurs no personal liability to the estate, ~..hether or not the distribution was proper., To be protected under this provi- *jOfl. a purchaser or lender need not inquire whether a personal representative ~~ted properly in making the distribution in kind. Source: R & RE, L. 73, p. 1599, § I; C.R.S. 1963, § 153-3-910. 15.12-911. PartitIon for purpose of distribution. When two or more heirs or deviseeS are entitled to distribution of undivided interests in any real or Nrs0~l property of the estate, the personal representative or one or more ~f the heirs or devisees may petition the court, prior to the formal or informal closing of the estate, to make partition. After notice to the interested heirs or deviseeS. the court shall partition the property in the same manner as pro- ~idcd by the law for civil actions of partition. The court may direct the per- sona! representative to sell any property which cannot be partitioned without ~rcjudice to the owners and which Cannot conveniently be allotted to any one party. Source: R & RE, L. 73, p. 16(X). § 1; C~R.S. 1963, § 153-3-911. .krrt. Jur. See 31 Am. Jur.2d, Executors and 1~,jrnjnjstrZtorS, 4349. t'.i.S. See 34 C.J.S.. Executors and Admin- `iritors. S 482. 15-12-912. Reserved.This section reserved for future use. 15-12-913. DistributIons to trustee. (1) Before distributing to a trustee, the personal representative may require that the trust be registered if the state in which it is to be administered provides for registration and that the trustee inform the beneficiaries as provided in section 15-16-303. (2) If the trust instrument does not excuse the trustee from giving bond. the personal representative may petition the appropriate court to require that the trustee post bond if he apprehends that distribution might jeopardize the interests of persons who are not able to protect themselves, and he may with- hold distribution until the court has acted. (3) No inference of negligence on the~part of the personal representative ~1.ll he di awn from his failure to exercise the authority conferred by subsec- Lions (I) and (2) of this section. Source: R& RE, L.73,p. 16OO,~ 1;C.R.S. l963.,~ l~3-3-913. 15-12-914. DisposItion of unclaimed assets. (I) If any heirs or devisees i~ any intestate or testator are unknown,, or if known and there is no person qiitlified to receive devises or distributive shares of such heirs or devisees it the time of making final settlement of the estate, or if such heirs or dcvi- `~ces refuse to receive and receipt for sUch devises or distributive shares, or in the event there is no taker under the provisions of article 11 of this title. the personal representative shall be ordered by the court to pay any PAGENO="0594" 590 15-12-914 Probate, Trusts, and Fiduciaries balances remaining in his hands to the state treasurer; and (he ~ be answerable for the same, without interest, anytime within twcnI)-~~ years after the same shall have~been paidJñI~the treasury, to such per'~n or persons as shall appear to be-legally entitled to the same, upon order ~f the court having administration of the estate. (2) Except as provided in subsection (1) of this section, any person. cur. poration, association, or other entity in possession of moneys paid to hu~ or it or in his or its possession in any fiduciary capacity, and the said monc',s are unclaimed, or the person to whom the person in possession may lawfuil~ pay the same, or the person who may be entitled thereto is unknown or absent oi fails to receive and properly receipt therefor. may pay said u~n -~ to the state treasurer; and the state shall be answerable for the same, without interest, anytime within twenty-one years after the same shall have been p~iid to the state treasurer; such payment to the state treasurer shall discharge the person makIng the same from any further liability or responsibility for such moneys. (3) After the lapse of twenty-one years from the time any such money~ shall be paid into the state treasury, and no claim therefor having been matte and established by any person entitled thereto, said moneys shall become the property of the state and shall be transferred to the public school fund thereof, and the state shall not be liable therefor. Prior to said lapse of twenty-one years, such moneys may be invested by the state treasurer, and all interest or increment therefrom shall be credited to the general fund. (4) At the time any personal representative or other fiduciary pays into the state treasury any moneys, he shall make a written report thereof to the attorney general of the state, giving him such information as he may ha'~e. under oath or affirmation, touching the identity and antecedents of the deceased, as well as of any person supposed to be entitled to said moneys. to the end that fictitious claims thereto may be forestalled. The attorney gen- eral shall file such reports in his office and keep the index thereof, and no order shall be made by a court for the repayment of any moneys so paid into the state treasury without the attorney general having first been served with written notice thirty days before the time of making application therefot Upon the serving of such notice, the attorney general may appear and take all steps for and on behalf of the state that any person who might be a defendant to such action might take. The reasonable expense of any such action taken by the attorney general shall be initially paid out of the attorney general's contingent fund; but, with the approval, order, and direction of the court having jurisdiction of the estate, any such reasonable expense incurred by the attorney general in conserving the estate and in investigating and litigating the claim of any alleged heir, devisee, distributor, or creditor shall be repaid to said contingent fund out of the moneys in the estate or fund in controversy before final settlement thereof. (5) No estate or trust shall be permitted to remain open for the reason that an heir or devisee or beneficiary is unknown or cannot be located or refuses to receive and receipt for his share. All property subject to the provi- sions of subsection (1) of this section shall be paid to the state treasurer no later than three months after the entry of the order of final settlement, and all property subject to the provisions of subsection (2) of this section shall be paid to the state treasurer no later than three months after such property becomes eligible for distribution. Source:R&RE,L.73.p. l6OO,~ l;C.R.S. l963,~ 153-3-914. ~~3- `~(`f PAGENO="0595" 591 Foreign Corporations 7-9401 nicalty the institution of a new suit. Bankers Trust Co. v. Hall, 116 Cob. 566. 183 P.2d 986 (1947). 7.8-123. Disposition of amounts due certain creditors and shareholders. (I) Upon the voluntary or involuntary dissolution of a corporation as pro- vided in this article, the portion of its assets distributable to a creditor or ~arehoIder who is unknown or cannot be found or who is under legal disabil- ~ and there is no person legally competent to receive and receipt for such &stributiOn shall be reduced to cash and deposited with the state treasurer. Stich deposit shall discharge the person making the same from any further liability or responsibility for such distributable portion. (2) If. within twenty-one years of the date of such deposit, the creditor cw shareholder or his legal representative provides proof satisfactory to the state treasurer of his right to such deposit, the state treasurer shall pay the ~posit to the claimant, without interest. (3) If, within such twenty-one year period, the state treasurer has not received proof satisfactory of a claimant's right to such deposit, the state shall not thereafter be liable for such deposit, and the deposit shall be trans- ferred to the credit of the general fund. During such twenty-one year period ~`~e state treasurer may invest the deposit, and all interest from such invest- ment shall he credited to the general fund. ~~irce: L. 58. p. 183, § 99; CRS 53. ~ 3 1-34-24; C.R.S. 1963, § 31-8-23; L.73.P~2.~ I. c.,j.s. See IS C.J.S.. Corporations. § 68. ARTICLE 9 Foreign Corporations 7.9-tOt. Admission of foreign corporation. 7-9-112. 7.9-102. Application to corporations hereto- fore authorized to transact 79113 business in this state. 7-9.103. Transacting business without certif- icate of authority. 7-9-114. 7.9-lf~4. Powers of foreign corporation. 7.9-105. Corporate name of foreign corpora. tion. 7-9-115. 7.9-106. Change of name by foreign corpora- 7-9-116. tion. 7.9-107. Application for certificate . of 79 117 authority. T - 7.9_l~. Filing of application for certificate of authority. 7-9-118. 7.9-t~. Effect of certificate of authority. 7.9-110. Amendment to articles of incorpo- ration of foreign corporation. 7-9-119. 7.9-Itt. Amended certificate of authority. 7.9-101. Admission of foreign corporation. (1) No foreign corporation has the right to transact business in this state until it has procured a certificate of authority to do so from the secretary of state. No foreign corporation gl a judgment has been obtained pursuant p~ this section may sue out a writ of appeal to ~y~W the judgment even though that is tech. Revocotion of certificate of author- ity. Issuance of certificate of revoca- tion. Merger of foreign corporation authorized to transact busi- ness in this state. Withdrawal of foreign corporation. Filing of application for withdrawal certificate of withdrawal. Registered office and registered agent of foreign corporation. Change of registered office or regis- tered agent of foreign cor- poration. Service of process on foreign cor- poration. PAGENO="0596" 592 CONNE~rICUT QUESTIONNAIRE RESPONSE RECFtV~ i~1~ HENRY E. PARKER ~`tat~ ut Ulniuwrtiru1 OFFICE OF THE TREASURER Oct. 29, 1979 The Honorable Benjamin 5. Rosenthal, Chairman Commerce, Consumer ath Monetary Affairs Subcommittee of the Committee on Goveroment Operations Rayburn Office Building Room B-317 Washington, D. C. 205115 Re: Unclaimed and Escheated Pro~erty Dear Mr. Rosenthal: In reply to your letter of Oct. 3, 1979 in which you request our cooperation on the above subject matter, we enclose material in response to your Unclaimed Property Questionnaire completed as much as was possible in the short snace of time allotted to this office which administers the aband6ned property or escheat program. In our resronses to the questions, naturally we have attempted to sub- stantially answer the questions based upon the experience this office has had with the program over the past 25 years or more; in specific situations about which you inquired and in which no experience was had, we so stated in our resnonse in order that an accurate determination could be made by your subcommittee as to the existence or non-existence 0f specific situations or problems, at least in Connecticut, and to further guide you in your proposals. We have enclosed copies of of our reporting forms used by escheating holders, our most recent advertisement of our escheat accounts in the various county newspapers and a copy of our escheat laws. You may have Mr. Don Tucker, chief economist for the subcommittee, contact or write this office if more specific information is sought under the escheat program. Very truly yours, c ~ - `~ el H. Frau1in6,~- Escheats-Soecial Funds Officer PAGENO="0597" 593 HENRY E. PARKER . PAUL J P1cDONOUCH TREASURER nI (!Iniuwrltrut DEPUTY TREASURER OFFICE OF THE TREASURER claited ~`rorerty Questionnaire ~ Frorert-- Statute! re~flntjons, and adoinjstrative orogran: a. Unclaired or abandoned cronerty statutes of Connecticut apply to banking organizations, business associations, financial organ- izations, life insurance companies, estates, courts, oublic corp.- orattons, oublic authority or public officer of the state or a political su~ivision thereof. croz,e~~y: realty or personalty, tangible or intangible hoidine e-efiod: ten to twenty years depending on the nature of the `mrorcrty; savings and checking ~ccounts have a 20 year holding oaricd while all other bank gamer on which a bank is obligated is ten years; life insurance oguities and obligations is 10 years; ccrtcrate divtdends and obligations 10 years; property held by a tublic corroration, public authority or public officer of this state or a pelitical subaiviuion thsreof is 10 years; all other ~o~rty not specifically provided for or excluded including any ~nccna, interest or other increment thereto remaining unclaimed for 7raars is escheatable. Certain specific statutes renders certain c-roperty escheatable under their own provisions such as wages under certain circumstances and unclaimed property resulting from judicial deterninat~ons such as utility refunds etc. Connecticut's escheat statutes are purely custodial in nature under which the state treasurer is a statutory trustee for a Claim period of 20 years fron the end of the calendar year for which the funds are received uoon the termination of which the claim period -is extinguished or foreclosed and the escheat becocas aboclute. Fetween the 20 year holding period and the 20 year claim mariod covering savings and checking account, the owner has 40 years within which to assert his rights to the property. interact: Ccnnectjcut banks and financial institutions wean escheating dorront savings accounts do include interest on such escheated accounts to the date of escheat or transfer to the State of Connecticut. The escheated funds are deposited in the General Fund except $25,000. or 7% of the receipts of the previous fiscal year , whichever amount is greater, from which the treasurer shall pay claims. PAGENO="0598" 594 HENRY E. PARKER PAUL J. MCDONOUGH TREASURER ~Ittt~ iii L!LflhttWrltrut DEPUTY TREASURER OFFICE OF THE TREASURER -2- b. Rules or Regulations: Connecticut has not adopted any Rules or.Regu- statutes ]ations implementing our state / ; though the matter has been studied and under consideration for some time. While a tentative set of rules were drawn up and precared, they were never.'officially adopted. c. Soecial Provisions of hanking~ insurance~ or general cormnerce laws or yprulitions: To the best of our knowledge, there aepear to be no specifid provisions under the law that impose certain requirements on how banks and other financial institutions must handle dormant bank accounts or other unclaimed property; the subject of escheat or abandon- ed property was first legislated to cover savings and checking accounts a list of which was furnished to the Banking Comnissioner who took aoprornriate action. About 1932 dormant accounts were esscheated by statute to the stats treasurer with additional special statutes being passed thereafter to cover other types of property such as wages and coroorate dividends. In 1961 the Abandoned Property Act was passed (effective Jan. 1, 1962) patterned after the Uniform Abandoned Property Code as reco:rrended by the Goamissioners on Uniform National Legislation. The entire program was assigned by statute to the state treasurer who designed appro~imte escheat forms for the various escheating holders. Today, Connecticut's escheat statutes and amendments thereto, spell out procedural and administrative requirements quite adequately so that certain requirements or laws are not required of the banking or insurance departments in tho matter of escheats except, of course, from an auditing point of view the latter agencies or departments will cooperate. d. Advertis4qg~and Publication: First, prior to the escheating of property by an escheating holder, within one~year before a presumption of abandon- ment is to take effect (usually the 9th or the 19th year as the case may be)the escheating hp~qr shall notify the owner of the property by ~jggt class mail directed to the ~yfl5~~5 last-known address that evidence of interest must be shown or indicated in the property or it shall be subject to escheat. Items in excess of $25~OO: These items are advertised by the state treasurer on July first of each year in a newsoaper having general circulation in each county in which is located the last-known address of each carson aupearing to be the owner of the property. PAGENO="0599" 595 HENRY E. P KER PAUL J. McDONOLJGH TREASURER ~`tZ1t~.? fif (!~niiuerIirirt DEPUTY TREASURER OFFICE OF THE TREASURER -3- d. (cort) advertisement, by statute, covers the name as reoorted, the lest~iswn address and the amount; the newspoper is instructed to establish cartioms covering categories such as banks, insur- ance funds, and corrorations-r.isceliansus. The advertisement includes only ownars of unclaimed property being advertised for the first tire; twenty years later items of unclaimed property that have remained outstanding an unclaimed since the initial escheat or receipt will be advertised a second tire end if still unclaimed a judicial determir~ation will have to be made by a Suzerior Court in order to render the escheat absolute with the result ttat the true curer can no longer file a claim for such mrspvrzy. e. idvYrtisioT hi- ETObTatint Holders: Particularly banks in ~onnecticut, ~oct orior to the escheat or transfer of escheated funds, will publish at their own exoense a list of dormant bank accounts in the leading mewsrater cf the county informing such owners (or their heirs or remresentatives) that such accounts, if not claimed, will be turned over under the escheat laws to the Treasurer of the State of Coon. f. "Rountv Hunters": There is no specific statute as such aired at 1b-sunty hunters" or any stautory lir~itattoos governing their activities Cr their relationship with a client. It is a known fact that they offer thetr services for a aercentage of the claim or dollar amount which is cm a graduating scale as the dollar amount increases and do mrovide thoir clients with a standard form acconoanying a letter which states in general that they ~ire in possession of certain inform- ation or knowledge that the client, is the apiarent owner of unclaimed assets or ovooerty or that they are potential heirs of property held by a state government or an escheating holder; if they sign the enclosed authority or agent form, they will proceed with the necessary steps to realize the funds or ~rooerty. In many instances, an initial derecit of $5.00 or $10.00 or more is ~equired of the client. An unscruou3ous `bounty hunter" may write to a number of ~ Smiths" (porticularly in con-son name situations) in Connecticut and attempt to extract five to ten dollars from each ~ ~ * Of course, these bounty hunters usually deal by letter in another jurisdiction rendering it difficult to track them down. PAGENO="0600" 596 H!N~Y F. PARKER . PAUL J. McDONOUGH TREASURER ~`tflt~ itt (!~inuwrttrut DEPUTY TREASURER OFFICE OF THE TREASURER -4- g. Definition of "abandoned" or Runclaimedil, See Section 3-57a of Connecticut statutes. While not specifically defined in the definitions, our statutes inform the escheating holder particularly banks, life insurance comoanies and corporations what circumstances constitute abandonment such as a 10 or 20 year period of inactivity or failure to respond or write to the escheating holder or failure to indicate any interest in the property or funds. It is basically the lack of contact with the holder of such property in any way be it by letter, phone or other means of communications, Banks have informed this office that ordinarily a letter from the bank to the depositor is returned by the postal authorities as "addressee unknown" or "whereabout unknowne or "left no forwarding address". 0n occasions inquiries are made by the bank as to the whereabouts o~ tha deoositor through friends. This office has been furnished with zerox copies of postal cards returned by postal,authorities as undeliverable to the derositor. It would aopear that if nail is not returned to the bank by the postal authorities, the banks or financial institutions could presume that it still constitutes inactivity if no contact is made by the owner with the bank in any manner; until contact is made in some way, the presumption of inactivity continues and the bank or any escheating holder would be compelled to treat such property as abandoned if the period of presumption of inactivity is met under the statutes. The owner of funds or property must exercise some degree of responsibility over his property or funds held by an escheating holder under some legal capacity which includes the duty to maintain some degree of contact with the bank who may treat such property as abandoned after 10 to 20 years if no interest or contact is made, If the contact is lacking after efforts were made to locate the deoositor, the bank is required to treat such property as abandoned, h. Audits and on-site investigations: The State Theasury Dept. which administers the escheat progran does not conduct field audits or on-site investigations of banks, insurance companies or corporations nor is any other agency or department aut~zorized to conduct such audits unless authorized by the state treasurer. PAGENO="0601" 597 IH ~ ~ HENRY E. PARKER nf ~ntuw~1irirt OFFICE OF THE TREASURER h. (ccat) The State Banking and Insuranc~ Departoents, in their periodic and regional or zoning audits (done in cooperation with other states) wili when the situation warrants it inform our treasury dept.; that a certain bank, credit union, or insurance company has been advised by then to eschaat certain funds or property to the state treasurer, 3~jer the rvovisions of section 3~~g of our escheat laws, the treasurer or any officer or agency designated by him, nay examine any person on oath or affirmation, or the records of any person, who he has reason to believe has kno-.ledge or has failed to retort or transmit property abandoned, Ba may bring an action in the court of anpropriate .zisdictiom to enforce the provisions of the escheat laws. 1. at far administration of uaclaine~ rvooerta- prpgggg: Our Treasury deprrtr~n~ has a r~~rvi5or of Eschaat~ and Stoci~ ~~sfl who devotes about one-third of his time to the escheat progran and the fufl tine services of an assistant (Clerk III); about $30,000. is budgeted for servdces, materials and advertising costs. 67440 497 PAGENO="0602" 104 Banks (includes savings & loan, credit unicns etc.) 115 ~ 120 ~ Brokers & Business Aesoc'ns 190 175 -, 200 Insurance companies 58 79 - 82 All others (Public Cor~.s & Govt. Agencies) 5 5 10 Estates by the Probate Courts 22 Amount of property reported: All institutions 23 6 (Estates-dollar amount) ~ `16,830. Banks $141,463. 6127,529. $355,175. $ 145,795. - $ 495,610. 118,879. Brokers & Bus. Assoc'ns 85,747. 111,712. Insurance companies 99,631. 102,654. 227,099. All others (Public Corns. & Govt. Ager.cs.$97,811. 127,744. TOTAL... .$ 721,490. Amount of property remitted: All institutions Under Conn. escheat law, a $824,814. ~ $11o3,708. check acconnanies the escheat Banks reeort for the total renorted for the ~eceding calendar year. Brokers . Insurance companies All others Number of individual accounts T6~6ess of 5500 All institutions (Average 20-25 yearly except estat to ~J~ft4t6~; occasidh Banks gmr year in excess of $25,000-$3 s which averag 1I~ e6434'0~66 ,000.) s about $3,500. 0Pu1~EEI011~ Brokers Insurance_companies 598 2. Amounts of unclaimed property reported and delivered to owners: 1976 1977 a. Numbers of institutions reportipg~: 357 379 All institutions 1978 412 b. c. d. e. f. 9. h. All others Number of names advertised: (only items of A25. plus) 1800 in 1979 .~__~.for~ i978 ~ $92,700. j~2:$l35,000. 197': 393 Dollar amounts returned to owners: ~,~:$75,OO0. Delivery percentaoe: lo~% Amounts remitted minus claims Average number of clairs: 1976: 317 -paia yearly Average refund ratio over the ~eceding 10 years: 15%; it is to ha noted, however, that Connecticut escheat law mrovides for a 20 year claim merioi from the year of receipt of the mronerty. The substantial number of dams umid cover those iteas escheated for the ~eceding calendar year or two. It would be difficult to trace the `ercentage ef refund over the next 18 or 19 years of those items eschoatcd in a narticular year say 1958 and 1959. Probably the total refund ratio over 20 years might be aa~roximately 20 to 25%. 1978: 424 PAGENO="0603" 599 PAULJ.McDONOUGH ~ ITIf (!tuiiwrljtijt DEPUTY TREASURER OFFICE OF THE TREASURER -7- 3, Stokerean Firns: Property or Funds Halsey, Stuart, & Shields 1978 Cash: none 0f N. Y, Stock: 1 sh. Affiliated Fund, Inc. (n.y. ~6.5o) Pierce etal 1978 Cash: ~8,6O9.OO Covering 1,4 itecs (wager & dividends) T~d~& Co (hartford) 1978 Cash $545.25 stock: 24 shares (The above brokerage firns have filed for previous years when cash and securities were escheatable) In addittOfl to the above, Investors Diversified Services Inc. of ~r.oesot.a, a tanagenent firm of mutual funds, has escheated cash cter the tact several years re~-esenting dividends, The trust detartcents of the Hartford Nat'l Bank & Trust Co. and The Cnnnect±c-t Sank & Trust Co. hate co~'.sistently escheated cash dividends and stc:k sinre the passage of our 1961 Abandoned Property Act including cash and dividends funnelled through their nominee companies. These banks have been extremely cooperative and loyal in their coapliance of the law to the letter, 4. ~~~ip~4gggg: a. National Banks: (excellent); State Banks: (excellent); Federal Savings & Loan Associations (excellent); State Savings & Loan Associations (excellent); Federal Credit Unions (excellent); State Credit Unions (Very Good)Securities Brokerage Firms (Very Gocd).; Mutual Funds very few mutual funds have filed escheat reportswith this office) insurance companies (excellent) and Nonfinancial Corps. (Very Good). PAGENO="0604" 600 y HENRY E. PARKER PAUL J. McDONOUGH TREASURER ~`tUtr nf (!Initurrttrut DEPUTY TREASURER OFFICE OF THE TREASURER /~a. (cont,) Since Connecticut's adoption of its uniform escheat law in 1961, banks and insurance cornoanies were very cooperative towards compliance with the escheat laws as it affected then. Dembers of their law depertinents or law firms made considerable inquiries of this office covering the procedural requirements of reporting property, the duties of the reix~rting holder and whether legal interpretations had been made by the Attorney General's office of certain crovisions of the statutes. Inquiries were made as to whether Rules and Regulations were adoptFd implementing the statutes. b. See lh supra for resnonse to this question. c. Our experience with the escheat program indicates a high level of compliance on the ~rt of banks, financial organ- isations, insurance conranies, corporations(public & prIvate), probate courts and other escheating holders of abandoned prop- erty. Under a cooperative arrangement with the banking and insurance depertments, tbrough their examiners' audits of-tanking and insurance institutions (state and zoning audits), the level of compliance is very high. The Insurance Dept. through its zone auditing under an arranginent with states in the northeast and other efforts has resulted in a high level of compliance by foreign insurance comtanies doing business in Connecticut. ~Je have reanon to believe that there exists a high level of cornoliance for banks and insurance comganies and have no icea uhat percentage of unclaimed property goes unreported. Corrorations: Public and Private Corporations, as shown or indicated by the escheat recorts on file with this office, for the most pert report unclaimed dividends, wages, stock, vendors accounts, outstanding checks (uncashed)etc; and many of these corporations subscribe to a service known as "C. T. Corporation Systemse which provide them with the procedural and statutory requirements for escheat in the various states. Menbers of the system are kept abreast of changes and amend- ments in the escheat laws of the various states; annually changes in our escheat laws, if any, are resnorted on a form provided by the above system. PAGENO="0605" 601 HENRY E FAR.~ER PAUL J. McDONOUGH iiif ~ntuwrftrut DEPUTY TREASURER OFFICE OF THE TREASURER Lc. (coot) Since our escheat laws do not extend beyond our borders, though we have reciprocal provisions , the ratter of compliance by corporations is somewhat left to the integrity of the corporation to comoly with the escheat laws of the state of incorporation or where it conducts its prmnci~l business outside of the state of incorporation. Foreign corporations in Connecticut are adnin- istered by the corporation division of the Secretary of Statets 0ffice and provide for the aepointrent of a statutory agent moon whom se-T~ce shali be made in the event of litigation; thrcugh the croporative efforts of the Secretary of State conoliance with the ercheat laws can be obtained where the situation calls for it. The ~nbiec lies with corporations who do business by rail in Commecticut and any attempt to police these corporations outside of C:mmecticut has its uroblems; c~nsstiti~onal questions night arise if examiners or auditors were sent beyond our borders to say nothing of the excense incurred to exact conpliance, To assume the role of the 5houod dog~ in search of unreported assets or property due Connecticut residents would warrOnt the emoloyment of additional personnel who night be challenged with a has-rage of legal and constitutional objections with no assurance that the pursuit exrense night be recovered. There are lir.its beycti which the efforts and the cost exceed the prize sought rarticuJarly by the crafler states with snaU and limited staffs administering the escheat program. St~emt--f~-e tercent of our escheat receipts are derived Srom bam~:s ari insurance compomies an institutional field that aesears be ca~bla of being su~rv~sedby the joint efforts of the bathing, insurance and treasury departments. The highest degree of compliance is enjoyed with these institutions from which most of the escheated revenue is derived with niniaun effort. PAGENO="0606" 602 HENRY E. PARKER . PAUL J. McDONOUGH TREASURER ~tat~ ui (i.Irnitwrltrut DEPUTY TREASURER OFFICE OF THE TREASURER -10- 5 Service Charges: By statute, Connecticut escheat laws, holders ~a) of unclaimed property, specifically banking organizations, are permitted to withhold or exclude any charges that lawfully may be imposed; notice of these chages are usually printed inside of a bank passbook cover based uron by-laws or regulations adopted by the particular bank* Frequently notice of rules and regulations governing deposits (savings and checking accounts) are posted by the bank visible to all customers of that bank; on occasions it is covered by a letter or literature available to bank customers, Some banks, just prior to escheat to the state, will advertise a list of unclaimed accounts eligible for escheat and will inform the public that if not claimed by the end of the calendar year, the bank by law is `equired to turn over the accounts via escheat to the state treasurer, (b) Among banks, the imposition of service charges on dormant accounts appear to occur only occasionally and not generally. Frequently, during the early stages after the adoption of the uniform escheat law, we inquired into custcmersi1 complaints, on service charges impomod on accounts particulary under $5.00 (some $1.00 and $2.00) in the mature of a bookkeeping monthly charge or a penalty of some sort after a letter of warning had been written to the depositor by the bank that the account was considered dormant and that if the depositor did not take appropriate action to lend activity to the account (such as increasing the amount on deposit) or failed to display any interest, a service charge would be imposed on a monthly basis with a possibility of escheat in the near future. (c) The problem of service charges anmears to be more prevalent with banking institutions; the problem is rare with insurance companies and other escheating holders. (d) To the best of our knowledge, some form of comrrnmication is given by the banks to the depositor that such charge will be imposed. (e) The typical charges imposed by banks that we have heard of is a monthly bookkeeping charge of *50cente or $1.00 or the imposimion of a small penalty particularly in sittr~ation~ where the depositor failed to return a small metal container furnished by the bank to a savings depositor compelling the pardon to save his loose or or extra change. PAGENO="0607" 603 PAUL J. McDONOUGH ~taio ii~ ~mittcrtiriit DEPUTY TREASUSER OFFICE OF THE TREASURER -II- have no knowledge of charges in unusual or extrene cases. g. l-~e learned of several cases in whièh unclained ~orerty or dornant tank accounts would have been reportable which was absorbed the tanks because of service charges but these accounts under ~5.CD or less which we doened rather tnsicnificant stn:e the bank nailed notices or nade efforts to c:rnnnicate with the detositors. be very difficult to estinate the total dollar arount of service charces mooted by all tanks in this state on unclained rr~ariy retorted for the calendar year 2.97$ without conducting a srecifjc servev anonc the financial institutions. a. sane as 1n5 anave. j. There is no soecific limitation covering service charges that a `anal: ray moose co a doruant account~; our statutes scecify that the charges aunt be valid charges and notice should be brought to the attention of the derYositor. The banks have voluntarily ~inted notice of its rules or regulations or copies of its by- laws cm the inside cover of its thssbook concerning service charges and renalties, the best cf cun knowledge, the~treasury de~rtaent has never been inv:ived in a service charge rotter or situation in which the state asserted a clam for refund or reinbrosemant of service charges~ eec have not been cenfroated with say evidence of any unreasonable charges inrosed by banks except ~ minor situations involving small bank accounts which I believe were justified. 6, Other Practices a. This office has no knowledge in yhich any banking institution has stoo~ed maying interest on dormant savings account or has taken away any interest roeviously credited. 67-~tiO 0 - 81 - 39 PAGENO="0608" 604 HENRI F. PARKER PAUL J. McDONOUGH TREASURER ~t~1tU fif (~nuttrrttrut DEPUTY TREASURER OFFICE OF THE TREASURER -12- 6. (cont.) b. We have had no exoerience where a dormant account of substanttal size was escheated to the state even though the owner was living at the sane address; generally in such situations such accounts are escheated because of a change of address without due notice to the bank. Under our law, one year prior to the escheat (after or just prior to the 10 or 20 year period as the case may be) the bank is required ~ or any escheating holder) to send by first-class mail a letter to the depositor at his last-known address as shown by the bank records that the funds will be escheated if no interest is thown by the depositor. c. We have no experience or knowledge of cases in which a bank have treated their certificates of deposit as exempt from the unclaimed property laws by automatically rolling then into new certificates. d. No knowledge of cases in this category in which banks have failed to classify certain property as unclaimed or dormant because of reasons cited in the query. e. We have no knowledge of other practices resorted to by banks or other financial institutions in which they seek to evade the intent or spirit of the unclaimed property laws or evade their respon- sibilities to the owners of property. If so, the matthr would have been reported to the State Ban ~ for appropriate action in the ratter and which would have been called to our attention. 7. Unclaimed rzomerty held by the federal~overnment: a. This state pursuant to U. S. Public Law 92-117 (8-13-71) "To provide for periodic pro rate distribution among the States of deposit of available amounts of unclaimed Postal Savings System deposits" received $2.~J2Q. belonging to Connecticut citizens which remained unclaimed as of the date of transfer to the state. ~ an additional amount of ~ was paid to this date representing the second pro rate distribution remaining unclaimed and belonging to Connecticut citizens. The total unpaid orinnipal balance reported by the U. S. Treasury Dept. as of 7-31-71 due Connecticut citizens amounted to $121,895. from which the first and second distributions mentioned above were made. No further distributions have been made to Connecticut since the last distribution~ PAGENO="0609" 605 HEI~SY a PACKER PAUL J. McDONOUGH TCECSUCER CatatD flf (~U1l11Drttfl~t DEPUTYTREASURER OFFICE OF THE TREASURER -13- 7. (coat) b. The resronse of the U. S. Treasury Dept. Fiscal Service was excellent in its distritation of the postal funds under Public law 92-117 (su~ra) which was a "windfall" for the states. C. Tunraicalla- cur state relied u~on our escheat laws as a legal for cur data in that such funds were due Connecticut citizens. The Treasury Dept. Fiscal Service said it would honor requests by the various states for such funds if due their citizens as shown by their records and would nay it in the forn of a liquida- ting dividend since this program was being abolished. We found the federal government very cooperative and made distribtitions in the manner set forth in its circular less expenses. Ca ~arch 2, 1976, the Dational Credit Union Administration forwarded a check for $6,586. re~esenting Conies fron nezibers' accounts in liquidated credit unions held in trust pursuant to the provisions of the Faderal Credit LTnion Act, 12 U. S.C. section 1751 et. seq. seccad check for $9,312.59 was received on Feb. 8, 1977 pursuant to the act. These funds represented unclaited funds due Connecticut citizens; neabers for these a~counts failed to respond to notices the ~ationa1 Credit Unicn Administration. This state naxeed P. A. 9!. (An Act concerning escheat of funds in the possession of federal agencies) at the 1969 session of the General A55eZb1-e effective lC-1-69 ur~der which no funds (other than the abeve) have been received by Connecticut to date. Enabling legislation should be passed by the Congress requiring the various federal agencies including the U. S. Judicial Dept. to escheat funds under their custody and control which remain eligible for escheat to the states to whom due determined by the citizen's last-knawn address. There appears to be a strong sentiment among the various states that federal income tax refunds remaining unclaimed after a period of 5 to 10 years should be paid or refunded to the states in trust for a nunber of years before the escheat becomes absolute. PAGENO="0610" `I I UI ~ ~ ~ S8~-.~ 3 3~ ~ .23 ..2 8 ~13 3t~38~ ~!P ~ o~ ~ ~ ~ ~ ~ ~ ~ ~33 ~ ~3238 838~2~2 333 883 322 0 z C) 0 PAGENO="0611" Barker James T Carbon Robert Herrick Herbert A Lticchesi Sandra & Smith James M Adu'rrs Gemce A"d~"o~" `ivie-~ Fc~:v_ Ti-erase C-:u:~ Jnie B * -nifflihs .Jchn Jr Kcrrru!ainen Frank A Lorry Lurra * LoueC~dy Partylo Lu-un Pellerin Yvonne Peterson Andrew Stephun David * Theriauht Jeffrey ,`/eckstrom Emma William David William John Chapnick Marion H Farcuhar Lilly Hunter Willie M Lewis Theodore B Jr Lucchesi William Obrien Ethel D Ray Elsie M Riley T ADDRESS Box 22 Pornfret Box 63 Woodsfock Hill Woodstock 6 Tiffany St Daniels~n Edward Anderson Rd Brooklyn 108 Pearl St Thompsonville I USURANCE - WIN DHAM COUNTi( ADDRESS 103 Milk St Willimunfic Box 37 RFD 1 Muosup 72 Em-n Avenue Willimanfic Eux 07 East Killinoly R F 0 2 Willimentic Church St Plaint ieid ii tam St Danielson - 112 Third St No Grosvenorda!e Penevillage East Killingly 25 Temple St Willimanfic Route 14 Canterbury Wauregan Rd Brooklyn 92 Quercus Ave Willimantic Rt 1 Box 94 Sterling 82 High St V/illirnanfic R F D 1 Danielson 79 t'.cunt St Willimantic 79 t.'.crnt St \`/illimantic Winduern Rd \`,`illimanfic Chestnut St Willimantic Providence St Putnam Railrcad Ave Plainfield Chestnut St Willimantic Main St Willimantic Main St Danielson S Walnut Ave Willimantic R F D 2 Willimanfic 29 Pennywood La Willimantic R F D Killingly R F D 2 Willimanfic R F D 2 Willimantic CORPORATIONS -WINDHAM COUNTY ADDRE~S 30 Gilman Putnam Courtlands Pomfret Ctr 163A Foster Dr Willimantic 363 C Roanoak Ave Willimantic Church St Brooklyn P0 Bx 117 Pomfret FOB 647 Danielson Gibson Hill Rd Ster!ing AMOUNT 66.33 66.00 33.64 93.45 130.15 AMOUNT 78.78 35.67 43.00 48.00 42.90 81.00 25.00 28.25 159.13 34.95 29.80 148.27 124.20 30.08 63.15 152.00 65.00 -65.00 35.33 36.34 26.17 76.05 36.71 46.27 39.12 80.50 37.60 * 78.85 68.25 28.30 30.50 AMOUNT 30.00 28.80 329.00 157.50 25.00 29.25 75.00 41.07 710 60, / S _________ Legal NotIce Cnranicle CAPTION "NOTICE OF NAMES OF PERSONS APPEARING TOOWN ABANDONED PROPERTY" In compliance vuith Public Act No. 540 11961) and amendments thereto, the following unclaimed property has been presumed abandoned and reported as such to the Honorable Henry E. Parker, TREASURER OF STATE OF CONNECTICUT, and consists of inactive bank accounts, unclaimed insurance funds and other unclaimed properly such as cash dividends, unpaid wages and mrc~a~mu-d deposits due peroons by various governmental departments or ANY PERSON pussessing an interest in the following listed funds may file a WRITTEN CLAI',\ with the "TREASURER, STATE OF CONNECTICUT, 20 TRINITY STREET, HARTFORD, CONNECTICUT 05115", who will pay to the prcper perum-i or psrunns entitled thereto upcn establishment of claim to fhe the STATE TREASURER. NO PHONE INQUIRIES . ONLY v.niNyn claims to the above address. EANKS-WINDHA,~\COUNTY WINDRAN COUNTY Wilhionantic Chronicle 7-10-79 PAGENO="0612" 608 L~-~e1y -I- The}~egister, Tuesday, July10, 1979-17 T T~ A Torrington Litolifield ii.[lj i-I Registei~ County "NOTICEOFNAMESOFPERSONS APPEARINGTO OWNABANDONEDPROPERTY" In compliance with Public Act #540 (1961) ansI amendments thereto, the following unclaimed property has been pie- sumed abandoned and reported as such to the Honorable Henry E. Packer, TREASURER OF STATE OF CONNEC- TICUT, am0 consists of inactive bank accounts, unclaimed insurance funds and other unclaimed properly such as cash dividends, unpaid wages and unclaimed deposits due per- sonsby various governmentaldepartmentsor agencies. ANY PERSON posse~sing an interest in the following listed funds may file a WRITTEN CLAIM with the "TREASURER, STATE OF CONNECTICUT, 20 TRINITY STREET, HARTFORD, CONNECTICUT 06115", who will pay to the proper person or persons entitled thereto upon establishment of claim to the satisfaction of the STATE TREASURER. NO PHONE INQUIRIES. ONLY written claimstothe above address. BANKS -LITCHFIELD COUNTY NAME ADDRESS AMOUNT CURTISLAWRENCEA EASTMA1NSTPLYMOUTII 63.01 MANICCLOANGEL 2160T000INGFORDWSTTORR 674.53 MEANEYTHOMAS 72WHEELcRST9VINSTcD 03.23 REICHENBERG KATHY 25WILLOWSTTORRINGTON 100.91 FIELIHANRUTH 11OMEADOWSTWINSTED 23.70 RUSSELLROBERT FALLMTLAKETERRYVILLE 234.35 SHORTFREDERICT RFD2HAROVINTON 15.7) WAGGLYDIA 1O7PINESTGARDNERMA 25.10 INSURANCE -LITCHFIELD COUNTY NAME ADDRESS AMOUNT BALLKATIE SALISBURYSTTORRINGTON 60.60 BRAMMER OLIVE 281WLAKEAVEWINSTED 20.70 BRUNOA 27ELMSTNEWMILFORD 25.00 BURNSGERARD PAPERMILLRDWOODBURY 109.72 CHALLIESROBERTNJR 1NWALNUTSTTHOMASTON 32.00 COOKGEORGE 44FIELDSTTORRINGTON 01.31 DAVIESORUCE 2ELMHURSTSTNEWHARTFORD41.33 GALLOOVSLANELITCHFIELD 72.37 HILLWILLIAM ~~220E?OISTAIL~~SI cci 40.11 P HOFFMANJOHN (N ELMST TORRINGTON 30.30 HOIVARDJACQUELINE IIARDHILLRDBETHLEHEM 100.40 KENTJOHN BOARDMANRDNEWMILFOLRD 42.09 "0s590K0V BOGUERDHAR001NTON 40.00 1167.2 14CHESTNUTSTWINSTEP 00.05. LADGLEALBERT 505IONSONA01I'IUOKINOIluN 23.35 McCORMIcEELEZ TWINLAKESRDSALISBURY 50.60 MORGAN GB 47 W005BURYRD WATERTOWN 113.60 OCONNELLCATHERINE 42WALNUTTERRYVILLE 35.12 OLSZANSKILAWRENCER NMAINSTWINSTED 39.17 PERRINEELIZABETH 64WOODSTWOODBURY 36.70 EAYDENBOWFRED 671MAINSTTORRINGTON ` 190.07 P,UZJAMES MARYALLRDNEWMILFORD 30.00 SIMONARTHUR I0MAINSTTORRINGTON 21.25 STOECKELRB RAILROADSTNORFOLE . 72.00 SOVANNEYLINCMERCINC 1299EMAINSTTORRINGTON 32a.o3 WALDRON EUNIcE . MIDDLESTNEWMILFORD - 45.00 WALSTONGEORGE WESTMORRISRDBANTAM 33.04 WHEELERAGNES OAEVILLE 31.71 CORPORATIONS-LITCHFIELDCQUNTY NAME AD~I5RESS AMOUNT BEITINI ERNEST BOBLEWN BRAY JACK CALABRESEMARIA CONSIDINEMATHEWJ CUSTISSYLVIAS DANAHERTI0OMASH' EGMANCHESTERTrOsIee EJKELLYCO FLAHERTYFW GIAMPAOLOJULIA GRATWICKMITCHELL HESSELBEATRICE H7JBBARDELLEN F KORPALSKIADAM L.~,PLANTEHAZELE LEWISCI,AIRE MANCHESTERELBERTG McDONALD ETHELM NELSON C POTTERRUTHE G PREISMARION - F3ICKMANMORRISM ROCK SALES CO SHURICKEDWARD SLATER ROBERT SNYDER CHARLES STE WART H 46EFIAINSTTORRINGTON 60.93 MAINE&BANKNEWMILFORD 55.90 RR3SECONDHILLNEW5ILFD 33.23 28EARLOAKVILLE 112.01 23MAINSTTORRINGTON 239.59 RT6WOODBURY 150.25 445PROSPECTSTTORRLNGTON 25.00 356MAINWINSTED 53.66 POB237TORRINGTON 119.70 26ALVORDSTTORRINGTON 31.59 GOODHOUSELITCHFIELD 40.42 WASHINGTON WOODBURY 37.57 NETTLETONHOLLOWWASHGTN 57.00 35OMAINSTWINSTED 35.00 WOODBURYRT1OWASHINGTON27O.32 RFD 1 BXOONEWHARTFORD 27.37 SCOTCRDTERRYVILLE 37.67 35(MAINST%VINSTED 32.C0 BOX4O3GEORGETOWN 57.00 273MAINTORRINGTON 30.30 SELLECKHILLSALISBURY 720.00 RH 1BOXI24CORNWALLBR 117.00 O3McGUINNESSTORRINGTON 111.92 164FENNRDWINSTED 44.04 NORTHROPSTBRIDGEWATER 28.44 OREHILLKENT 20.30 117PARKLAN5IILFORD 38.35 RFD2WINSTED 107.93 RFD3WESTHILLWINSTED 32.13 ROSEHAVENLITCHFIELD 04.70 MOTOR SALES NM RD ZN MLFRD 28.92 VAI,AITIS KIM S WATSON VIRGINIA \VES CON CORP PAGENO="0613" PAGENO="0614" C // PAGENO="0615" ~1 PAGENO="0616" p ~ ~ ~* ~ ~ ~ ~pp-~r~ ~ .~ ~ ~ ~ PAGENO="0617" r 9' `` 14 41 41 ;49 1 1 1 14 ~ I a I 4 ~ 4~ 1 2 2 22 -- -- 24 2 2 2 ~ I 2 4 2 ~` ; ~jI~j~3~ 22 ~ I ~ ~ ~ 2 j ~j II - I -- -- PAGENO="0618" 3 3 ~ ~ ~ 2 r ~ : ~ PAGENO="0619" 615 DELAWARE ~ STATE c~ DELA~.'APE OEP~ 5T'.E"T OF F;\A~E DIVISION OF REVENUE 820N F~ENST~Err FL .\~LTO\. DELAw~r 1980L November 6, 1979 Commerce, Consumer & Monetary S~bcornimttee B-37T Rayburn Office Building 1-louse of Representatives Washington, D. C. 20515 Re: Questionnaire on Unclaimed and Escheated Property of Financial Institutions Dear Cong~ssman Rothenthal: Your letter and questionnaire dated October 3, 1979, addressed to the Legislative Reference Bureau, has j~ist recently been received by the Office of the State Escheator. Under Delaware law the Secretary of the Department of Finance is designated as the State Escheator, and the Division of Revenue, Department of Finance, administers the Escheat In view of your request for an early reply, we are returning herewith the questionnaire partially completed, with a view toward later submitting a supplemental reply with further detailed responses wherever possible. Very truly yours, For the State Escheator ~L1~ R ert R. Sn-i~ers Deputy Director mrs /enclo sure PAGENO="0620" 616 Unclaimed Property Questionnaire (Please send response to Commerce, Consumer, and Monetary Affairs Subcommittee; B-377 Rayburn Building; Washington, D.C. 20515.) 1. Unclaimed property statute, regulations, and administrative, program: a. How does the state unclaimed property or abandoned property statute apply to banks and other financial institutions (including trust com- panies, ~ loan associations, securities brokerage firms, mutual funds, credit unions,ä~idJnsurance q,gg~p,~j~ies)? _______ - E~T~ ~ ~ In particular, please specify: / ) ~ (i) the types of property and institutions covered (ii) any types of property or institutions specifically ~ (iii) the holding period which must elapse before the property is reported to the state ~~-s ~ - ~ ~ ~ ~ `7 ~ (iv) whether the role of the state is purely custodial, or whether the state assumes ownership of the property -- Cv) whether the state pays interest on funds under its custody (vi) any other important characteristics of the law as it applies to financial institutions. b. What administrative rules or regulations of your office or agency apply to the handling and reporting of unclaimed property to the state by banks and other financial institutions? Please attach a copy of any such admin- istrative rules. ~ ~ ~ .`j?e~-~l~ c. Are there any provisions of your state's other banking, insurance, or general commerce laws or regulations that impose certain requirements on how banks and other financial institutions must handle dormant de- posit accounts or other unclaimed property, especially requirements for the protection of the rights of the owners of the property?.4~ (This and the previous question would cover limitations on service charges, requirements of prior notice to owners, requirements con- cerning efforts to locate owners, for example.) d. What is the practice in your state as regards advertising the names of owners of unclaimed property being turned over to the state? In parti- cul ar: az~ ja.--.-~j'. ~ .`~---`- ~ ~-. (i) In which newspapers and in which other media are the names advertised? (ii) Who places the advertisements, the state or the individual institutions holding the property? ~ i.-',-t 7i;~I;*::-,; (iii) Are addresses given in the advertisements, or only names? i~"~-..~-' (iv) Do the advertisements cover all amounts of unclaimed property, or only property whose value exceeds a certain minimum? If there is a minimum, what is th~Ejnujn? i~-~-~- "~-; ~ (v) Do the advertisements include only the owners of unclaimed property that is being reported for the first time, or do they include also owners of property still unclaimed from reports of on~,or more earl i er years? /~ -J ~ ~ ~ r'~ ~ ~ IF AVAILABLE, PLEASE SUPPLY A COPY OF YOUR STATE'S MOST RECENT ADVERTISING NOTICE. e. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance with state requirements) to locate the owners of unclaimed bank accounts and other financial property? j `1. Are there any state limitations on the actions of `bounty hunters' who seek out the advertised owners of unclaimed property in the hope of getting a share of the property? ~ g. lIhat is the definition of `abandoned or unclaimed in your state? In financial institutions, is property presumed abandoned when there has been no `contact' for a certain number of years?1~-'How is contact' de- fined? If mail addressed to the owner is not being returned by the Post Office as undeliverable, can the bank or other institution presume that there is still contact' and that the property is not abandoned? PAGENO="0621" 617 h. Does your office (or some other state office acting in cooperation with your office) conduct field audits or on-site compliance investigations devoted exclusively to checking compliance with the unclaimed property laws? If so ,4~'1~ (i) How many such field audits or investigations are conducted each year? (ii) How large is the staff assigned tà this function, and what is the budget available for this work? (iii) What types of institutions have been given field audits within the past three years? (iv) what types of institutions, if any, have not been checked for corn- pliarce in this way because of lack of authority to conduct field exa'-inatioms or because of some other legal impediment? Please eiabcrate. (v) Wnat ite-~s are checked in such a field audit? (A copy of your audit prcmra~ or instructions would be satisfactory.) (vi) If the field audits are performed by another state office or agency, which office or agency is that? i. What is your states budget for adnini~tration of the unclaimed property prornrarn? Ho': many full-time (or full-time-equivalent) persons are assigned to the unclaimed property program? - _ --`~~ ~ -~-~ - *1 - ~ ~ 5 r~zZ~ ~ - ~ ~J ~ ~ PAGENO="0622" 618 2. Amounts of unclaimed property reported and delivered to owners: [WHERE EXACT FIGURES ARE NOT AVAILABLE, PLEASE PROVIDE AN ESTIMATE IF AT ALL POSSIBLE. ESTIMATED FIGURES MAY BE MARKED WITH "e". FOR YOUR CONVENIENCE, A BLANK FORM IS ATTACHED ON WHICH THE REQUESTED INFORMATION CAN BE ENTERED.] For each of the most recent three years for which information i~ available, please report, by type of institution: a. The numbers of institutions filing unclaimed property reports in wh)Ph~ ~ some unclaimed property was reported. __ i;i~:p1 ~ *.~ ~ c. The dollar amounts of unclaimed property remitted to the state. d. The numbers of individual unclaimed property accounts reported with values in excess of $500. (Even rough indications of numbers, such as `none", "less than five", "more than 20", etc., would be helpful if exact figures cannot be given.) The types of institutions to be reported separately above are (i) banks (including savings banks and trust companie~), (ii) securities brokerage firms, (iii) insurance companies, and (iv)Tall other firms~ (If infor- mation is available separately for savings and loan associations, credit unions, mutual funds, and nonfinancial corporations, that would be of interest.) In addition, for each of the most recent three years, please report the totals of the following (a breakdown by types of institution is not re- quested here): e. The number of names or unclaimed accounts advertised by the state or (if relevant) by the holders. f. The dollar amounts of unclaimed property reported to your office that has subsequently been returned to the owners, either by the holders or by the state. g. The delivery percentage, showing what percentage of reported funds was later returned to the owners. h. The net dollar amounts of unclaimed property remitted to the state in that year, minus claims paid by the state in that year. ~ ~ ~ - -~ r `)`~7T ~ / ~ 77~ 4'q a'/~ .c7~-. PAGENO="0623" 619 FLORIDA QUESTIONNAIRE RESPONSE OFI IC L OF (OMPI1ROLI LIR - ~ ~ 1)EI'.\RTMENT OF BANKING AN]) FINANCE STATE OF FLORIDA TALLAHASSEE 323 November 1, 1979 EeCjamin S. Rosenthal ci the Thited States cc Rerrese~tattves Rouse Offoce Bldg., ~m. B-377 asocnctco, D. C. 20515 tsar Congressman Rosenthal: Your letter of October 3, l97~ addressed to Mr. Harry B. Carson has been received by our office and he has completed your questionnaire. This office is concerned with~the points raised in the cuestionmaire as they deal with the proper handling and accounting uoc.~ai.mec umts. Fe trust that the enclosed completed questionnaire is ad- equate. If not, or additional inf~rmation or clarification is meeded, then please feel free to contact this office. Sincerely, / A. LEWIS GAL: cbm CC: Harry B. Carson 67-'4'40 0 - 81 - `40 PAGENO="0624" 620 UNCLAIMED PROPERTY QUESTIONNAIRE RESPONSE STATE OF FLORIDA 1. a. The Florida Disposition of Unclaimed Property Law (Chapter 717, Florida Statutes) applies to banks and other financial institutions (including trust companies, savings and loan associations, securities brokerage firms, mutual funds, credit unions, and insurance companies) in the reporting of abandoned/unclaimed property held in a trust or fiduciary capacity to this office. (i) The types of property cover cash items, safe deposit boxes and securities such as stocks and bonds. The institutions covered are those listed above plus many other types of entities. Some of these other reporting sources would include property held by state courts, utility companies, public officers, and agencies. There is also a catch-all provision within the law that provides for the reporting of all tangible personal property held by any holder of such property to this office. In summary, basi- cally every type of business, financial or govern- mental entity holding unclaimed/abandoned property for a person with the last known address in this state is required to report to this office at the prescribed period. (ii) There are no specific types of property or insti- tutions specifically excluded within Chapter 717, Florida Statutes. The specific exclusions or dis- position of unclaimed funds such as unclaimed es- tates are provided within other chapters of Florida Law. (iii) The holding or prescribed dormancy period before unclaimed property is reported to the state is seven (7) years for most of the holders of such property. The exceptions are as follows: Banks 10 yrs. (7 yrs. for safe deposit boxes) Savings & Loan Association -- 10 yrs. Credit Unions 10 yrs. Travelers Checks 15 yrs. (iv) The role of the state is purely custodial as there is no statute of limitations in making a claim by a rightful claimant. Cv) The state does not pay interest on funds received under its custody (vi) No other important characteristics of the law as it applies to financial institutions exists. b. Rules of the Department of Banking and Finance for disposing of unclaimed property exist and a pamphlet copy is attached (Exhibit ~l) per your request. c. Rule 3D-lO.22 within the State Credit Union Law provides that dormant/inactive share accounts are segregated and interest/ dividends on these accounts should be paid in the same manner as active accounts. This consumer protection is not provided under the Federal Credit Union Act. PAGENO="0625" 621 d. (i) & (ii) This office causes a legal notice to be pub- lished in a newspaper of general circulation of the county of the last known address within this state. If the address of the owner is known then the county in which the reporting source is located will be used. (iii) & (iv) Addresses are included, when known, in the aduertisements and all advertisements must meet the 525.00 minimum, value before such name is advestised. (u) Advertisements include only the owners of unclaimed prorertv that is being reported for the first time. other effort other than the legal notice and mail re- cuirements are made by this office on a regular basis. This office has publicized our legal notice of Apparent ~ners of Unclaimed Property in order to focus attention to the notice and to return a greeted percentage to the right- ful owners. f. There are no state limitations on the actions of "bounty hunters" uho seek out the advertised owners of unclaimed procertu an the hope of getting a share of the property. The usual fee contracted by such persons is 50%. 0. ~`-2O.Cl states "Dormant/inactive accounts" means the :~as not evidenced an interest in the property for the arplicable prescribed period. The interest should be a rositive verification with a record of same. A mailing of a nerative verification does not constitute activity by tke owner. Activatv must be owne~ generated. h. (a) thru (vi) This office uses other governmental agencies to conduct field audits in drder to assure compliance with Chapter 717, Florida Statutes. The administration of the Abandoned Property program is vested within the DePartment of Banking and Finance and therefore re- ceives good cooperation from State Banking and Credit ynion Examiners. Specific examples of cooperation are as follous: State Credit Unions - We have state credit union examiners complete a short foam which is a cur- sor~: review for com~liance with Chapter 717, Florida Statutes when they are completing their routine examination. A copy of our form is enclosed. 2. Federal Credit Unions H We have federal credit ii~ii~n examiners complete a short form which is a cursory review for compliance with Chapter 717, Florida Statutes when they are completing their routine examination. A copy of our form is en- closed. 3. State Chartered Banks We have state bank examiners complete a short form which is a cursory review for compliance with Cha~ter 717, Florida Statutes when they are completing their routine examination. A copy of our form is enclosed. National Banks - We would like to see Federal Bank examaners complete a form for us similar to our State Banking Examination form. 5. Federal Savings & LoanAssociations - We are in need of assistance by the appropriate regulatory agency to insure compliance. 6. Insurance Companies - We have state insurance ex- aminers complete a short form which is a cursory review for compliance with Chapter 717, Florida Statutes when they are completing their routine examination. A copy of our form is enclosed. 7. State Savings & Loan Association - We are working on the establishment of an examination procedure in this area. The cost of administering the unclaimed property program for the Fiscal Year 1978-79 was less than $110,000.00. This PAGENO="0626" 622 figure includes two (2) full time positions. The program has been expanded to three (3) full time positions but the cost is not expected to exceed $125,000.00 for Fiscal Year 1979-80. 2. a. thru h. Information supplied on your form. 3. a. thru -c. The names of individual securities brokerage firms that filed unclaimed property reports showing positive amounts of unclaimed property are as follows: 1. Merrill Lynch, Pierce, Fenner & Smith, Inc. More than $100,000.00 reported and remitted with approximately 25 % of the owners unknown. 2. Bache Halsey Stuart Shields, Inc. More than $30,000.00 has been reported and re- ceived of which approximately 25% of the $30,000 .00 represents unknown owners. 3. Thomson & McKinnOn Auchincloss More than $5,000.00 has been reported and received of which all are known owners. 4. A. G. Edwards & Sons, Inc. More than $5,000.00 has been reported and received of which all are known owners. 4. a. (i) It is our opinion that national banks are in fair compliance with Chapter 717, Florida Statutes. This area could be improved with more communications between appropriate federal authorities and our office. We are in the process to develop better communications in this area. (ii) State banks are substantially in complete compliance with Chapter 717, Florida Statutes. A big factor for this compliance by state banks is that the State Banking Examiners and the Abandoned Property Program are located within the same office under the Depart- ment of Banking and Finance. (iii) Federal Savings & Loan Associations are in fair com- pliance with Chapter 717, Florida Statutes. Our office provides reporting forms and instructions on a regular basis which contributes to their compliance. (iv) State Savings & Loan Associations are substantially in complete compliance with Chapter 717, Florida Statutes. (v) Federal Credit Unions are substantially in complete compliance with Chapter 717, Florida Statutes. This office is receiving full cooperation from the Regional Director's office of the National Credit Union Administration in Atlanta, Georgia. (vi) State Credit Unions are substantially in complete compliance with Chapter 717, Florida Statutes. A big factor for this compliance by the State Credit Unions is that the State Credit Union Examiners and Abandoned Property Program are located within the same office under the Department of Banking and Finance. (vii) & (viii) Securities brokerage and mutual fund firms show poor or no compliance to the law. This fact has been supported by recent examinations of such holders of unclaimed property. (ix) Insurance companies show fair compliance as they are a fairly regulated industry. We also have the assistance of state insurance examiners to insure compliance. PAGENO="0627" 623 3a urclai-ed orcpert' reported and delivered to owners: a. _-:s'-s c cstc :ut:orcs retortion: 211 rcstituticns 1977 1700 500 4 100 :~ 096 "e" e Brokers Insurance ccc-panies All others of orooertv reoorted: iintitu~s or's crO' ens Insurance cc-conies * 211 others of orooertv reitted: C. 1976 1200 "e" 300 "e" 4"e" 75"e' 821 "e" 2,072,045.56 74,341.50 580,975.33 44,604.99 In excess of 2,000 `e"~ In excess of 1,700 "e" 100 `e" 200 `e" I institutions .sJrs:e cc -f cccv accounts 1978 2200 "e" 900 "e" 10 "e" 150 "e" 1140 "e" 11,002,813.92 1,731,491.23 6,989,511.93 1,038,894.74 4,000 "e" 3,000 "e" 450 "e" 400 "e" 200 "e" 15,000 "e" $400,000.00 "e" 40% "e" 9,795,141.50 184,188.12 2,084,674.40 105,128.7 3,000 "e' 2,500 "e' 150 `e 300 "e' 150 "e' 12,000 "e' $250,000."e' 40% "e' excess on ~11 institutions or'c':ers l ot.ers 100 "e' e. . tunber of nanes advertised: 8,000 "e" f. Dollar amounts returned to owners~175,000.P0 "e" ~. Delivery percentaqe: h. 2-ounts remitted minus clams + = Ictu reafilv available 40% "~" 4 PAGENO="0628" 624 (x) Nonfinancial corporations are substantially in com- pliance with Chapter 717, Florida Statutes as this is an entity that usually does not have items to report. b. Field examinations have altered the amounts reported to this office. Some of the companies or financial entities audited and the results thereof are as follows: COMPANIES AUDITED AMOUNT 1. RCA $ 39.05 2. General Electric - Cash 20,797.60 General Electric - Stock 5,765.17 3. international Telephone & Telegraph - Cash 561.78 international Telephone & Telegraph - Stock 1,889.69 4. Metropolitan Life insurance Company 5,511.72 5. Exxon - Cash 1,658.75 Exxon - Stock 4,000.00 6. Merrill Lynch, Pierce, Fenner & Smith, Inc. 45,667.00 7. Bache Halsey Stuart Shields, Inc. - Cash 4,517.89 Bache Halsey Stuart Shields, Inc. - Stock 10,651.15 8. Hollywood Federal Savings & Loan Assoc. 45.708.89 9. The First National Bank of Tampa 42,450.62 10. Sun Bank & Trust Company - St. Petersburg 155,610.97 TOTAL $344,830.28 c. A rough estimate (based on experience and historical data) of unclaimed property that is not being reported but would be reported if there were substantially complete compliance with the letter and intent of the law is as follows: (i) banks and other depository institutions should be reporting an additional $1 to $5 million plus a year (ii) brokerage firms should be reporting an additional $500,000.00 to $1 million plus a year (iii) insurance companies should be reporting an additional $500,000.00 to $1 million plus a year (iv) nonfinancial corporations should be reporting ad- ditional $500,000.00 to $1 million plus a year. 5. a. thru k. Service charges by financial institutions are a problem in the State of Florida due to the absence of clear regulation. There has been an isolated case of a national bank service charging cashier checks without legal authority. Most ser- vice charge policies by financial institutions appear to be nominal and a fair charge. We have noted some financial institutions not reporting on a timely basis due to a change from a ledger system to computer or from one computer system to another system and not bringing forward the date of last customer contact. The date used is the conversion date thus further delaying the reporting date to the state and thus causing further illegal service charges. 5 PAGENO="0629" 625 6. a. There have been cases in which banks have stopped paying in- terest or. do~rant savings accouxfts but this fact was not docunented because our lack of legal authority to correct b. There have been isolated cases in which dormant accounts of substantial size (several hundred dollars or more) were turned over by banks or other savingd institutions to the state even though the owner of the account was living at the same address that is on record with the financial institution. These are isolated and exceptional cases. The problem exists be- cause financial institutions are not making a diligent effort to locate the owners of unclaimed property prior to reporting the account to thas office. c. We have not discovered any financial institution treating their certificate of deposits as exempt from the unclaimed property law by automatically rolling them over into new certificates whenever they mature. 6. the only oajor item noted in which banks or other despository institutions have failed to classify certain property as unclaimed or dormant is unidentified deposits. This is when a financial institution accepts a deposit but cannot locate the correct account to credit the deposit. The financial in- stitution does not have a right to put said funds into other income as it should be properly recorded as liability and reported to the state at the appropriate time. e. WCWE WOTED. 6. WDWE WOTED. a. thou c. this offace has received over $280,000.00 in unclaimed oostal accounts throuch the Rebate Act, Public Law 92-117. this has been our only success on receiving unclaimed funds from the W. S. tovernment. We had hoped that with the im- oenentation of that law it would clearly establish our richt to other similar unclaimed funds held by the U. S. government in the names of Florida residents. . In addition to Charter 717, Florida Statutes (the custodial law) we have chapter 716, Florida Statutes, `Escheats Foreiture, Etc. to handle unclaimed funds from the U. S. Treasury. Our last attempt to gain an understanding on our right to claim un- claio.ed funds at the federal level brought about the September 21, 1977 response from Pamela L. Food, Attorney, Fiscal Law Section of the Department of Treasury. (Exhibit ~2) 6. a. Ci) We strongly recommend that the examiners of Federal Saviucs & Loan Associations complete examination forms similar to the one currently in use by state banking examiners. (Exhibit ~3) This is simply a cursory review which is accomplished during their routine examination. This examination form only de- tects non-compliance and it does not require an in-depth audit with worksheets. (ii) A clear and equitable service charge policy should be set-up for all financial institutions. b. (i) Federal Legislation should be considered by Congress that would accomplish the following: 1. Return to the states unclaimed funds held at the federal level to the respective states. The states would then be required to cause a legal notice to be published and a portion of the funds would revert to the rightful owners. The thrust of such federal legislation would cause more money getting back to rightful owners or their legal heirs. PAGENO="0630" 626 ATTACHMENTS: Exhibit ~1 - Pamphlet copy of the Florida Disposition of Unclaimed Property Law along with the Rules and Regulations Exhibit *2 - Treasury letter dated September 21, 1977 Exhibit *3 - Bank examination forms PAGENO="0631" 627 UNCLAIMED PROPERTY LAW AND RULES - EXHIBIT 1 FLORIDA DISPOSITION OF UNCLAIMED PROPERTy LAW AS AMENDED OCTOBER 1, 1977 CHAPTER 717, FLORIDA, STATUTES DEPARTMENT OF BANKING & FINANCE REVISED - JUNE, 1978 GERALD A. LEWIS Comptroller of Florida PAGENO="0632" 628 OFFICE OF COMPTROLLER THE DEPARTMENT OF BANKING AND FINANCE TALLAHASSEE GERALD A. LEWIS COMPTROLLER James H. Allen, Jr. Director, Division of Finance Harry B. Carson, Administrator The Florida Disposition of Unclaimed Property Law 1401 State Capitol Building Tallahassee, Florida 32304 Phone: (904) 487-2583 or 488-0545 Ronald L. Lovell, Area Supervisor West Palm Beach Field Office 2453 North Military Trail 33401 Phone (305) 686-8640 David D. Myers, Area Supervisor Orlando Field Office State Office Bldg., Suite 519 400 West Robinson Street 32801 Phone (305) 423-6115 Larry Padgett, Area Supervisor Pensacola Field Office 160 Government Center, Suite 701 32501 Phone (904) 436-8520 Arthur Sheppard, Area Supervisor Miami Field Office 401 N.W. 2nd Avenue, Suite 870 33128 Phone (305) 377-5213 Jose Torres, Area Supervisor Tampa Field Office Executive Square Office Park 402 Reo Street, Suite 113 & 118 33609 Phone (813) 272-2565 Albert Winter, Area Supervisor Jacksonville Field Office 103 Century Twenty One Drive Suite 113 32216 Phone (904) 724-3952 Published By Gerald A. Lewis Comptroller of Florida The Capitol Tallahassee, Florida 32304 PAGENO="0633" 717.01 Short title. 717.02 Definitions and use of terms. 717.03 Property held by banking or financial or- ganizations. 717.04 Unclaimed funds held by insurance corpo- rations. 717.05 Deposits and refunds held by utilities. 717.0'S Undistributed dividends, distribution of business associations, stock or certificate of c's-net-ship. 717.07 Property of business associations and banking or financial organizations held in course of dissolution. 717.05 Property held by fiduciaries. 717.03 Property held by state courts and public officers and agencies. 717.10 Miscellaneous personal property held for another person. 717.11 Reciprocity for property presumed aban- doned or esoheated under the laws of another state. 717.12 Report of abandoned property. 717.13 Notice and publication of lists of aban- doned pro~rty. 717.131 Petition for administrative declaration of abandoned property. 717.14 Payments or delivery of abandoned prop- erty. 717.15 Relief from liability by payment or deliv- ery. 717.16 Income accruing after payment or deliv- ery. 717.17 Periods of limitation not a bar. 717.18 Sale of abandoned property. 717.19 Deposit of funds. 717.195 Administration of abandoned property. 717.23 Claim for abandoned property paid or de- livered. 717.21 Determination of claims. 717.22 Judicial action upon determination. 717.23 Election to take payment or delivery. 717.24 Examination of records. 717.25 Proceeding to compel delivery of aban- doned property. 717.27 Penalties. 717.28 Rules and regulations. 717.29 Effect of laws of other states. 717.30 Repeal. 717.01 Short title-This act may be cited as the "Florida Disposition of Unclaimed Property Act." c: ~:-~ soot 717.02 Definitions and use of terms-As used in this act, unless the context otherwise requires: `(3) "Banking organization" means any state or national bank, trust company, savings bank, indus- trial bank, land bank, or safe deposit company, whether organized or operated under state or federal law. (2) "Business association" means any corpora- tion, joint stock company, business trust, partner- ship, or any association for business purposes of two or more individuals. 1(3) "Financial organization" means any savings andloan association, building and loan association, credit union, cooperative bank, or investment com- pan,', engaged in business in this state, whether or- ganized or operated under state or federal law. (4) "Holder" means any person in possession of property subject to this act belonging to another, or who is trustee in case of a trust, or indebted to anoth- er on an obligation subject to this act. (5) "Insurance corporation" means any associa- tion or corporation transacting within this state the business of insurance on the lives ofpersons or insur- ance appertaining thereto, including, but not by way of limitation, endowments and annuities; disability, accident and health insurance; and property, casual. ty and surety insurance; as all said terms are defined in chapter 624, part V. (6) "Owner" means a depositor, or a person enti- tled to receive the funds as reflected on the records of the bank or financial organization, in case of a deposit, a beneficiary in case of a trust, a creditor, claimant, or payee in case of other choses in action, or any person having a legal or equitable interest in práperty subject to this act, or his legal representa- tive. (7) "Person" means any individual, business as- sociation, government or political subdivision, public corporation, public authority, estate, trust, two or more persons having a joint or common interest, or any other legal or commercial entity. (8) "Utility" means any person who owns or op- erates within this state, for public use, any plant, equipment, property, franchise, or license for the transmission of communications, for the production, storage, transmission, sale, delivery or furnishing of electricity, water, steam, or gas, or for the transpor- ta~ion of persons or property. (9) "Department" means the Department of Banking and Finance. H1ztor~-.--o. 1, ch. 61.10.. u. 12. 35, ch. 69-106; e. 279, ch. 71.377; s. 1, ch. 77.2.36 `Note-Al amended, effective October 1, 1977. `717.03 Property held by banking or financial organizations.-The following property held or ow- ing by a banking or financial organization is pre- sumed abandoned: (1) Any demand, savings, or matured time depos- it~ made in this state with a banking organization, together with any interest or dividends thereon, ex- cluding any charges that may lawfully be withheld, unless the owner has, within 10 years: (a) Increased or decreased the amount of the de- posit, or presented the passbook or other similar evi- dence of the deposit for the crediting of interest; (b) Corresponded in writing with the banking or- ganization concerning the deposit; or (C) Otherwise indicated an interest in the deposit as evidenced by a memorandum on file with the banking organization. (2) Any funds paid in this state toward the pur- Ch.717 629 DISPOSITION OF UNCLAIMED PROPERTY CHAPTER 717 DISPOSITION OF UNCLAIMED PROPERTY Ch. 717 -1- PAGENO="0634" 630 DISPOSITION OF UNCLAIMED PROPERTY Ch. 717 chase of shares or other interest in a financial organ- ization, or any deposit made therewith in this state, and any interest or dividends thereon, excluding any charges that may lawfully be withheld, unless the owner has, within 10 years: (a) Increased or decreased the amount of the funds or deposit, or presented an appropriate record for the crediting of interest or dividends; (b) Corresponded in writing with the financial organization concerning the funds, or deposit; or (c) Otherwise indicated an interest in the fund or deposit as evidenced by a memorandum on file with the financial organization. (3) Any sum payable on checks certified in this state or on written instruments issued in this state on which a banking or fmancial organization is di- rectly liable, including by way of illustration but not of limitation, certificates of deposit, drafts, and trav- eler's checks, that, with the exception of traveler's checks, has been outstanding for more than 10 years from the date it was payable, or from the date of its issuance if payable on demand, or, in the case of traveler's checks, that has been outstanding for more than 15 years from the date of issuance, unless the owner has within 10 years, or within 15 years in the case oftraveler's checks, corresponded in writing with the banking or financial organization concern- ing it, or otherwise indicated an interest as evi- denced by a memorandum on file with the banking or fmancial organization. (4) Any funds or other personal property, tangi- ble or intangible, removed from a safe-deposit box, or agency or collateral deposit box, in this state on which the lease or rental period has expired due to nonpayment of rental charges or other reason, or any surplus amounts arising from the sale thereof pursuant to law, that have been unclaimed by the owner for more than 7 years from the date on which the lease or rental period expired. Hlctoey.-e. 2. oh. 61-12. L 2, oh. 77-236. `Note-Ac amended, effective October 1, 1977. 717.04 Unclaimed funds held by insurance corporations.- (1) LIFE INSURANCE.- (a) Unclaimed funds, as defined in this subsec- tion, held and owing by a life insurance corporation shall be presumed abandoned if the last known ad- dress, according to the records of the corporation, of the person entitled to the funds is within this state. If a person other than the insured or annuitant is entitled to the funds and no address of such person is known to the corporation or if it is not definite and certain from the records of the corporation what per- son is entitled to the funds, it is presumed that the last known address of the person entitled, to the funds is the same as the last known address of the insured or annuitant accoe-rling to the records of the corporation. `(b) "Unclaimed funds," as used in subsection (1), means all moneys held and owing by any life insur- ance corporation, unclaimed and unpaid for more than 7 years after the moneys become due and paya- ble, as established from the records of the corpora- tion, under any life or endowment insurance policy or annuity contract which has matured or terminat- ed. A life insurance policy not matured by actual proof of the death of the insured is deemed to be matured, and the proceeds thereof are deemed to be due and payable, if such policy was in force when the insured attained the limiting age under the mortali- ty table on which the reserve is based, unless the person appearing entitled thereto has within the preceding 7 years: 1. Assigned, readjusted, or paid premiums on the policy, or subjected the policy to loan; or 2. Corresponded in writing with the life insur- ance corporation concerning the policy. (2) INSURANCE OTHER THAN LIFE INSUR- ANCE.- (a) Unclaimed funds as defined in subsection (1), held and owing by a fire, casualty or surety insur- ance corporation shallbe presumed abandoned if the last known address according to the records of the corporation, of the person entitled to the funds is within this state. If a person other than the insured, the principal, or the claimant is entitled to the funds and no address of such person is known to the corpo- ration or if it is not definite and certain from the records of the corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known address of the insured, the principal, or the claimant according to the records of the corpora- tion. `(b) "Unclaimed funds," as used in subsection (2), means all moneys held and owingby any fire, casual- ty, or surety insurance corporation, unclaimed and unpaid for more than 7 years after the moneys be- come due and payable, as established from the records of the corporation, either to an insured, a principal, or a claimant under any fire, casualty, or surety insurance policy or contract. (3) Moneys otherwise payable according to the records of the corporation are deemed due and paya- ble although the policy or contract has not been sur- rendered as required. Hlctcry.-e. 3, oh. 61-itt e. 3, ch. 77.236. `Note-Ac amended, effective October 1,1977. 1717.05 Deposite and refunds held by utilitica. -The following funds held or owing by any utility are presumed abandoned: (1) Any deposit made by a subscriber with a utili- ty to secure payment for, or any aum paid in advance for, utility services to be furnished in this state, less any lawful deductions, together with any interest thereon, that has remained unclaimed by the person appearing on the records of the utility entitled there- to for more than 7 years after the termination of the services for which the deposit or advance payment was made. (2) Any sum which a utility has been ordered to refund and which was received for utility services rendered in this state, together with any interest thereon, less any lawful deductions, that has re- mained unclaimed by the person appearing on the records of the utility entitled thereto for more than 7 years after the date it became payable, in accord- ance with the fmsl determination or order providing for the refund. (3) Any sum paid to a utility for a utility service, Ch. 717 -2-- PAGENO="0635" Ch. 717 which service has not, within 7 years of such pay- ment, been rendered. Hirtor~.-,. 4. nc. 61-10; s. 4. ch. 77.236. `Ncto.-.k, &`cecded. effe October 1. 1977. `717.06 Undistributed dividends, distribution of business associations, stock or certificate of ownership.- (1' Any dividend, profit, distribution, interest, pav77ent on principal, or other sum held or owing by a `ansinesa asaaciation for or to a shareholder, certifi- cate hrider, rten7ber, bondholder, or other security Cr a participating patron of a cooperative, has rot claimed it, or corresponded in writing with the business association concerning it, within 7 years after the date prescribed for payment or deliv- erv, is presumed abandoned if: `a) The records of the business association mdi- tate that the last known address of the apparent owner is in this state. (hi No address of the apparent owner appears on the records of the business association and: 1. The last known address of the apparent owner is in this state: or 2. The business association is domiciled in this state and has not previously paid the property to the state of'the las'. known address of the apparent own- (c) The last known address of the apparent own- er, as shown on the records of the holder, is in a state designated by regulation adopted by the department as a state that does not provide bylaw for the escheat cr ether disposition ofsuch property to the state, and the business association is domiciled in this state. (d) The last known address of the apparent own- er, as shown on the records of the business associa- tion, is in a foreign nation and the business associa- tion is domiciled in this state. (2) When any dividend, profit, distribution, in- terest, payment on principal, or other sum under subsection (1) is presumed abandoned, the intangible interest in the business association, as evidenced by the stock records or membership records of the asso- ciation, pursuant to which the sum in subsection (1) became owing to the owner, shall be presumed aban- doned at the same time the sum is presumed aban- doned. With respect to such interest, the business association shall be deemed the holder. (3) Any dividend or stock split or exchange, or any distribution held and owing to a person at the time the stock or other security to which it attaches is presumed abandoned, shall also be presumed abandoned as of the same time. a ~s. 6:-Ia,. 4. nh 77.230. erece October 1. 1077. `717.07 Property of business associations and banking or financial organizations held in course of dissolution.-All intangible personal property distributable in the course of a voluntary or involuntary dissolution of a corporation, business as- sociation, banking organization, credit union, or oth- er financial organization organized under the laws of, or created in, this state that is unclaimed by the Ch. 717 owner within 7 years after the date for final distribu- tion, is presumed abandoned. H1ztory.-~. 6. ch. 61-15;s. 4, ch. 77-236. `Note-As amended, affectice October 1, 1977. 1717.08 Property held by fiduciaries-All in- tangible personal property, and any income or incre- ment thereon, held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has, within 7 years after it becomes payable or distributable, increased or decreased the principal, accepted payment of principal or income, corresponded in writing concerning the property, or otherwise indicated an interest as evidenced by a memorandum on file with the fiduciary: (1) If the property is held by a banking organi.za- tión or a financial organization, or by a business association organized under the laws of, or created in, this state; (2) If it is held by a business association doing business in this state but not organized under the laws of, or created in, this state, and the records of the business association indicate that the last known address of the person entitled thereto is in this state; or (3) If it is held in this state by any other person. H1stoey.-~ 7, ch. 61-10; 4. ch. 77-236. `Note~-A, occecded, effec'.ice October 1, 1977. cC-,. 733.816 Diopctiticc of coct,imed funds held by pee-scent ,-eprec,,tu- 1717.09 Property held by state courts and public officers and agencies-All intangible per- sonal property held for the owner by any court, pub- lic corporation, public authority, or public officer of this state, or a political subdivision thereof, that has remained unclaimed by the owner for more than 7 years is presumed abandoned. Rlstoey.-s. 8, oh. 61-15~ 4. oh. 77-236. `Note.-A, oececded. effectice October 1, 1977. 1717.10 Miscellaneous personal property held for another person.-All intangible personal prop- erty, not otherwise covered by this act, including any income or increment thereon and deducting any law- ful charges, that is held or owing in this state in the ordinary course of the holder's business and has re- mained unclaimed by the owner for more than 7 years after it became payable or distributable is pre- sumed abandoned. HIstory-s. 9, ch. 61-10; s. 4, ch. 77.236. `Note.-As amended, effeetnee October 1, 1977. 717.11 Reciprocity for property presumed abandoned or escheated under the laws of another state-If specific property which is subject to the provisions of this act is held for or owed or distributable to an owner whose last known address isin another state by a holder who is subject to the jurisdiction of that state, the specific property is not presumed abandoned in this state and subject to this act if: (1) It may be claimed as abandoned or escheated under the laws of such other state; and (2) The laws of such other state make reciprocal provision that similar specific property is not pre- sumed abandoned or escheatable by such other state when held for or owed or distributable to an owner whose last known address is within this state by a -3- 631 DISPOSITION OF UNCLAIMED PROPERTY PAGENO="0636" 632 DISPOSITION OF UNCLAIMED PROPERTY Ch. 717 holder who is subject to the jurisdiction of this state. HIstory-s. 10, ch. 61-10. 717.12 Report of abandoned property.- (1) Every person holding funds or other property, tangible or intangible, presumed abandoned under this act shall report to the Department of Banking and Finance with respect to the property as herein- after provided. (2) The report shall be verified and shall include: (a) The name, if known, and last known address, if any, of each person appearing from the records of the holder to be the owner of any property of the value of $25 or more presumed abandoned under this act; (li) In case of unclaimed funds of life insurance corporations, the full name of the insured or annul- tent and his last known address according to the life insurance corporation's records; (c) The nature and identifying number, if any, or description of the property and the amount appear- ing from the records to be due, except that items of value under $25 each may be reported in aggregate; (d) The date when the property became payable, demandable, or returnable, and the date of the last transaction with the owner with respect to the prop- erty; and (e) Other information which the department pre- scribes by rule as necessary for the administration of this act. (3) If the person holding property presumed abandoned is a successor to other persons who previ- ously held the property for the owner, or if the hold- er has changed his name while holding the property, he shall file with his report all prior known names and addresses of each holder of the property. (4) The report shall be filed before November 1 of each year as of June 30 next preceding, but the re- port of insurance corporations shall be filed before May 1 of each year as of December 31 next preced- ing. The department may postpone the reporting date upon written request by any person required to file a report., (5) If the holder of property presumed abandoned under this act knows the whereabouts of the owner and if the owner's claim has not been barred by the statute of limitations, the holder shall, before filing the annual report, communicate with the owner and take necessary stepe to prevent abandonment from being presumed. The holder shall exercise due dili- gence to ascertain the whereabouts of the owner. (6) Verification, if made by a partnership, shall be executed by a partner~ if made by an unincorpo- rated association or private corporation, by an offic- er; and if made by a public corporation, by its chief fiscal officer. Hlstory.-s. 11, ch. 61-10; as. 12. 35, ch. 69-106; 5. 222. ch. 77.104. 717.13 Notice and publication of lists of abandoned property.- `(1) Within 120 days from the filing date as set forth in s. 717.12, the department shall cause notice to be published at least once each week for 2 succes- sive weeks in a newspaper of general circulation in the county in this state in which is located the last known address of any person to be named in the notice. If no address is listed, or if the address is outside this state, the notice shall be published in the county in which the holder of the abandoned proper- ty has his principal place of business within this state. (2) The published notice shall be entitled "Notice of names of persons appearing to be owners of aban- doned property," and shall contain: (a) The names in alphabetical order and last known addresses, if any, of persons listed in the re- port and entitled to notice within the county as here inbefore specified. (b) A statement that information concerning the amount or description of the property and the name and address of the holder may be obtained by any persons possessing an interest in the property by addressing an inquiry to the department. (c) A statement that if proof of claim is not pre- sented by the owner to the holder and if the owner's right to receive the property is not established to the holder's satisfaction within 65 days from the date of the second published notice, the abandoned property will be placed notlater than 85 days after such publi- cation date in the custody of the department to which all further claims must thereafter be directed. (3) The department is not required to publish in such notice any item of less than $25 unless it deems such publication to be in the public interest. 1(4) Within 120 days from the final filing date of the report required by s. 717.12, the department shall mail a notice to each person having an address listed therein who appears to be entitled to property of the value of $25 or more presumed abandoned under this act. (5) The mail notice shall contain: (a) A statement that, according to a report filed with the department property is being held to which the addressee' appears entitled. U,) The name and address of the person holding the property and any necessary information regard- ing changes of name and address of the holder. (c) A statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the published notice, the property will be placed jn the custody of the department to which all further claims must be directed, Hlclory..-o. 12, ch. 61-10; as. 12. 35, ch. 69-106; o. 5, ch. 77-236. `Note-As amended. effectine October 1, 1977. °717,131 Petition for administrative declara. tion of abandoned property-The holder of any item of personal property, tangible or intangible, may file with the department a petition requesting the department to accept custody of the property, alleging that special circumstances exist, showing compliance with s. 717.12(1), (2), (3), (5) and (6), and attaching proof that a diligent search and inquiry has been made to locate the owner. If the depart- ment finds that the proof of diligent search is satis- factory and that acceptance will preserve and pro- tect the interests of the owner and the state, it shall give notice as provided in s. 717.13 and may accept custody of the property prior to the expiration of the statutory waiting period. Upon acceptance by the department, such property is presumed abandoned. HIstory-s. 1, oh. 67.35; as. 12,35, ch. 69-196; a, 6, ch. 77.230. `Note-As amended, effective October 1,1977. Ch. 717 -4-. PAGENO="0637" Ch. 717 ______ 1717:14 Payments or delivery of abandoned property.-Every person who has filed a report as provided by s. 717.12 shall, within 20 days after the time soecified in s. 717.13 for claiming the property from the holder, pay or deliver to the department all abandoned property specified in the report, except that, if the owner establishe.shis right to receive the abandoned property to the satisfaction of the holder within the time specified in s. 717.13, or if it appears that for some other reason the presumption of aban- donrr.ent is erroneous, the holder need not pay or deliver the property, which will no longer be pre- sumed abandoned, to the department, but in lieu thereof shall file a verified written explanation of the proof of claim or of the error in the presumption of abandonment. It'..-.~ 13. ~:`. ct-u' i2. 77. co,. raIse;,. 0; ,o, Oc'.th,r 1. 1977. `717.15 Relieffromliabilitybypaymentorde. livery.- (1) Upon the payment or delivery of abandoned prcoei-ty to the department, the state shall assume custody and shall be responsible for the safekeeping thereof. The retention of related pertinent records shall remain the responsibility of the original hold- er. Any person who pays or delivers abandoned prop- erty to the department under this act is relieved of all liability to the extent of the value of the property so paid or delivered for any claim which then exists or which thereafter may arise or be made in respect to the property. Any holder who has paid moneys to the department pursuant to this act may make pay- ment to any person appearing to such holder to be entitled thereto, and upon proof of such payment and proof that the payee was entitled thereto, the department shall forthwith reimburse the holder for the payment. 2 The holder of any interest under s. 717.06~2) cr3- or a. 717.10 shall deliver a duplicate certificate to the department within the time specified in s. 717.14. Upon delivery to the department, the holder and any transfer agent, registrar, or other person acting for or on behalf of the holder in executing or delivering such duplicate certificate shall be re- lieved from all liability to any person, including, but not limited to, any person acquiring the certificate presumed abandoned or the certificate issued to the department, for any losses or damages resulting to such person by the issuance and delivery to the de- partment of such duplicate certificate. Hiatory.-,. 14. el-ia 12. 20. ES-lOS; ,.7, 77-235. `75ss.-A, ~.-a~5r5. effe,s,~e Octcbar 1, 1977. `717.16 Income accruing after payment or de- livery.-When cash property is paid or deliveredto the department under this act, the owner is not enti- tled to receive income or other increments accruing thereafter. When income-producing property other than money is delivered to the department under this act, any dividends, interest, or other increments realized or accruing on such property at or prior to liquidation or conversion thereof into cash shall be credited to the owner's account by the department. 10. 61-10; ,.a 12.20. 63-105; ,. 7, ch. 77-235. ~f5r~:~e O,tcbar 1. 1977. Ch. 717 717.17 Periods of limitation not a bar-The expiration of any period of time specified by statute or court order, during which an action or proceeding may be commenced or enforced to obtain payment of a claim for money or recovery of property, shall not prevent the money or property from being presumed abandoned property, nor affect any duty to file a report required by this act or to pay or deliver aban- doned property to the department. flhstoay.-.-1. 16, ch. ei-i~ 12, 35. ch. 69196. 717.18 Sale of abandoned property.- `(1) All abandoned property, other than money, delivered to the department under this act may be sold by it. All stocks, certificates of ownership, and bonds of value received by the department shall be sold within 1 year from receipt. However, the depart- ment shall have the discretion to withhold from sale any abandoned property that the department deems to be of benefit to the people of this state. Any sale of property other than stocks and bonds shall be to the highest bidder at public sale in whatever place in the state affords in its judgment the most favora- ble market for the property involved. The depart- ment may decline the highest bid and reoffer the property for sale if it considers the price bid insuffi- cient. It need not offer any property for sale if, in its opinion, the probable cost of sale exceeds the value of the property. (2) Any sale held under this section shall be pre- ceded by a single publication of notice thereof, at least 3 weeks in advance of sale in a newspaper of general circulation in the county where the property is to be sold. `(3) The department may make, execute, and de- liver to the purchaser a good and sufficient bill of sale, assignment, or transfer of title of the property sold. If a bond, certificate ofshares ofstock, or certifi- cate of membership in a corporation or association is sold and assigned, the assignment thereof shall have the same force and effect as though made by the original owner and shall entitle the purchaser to all rights of ownership in and to such certificate. The department shall execute such assignment and transfer as the duly constituted agent and trustee of such original owner. `(4) If the department determines that any prop- erty delivered to it pursuant to this act has no appar- ent value, it may at any time thereafter destroy or dispose of same with the written approval of the Department of State. In that event, no action or pro- ceeding shall be brought or maintained against the state, any state employee, or against the holder on account of any action taken by the department pur- suant to this subsection with respect to said proper. ty. HIM0,-y.-8. 17, ch.el.1O;s,. 12,35,ch. 69.156;s. 1,,th. 72192;s. 8, ch.77236. `Note.-5ab,actio~a1 (1) ~ad (3), ~ ~ad sabsactio,, (4), ~1aa1ated, eff9ctiae Octobea 1, 1977. 1717.19 Deposit of funds.-All funds received under this act, including the proceeds from the sale of abandoned property under s. 717.18, shall forth- with be deposited by the department in the state school fund of the state, except that the department shall retain in a separate account an amount not exceeding S150,000 from which it shall make prompt 633 DISPOSITION OF UNCLAIMED PROPERTY -5- PAGENO="0638" 634 DISPOSITION OF UNCLAIMED PROPERTY Ch. 717 payment of claims duly allowed by it as hereinafter provided and for all expenses incurred in adminis- tering this act. Before making the deposit it shall record the name and last known address of each person appearing from the holders' reports to be en- titled to the abandoned property and the name and last known address of each insured person or ennui- tant, and with respect to each policy or contract list- ed in the report of an insurance corporation, its num- ber, the name of the corporation, and the amount due. The record shall be available for public inspec- tion at all reasonable business hours. HLtoey.-o. 18, nh 61-10; s, 12. 35. oh. 69-106; s. 9, oh. 77-236: `Note-A, amended. effectine October 1, 1977. 1717.195 Administration of abandoned prop- erty.-Abandoned property under this chapter shall be administered by the Division of Finance of the Department of Banking and Finance and shall be funded from funds available in the regulatory trust fund °[under the division]. An amount equal to the actual costs incurred in the administration of this chapter shall be transferred from the separate ac- count specified in s. 717.19 to the regulatory trust fund annually. Hletory.-,. 1, ,h. 72-174; s.9, ch. 77-236. `Note.-As amended, effectice October 1. 1977. `Note-Bracketed soerds inserted by the editor, to conform tech. 72-174. 717.20 Claim for abandoned property paid or deliverecL-Any person claiming at any time an interest in any property delivered to the state under this act may file a claim thereto or to the proceeds from the sale thereof on the form prescribed by the department. Hlntoey.-s. 15, ch. 61.10; en. 12, 35, ch. 69-104. 717.21 Determination of claims.- (1) The department shall consider any claim filed under this act and may hold a hearing and receive evidence concerning it. If a hearing is held, it shall prepare a finding and a decision in writing on each claim filed, stating the substance of any evidence heard by it and the reasons for its decision. The decision shall be a public record. (2) If the claim is allowed, the department shall make payment forthwith. The claim shall be paid without deduction for costs of notices or sale or for service charges. Stlctory.-o. 20, ch. 61.15-, en. 12,35, oh. 69-106. 1717.22 Judicial action upon determination.- Any person aggrieved by a decision of the depart- ment, or as to whose claim the department has failed to act within 90 days after the filing of the claim, may petition for review as provided in chapter 120 to establish his claim. The proceeding shall be brought within 90 days after the decision of the de- partment or within 180 days from the filing of the claim if the department fails to act. Hletoey.-o. 21, ab. 61-10. so. 12. 35. ch. 69-106;,. 9, ch. 77-236. `Note-As amended. effectineOctober 1,1977. 717.23 Election to take payment or delivery. -The department, after receiving reports of proper- ty deemed~1~iidpned pursuant to this act, may de- cline to r&cel~any property reported which it deems to have a value less than the cost of giving notice and holding sale or it may, if it deems it desir. able because of the small sum involved, postpone taking possession until a sufficient sum accumu- lates. - Htrtory.-o. 22, ch. 61-10; on. 12, 35, oh. 69-106. 717.24 Examination of records-The depart- ment may at reasonable times and upon reasonable notice examine the records of any person if it has reason to believe that such person has failed to re- port property that should have been reported pursu- a~t to this act. If any person refuses to permit the e~iamination of his records, the department may is- sue subpoena to compel such person to testify and produce his records; said subpoena to be served by the sherifYof the county where the person resides or may be found. Such person shall be entitled to the same per diem and mileage as witnesses appearing in the circuit court. of the state which shall be paid by the state. If any person shall refuse to obey any subpoena so issued or shall refuse to testify or produce his records, the department may present its petition to the circuit court of the county where any such person is served with the subpoena or where he resides, whereupon said court shall issue its rule nisi to such person requiring him to obey forthwith the subpoena issued by the department or show cause why he fails to obey the same, and unless the said person shows sufficient cause for failing to obey the said subpoena, the court shall forthwith direct such person to obey the same, and upon his refusal to comply, he shall be adjudged in contempt of court and shall be punished as the court may direct. Hletory.-o. 23, oh. 61-19- so. 12, 35, ch. 69-106; s. 223, eb. 77-104. 717.25 Proceeding to compel delivery of abandoned property.-If any person refuses to de- liver property to the department as required under this act, it shall bring an action in a court of appro- priate jurisdiction to enforce such delivery. Hletoey.-,. 24, oh. 61-10; on. 12, 35, oh. 69-106. 717.27 Penalties.- (1) Any person who willfully fails to render any report or perform other duties required under this act shall be guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083. (2) Any person who willfully refuses to pay or deliver abandoned property to the department as required under this act shall be guilty of a misde- meanor of the second degree, punishable as provided in s. 775.082 or s. 775.083. 1(3) Any person who willfully or fraudulently con- ceals, destroys, damages, or makes unlawful disposi- tion of any property or of the books, records, or ac- counts pertaining to property which is subject to the provisions of this act is guilty of a misdemeanor of the second degree, punishable as provided in s. 775.082 or s. 775.083. Hlstoey.-o. 26. oh. 61-10-so. 12, 35, oh. 60-106;,. 688. oh. 71-136; s. 10, oh. 77-234. `Note.-Effecti'ce October 1, 1977. 717.28 Rules and reguiations.-The depart- ment is hereby authorized to make necessary rules Ch. 717 -6- PAGENO="0639" Ch. 717 635 DISPOSITION OF UNCLAIMED*PROPEIWY and reg~i1ations to carry out the provisions of this act. HIstory.-.. 27. ch. 81-10; s,. 10; 30, ch. 69-106. 717.29 Effect of laws of other statee.-This act shall not apply to any property that has been pre. surned abandoned or escheated under the laws of another state prior to September 30, 1961. Cb.. 717 HIst~ry.--s. 29, ch. 81.10. 71720 RepeaL-This act shall not repeal, but shall be additional and supplemental to the existing provisions of ~. 43.17-43.19, 402.17, and 550.164, chapter 718, ca. 731.28, 731.33. ~sry.-e. ~. c~. 01-10. 7.- 67-t~LtO 0 - 81 - L~1 PAGENO="0640" Oupp. No. 90 636 RULES FOR DISPOSING OF UNCLAIMED PROPERTY RULES OF THE DEPARThIENT OF BANKING AND FINANCE CHAPTER 3D*20 RULES FOR DISPOSING OF UNCLAIMED PROPERTY CHAPTER 3D~2O 3D-20.O1 Definitions 3D~20.O2 Claim Procedures 3D-20.03 Deduction of Lawful Charges 3D-20.04 Action by Department 3D-20.05 Sale of Abandoned Property 3D-20.06 Notice 3D-20.07 Public Inspection 3D-20.08 Conditions of Sale 3D-20.09 Sale of Securities 3D-20.1O Report of Abandoned Property 3D-20.O1 Definitions. As used in these rules: (1) `Department" means the Department of Banking and Finance or the Division of Finance. (2) "Lawful charges" means any charge as authorized by law or where a contractual agreement exists between the owner and holder. (3) "Service charge" means all documented charges that are incurred by a banking or financial organization with regard to the handling of an account. No further reduction of an account by service charges shall be allowed after the date required by Section 717.12, F.S., for reporting such account to the Department as property presumed abandoned. (4) "Dormant/inactive accounts" means the owner has not evidenced an interest in the property for the applicahie prescribed period. This interest should be a positive verification with a record of same on file. Specific Authority 20.05(5), 120.58. 717.28 FS. Law Implemented 717.03, 717.12, 717.21 PS. History-New 9.15.75, Amended 4-10-78. 3D-20.02 Claim Procedures. All claims under Section 717.15 or 717.20, Florida Statutes, must be submitted upon the form prescribed and supplied by the department and sent to the Department of Banking and Finance, 1401 State Capitol Building, Tallahassee, Florida 32304. (1) Claims by original holder. Claims made by the original holder under Section 717.15, Florida Statues, are to be submitted upon the form prescribed and supplied by the department (a copy of which appears in Chapter 3-2 of these rules as Form DBF-F-15). The claim shall be signed by an officer of the institution being reimbursed. A copy of the paid instrument restoring the funds to a rightful owner shall be attached thereto. (2) Claims by original ownsr or heir. Claims made by the original owner under Section 717.20, Florida Statutes, are to be submitted upon the form prescribed and supplied by the department (a copy of which appears in Chapter 3.2 of these rules as Form DBF.F-16). When a claim is made by omeone other than the original owner such as en heir, then the claimant must provide woof that the original owner cannot make claim to the property. Claims by other than original owner are to be filed on a form to be supplied by the department (a copy of which appears in Chapter 3-2 of these rules as Form DBF-F47). All claims made under Section 717.20, Florida Statutes, must have the claimants signature and be properly notarized. (3) Multiple claims. If more than one person claims to be entitled to the property, a hearing, pursuant to Chapter 120, FS. and Chapter 3-3 of these rules, may be held. Specific Authority 20.05(5). 120.53, 717.28 FS. Law Implemented 717.15, 717.20, 717.21 PS. History-New 9-15.75, Amended 4.10-78. 3D-20.03 Deduction of Lawful Charges. Specific Authority 20.05(5). 120.53, 717.28 FS. Law Implemented 717.21 PS. History-New 9.15.75, Repealed 4-10-78. 3D.20.04 Action by Department. The department will commence action on all claims within 21 days after receipt thereof. A decision will be made and served on the claimant at the address furnished the department. Specific Authority 20.05(5). 120.58, 717.29 FS. Law Implemented 717.21 PS. History-New 9-15-75. 3D*20.05 Sale of Abandoned property. All items of abandoned property offered for sale, other than money in general use, shall be offered for sale at public sale and shall be suld for cash, on an as-is-basis, and without recourse. The highest bid ahail be the highest sufficient bid, as determined by the department. Specific Authority 20.05(5), 120.53, 717.28 FS. Law Implemented 717.28 PS. History-New 9-15-75. 3D-20.06 Notice. Notice of public sale will be given to the public at least 21 days before the sale; the notice shall specify where the items may be inspected. Specific Authority 20.05(5), 120.58, 717.28 PS. Law Implemented 717.18 FS. HIstory-New 9-15-75. 3D-20.07 Public Inspection. All items shall be availahie for public inspection 21 days prior to the sale in the office provided by the department. A list of items offered for sale shall be available upon request. Specific Authority 20.05(5), 120.58. 717.28 PS. Law Implemented 717.18 PS. History-New 9-15-75. 3D-20.08 Conditions of Sale. The sale will be based on the following conditions: (1) The Department shall execute a document (a copy of which appears in Chapter 3-2 of these rules as Form DBF-F-20) evidencing clear title to the purchaser. PAGENO="0641" 637 CHAPTEP. ~DZO RULES POE DISPOSING OP UNCLAIMED PROPERTY Supp. No.80 (2) The purehceee ere to ha removed et the SD-20.09 Sale of Secuxltlez. buyc~ c cxp~n.~ end ri~h at the conc1u~!on of the Specific Authority 20.05(5), 120.53, 717.28 FS. Law money thafl be pa!d before delivery. 1~pie~ented 717.16 FS. Rletory-New 9.15-75, Repealed Ace quete time fo'~ C r~re [~fl ~ ~ ~ 4.10.7C. ~e~.rJ checiu b~ore doiircry of p~opcrty. (3) ~n 1ur~r~tv i~ c~ci~ by the d~partm~nt ~ c,~ ~ ~D-2O.1O Iteport of Abandoned Propcety. All i~ end no tale ¶~fl1 be cot etide ~ ~ ~ perrona cubject to thee ect ahell file a pontive or ~or 0: imp~catioo. &ch end CTCY ~ ~ald ne~ntlve report to the Department fifteen yezirz after `~~i," end vit~,ut recoucoc. bcoomln~ rubjeet to the act end each year thereafter. Cpeelflr Authert~y 20.05(5) 120 53 717 22 P2 Li SpemiCe Authority 20.01(5), 120.52, 717.28 PS. Law i~~reaOrd 717.16 P2. Rfrme~y-Na~ 0-10-75. ` Ima!e~utcd 717.18 PS. Rhtorr-New 840-75. PAGENO="0642" 638 EXAMINATION FORMS Form 56 Rev 7-77 Examined Close of Business - Number ___________ `~ri~ti. 6~K' EMiC~r~ (~U'(\ STATE OF FLORIDA - OFFICE OF THE COMPTROLLER ABANDONED PROPERTY EXAMINATION - STATE BANKS EXHIBIT 4~3 SCOPE OF EXAMINATION: (1) This `form is to be completed pg~~ for banks that have been in existence 10 or more years. The 1977 Legislature amended the Law reducing the dormancy period for reporting from fifteen (15) to ten (10) years for banks. This is an examination which should take approximately one hour. A copy of this schedule will be transmitted to the Abandoned Property Section of the Division of Finance. (2) Records should be reviewed for the purpose of evaluating compliance with requirements for reporting all outstand- ing liabilities in accordance with Chapter 717, Florida Statutes. QUESTIONAIRE 1. NAME OF BANK: ADDRESS OF BANK:_________________________________________________________________ 2. DATE OF EXAMINATION: EXAMINER-IN-CHARGE:____________________ EXAMINER PREPARING SCHEDULE:________________________________________________ 3. Has this bank filed a current report with the Abandoned Property Section of the Comptroller's Office? (Report is due November 1st each year for the period ended June 30th. The report for the period ended June 30, 19, should include all outstanding items prior to July 1, 1967.) ______________________________________ 4. Does it appear that all outstanding liabilities have been reported such as: (a) Dormant/Inactive Savings Accounts; Date of Oldest Item: (b) Dormant/Inactive Checking Accounts; Date of Oldest Item:. (c) Outstanding Cashiers Checks, Certified Checks, Travelers Checks, Money Orders, Dividend Checks ; Date of Oldest Item:. (d) Unidentified Deposits ; Date of Oldest Item: (e) Safe Deposit Boxes ; Date of Oldest Item: (f) Trust Department: Outstanding Drafts ; Date of Oldest Item: Is unclaimed property held in trust accounts? : Are Attempts being made to contact beneficiaries? : Oldest contact Date_______ 5. Does it appear that Miscellaneous or Other Income' contains items that should have been reported? ________ 6. If dormant accounts are on computer, does the printout reflect the date of last contact with the owner on all accounts or does it show the computer conversion date or some other incorrect date?______________________________________________________ 7. Service Charge Policy: Are service charges consistent with contractural agreement and policy of the Board?. Brief surmary of Service Charge Policy relating to inactive accounts and interest payment policy on inactive savings accounts. 8. Does the bank have any Cuban Blocked Accounts which have been blocked by the U. S. Treasury under the authority of Public Law 87-195 and under Foreign Assets Control Regulations? _______ If yes, have they been properly reported to the Abandoned Property Section, State Comptroller's Office? _______ NOTE: This office has been granted a license (#C-6753) by the U. S. Treasury Department which permits and approves the transfer of all Cuban Blocked Accounts. 9. Does it appear that a more in-depth examination is warranted? ,.~ 10. Examiner's comments, sugge''4 --~`~~ PAGENO="0643" 639 fro~L~ CLfo~ ~ör~) E~i~o~ ü~"~ FYATE OF flC~IDA - OFFICh OF ~ CIY,9TDJLLER ~~FFfOD PRD?EgIY DIAMINATION IDOM 102 FFIERAL CHAR'IERED ~10IT ~IcE3 - EIAPTER 717, FFDRIDA STATUT10 Score of Exa-nination: All records that will insure cannliance with the reporting of outstanding liabilities (inactive share accounts, overnatnent of loans, outstanding checks) in accordance with Chanter 717, florida Statutes, should be revieced. The new icr effective October 1977 reduces the dnrnmncv period for federal chartered fifteen (15) to ten (10) years. The report ~ue Novwrber 1, 1977 should outstanding diana with a date of prior to July 1, 1947. F~st'rrt ci Fandin~s: 1. Name sod address of Credit Union __________________________________ 2. Date of Charter Nasser's Name_____________________ 3. Are inactive/dorn-.ant share accounts placed in a special section of the individual ledger with a snecial control? Yes ( ) No ( ) N/A Ones a special printout exist if on coshauter? Yes ( ) No If yes, at wiat don-na-roy period? ________________________________________ -I. :-ian-e at: of the cutstanding liabilitie~ been reported such as: (a) Inactive or Donna-nt Share Account~ Yes ( ) No (b) Dctsnandiog Checks Yes ( ) No 5. Did the `Other Inca~" or "Undivided Profit" ledgers indicate any itwns that should have been reported? Yes ( ) No 6. According to your findings what is the date, account number, and amount of the oldest inactive share account? ___________________________________ (a) Date, nirnber, and amount of oldest outstanding check? _______________ (b) Are dates of last activity (contact) properly carried forward on ledger cards or data printouts? Yes ( ) No 7. If service charges exist, are they in bccordance with the By-Laws? Yes( ) No( ) N/A( ) 8. Examiner's Omta-ents or Suggestions: 9. Examiner's Name _______________ Date ___________ PAGENO="0644" 640 GEORGIA QUESTIONNAIRE RESPONSE ~eparfnt~n~ sif ~L~zuthtst~ mth ~tnzs~te~ L ~ 148 ~mttrnntimta1 ~ ~. -~ ~ 040 ~JIa2thx, t~tergb~ 30303 October 25, 1979 Mr. Don Tucker Chief Economist Commerce, Consumer, and Monetary Affairs Subcommittee House Coniiiittee on Government Operations Rayburn House Office Building, Room B-377 Washington, 0. C. 20515 Subject: Survey on Unclaimed Property Matters transmitted by letter dated October 3, 1979 from Congressman Benjamin S. Rosenthal to Mr. John A. Blackmon, former Comissioner, Georgia Department of Revenue, Unclaimed Property Division Dear Mr. Tucker: The unclaimed property statutes in Georgia have divided responsibility in this matter between the Georgia Department of Revenue and the Department of Banking and Finance. Inasmuch as your survey related primarily to financial institutions, the Georgia Department of Revenue has forwarded your material to this office for response. I will attempt to respond to your questions in the order given and to assist in that response I am enclosing herewith a booklet entitled Disposition of Unclaimed Property Act' as published by the Georgia Department of Revenue and containing Chapter 560-13 of the Rules and Regulations of the Department of Revenue as well as a copy of the "Disposition of Unclaimed Property Act" as enacted by the Georgia General Assembly in 1972. I am further enclosing an amendment to that Act which changes Section 6 on Page 3 of the booklet and was enacted by the Georgia General Assembly in 1976. Finally, I am attaching a copy of Chapter 80-1-8 of the Rules and Regulations of the Georgia Department of Banking and Finance which relate to dormant accounts, service charges, and abandoned or unclaimed properties. The Rules of the Department of Banking and Finance relate to financial organizations as defined in the Act and include all of those organizations in which you are interested with the exception of securities brokerage firms, mutual funds, and insurance companies. These organizations are subject to the regulations of the Department of Revenue as contained in Chapter 560-13. My responses to your questions will relate only to those financial organizations (Federal and State chartered banks, savings and loan associations and credit unions) which report to the Department of Banking and Finance relative to unclaimed or abandoned properties. PAGENO="0645" 641 ~r. Don Tucker Page 2 October 25, 1979 The Department of Revenue did provide me with answers to some of your questions relative to those institutions in which you are interested and subject to their regulations and I enclose those for your information. I will attempt to be as complete as possible with my responses; however, I only received your survey on October 23, 1979 which left little tire to give your survey the thought which it desired. The following represent my answers to your questions: 1. (a)(i) With respect to banks, savings and loan associations and credit unions as well as trust activities of those institutions please refer to Section 3 and Section 13 of Act included herewith. Other institutions in which you are interested report to the Department of Revenue pur- suant to the other provisions of the Act. 1. (a)(ii) We are not aware of any excluded properties. l.(a)(iii) Fifteen years with the exception of dividends which must be reported after seven years for some institutions. 1. (a)(iv) The role of the State is purely custodial and a reserve fund is raintained to return escheated property claimed by the true owner. (a~(.) The State does not pay interest on funds which are escheated to it; however, funds of a financial organiza- tion which are reported as abandoned to the State but are never actually escheated do accrue interest at the lowest rate paid by that financial institution on its savings accounts irrespective of whether or not the unclaimed property originated as a savings account. 1. (a)(vi) As the Georgia Disposition of Unclaimed Property Act applies to banks, savings and loan associations and credit unions it is not a true escheat law in that the funds are never turned over to the State but are maintained by the financial institution in interest bearing accounts and reports are filed annually with the Department of Banking and Finance as to additions and deletions from the accounts held in the unclaired property status in the name of the original owners of those Occounts. A very limited service charge is authorized relative to the these accounts (maxi- rum $24.00). PAGENO="0646" 642 Mr. Don Tucker Page 3 October 25, 1979 1. (b) A copy of Chapter 80-1-8 of the Rules and Regulations of the Department of Banking and Finance are attached here- with. 1. (c) Section 13, Paragraph (e) relates to the financial ~-esponsibility for locating the owner of unclaimed property in an effort to prevent abandonment of that property. As stated previously, service charges on these accounts are severely limited despite the additional cost incurred by the financial institution in preparing annual reports and main- taining the accounts under adequate internal controls which encompasses maintaining the accounts under dual control because of their susceptibility to unauthorized transactions. The element of internal control has long been a matter of concern to financial regulatory bodies and is a standard point of review on each examination of financial institutions. 1. Cd) The Department of Revenue has responded to you relative to those institutions under their jurisdiction. With respect to those financial organizations under the jurisdiction of the Department of Banking and Finance no funds are actually turned over to the State and records continue to be maintained in the name of the true owner on the books of the financial organiza- tion. Accordingly, as with other depositors' accounts it would not seem appropriate to advertise the names of those account-holders for the same reasons that financial institutions depositors' records are generally maintained as confidential and confidentiality has frequently been recognized both by Congress and the various State legislators. 1. Ce) Again, I refer you to requirements of Section 13, Paragraph (e) imposing a requirement on the holders of unclaimed proper- ties in financial organizations to seek out the owners of such property in an effort to prevent abandonment. 1. (f) The Department of Revenue has given you a response relative to those accounts under their jurisdiction which indicates that their records relative to the unclaimed property question are public information. While the statute does not provide for "bounty hunters" they certainly have access to the records. On the other hand, records of reports submitted by banks, savings and loan associations and credit unions under the jurisdiction of the Department of Banking and Finance are main- tained on a confidential basis because they represent depository accounts of customers of the financial institutions which as stated previously have traditionally been considered confidential between those customers and the financial institution and other- wise available for review only upon proper subpoena or during the confidential examination process. The Department is fre- quently approached by the so called "bounty hunters" in their efforts to obtain access to these records, but so far such PAGENO="0647" 643 Mr. Don Tucker Page 4 October 25, 1979 1. (f) access has been refused. It is the opinion of the Depart- ment that ouch more disservice is done to the public through the activities of these scavengers who play upon the natural greed of many people than has ever been lost through the normal business activities of any financial institution. (a) Please refer to Section 3 of the Act. (h) The Department of Banking and Finance does not conduct any audits exclusively for the purpose of verifying unclaimed property reports. Financial Examiners engaged in regular (at least annual) examination of financial institutions check for compliance with theDisposition of Unclaimed Property Act as well as compliance with all other laws and reculations. In addition, administrative confirmation of aTcunts racorted and transferred to interest bearing accounts are made periodically. The General Asserbly of Georgia has not made a specific aPpropriation to the Department of Banking and Finance for carryina out its responsibilities under the Disposition of Unclaimed Property Act. The Department receives an annual appropriation from the General Assembly and assesses the amount of that appropriation against all of the financial institutions which it supervises. That appropriation has been sufficient in past years to carryout our assigned. duties including enforcement of the Disposition of Unclaimed Procerty Act. We have no employees which are assigned full- tine to this function feeling that its scope is insufficient at this time to justify such~full-time staff. Employees resoonsibie for the enforcement of the Act are given sufficient tir.e to adequately carry out their duties in this racard hcs'ever. 2. th respect to the information you request under this item, the following is the cnly information available in the time period given to respond to the question. As of June 30, 1978, 191 State banks and 42 National banks reported total unclaimed property under the provisions of Georgia's Disposition of Unclaimed Property Act in the amount of $1,898,383.19 (approximately 1/3 of this figure was in one institution). Savings and loan institutions (allexcept one are State-chartered) reported $333,681.79 and credit unions reported $64,657.91. With the exception of some Federal credit unions all of these funds have been transferred into interest bearing accounts. The National Credit Union A~1nimistration pro- vi ~es for Federal credit unions to transfer abandoned properties out of he:csit accounts into an `accounts payable" account and prohibits the pay- rent of interest on any account other than deposit accounts. Accordingly, those Feteral credit unions who have chosen to comply with the Georgia PAGENO="0648" 644 Mr. Don Tucker Page 5 October 25, 1979 2. statute governing unclaimed property have come in for criticism from the National Credit Union Administration because of their efforts to pay interest on these abandoned accounts. While most Federal credit unions have expressed a desire to cooperate with this Department in this regard, some have steadfastly refused to cooperate either reluctantly because of the existence of the NCUA regulation or a ruling in this regard was sought from the National Credit Union Administration and was rendered to this office by the local Regional Administrator of National Credit Union Administration here in Atlanta. We have requested that this ruling be reviewed in Washington by the Administrations legal counsel. It is the estimate of this Department that the total dollar amount of unclaimed properties in Georgia is growing at the rate of approximately $200,000 per year with the major portion of these accounts being in amounts of less than $50.00. I would estimate that no more than 5% of the number of accounts have balances in excess of $1,000. 3. The Department of Banking and Finance is unfamiliar with the treatment of brokerage firms in that that comes under the jurisdiction of the Georgia Department of Revenue. 4. (a) With the exception of limited noncompliance relative to Federal credit unions it is the opinion of this Department that all financial institutions both federally and state-chartered operating in Georgia are in substantially complete compliance with the provisions of Georgia's law relative to unclaimed property. (b) The audit andcompliance review conducted by this Department has generally resulted in deletion of reportedly abandoned accounts from reports filed with the Department. Additions to abandoned property reports have been relatively few and in only nominal dollar amounts. Generally speaking, the errors in reports filed have generally come about because of a misunderstanding or misinterpretation relative to the Act which has proven to be quite confusing to bank personnel and because of failure of a bank to service charge accounts as provided for in the statute. The bank would file amended reports taking the allowable service charge after it discovered that the law provided for same. (c) We do not believe that additional enforcement would result in any significant increase in reported abandoned property and we do believe that all financial institutions in Georgia with the exception of certain Federal chartered credit unions are in substantially complete compliance with the letter and the intent of the law at this time. PAGENO="0649" 645 `lr. Don Tucker °age 6 :::::e~ 25. 1979 i nforvation known to this Depa~-tment relative to service c-.arces in-nosed on dormant accounts or unclaimed property is derived from routine examinations ~f financial institutions. have received no customer complaints in this area nor are the institutions required to file reports on this specific matter with the Department. (b) The practice of imposing service charges on dormant accounts and other unclaimed property appears to be a general practice and results from the fact that Georgia law severely restricts one service charge which a bank can assess to a maximum of (52.07 per month for a twelve month period). As stated evicvsTh'. dormant accounts require special security proce- dunes and control. These accounts must also be maintained the bank's other records, under proper control, on automated processing units. Each, account balance is relatively smai~ con-oared to active accounts: and the account balance in itself does not generate sufficieht income for the bank to pay for the extra security precautions as well as the per unit data processing cost. Therefore, the 524.00 maximum service charge which a financial institution in Georgia may assess is not adequate to cover the cost of maihtaining these accounts; there- fore, the banks as a general practice assess the charge in order to defray that cost as much as possible. In most all cases the service charge is authorized by the customer when the account is craned in his signature card contract. `os: hunks and other institutions are charging the maximum 52.00 for a period of tu~elve months maximum. (f~ ?~ease refer to the previous answer. (g) Only where the amount was less than $24.00. (h) I could not possibly give you a reasonable estimation of this amount. (i) I do not know an approximation of the dollar amount of this figure. (~) 52.00 per month for a maximum of: twelve months following the last transaction on the account. T0e snar:~ent of Eankino and Finance has required some financial institutions to restore excessive service charges taken in igno- rance of the law and such financial institutions have always con- curred in the Department's request. PAGENO="0650" 646 Mr. Don Tucker Page 7 October 25, 1979 6. (a) The Department has receivedinquiries from some financial institutions relative to a proposed practice of discontinuing the payment of interest on savings accounts following a dormancy period (usually 5 years) after the account became pay- able. The Department has advised those institutions that they could only take this course of action where the signature card contract between the bank and its customer authorized the dis- continuance of interest, but the bank or other financial insti- tutions could not unilaterally decide to discontinue the payment of interest where the signature card contract did not authorize that. To date, all financial institutions have acted according- ly and we have received no complaints from the public relative to this practice. Most institutions have indicated that a customer claiming an account upon which interest payments had been stopped would be given the interest which would have accrued had the bank not followed this practice. Of course, beginning with the fifteenth year of inactivity, State law will require that interest be paid on all such accounts whether they originated as savings accounts or not. (b) No. (c) Not to our knowledge. (d) Not to our knowledge. (e) This Department has not observed any such practices. (f) No. 7. Not to my knowledge. 8. (a)(i) The National Credit Union Administration should be requested to amend their regulations to allow Federal credit unions to fully comply with State laws governing unclaimed properties so long as those laws were not discriminatory toward those feder- ally chartered institutions. In Georgia the law is not discriminatory and yet Federal credit unions are permitted to ignore the provisions of the State law. (a)(ii) It appears to this office that the rights of the owners of dormant bank accounts and other unclaimed property are ade- quately protected at this time. Most instances of abandoned property now occur because of personality traits of some individuals which cause them to maintain absolute and total secrecy over their financial transactions even from members of their own families and clerical errors of individuals in han- dling their financial records. The Federal bureaucracy should not involve itself in the lives of individual citizens to the PAGENO="0651" 647 :o::ter 25, ~79 8. (a)(ii) extent it would be necessary to correct these deficiencies in human behavior. (b) either the Congress nor the Federal regulatory agency should involve themselves in, this matter of local legisla- tion. Their only involvement should be to see that federally chartered financial institutions are treated fairly relative to State-chartered financial institutions en: that they do not escape the coverage of reasonable egisiation. for the c:portunity to respond to your survey and if we can be of any f_r:rer assistance please feel free to call us. Yours very trul Robert?~. Moler, CFE Deputy Cosonissioner evizas - representative PAGENO="0652" 648 Responses from Georgia Department of Revenue relative to Securities Brokerage Firms, Mutual Funds, and Insurance Companies 1. d. (i) The legal organ in the counties of owners last known address. (ii) The administrator of the Unclaimed Property Unit, a part of Property Tax Division, State Revenue Department. (iii) Names and addresses, when available. (iv) Only property whose value exceeds $25.00. (v) Advertisements include only the owners of unclaimed property reported in the current reporting period. (May 1 for insurance companies, November 1 for corporations, utilities, miscellaneous personal property, undistributed dividends and distributions of business associations, fiduciaries, state courts and public officers and agencies, etc. e. An attempt is made to contact the owners of unclaimed property (by the State) by letter to owners with last known addresses. In most cases the addresses are fifteen years old and 95% of the letters are returned "undeliverable" f. "Bounty Hunters" were not specifically provided for in the Georgia Disposition of Unclaimed Property Act. Records are available for public inspection at all reasonable business hours. g. Abandoned or unclaimed means contact has not been made with, or by, owner for fifteen years or more, except property described as Undistributed Dividends and Distributions of Business Associations which is held seven years. life "Contact", where insurance companies are involved means the owner has not assigned, readjusted, or paid premiums on the policy, or subjected the policy to loan; or corresponded in writing with the insurance company concerning the policy within the preceding fifteen years. "Contact", where fire, casualty or surety insurance corporations are involved means the insured, principal or the claimant has created no activity within the preceding fifteen years. If mail addressed to the owner is not being returned by the Post Office and no activity has occured within the preceding fifteen years the property is considered abandoned. h. Field audits are not conducted. The state's budget for administration of the unclaimed property program was established at $50,000. PAGENO="0653" 649 UNCLAIMED PROPERTY STATE REVENUE DEPARTMENT UNCLAIMED PROPERTY DIVISION P.O. BOX NUMBER 38096 ATLANTA. GEORGIA 30334 ACT AND RULES BULK RATE I U. S. POSTAGE I PAID I Permit No. 351 Ga. DISPOSITION OF UNCLAIMED PROPERTY ACT ACT NUMBER 1257 (S. B. NUMBER430) GEORGIA LEGISLATURE 1972 PAGENO="0654" 650 Enclosed you will find a copy of Act Number 1257 snd the Rules governing the administration of the new "Disposition of Unclaimed Property Act". The Act is based on the "Uniform Disposition of Unclaimed Property Act" as adopted in 1955. It has been adopted in a great number of states since that time. We see the purposes of the Act as being the following: (A) To marshal, protect, and preserve the property rights and interests of the absent, incapacitated, or miss ing owners of property, or those persons claiming by, through, or under them, who by reason of chance, ac- cident, or circumstances beyond their control, have become in the eyes of the law incapable persons and whose rights and interests in such property it is the duty of the government and law to protect. (B) To eliminate the risks and inconveniences to which holders of unclaimed property may be subject by reason of actual or possible claims thereto or to the custody thereof by more than one state. (C) To provide a uniform and equitable set of standards for the determination of entitlement to receive, hold, and dispose of unclaimed property. (D) To provide methods whereby the party states may cooperate with each other in the discovery and taking possession of unclaimed property. We are not enclosing any forms at this time. The required forms, as set out in the rules, may be obtained by request. The provisions of this Act are not voluntary. They are the law and it is the duty and obligation of eadh and every person covered by them to comply as fully as possible. The complete cooperation of all persons involved under the provisions of the Act is greatly needed in order that the maximum benefits to all parties affected may be achieved. We will be happy to assist you in any way possible. Please sendnll inquiries and requests for forms to: State Revenue Department Unclaimed Property Division P.O. Box Number38O96 Atlanta, Georgia 30334 Let me once again urge your full cooperation in this matter. Sincerely, / John A. Blsckmon Commissioner PAGENO="0655" 651 RULES OF DEPARTMENT OF REVENUE CHAPTER 560-13 DISPOSITION OF UNCLAIMED PROPERTY 560-13-1 Report of Abandoned Property 560-1 3-2 Postponement of Reporting Date 560-13-3 Communication with Owner by Holder 560-13-4 Deliver-v of Abandoned Property 560-13-5 Proof of Payment 560-13-6 Statute of Limitations Exemption Claims 560-13-7 Claims for Abandoned Property by Owner 560-13-8 Forms 560-1 3-9 Effective Date 560-13-1 REPORT OF ABANDONED PROPERTY All holders required to report under Section 12 of the Ac~ shall requestforms Number 100(a) and 100(b) except that ins-rrence corporations shall requeat forms Number 100(b) and 100(c).' Authority: Acts of General Assembly 1972 (SB. 430) 560-13-2 POSTPONEMENT OF REPORTING DATE Any person seeking a postponement of the reporting dateunder Section 12(d) of the Act shall make such request to the State Revenue Commissioner. The request shall be in writing and shall contain a short state- ment showing good cause why the request should be granted. Authority: Acts of General Assembly 1972 (SB. 430) 560-13-3 COMMUNICATION WITH OWNER BY HOLDER (a) "Knows the whereabouts or', as used in Section 12(e) of the Act shall mean that the holder has the name arid last known address of the owner in his business records. (b) Any holder required to communicate with an owner ~inder Section 12(e) of the Act, shall do so by first class mail. Authority: Acts of Genera] Assembly 1972 (SB. 430) 560-13-4 DELWERY OF ABANDONED PROPERTY (a) All property deivtred to the State Revenue Commissioner under Section 15 of the Act shall be sent by registered mail and accompanied by Form Number 101. The holder shall bear all losses until receipt is acknowledged by the State Revenue Commissioner. (b) Any property that the owner claims was erroneously~ presumed abandoned, or any claim which the holder has paid to the owner before delivery to the State Revenue Commissioner, which is required to be re- ported by verified written explanation under Section 15 of the Act, shall be so reported on form number 102, which may be obtained from the State Revenue Commissioner by request. Authority: Acts of General Assembly (SB. 430) 560-13-5 PROOF OF PAYMENT Any holder required to submit proof of payment to the State Revenue Commissioner under Section 16(a) of the Act, for the purpose of reimbursement for claims made after delivery of the property to the State Revenue Commissioner, shall submit such proof on form number 103 which may be obtained by request from the State Revenue Commissioner. Authority: Acts of General Assembly 1972 ~S.B. 430) 67-is'sO 0 - 81 - PAGENO="0656" 652 560-13-6 STATUTE OF LIMITATIONS EXEMPTION CLAIMS All holders who are required to report under this Act, and who hold property or funds that are presumed abandoned under the terms of this Act, and which otherwise would have been reported had the Statute of Limitations not expired prior to the effective date of this Act, shall file with the State Revenue Commissioner form number 105, which is available by request, and shall include the following information: (1) The name of the owner, if known, and the nature and identifying number, if any, of any property presumed abandoned by the terms of this Act, on which the applicable Statute of Limitations is claimed to have expired prior to the effective date of this Act. (2) The date when the property became payable, demandable, or returnable, and the date of the last transaction with the owner with respect to the property. (3) A. The period of the Statute of Limitations applicable to the enforcement of any claim to such property. B. The date on which the Statute of Limitations began to run against the owner's claim to such property. C. Any known disabilities which may have affected the running of the Statute of Limitations. D. The date on which the applicable Statute of Limitations is claimed to have expired. Authority: Acts of General Assembly 1972 (S.B. 430) 560-13-7 CLAIMS FOR ABANDONED PROPERTY BY OWNER An owner of property, which has been delivered to the State Revenue Commissioner because of the pre- sumption of abandonment, may claim such property or the proceeds of such property after its sale by the State Revenue Commissioner on form number 104, supplied by the State Revenue Commissioner. With the claim, he shall submit verified copies of documents and such other proof of ownership as may be required at the discretion of the State Revenue Commissioner in support of the claim. No owner of abandoned property shall be entitled to receive interest or other increments accruing on such property from either the holder or the State Revenue Commissioner after the date it has been delivered to the State Revenue Commissioner as abandoned property. Authority: Acts of General Assembly 1972 (S.B. 430) 560-13-8 FORMS The following forms will be used in the administration of the Act and can be requested from the State Revenue Commissioner: Form 100 (A) - Report of Abandoned Property. Form 100 (B) - Summary Report of Abandoned Property. Form 100 (C) - Insurance Corporations' Report of Abandoned Property. Form 101 - Remittance Form Form 102 - Proof of Claim. Form 103 - Proof of Payment. Form 104 - Owners' Claim Form. Form 105 - Statute of Limitations Exemption. 560-13-9 EFFECIIVE DATE This Chapter shall become effective beginning January 1, 1973. Authority: Acts of General Assembly 1972 (SB. 430) PAGENO="0657" 653, AN ACT To be known as the "Disposition of Unclaimed Property Act"; to provide for certain definitions; to provide for prenmptions of abandonment of property or funds held by banking and financial organizations; to provide for enirnptions of abandonment of property or funds held by insurance companies; to provide for presump- tioris of abandonment of property or funds held by utilities; to provide for presumptions of abandonment of stocks, dividends, property or other funds held by business associations; to provide for presumptions of aband- onment of property or funds distributable in the course of dissolution of a business association, banking organi- zation or financial organization; to provide for presumptions of abandonment of property or funds held in a fidu:iarv capacity; to provide for presumptions of abandonment of property or funds held by any court, public corporation, public authority, public officer or political subdivision; to provide for the presumption of aband- onroent of all intan~ble personal property held or owing in this State; to provide for reciprocal provisions for a disposition of unclaimed property where statutes of other states make similar reciprocal provisions; to require bolders of abandoned property to make reports to the State Revenue Commissioner or to the Superintendent of Banks: to provide different requirements for banking and financial organizations; to provide for the publish- ing of noti:es of abandoned property; to require the holder of abandoned property to deliver the same to the State Revenue Commissioner; to transfer responsibility for delivered property from the holder to the State; to boo t:re owner of Property from the right to income or other increments accruing to property which has been deiverei t~ tb~ State Revenue Commissioner; to provide that periods of limitation are not a bar to the pre- on of abandonment: to require the State Revenue Commissioner to sell all abandoned property other money at public auction; to require that funds be deposited in the general funds of the State; to provide for the filing of a claim for property which has been delivered to the State; to authorize the State Revenue Commissioner to consider claims for property and to hold hearings; to provide for a method of appeal of any a:: or failure to act of the State Revenue Commissioner; to authorize the State Revenue Commissioner to de- cline to receive abandoned property under certain circumstances; to authorize the State Revenue Commiaaion- er or the Superintendent of Banks to examine records of ss~spected holders of abandoned property; to author- ize the State Revenue Commissioner to institute court actions; to provide for the administration of this Act; to provide for penalties for failure to report or failure to deliver abandoned property; to authorize the State Revenue Commissioner and the Superintendent of Banks to make rules and regulations; to provide exemptions from the cover-ace of this Act; to provide for the severability of the provisions of this Act; to provide a uniform interpretation of this Act; to provide for an effective date; to repeal conflicting laws; and for other purposes. BE IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA: Section 1. Short Title. This Act may be cited as the "Disposition of Unclaimed Property Act". Section 2. Definitions and Use of Terms. As used in this Act, unless the context otherwise requires: (a) "Banking organization" means any bank, regulated certificated bank, trust company or savings bank engaged in business in this State. (b) "Business association" means any corporation, joint stock company, business trust, partnership, or any association for business purposes of two or more individuals. (c) "Financial organization" means any savings and loan association, building and loan association, credit union, or investment company, engaged in business in thisState. (d) "Holder" means any person in possession of property subject to this Act belon~ng to another, or who is trustee in case of a trust, or is indebted to another on an obligation subject to this Act. (e) "Insurance corporation" means any association or corporation transacting within this State the business of insurart:e on the lives of persons or insurance appertaining thereto, including, but not by way of limitation, endowments and annuities; disability, accident and health insurance; and property, casualty and surety insur- an:e as all said terms are defined in Code Chapter 56-4. (1) `Owner" means a depositor in case of a deposit, a beneficiary in case of a trust, a creditor, claimant, or payee in case-ssf other choses in action, or any person having a legal or equitable interest in property subject to this Act, or his legal representative. S. B. 430 PAGENO="0658" 654 (g) "Person" means any individual, business association, government or political subdivision, public corpo- ration, public authority, estate, trust, two or more persons having a joint or common interest, or any other legal or commercial entity. (h) "Utility" means any person who owns or operates within this State, for public use, any plant, equip- ment, property, franchise, or license for the transmission of communications or the production, storage, trans- mission, sale, delivery, or furnishing of electricity, water, steam, or gas. Section 3. Property Held by Banking or Financial Organizations. The following property held or owing by a banking or financial organization is presumed abandoned: (a) Any demand, savings or matured time deposit made in this State with a banking organization, together with any interest or dividend thereon, excluding any charges that may lawfully be withheld, unless the owner has, within fifteen years: (1) Increased or decreased the amount of the deposit, or presented the passbook or other similar evidence of the deposit for the crediting of interest; or (2) Corresponded in writing with the banking organization concerning the deposit; or (3) Otherwise indicated an interest in the deposit as evidenced by a memorandum on file with the bank- ing organization. (b) Any funds paid in this State toward the purchase of shares or other interest in a financial organization (or any deposit made therewith in this State), and interest or dividends thereon, excluding any charges that may lawfully be withheld, unless the owner has within fifteen years: (I) Increased or decreased the amount of the funds (or deposit), or presented an appropriate record for the crediting of interest or dividends; or (2) Corresponded in writing with the financial organization concerning the funds (or deposit); or (3) Otherwise indicated an interest in the funds (or deposit) as evidenced by a memorandum on file with the fInancial organization. (c) Any sum payable on checks certified in this State or on written instruments issued in this State on which a banking or financial organization is directly liable, including, by way of illustration but not of limit- ation, certificates of deposit, drafts, and traveler's checks, that has been outstanding for more than fifteen years from the date it was payable, or from the date of its issuance if payable on demand, unless the owner has within fifteen years corresponded in writing with the banking or financial organization concerning it, or otherwise indicated an interest as evidenced by a memorandum on file with the banking or financial organi- zation. (d) Any funds or other personal property, tangible or intangible, removed from a safe deposit box or any other safekeeping repository (or agency or collateral deposit box) in this State on which the lease or rental period has expired due to nonpayment of rental charges or other reason, or any surplus amounts arising from the sale thereof pursuant to law, that have been unclaimed by the owner for more than fifteen years from the date on which the lease or rental period expired. Section 4. Unclaimed Funds Held by Insurance Corporations. (a) Life Insurance. (I) "Unclaimed funds", as defined in this subsection, held and owing by a life insurance corporation shall be presumed abandoned if the last known address, according to the records of the corporation, of the person entitled to the funds is within this State. If a person other than the insured or annuitant is entitled to the funds and no address of such person is known to the corporation or if it is not definite and certain from the records of the corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known address of the insured or annuitant according to the records of the corporation. (2) "Unclaimed funds", as used in this subsection, means all moneys held and owing by any life in- surance corporation unclaimed and unpaid for more than fifteen years after the moneys became due and payable as established from the records of the corporation under any life or endowment insurance policy or annuity contract which has matured or terminated. A life insurance policy not matured by actual proof of the death of the insured is deemed to be matured and the proceeds thereof are deemed to be due and payable if such policy was in force when the insured attained the limiting age under the mortality table on which the reserve is based,unless the person appearing entitled thereto has within the preceding fifteen years: (i) assigned, readjusted, or paid premiums on the policy, or subjected the policy to loan; or (il) corresponded in writing with the life insurance corporation concerning the policy. S. B. 430 -2- PAGENO="0659" 655 (b) Insurance other than Life Insurance. (1) "Unclaimed funds", as defined in this subsection, held and owing by a fire, casualty or surety insurance corporation shall be presumed abandoned if the last known address according to the records of the corpo- ration, of the person entitled to the funds is within this State. If a person other than the insured, the princi- pal, or thc claimant is entitled to the funds and no address of such person is known to the corporation, or if it is not deimite and certain from the records of the corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known ad- dress of the insured, the principal, or the claimant according to the records of the corporation. (2) "Unclaimed funds", as used in this subsection, means all moneys held and owing by any fire, casualty or surety insurance corporation unclaimed and unpaid for more than fifteen years after the moneys become due and payable as established from the records of the corporation either to an insured, a principal, or a claimant under any fire. casualty or surety insurance policy or contract. (c) l,!oneys otherwise payable according to the records of the corporation are deemed due and payable ~thcud~ the ~o!icy or contract has not been surrendered as required. Section 5. D~posjts and Refunds Held by Utilities. The following funds held or owing by any utility are presumed abandoned: (a) Any deposit made ba a subscriber with a utility to secure payment for, or any sum paid in advance for, utility services to be furnished in this State, less any lawful deductions, that has remained unclaimed by the gem-on appearing on the records of the utility entitled theretofor more than fifteen years after the termination of the sereires for which the deposit or advance payment was made. (b) Any sum which a utility has been ordered to refund and which was reCeived for utility services rendered in this State. torether with any interest thereon, less any lawful deductions, that has remained unclaimed by the net-son appearing on the records of the utility entitled thereto for more than fifteen years after the date it be- c.ame payahie in accordance with the final determination or order providing for the refund, unless the regula- tory body havinc jurisdiction over the utility has provided by~order for a different disposition of such unclaim- ed funds. Section 6. Codistributed Dividends and Distributions of Business Associations. Any stock or other certificate of ownership, or any dividend, profit, distribution~ interest, payment on principal, or other sum held or owing ba a business association for or to a shareholder, certificate holder, member, bondholder, or other - security holder, or a participating patron of a cooperative, who has not claimed it, or corresponded in writing with the business association concerning it, within fifteen years after the date prescribed for payment or de- livery is presumed abandoned if: (a) It is held or owing by a business association organized under the laws of or created in this State; or (b) It is held or owing by a business association doing business in this State, but not organized under the laws of or created in this State. and the records of the business association indicate that the last known address of the person entitled thereto is in this State. Section 7. Prooertv of Business Associations and Banking or Financial Organizations Held in Course of Dis solution. All intangible personal property distributable in the course of a voluntary dissolution of a business association, banking organization, or financial organization organized under the laws of or created in this State that is neither claimed by the owner within fifteen years after the date for final distribution, nor deposited with the State Treasurer pursuant to the applicable provisions of the Georgia Business Corporation Code or the Georgia Non-Profit Corporation Code, is presumed abandoned. Section 8. Property Held by Fiduciaries. All intangible personal property and any income or increment thereon, held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has, within fifteen years after it becomes payable or distributable, increased or decreased the principal, accepted payment of principal or income, corresponded in writing concerning the property, or otherwise in- dicated an interest as evidenced by a memorandum on file with the fiduciary: (a) If the property is held by a banking organization or a financial organization, or by a business association oreanized under the laws of or created in this State; or (b) If it is held by a business association, doing business in this State, but not organized under the laws of or created in this State. and the records of the business association indicate that the last known address of the person entitled thereto is in the State; or S.B.430 PAGENO="0660" 656 (c) If it is Iseld in this State by any other person. Section 9. Property Held by State Courts and Public Officers and Agencies. All intangible personal property held for the owner by any court, public corporation, public authority, or public officer of the State, or a politi- cal subdivision thereof, that has remained unclaimed by the owner for more than fifteen years is presumed a- bandoned. Section 10. Miscellaneous Personal Property Held for Another Person. All intangible personal property, not otherwise covered by this Act, including any income or increment thereon and deducting any lawful charges, that is held or owing in this State in the ordinary course of the holder's business and has remained unclaimed by the owner for more than fifteen years after it became payable or distributable is presumed abandoned. Section 11. Reciprocity for Property Presumed Abandoned or Escheated Under the Laws of Another State. If specific property which is subject to the provisions of Sections 3, 6, 7, 8, and 10 is held for or owed or dis- tributable to an owner whose last known address is in another state by a holder who is subject to the jurisdic- tion of that state, the specific property is not presumed abandoned in this State and subject to this Act if: (a) It may be claimed as abandoned or escheated under the laws of such other state; and (b) The laws of such other state make reciprocal provision that similar specific property is not presumed abandoned or escheatable by such other state when held for or owed or distributable to an owner whose last known address is within this State by a holder who is subject to the jurisdiction of this State. Section 12. Report of Abandoned P~ppgr(y~ (a) Every person holding funds or other property, tangible or intangible, presumed abandoned under Sections 4 through 10 of this Act shall report to the State Revenue Commissioner with respect to the property as hereinafter provided. (b) The report shall be verified and shall include: (I> Tise name, if known, and last known address, if any, of cads person appearing from the records of the holder to be the owner of any property of the value of $25.00 or more presumed abandoned under this Act; (2) In case of unclaimed funds of insurance corporations, the full name of the insured, annuitant, principal or claimant and his last known address according to the insurance corporation's records; (3) The nature and identifying number, if any, or description of the property and the amount appearing from the records to be due, except that items of value under $25.00 each may be reported in aggregate; (4) The date when the property became payable, demandable, or returnable, and the date of the last transaction with the owner with respect to the property; and (5) Other information which the State Revenue Commissioner prescribes by rule as necessary for the administration of this Act. (c) If the person holding property presumed abandoned is a successor to other persons who previously held the property for the owner, or if the holder has changed his name while holding the property, he shall file with his report all prior known names and addresses of each holder of the property. (d) The report shall be filed before November 1 of cads year as of June 30 next preceding, but the report of insurance corporations shall be filed before May 1 of each year as of December 31 next preceding. The State Revenue Commissioner may postpone the reporting date upon written request by any person required to file a report. (e) If the holder of property presumed abandoned under this Act knows the whereabouts of the owner and if the owner's claim has not been barred by the statute of limitations, the holder shall, before filing the annual report, communicate with the owner and take necessary steps to prevent abandonment from being presumed. The holder shall exercise due dillgence to ascertain the whereabouts of the owner. (f) Verification, if made by a partnership, shall be executed by a partner, if made by an unincorporated association or private corporation, by an officer; and if made by a public corporation, by its chief fiscal officer. S. B. 430 - 4- PAGENO="0661" 657 (g) The initial report filed under this Act shall apply only to items of property which subsequent to the effective date of this Act thall first become "presumed abandoned" as such term is defined by the provisions of this Act; provided, however, that nothing in this Section shall be construed to require a utility to include in its initial report any item of money or property as to which the name of the owner and his last known address do not appear in the records maintained by the utility in accordance with rules or practices sanctioned by any State or federal regulatory body having jurisdiction over such utility. Section 13. Report of Abandoned Property Held by Banking or Financial Organizations. (a) Every person holding funds or other property, tanglble or intanglble, presumed abandoned under Section 3 of this Act shall report to the Superintendent of Banks, sending a copy thereof to the State Revenue Commissioner, with respect to the property as hereinafter provided. (b) The report shall be verified and shall include: (1) The name, if known, and last known address, if any, of each person appearing from the records of the holder to be the owner of any property of the value of $25.00 or more presumed abandoned under Section 3 of this Act: (2) The date when the property became payable, demandable, or returnable, and the date of the last transaction with the owner with respect to the property; and (3) Other information which the Superintendent àf Banks prescribes by rule as necessary for the ad- ministration of this Section. (c) If the person holding property presumed abandoned is a successor to other persons who previously held the property for the owner, or if the holder has changed his name while holding the property, he shall file with his report all prior known names and addresses of each holder of the property. (d) The report shall be filed before November 1 of each year as of June 30 next preceding. The Superin- tendent of Banks ma~ postpone the reporting date upon written request by any person required to file a re- port. (e) If the holder of property presumed abandoned under this Section knows the whereabouts of the owner and if the bwners claim has not been barred by the statute of limitations, the holder shall, before filing the an- nual report. corantunicate with the owner and take necessary steps to prevent abandonment from being pre- s-cn~ed. The holder shall exercise due diligence to ascertain the whereabouts of the owner. (1) Verification shall be executed by an officer of the banking or financial organization. (g) The initial report filed under this Section shall be filed by November 1, 1973. (h) Upon receiving and approving the reports required by this Section, the Superintendent of Banks shall notify all holders of property presumed abandoned to transfer such property to interest paying savings ac- counts in the name of the person or persons to whom the property belon~ according to the records of the banking or financial organization. Annual reports submitted pursuant to subsection (d) of this Section shall show any changes that have transpired on any report previously submitted. (i) No banking or financial organization shall deduct a service charge from any account on which there has been no deposit or withdrawal for 12 or more months or otherwise impose a service charge on any such account. A service charge may be imposed for 12 months immediately following a deposit to or withdrawal from any such account. Section 14. Notice and Publication of Lists of Abandoned Property. (a) Within 1.20 days from the filing of the report required by Section 12, the State Revenue Commissioner shall cause notice to be published at least once each week for two successive weeks in an English language news- paper of general circulation in the county in this State in which is located the last known address of any person to be named in the notice. If no address is listed or if the address is outside this State, the notice shall be pub- lished in the county in which the holder of the abandoned property has his principal place of business within this State. (b) The published notice shall be entitled "Notice of Names of Persons Appearing to be Owners of Aban- doned Property", and shall contain: (1) The names in alphabetical order and last known addresses, if any, of persons listed in the report and en- titled to notice within the county as hereinbefore specified. (2) A statement that information concerning the amount or description of the property and the name and address of the holder may be obtalned by any persons possessing an interest in the property by addressing an inquiry to the State Revenue Commissioner. S. B. 430 -5-, PAGENO="0662" 658 (3) A statement that if proof of claim is not presented by the owner to the holder and if the owner's right to receive the property is not established to the holder's satisfaction within 65 days from the date of the second published notice, the abandoned property will be placed not later than 85 days after such publi- cation date in the custody of the State Revenue Commissioner to whom all further claims must thereafter be directed. (c) The State Revenue Commissioner is not required to publish in such notice any item of less than $25.00 unless he deems such publication to be in the public interest (d) Within 120 days from the receipt of the report required by Section 12, the State Revenue Commission- er shall mail a notice to each person having an address listed therein who appears to be entitled to property of the value of $25.00 or more presumed abandoned under this Act. (e) The mailed notice shall contain: (1) A statement that, according to a report filed with the State Treasurer, property is being held to which the addressee appears entitled. (2) The name and address of the person holding the property and any necessary information regard- ing changes of name and address of the holder. (3) A statement that, if satisfactory proof of claim is not presented by the owner to the holder by the date specified in the published notice, the property will be placed in the custody of the State Revenue Com- missioner to whom all further claims must be directed. Section 15. Payment or Delivery of Abandoned Property. Every person who has filed a report as provided by Section 12 shall within 20 days after the time specified in Section 14 for claiming the property from the holder pay or deliver to the State Revenue Commissioner all abandoned property specified in the report, ex- cept that, if the owner establishes his right to receive the abandoned property to the satisfaction of the holder within the time specified in Section 14, or if it appears that for some other reason the presumption of abandon- ment is erroneous, the holder need not pay or deliver the property, which will no longer be presumed abandon- ed, to the State Revenue Commissioner, but in lieu thereof shall file a verified written explanation of the proof of claim or of the error in the presumption of abandonment. Section 16. Relief from Liability by Payment or Deliveiy. (a) Upon the payment or delivery of abandoned property to the State Revenue Commissioner, the State shall assume custody and shall be responsible for the safekeeping thereof. Any person who pays or delivers a- bandoned property to the State Revenue Commissioner under this Act is relieved of all liabifity to the extent of the value of the property so paid or delivered or any claim which then exists or which thereafter may arise or be made in respect to the property. Any holder who has paid moneys to the State Revenue Commissioner pursuant to this Act may make payment to any person appearing to such holder to be entitled thereto, and upon proof of such payment and proof that the payee was entitled thereto, the State Revenue Commissioner shall forthwith reimburse the holder for the payment. (b) In the event legal proceedings are instituted by any other state or states and any state or federal court with respect to unclaimed funds or abandoned property previously paid or delivered to the State Revenue Commissioner, the holder shall give written notification to the State Revenue Commissioner and the Attorney General of this State of such proceedings within ten days after service of process, or in the alternative at least ten days before the return date on which an answer or similar pleading is due (or any extension thereof secur- ed by the holder). The Attomey General may take such action as he deems necessary or expedient to protect the interest of the State of Georgia. The Attorney General by written notice prior to the retum date on which an answer or similar pleading is due (or any extension thereof secured by the holder), but in any event in reasonably sufficient time for the holder to comply with the directions received, shall either direct the holder actively to defend in such proceedings or that no defense need be entered in such proceedings. If a direction is received from the Attorney General that the holder need not make a defense, such shall not preclude the hold- er from entering a defense in his own name if he should so choose. However, any defense made by the holder on his initiative shall not entitle the holder to reimbursement for legal fees, costs and other expenses as is here- inafter provided in respect to defenses made pursuant to the direction of the Attorney General. If, after the holder has actively defended in such proceedings pursuant to a direction of the Attorney General, or has been notified in writing by the Attorney General that no defense need be made with respect to such funds, a S. B. 430 -6- PAGENO="0663" 659 judgment is entered against the holder for any amount paid tà the State Revenue Commissioner under this Act, the State Revenue Commissioner shall, upon being furnished either proof of payment or satisfaction of such judgment, reimburse the holder the amount so paid. The State Revenue Commissioner shall also reimburse the holder for any legal fees, cost and other directly related expenses incurred in legal proceedinga undertaken pursuant to the direction of the Attorney General. Section 17. Income Accruing After Payment or Delivery. When property is paid or delivered to the State Revenue Commissioner under this Act, the owner is not entitled to receive income or other increments accru- ing thereafter. Section 18. Periods of Limitation Not a Bar. The expiration of any period of time specified by statute or court order, during which an action or proceeding may be commenced or enforced to obtain payment of a claim for money or recovery of property, shall not prevent the money or property from being presumed a- bandoned property, nor affect any duty to file a report required by this Act or to pay or deliver abandoned property to the State Revenue Commissioner; provided however, that holders shall not be required to report cr to pay or deliver abandoned property as to which the period of the statute of limitations applicable to the enforcement of ans' claim to such property shall have expired prior to the effective date of this Section. Section 19. Sale of Abandoned Property. (a) All abandoned property, other than money delivered to the State Revenue Commissioner under this Act, shall within one year after the delivery be sold by him to the highest bidder at public sale in whatever city in the State affords in his judgment the most favorable market for the property involved. The State Revenue Commissioner may decline the highest bid and reoffer the property for sale if he considers the price bid insuf- Orient. He need not offer any property for sale if, in his opinion, the probable cost of sale exceeds the value of the property. (b) Any sale held under this Section shall be preceded by a single publication of notice thereof, at least three weeks in advance of sale in an English language newspaper of general circulation in the county where the property is to be sold. (c) The purchaser at any sale conducted by the State Revenue Commissioner pursuant to this Act shall re- ceive title to the property purchased, free from all claims of the owner or prior holder thereof and of all per- sons claiming through or under them. The State Revenue Commissioner shall execute all documents necessary to complete the transfer of title. - Section 20. Deposit of Funds. (a) All funds received under this Act, including the proceeds from the sale of abandoned property under Section 19. shall forthwith be deposited by the State Revenue Commissioner in the general funds of the State, except that the State Revenue Commissioner shall retain in a separate trust fund an amount not exceeding S 103,033 from which he shall make prompt payment of claims duly allowed by him as hereinafter provided. Before making the deposit he shall record the name and last known address of each person appearing from the holder's reports to be entitled to the abandoned property and of the name and last known address of each in- sured person or annuitant, and with respect to each pollcy~ or contract listed in the report of an insurance corporation, its number, the name of the corporation, and the amount due. The record shall be available for public inspection at all reasonable business hours. (b) Before making any deposit to the credit of the general funds, the State Revenue Commissioner may deduct: (1) any costs in connection with sale of abandoned property, (2) any costs of mailing and publication in connection with any abandoned property, and (3) reasonable service charges. Section 21. Claim for Abandoned Property Paid or Delivered. Any person claiming an interest in any property delivered to the State under this Act may file a Claim thereto or to the proceeds from the sale there- of on the form prescribed by the State Revenue Commissioner. S. B. 430 -7- PAGENO="0664" 660 on2 ~(grminatio99f~laims. (a) The State Revenue Commissioner shall consider any claim filed under this Act and may hold a hearing and receive evidence concerning it. If a hearing is held, he shall prepare a finding and a decision in writing on each claim filed, stating the substance of any evidence heard by him and the reasons for his decision. The de- cision shall be a public record. (b) If the claim is allowed, the State Revenue Commissioner shall make payment forthwith. The claim shall be paid without deduction for costs of notices or sale or for service charges. Section 23. Judicial Action Upon Determinations. Any person aggrieved by a decision of the State Revenue Commissioner or as to whose claim the State Revenue Commissioner has failed to act within 90 days after the filing of the claim, may appeal such decision or lack of decision to the Superior Court of Fulton County, Georgia. The proceeding shall be brought within 90 days after the decision of the State Revenue Commission- er or within 180 days from the filing of the claim if the State Revenue Commissioner fails to act. The appeal shall be tried de novo without a jury. Section 24. Election to Take Payment or Delivery. The State Revenue Commissioner, after receiving reports of property deemed abandoned pursuant to this Act, may decline to receive any property reported which he deems to have a value less than the cost of giving notice and holding sale, or he may, if he deems it desirable because of the small sum involved, postpone taking possession until a sufficient sum accumulates. Unless the holder of the property is notified to the contrary within 120 days after filing the report required under Section 12, the State Revenue Commissioner shall be deemed to have elected to receive the custody of the property. Section 25. ~ The State Revenue Commissioner or the Superintendent of Banks, as the case may be, may, at reasonable times and upon reasonable notice, examine the records of any person if he has reason to believe that such person has failed to report property that should have been reported pursuant to this Act. Section 26. Proceeding to Compel Delivery of Abandoned Property. If any person refused to deliver property to the State Revenue Commissioner, as required under this Act, he shall bring an action in a court of appropriate jurisdiction to enforce such delivery. Section 27. Administration. The State Revenue Commissioner shall create a Division of his office, to be known as the Unclaimed Property Division, for the purpose of administering the provisions of this Act. An appropriation shall be made biennially for the maintenance of such division and to provide sufficient staff to adequately enforce the provisions of this Act. Other Divisions of the office of State Revenue Commissioner, as well as all State officers and employees generally, shall assist in the enforcement of this Act in connection with the performance of their normal duties. Section 28. Penalties. Any person, firm or corporation who wilfully fails to render any report or perform any other duties required under this Act shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine not to exceed Si 000.00 or confinement in the county or other jail not to exceed six (6) months, or by both such fme and imprisonment at the discretion of the court. Section 29. ~ The State Revenue Commissioner and the Superintendent of Banks are hereby authorized to make necessary rules and regulations to carry out the provisions of this Act. Section 30. Effect of Laws of Other States. This Act shall not apply to any property that has been presum- ed abandoned or escheated under the laws of another State prior to the effective date of this Act. ~gç~jo~i. Effect of Existing Georgia Laws. This Act shall not be construed to apply to any property, tangible or intangible, which is a part of an estate subject to escheat under Chapter 85-1 1 of the Code of Georgia of 1933. -o- PAGENO="0665" 661 Section 32. Severability. If any provision of this Act or the application thereof to any person or circum- stances is held invalid, the invalidity shall not affect other provisions or applications of the Act which can be given effect without the invalid provision or application, and to this end the provisions of this Act are sever- ab!e. Se:tion 33. Uniformity of Interpretation. This Act shall be so construed as to effectuate its general purpose uniform the law of those states which enact it. Se:tion 34. Effective Date. The provisions of this Act shall become effective January 1, 1973. Section 35. ~gggal. AllIaws and parts of laws in conflict with this Act are hereby repealed. PAGENO="0666" 662 AM ENDMENT Section 6, page 3 herein, of the Disposition of Unclaimed Property T~ct' was amended in 1976, so that it now reads, in its entirety, as follows: Section 6. Undistributed dividends and distri- butions of business associations (a) Any stock or other certificate of ownership, or any dividend profit, distribution, interest, payment on principal , or other sum held or owing by a business association for orto a shareholder, certificate holder, member, bondholder, or other security holder, or a particular patron of a cooperative, who has not claimed it, or corre- sponded in writing with the business association concerning it, within seven years after the date prescribed for payment or delivery is presumed abandoned if: (1) It is held or owing by a business association organized under the laws of or created in this State; or (2) It is held or owing by a business associ- ation doing business in this State but not organized under the laws of or created in this State, and the records of the business association indicate that the last known address of the person entitled there- to is in this State. (b) In the event of the expiration of the seven- year period specified in section 22-511 (c) of the Georgia Business Corporation Code for the claim by a shareholder or other entitled person of any dividend or other distribution or payment to which such shareholder is entitled from a corporation organized under the Georgia Business Corporation Code, such that an action for recovery thereof cannot be brought against the corporation, then such divi- dend or other~ distribution or payment is presumed abandoned, notwithstanding the provisions of sub- section (a) of this section.' PAGENO="0667" 663 GEORGIA RULES OF DEPARTMENT OF BANKING AND FINANCE BANKS CHAPTER 80-1-8 DISPOSITION OF DORMANT ACCOUNTS AND ABANDONED PROPERTY TABLE OF CONTENTS 80-l-8-.Ol Dormant Accounts; Service Charges 80-l-8-.02 Abandoned Property Defined 80-1-8 -.03 Reports of Abandoned Property Sold 80-1-8-.04 Disposition of Abandoned Property 80-1-8-.O1 Dormant Accounts; Service Charges (1) Dormant accounts are hereby defined as follows: (a) Demand Deposit Accounts are deemed to be dormant when the depositor has neither increased nor decreased the amount of the deposit nor corresponded with the bank regarding the deposit for a period of not less than twelve months imme- diately preceding the determination. (b) Time and Savings Deposits, including Certificates of Deposits, are deemed to be dormant when the depositor or share- holder in the case of credit unions and savings and loan asso- ciations has neither increased nor decreased the amount of the deposit or shares, nor corresponded with the financial institution regarding the deposit or shares for a period of not less than five (5) years from the date upon which the deposit or share first became eligible for withdrawal. (c) Certified and Official checks shall be deemed to be dor- mant when they have not been presented for payment within seven (7) years of their date o~f issue, or if the issuing financial institution has not had correspondence with the registered owner of the check for a period of seven (7) years immediately preceding the determination of dormancy. (2) Where the signature card or other evidence of the financial institution's debt does not make provision for a maintenance or ser- vice charge on a dormant account as heretofore described, such a charge may be assessed in an amount not to exceed $2.00 per month for the twelve-month period immediately following any deposit to or withdrawal from the account. No service charge or maintenance charge may be assessed for the dormancy period beyond the first twelve months. Authority: Ga. L. 1974, pp. 733, 819. 37 PAGENO="0668" 664 Chapter 80-1-8 Page 2 80-1-8-.02 Abandoned Property Defined (1) Dormant accounts as heretofore defined shall be considered abandoned when the accounts have been inactive for fifteen (15) years including the period of time from last activity to date of dor- mancy as defined in Rule 80-1-8-.0l. (2) Shares of interest or funds paid for the purpose of purchasing shares of interest in a financial institution and interest and dividends accumulated thereon shall be deemed to have been abandoned when the amount has been neither increased nor decreased for a period of fifteen years following the payment of the funds or when the owner has not corresponded in writing with the finanacial institution regarding the shares. (3) Accrued or accumulated dividends on shares of interest found to be abandoned shall be deemed abandoned. (4) Any property held by a financial organization for safekeeping or in a safe deposit box for a period of fifteen (15) years without rental having been paid on the safe deposit box or the owner of the property having otherwise corresponded with the bank in writing concerning the property shall be deemed abandoned. Authority: Ga. L. 1972, p. 762; 1974, P. 733. 80-l-8-.03 Reports of Abandoned Property Held (1) No later than November 1 of each year each financial organ- ization shall file with the Commissioner of Banks a report showing all abandoned property held by that financial organization on the pre- ceding June 30. Each report shall contain the following information: (a) The name and last known address of each person appear- ing as owner of the property, where the value of the property is estimated to be $25 or more. (b) The date when the property was first available for trans- fer, withdrawal, or conversion by the owner. (c) The date of the last transaction with regard to the property. (d) The total aggregate value of all property deemed to be abandoned in accordance with this regulation which is not re- quired to be listed under paragraph (a) above. (e) An itemized listing of all changes to properties reported to have been abandoned on previous reports. (2) The reports shall be certified as correct by an officer of the financial organization reporting. (3) Before filing the required reports, the holder of the property shall make a reasonable effort to notify the owner that the property is to be declared abandoned and for this purpose the mailing of a statement of the property, held to the last known address of the owner will be deemed as sufficient reasonable effort. Authority: Ga. L. 1972, p. 762; 1974, p. 733. 38 PAGENO="0669" 665 Chapter 80-1-8 Page 3 80-1-8-.04 Disposition of Abandoned Property (1) Upon receipt of notice by the holder of abandoned property from the Department of Banking and Finance, the holder shall within thirty (30) days transfer all sums representing abandoned Demand Deposits, Time and Savings Deposits, Member Shares, Certified and Official Checks, and Accrued Interest or Dividends to an interest-bearing account. (2) Upon receipt of notice by the holder of abandoned pro- perty from the Department of Banking and Finance, the holder shall within sixty (60) days cause all property in the form of shares of interest in a financial organization to be sold to the highest bidder at public sale in the city where the principal office of the holder is located. (a) Such public sale shall be preceded by the publication on a single occasion of notice pf the sale at least three weeks prior thereto in a newspaper of general circulation in the county where the property is to be sold. (b) Moneys received from such sale shall be deposited in an interest-bearing account in the name of the owner of the shares prior to the determination of its abandonment. (3) Property held for safekeeping and in safe deposit boxes deemed to have been abandoned shall be placed for sale in the manner prescribed in paragraph (2) above and the moneys received shall be deposited to an interest-bearing account in the name of the last known owner of the property. (4) Holders of abandoned property in interest-bearing accounts who do not choose to maintain such accounts shall within thirty (30) days of receipt of notice from the Department of Banking and Finance to transfer abandoned properties to interest-bearing accounts, transmit such funds to the Commissioner and thereafter such financial organizations shall be relieved of reporting as to those properties surrendered. Authority: Ga. L. 1972, p. 762; 1974, p. 733. Effective Sept. 17, 1975 PAGENO="0670" 666 HAWAII QUESTIONNAIRE RESPONSE RECEIV~ OCT 2 ~ 0iJ~tB PJitI Honorable Benjamin S. Rosenthal Chairman Commerce, Consumer, and Monetary Affairs Subcommittee Ninety-Sixth Congress Congress of the United States House of Representatives Rayburn House Office Building Room B-377 Washington, D. C. 20515 Dear Congressman Rosenthal: In response to your letter of October 3, 1979 regarding the above subject matter, we provide the following information in the order in which the subjects were listed in the questionnaire: 1. Unclaimed property statute, regulations, and administrative program: a. (i) Types of property covered are money, stocks, bonds, certificates of membership in corporations, securities, bills of exchange, deposits, interest, dividends, income, amounts due and payable under terms of insurance policies, pension trust agreements, profit sharing plans, credit balances on paid wages, security deposits, refunds, funds deposited to redeem stocks, bonds, coupons and other securities together with any interest or increment thereon. (ii) Types of institutions covered are banks, trust companies, savings banks, savings and loan associations, building and loan associations, credit unions, investment companies, public corporations, joint stock companies, business trusts, partner- ships, or any association for business purposes of two or more individuals, life insurance corporations, utility companies, government or political subdivisions, public authorities, estates, trusts, any legal or commercial entities, and any holder acting in a fiduciary capacity for the benefit of another person. STATE OF HAWAII DEPARTMENT OF BUDGET AND FINANCE October 17, 1979 Re: PAGENO="0671" 667 (iii) The holding period for various types of property are: Travelers Checks: 15 years from date of issuance. Distributable property held by dissolved corporations: 2 years after date for final distribution. All other property: 7 years after last contact with the owner. (iv) The role of the State is purely custodial. (v) The State does not pay interest on funds under its custody. (vi) There are cone. have cot as yet promulgated any rules and regulations for the prcgra because the State law is sufficiently conprehensive and c. All requirements regarding the disposition of unclaimed property are contained in Chapter 523, Hawaii Revised Statutes, Uniform Disposition of Unclaimed Property Act. d. (i) Unclaimed property advertisements are placed in a newspaper of general circulation in each of the four counties of the State. (ii) The advertisecents are placed and paid for by the State. (iii) The advertisements include owners' names, owners' last Imown addresses, if any, and names of the holders. (iv) The advertisements list only items of value of $25.00 or more. (v) The advertisements include only the owners of unclaimed property that is being reported for the first time. Attached is a copy of the State's cost recent advertising notice of August 1979 labelled Attachment A. e. Holders of unclaimed property are required by statute to exercise due diligence to ascertain the whereabouts of the owner and if the whereabouts of the owner is known, they must communicate with the owner and take necessary steps to prevent abandonment from being presumed. f. There are no provisions in our Unclaimed Property Act that places limitations on "bounty hunters". 67-'~0 0 - 81 - L~3 PAGENO="0672" g. The seven-year period of inactivity before abandonment is presumed is determined from the last time the owner has made a transaction or evidenced any interest in his account. Mail addressed to the owner and not returned by the post office as undeliverable is not considered a "contact" since this is action taken by the holder, not the owner. h. (i) We have not conducted any field audits or investigations as we are still considering this aspect of unclaimed property administration. (ii) There is no staff or budget available for audits or investiga- tions. (iii) (iv) (v) (vi) i. We have one full-time clerk and two other employees who divide their time im performing unclaimed property duties and other finance division activities. 2. Amounts of unclaimed property reported and delivered to owners: Please refer to Attachment B. 3. Brokerage firm reports: a. Securities brokerage firms filing positive reports include: 1) Bache Halsey Stuart Shields, Inc. 2) Merrill, Lynch, Pierce, Fenner & Smith, Inc. b. The dollar amounts of cash, listings of securities, and numbers of individual accounts reported are as follows: Brokerage Firm Cash __________ _____________ Bache Halsey, etc. $921.87 No. of Securities mdiv. Accts. -- Reported in Aggregate 668 None. None. None. None. $2,008.42 $2,930.29 Merrill, Lynch, etc. Aggregate -- 8 -- 8 PAGENO="0673" 669 c. The breakdown of the aggregate cash reported by all brokerage firms as between cash belonging to individual named owners and cash without names is as follows: Aggregate Total: $2,930.29 Individual Owners: $1,981.54 Unknown 0.-nets: $948.75 Cc~liaace: a. Degree of ccpliance with the State's unclaimed property laws: E V A L U A T I 0 N Substantially Poor or Type of Complete Fair No Institution Compliance Compliance Compliance __________ 1. National Bank X 2. State Banks X Reports are received on a timely basis. Reports are received on a timely basis. Reports are received on a timely basis. X Of 27 securities brokerage firms In the State, we receive reports from only 2 X Of 21 mutual fund firms, none has sub- mitted a report. Evaluation Factors Reports are received on a timely basis. Reports are received on a timely basis. Reports are received on a timely basis. x 2. Federal Sa--inas & & Loans 5. Federal Credit Unions 6. State Credit 8. Nutual Funds PAGENO="0674" 670 EVALUATION Substantially Poor or Type of Complete Fair No Evaluation Institution Compliance Compliance Compiiance Factors 9. Insurance X Of 559 insurance Companies companies in the State, we received reports from 77 for a compliance percen- tage of 14%. 10. Non-financial Corporations N/A We do not have the - information necessary to make an evaluation. b. We have not conducted any field audits, investigations, or litigations. c. We do not have the information necessary to make this type of estimate. 5. Service Charges: a. The only information we receive concerning service charges imposed by banks and other financial institutions on unclaimed property are the charges listed on the annual reports filed with the State. b. Imposition of service charges on dormant accounts appear to occur only occasionally. c. No other type of institution except banks has listed service charges on dormant accounts in their annual reports. d. We have no information regarding advance notification to customers of service charges on dormant accounts. e. During the five years existence of our program, only three reports submitted by two banks listed service charges on dormant accounts. One report listed service charges on dormant bank drafts at a rate of 50~ per month. The other -two reports listed service charges ranging from $1.04 to $11.00 per account. f. The only service charges are those listed in 5(e) above. g. We attach copies of two reports (Attachments C & D) submitted by a bank where dormant accounts were closed by service charges. PAGENO="0675" 671 h. The total dollar exount of service charges imposed by banks for 1978 was $355.36 as shown on Attacksent D. For 1975, the total dollar exnnnt was $23,905.30. i. Except for the fact that over a five-year period we have received only three reports frc two banks listing service charges, we do not have the information available to make an estimate of unreported service charges. j. Under Chapter 523, Hawaii Revised Statutes, Uniform Disposition of Unclaimed Property Act, there are no provisions governing the amounts of service charges that banks or other institutions may impose on dormant accounts or other unclaimed property. k. We have not asserted any claims for refunds of service charges. a. ~e have exterienced no cases regarding the type of situation mentioned. b. There have been cases (over 20) where dormant accounts in amounts of 92C3.00 or mare were turned over to the State even though the owner cf the account was living and receiving nail at the same address as shown in the records of the institution. The amounts ranged from $273.03 to $4,590.00. This information was obtained from our claim files where claimants listed the sameaddress (where claim checks were mailed and not returned) as the last known address listed on the institution's reports. c. We have experienced no cases regarding the type of situation mentioned. have experienced no cases regarding the types of situations e. Ue have not cbserved any practices in which banks or other financial institutions seek to evade the intent of the unclaimed property laws or evade their responsibilities to the owners of the property. f. We cannot identify any other particular banking services or programs that appear to be particularly vulnerable to service charge abuse or other abuse of public trust by the banks. 7. Unclaimed property held by federal government: a. We filed a claim in 1976 for $14,000.00 of U.S. savings bonds with the Department of the Treasury, Fiscal Service, Division of Transactions and Ruling, Parkersburg, West Virginia 26101. b. The Treasury Department replied that it does not recognize claims for payment by a State acting merely as custodian of unclaimed or PAGENO="0676" 672 abandoned securities and not as successor in title and ownership of the securities.' Hawaii's unclaimed property program is a custodial type of program. c. Chapter 523, Hawaii Revised Statutes, Uniform Disposition of Unclaimed Property Act. 8. Suggestions for federal action: a. We believe that our unclaimed property law is comprehensive and effective in ensuring compliance from holders and at the same time protecting the rights of owners of dormant bank accounts. Accordingly, we do not believe that any regulatory steps involving federal regulatory agencies are necessary. b. We do not believe that any corrective federal legislation by Congress is necessary at this time. Yours very truly, (Mrs.) EILEEN R. ANDERSON Attachments PAGENO="0677" insurance companies A~tach~ient B 673 3a a. Amounts of uncl~ined property reported and delivered to owners: June 30, June30, 1976 1977 Numbers of institutions reP~~g: All institutions 183 Barks 9 Courts 2 :ro:ems 2 Credit Umicns 32 :msurarce cc:onies 69 Savings & Loans 7 others 62 of Prooertv reported: 6/30176-77 ______________ All institutions $411,644.74 178,715,19 21,050,19 85.00 41,819,72 11,106,13 132,199.08 26,669.43 ~ $215, 578.09 125,426,29 16,621,22 92,80 18,290,84 17,770,44 19,089,34 18,287,16 276 11 1 2 46 72 16 128 6/30/77 - 78 $788,335.90 201,904,52 25,482,07 2,710,67 20,491,72 28,883,34 486,708,12 22, 155,46 June 30, 1978 298 22 3 2 28 77 11 155 6/30/78 - 79 $580, 107,36 201,672,46 12,341,10 28,291,65 22 , 006. 67 208,856,83 106,938.65 * $347,922.00 177,536.58 12,830,16 4.80 28,852,51 20,147.40 66,088,47 42,462,08 Banks Courts Credit Unions :rs.~-er:e C remiss Savings & Loans All others o. Amount of oro:ert' re-~tted: All institutions Banks Courts Brc ke rs Credit Unions Insurance ccmoanies Savings & Loans All ctners *$428, 321, 23 164,024.32 26,267,21 957,80 29, 273, 15 20,728,54 157,103.00 29,967,21 of ~rdividual accounts in excess of 5500 All institutions - We have no exact figures availab estimate the number of unclaimed Banks with values in excess of $500.00~ Brokers .e, however, wel roughly property acco4its reported to be more tha~i 100. of na-es advertised: f. Loiiar amounts returned to owners: ~ h. Amounts remitted minus claims 2690 (e) $221,352.34 53.777. $163,995.20 1800 (e) $393,811.27 49.957 $413,774.62 2050 (e) $257,078.92 44.317. $278,389.49 * Anmunts remitted should equal amounts reported less amounts returned to owners, however, our balances differ because of some amounts reported during a fiscal year which are not collected until the subsequent fiscal year. PAGENO="0678" Attccbm~L sector of F!naoce State of Nassau `P. 0. Boo 150 Hooolulu Fioaocc Dioissoe 674 CITY BANK `"`"7~Jame of Holder) THIS SPACE~11 Dote: .._! Yi,19Th_____-_.. , 19_ CHECK IS FOR THE FOL' WINOi SCHEDULE OF ITEMS REMOVED FROM OUR REPORT ~ July 2L]~,7O, i~_ (See reverse olde for inotructl050) ADDRESS AMOUNT f REASON FOR DELETION - -410040 409336 418858 406027 409980 421999 400479 413856 406485 407961 408062 423029 408925 419838 420933 418181 406833 406841 406159 424785 409964 407988 400940 420097 418866 401122 417800 401025 418327 405624 410229 410210 NAME OF OWNER #GBANLOO, Bartolorne NGBANLOO, Eufronio S. 3ATALONA, Jacob SOMINOO'J Tedorico P ESPINUEVA, Mrs. Gladys STE Key FUJI NO KAI GREEN, William O.or Cecilia HENNA, Henry KAEO, Peter P. KAM, Ernest N. Jr. KILANTANO, Alfred B. or Gladys J. Coelho LAGAZO, Rufino or Tedosia LAU, JAMES K. H. LECROY, Robert E. LEE, K. G. LOPEZ, Joseph MIMURA,Felicia STE Lorraine M. MIMURA, Felicia STE Myra K. MIYOOAWA, Masao & Jeanne M. ODA, Ja~mes S. ORIMOTO, Alice PASTELOK, Paul J. ROGERS, C. SHOOTER, Henry SILVA, Eugene SOLIBEN, Mary M. TERAOKA, Hisao THOMPSON, Charles K. TOKUDA, Mabel F. or NIHI, Napoleon TONG, Mirmam, A. STE Tanmiy K.J YAZAWA, Janet STE Carl H. YAZAWA, Janet ITF Susan S. none 504 Mokauea St., Mono 135 Huanu St., Mono 1339 Akana Lane, Mono o 629 Mokauea St., Hono P.O.Box 1177, Hono 2057 Alewa Dr., Mono none none none P.O.Box 1l67,.,Ewa 928 A Kinau, MOno. USS BarberoSSG 317 Pearl Harbor 11174 12th Ave., Mono hone 701 Winant, Mono. 701 Winant, Mono. 2028 Algaroba #3,Hono none P.O.Box 373,Pearl City 250 5 Motel, Mono. 1145 Bishop, Mono. Mqs.Co.4th Marines Regt. 1st Marine Brig.EME none none 1320 8th Ave., Mono. Waimano Home 815 5. Motel, Hone. .RR 1 Box 921 Waianae none none 928 A Kinau, Mono. 250 5. Motel St. RR 1 Bus 921 Waianae TOTAL AMOUNT OF THIS PAGE 5 1.56 5.29 ` 5.29 4.97 3.01 1.04 1.04 1.04 1.04 10.61 is 11.00 3.17 16. B9 1.56 1.04 1.04 1.04 1.04 5.29 11.00 4.10 1.04 1.56 5.29 5.29 10.61 3.31 11.00 5.29 5.29 151 .32 10.25 10.25 62.41 82.91 234.23' DORMANT SERV. CMOS. DORMANT SERV.~CHGS. DORMANT SERV. CHGS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. ACCOUNT CLOSED ~5J?Ota.~ DORMANT. SERV. CMOS. DORMANT SERV. CHOS. - DORMANT SERV. CMOS. DORMANT SERV. CHGS. DORMANT SERV. CHGS. DORMANT SERV. CMOS. DORMANT SERV. CHGS. DORMANT SERV. CHGS. ACCOUNT CLOSED11'°'~'°°' DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. . CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. - DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. DORMANT SERV. CMOS. ACOCUNT CLOSED ~ ~~er ACCOUNT CLOSED u'°° F'NAN~E DV~ON * Y10 `) A~CB 408925 407988 405624 LAU, James, K. M. PASTELOK, Paul J. TONG, Miriam A. STE Taimny K.J. (Origial only to be attached on Remittance Statement for Abandoned Property. FORM No. .~E.4J Form No. BFF5 PAGENO="0679" Attuch~nent D ~-Ofri;u,ce F-n~. Du:~ OF O,.~ER 3 accounts under $25 Charles Aipia, Jr. 4 accounts under $25 2523 ~uricn Tanicuchi 2622 ~ian Taric~chi ~iuricn C. Taniçuchi .17C2C31 Drafts-ens Club of Ha~uii 3927~S Aifro~ 2uis/Hiro~i Yarode .2 2 ac:c~nts under $25 3 accc~nts under $25 13 accounts under $25 13 4 accounts under $25 Executive Buying Corp. 4 accounts under $25 1 eccc~nt under $25 20 e:cc~ntu ur,dor $25 2 acccurts under $25 2 accc~'nts under $25 4 accounts under $25 PAGES 1 and 3 checking accoun James B. Cole & Frank N. Wata 1~, /9 71' k/cf I?;I'e. ,e/ ~ p~/ ~I~/~c ~:cv',,Ir'-S ~ /~;j,,1 C(."7'& ~ ~c- i~~- ~ /.~. AMOUNT REASON FOR DELETION SERV. CHGS. CC#04 000175 2/21/78 SERV.CHGS. CC#0l 094745 3/8/78 CC~0l 094746 3/8/78 CC#0l 094747 3/8/78 Reactivated 5/5/78 Raactivated 5/5/78 SERV. CHGS. SERV. CHGS. SERV. CHGS. SERV. CHGS. CC#03033529 4/28/78 SERV. CHGS. SERV. CHGS. SERV. CHGS. SERV. CHGS. SERV. CHGS. SERV. CHGS. nd Arcade, 1 in9 675 (~ CITY EA~K DO NOT USE THIS SPACE Number: Date; MAY 8 c' Hc'ir) Ce ICe'S ven'o'.'eo FPO'/ OUR REPORT OF AUE!JST 2 . 4700 ADDRESS 7.63 60.00-' 34.28 25.25 25.25 25.25 48.60 517.28 16.35- 21.30- 90.38-'- 22.50' 177.72- 37.20 4.20 36.82 18.10' 18.50' 10.10' rs, Pool I harges tot 38.00 ,4c0c...#u c.loie~L ,iecou,'a eL~ea4Z for First State Invest abe had Doonnant- Service /0cc' fc'.co ic',O(' AMOUNT OF THIS PAGE 1234.71 $1234.71 (Origial only to be attached on Remittance Statement for Abandaned Property, FORM No. .OEEd) Ftr,, No. BFF5 PAGENO="0680" V PAGENO="0681" 677 ILLINOIS QLESTIOXxAIRE RESPONSE STATE OF ILLINOIS DEPARTMENT OF FINANCIAL INSTITUTIONS 421 E. CAPITOL STREET SPRINGFIELD ~7O5 November 21, 1979 The Honorable Benjamin S. Rosenthal Concress of the United States Hojse of Representatives Cc~-erce, Consu-er, and Honetary Affairs Subcc~ittee Rayb'jrn House Office Buildinc, Room B-377 washington, D. C. 20515 2-ear Ccngressr-en Rosenthal: ~.t:ached please find our response to your questionnaire regarding the subject of unolaired property. I hope the information provided will be of assistance to you and and your Committee as you consider federal legislation. If you or your staff have any questions or are in need of additional information, please call the Administrator of our Unclaimed Property Division, Michael E. Fryzel, (312) 793-2004. Sincerely, EDGAR F. CALLAHAN DIRECTOR EEC/sd Attachment Administrative Division Credit Union Divnion Unclaimed Property Division (217) 782-2831 (217) 782-2833 (217) 782-6692 PAGENO="0682" 678 ILLINOIS DEPARThENT OF FINANCIAL INSTITUTIONS UNCLAIMED PROPERTY DIVISION RESPONSE TO UNCLAIMED PROPERTY QUESTIONNAIRE 1. Unclaimed property statute, regulations, and administrative program: a. The objectives of the Illinois Uniform Disposition of Unclaimed Property Act are as follows: to find the missing owner and return or reactivate the unclaimed property; to act as custodian and protect the missing owner's asset; and to help defray the cost of State government through the use of unclaimed money until it is claimed by the owner or rightful heir. The Illinois Unclaimed Property Act defines classes of persons, corporations, and institutions as well as the various types of property that is subject to the Act. Included are such institutions as banks, savings and loan associa- tions, credit unions, business associations, insurance companies, munici- palities and utilities. Section 9 of the Act states that any intangible property held or owing in Illinois is subject to the Act. The only types of financial assets that are specifically excluded from the Act are active express trusts, property exempted by the Statute of Limita- tions prior to enactment of the Act, and annuity, pension or benefit funds supported by public revenues. Property is considered unclaimed after a period of seven years of no activity, contact, or indication of interest on the part of the owner. There are two exceptions allowed by law. Unclaimed property in a liquidation must be reported within two years of final distribution and travelers' checks are reportable fifteen years after no activity or contact. The Unclaimed Property Act establishes the State as custodian for a missing owner's financial assets. Unclaimed property is always available for claim by the o~mer or rightful heir and never becomes the property of the State. The State does not pay interest or dividends on unclaimed property remit- ted to its custody. b. Enclosed please find a copy of the current Rules and Regulations promulgated to administer the Unclaimed Property Act. Aslo enclosed is a draft copy of anticipated changes in the Rules and Regulations. c. There are no banking, insurance or general commerce laws or regulations in Illinois that conflict with the requirements of the Illinois Unclaimed Prop- erty Act. d. The Illinois Unclaimed Property Act requires that the holder of unclaimed property make an effort to contact the owner before reporting property as presumed abandoned to the State. After reporting to the State, the latter publishes the name and last known address in a generally distributed news- paper in the county of the last known address for every account over $100. The Department publishes the names of owners of life insurance proceeds PAGENO="0683" 679 after the May 1st report and others are published after the November 1st reporting cycle. Names of missing owners are published only once. Enclosed is a copy of the publication of missing owners which appeared in the Chicago Tribune on August 9, 1979. e. In addition to the holder's effort to find the owner and the State's effort of publishinc names in the county of last known address, other efforts in- clude notifvine State Legislators of, names of missing owners in their res- pective districts and spot advertisements on radio and TV and feature articles in rawepamers. f. With respect to `bounty hunters', the State of Illinois requires that the latter sho~: his contractual right to work for the missing owner. The State of Illinois restricts the fee of a bounty hunter to 1O~ of the findings. c. Property in Illinois is presumed ab~ndoned if there has been no activity, contact, or indication of interest by the owner of that property for at least seven years. The non-return df US. mail is not considered contact or an indication of interest. h. The Department of Financial Institutions has a staff of ten field examiners `~hn conduct audits of institutions which may have unclaimed property. Our staff has examined banks, savings and loan associations, insurance companies, utilities, municipalities, and corporations. Enclosed are copies of examina- :icm pro:adures foiio~:ed by our field staff. i. The budget for the administration of the Unclaimed Property Division of the Department of Financial Institutions for this fiscal year is S682,800, The Division has a staff of 26 full-time people, 2. The initial reporting of unclaimed property by a holder only requires the names and last kna~n address of missing owners of accounts over $100 and just the number of unclaimed accounts under $100. After publication, the holder must surplv information which matches the owner of each account and the amount due that person. Anproximately 4,000 institutions have remitted close to eight million dollars in each of the last three years. The State of Illinois has advertised the name of almost 12,000 missing owners in each of the last three years, Illinois has returned or caused to be returned approximately half of all unclaimed property reported. 3. Approximately 105 brokerage firms are reporting unclaimed property on a regular basis to the State of Illinois. Of that total, 81 have stated that they have had nothing to report in the last three years. Twenty-four brokerage firms have reported stock certificates. Theaverage annual report of those reporting mnnev is approximately Sl,000. 4. ;ational and state banks, federal and state savings and loan associations, federal and state credit unions, and insurance companies have shown a good degree of corpliance evidenced by the fact that almost all at. least file an annual report. PAGENO="0684" (380 Large utilities report better than small ones. Compliance from corporations, retailers, county offices, and municipalities could be greatly improved. In the past year, this Department conducted approximately 800 examinations and, in the majority of cases, found unreported unclaimed property. 5. A majority of banks, and some savings and loan associations and credit unions impose a service charge on small dormant accounts. These charges vary from $2 per year to $2 per month. We have generally found that institutions imposing a service charge have on file a signed agreement by the customer stating that he agrees to abide by current or future bylaws relative to service charges. The Illinois Unclaimed Property Act permits the holder to deduct a lawful charge from the remittance of unclaimed property. We define lawful to mean that a signed agreement exists between the holder and depositor relative to their service charge. The Department also takes the position that we stand in the shoes of the deposi- tor when we receive unclaimed property. If a holder would reinstate an owner's account to its maximum value should that owner appear, then they must remit the same amount to the State when unclaimed property is remitted. 6. Illinois Unclaimed Property Law will accept cessation of interest payments or imposition of service charge only if the depositor agreed to same and the treat- ment is uniform for all depositors. There have been many instances where financial assets have been remitted as unclaimed even though the owner is still receiving mail at the address shown in the holder's records. In these instances, it appears that the holder has not complied with his responsibilities to make an effort to find the missing owner before reporting same to the State. Holders have previously avoided unclaimed property laws by automatic roll over of certificate of deposit or other time deposits. Illinois law requires re- porting such deposits seven years after expiration of the time interval stated on the instrument. Financial institutions have made other efforts to avoid the intent of the Un- claimed Property Law such as claiming "activity" or `contact' via automatic crediting of interest or non-return of mail. 7. The State of Illinois sends unclaimed property report forms to numerous federal agencies who may be holders of unclaimed property. The majority of these agencies respond that they are required to remit unclaimed money to their headquarters or U. S. Treasury. The Department of Financial Institutions believes that federal agencies should have the same responsibility as any other holder of unclaimed property. We agree with the National Association of Unclaimed Property Administrators that legislation requiring federal agencies to comply with each state's unclaimed property laws be adopted. PAGENO="0685" Chtcn~o Triburri, Thieril,, A'ç~'',t 9, 1979 Sctlon 3 L.1~ ~ i t.g~d P4.k., ~,i.pI }hk.s .~H.,k,s [_i.~.iN.rk., f i.~.i H@vk,s ~ l.,k., ~ t.,~l N~tk.s f ta~ M.k.. NOTICE OF NAMES OF PERSONS ,~!~EARING_TO BE~OWNERS_OF ABANDONED PROPERTY IF YOUR.NAME APPEARS BELOW, YOU MAY HAVE MONEY COMING ~ The State of Illinois, Department of Financial Institutions, is trying to locate the owners of cash and other assets. Tho State has already caused more than 40 million dollars to be returned to oyvners through this program. This money, left in accounts $ $ and unclaimed for more than 7 years, falls under the jurisdiction of the Unclaimed Property Act. It is the responsibility of the bankorotherholding institutionto attemptto locatethe owners. If your name appears below, pour bank or other holding institution S $ `has been unable to locate you. If you contact us, in writing, we will refer you to the institution holding your asset. $ DEPARTMENT OF FINANCIAL INSTITUTIONS Dopartmont 16 $ Write to: UNCLA1MED PROPERTY ~ " `~"*" 421 East Capitol Avonuo, Springfioid, Illinois 62706 All inquiries regarding the names listed below must be in writing and should contain the name of the person listed and a $ correct address where a reply may be sent $ S. ~ 4 Pursuant to Paragraph 112, chapter 141, thllnols Revised Statutes,19t31, notIce is hereby gIven that the parsons tinted below appear to bo the owners of abàn~ , $ donod property. Unless proof of claim Is presontod to the Holder and the Ownora right to receive the property Is established withIn 65 days from the data of the fast published notice the abandoned property will bo placed In thecustodyof the, Director of the Department of Financial institutions, not later than 85 daya atter S z $` such publication date. . S ~ C~L$ ~ 5 PAGENO="0686" C/C LI PAGENO="0687" 0 4: PAGENO="0688" PAGENO="0689" PAGENO="0690" PAGENO="0691" 687 EXAMINATION PROCEDURES FOR BANKS FL~5E OF ILLINOIS ERI~4~r OF ~ TNSrTmr?rrn~J~ S~icn -- DIVISIONAL XEOURES ~ocedur~Page No. 19-2-0 1 of 1 -Secr~c~. ~J Effective Date March 14, 1979 3rcced.ire ~Y-INAL~--3ANo~s ~ND SAVIN~ 1~ND LOAN PSScCThTICNS ~pproved INDEX 1. Scteduling Examinations 19-2-1 2. ?-aoarir~g for sri Examination . 192-2 3. xcmir.aticn 19-23 ~ 19-2-4 5. No Corruter 19-2-5 6. Listir-~g Darand Cegosit and Savir~gs Acamunt on UPD 311 . . 19-2-6 7. Listing Certificates of Darosit cn UPD 311 19-2-7 8. O.iusrariding cnecks 19-2-8 9. Listis~ 0~tstariding Cnecks on U?D 311 39-2-9 10. Co-~er Areas to Look for Unclaimed Pro~srty 19-2-10 Li. Foijnatjor~ Notes 19-2-11 12. Fimishing the Examination and Closing Interview 19-2-12 13. &Yjrce Code on Unclaimed Promerty 39-2-13 I ________________________________________-~ PAGENO="0692" STATE OF ILLflX)IS DEPARINEN'r OF FINANCIAL INSTITUTIONS 688 Section DIVISIONAL PROCEFAJRES Procedure-Page No. 19-2-1 1 of 1 Sub-Section UNCLAIMED PROPERlY Effective Date March 15, 1979 Procedure E~INATIC~-BANKS AND SAVINC~ AND LOAN ASSOCIATIONS Approved . 1. SCHEIXJLING EXAMINATIONS ¶[HE EXAMINER SHOULD SCHEDULE EXAMINATIONS ONLY AT THOSE INSTITUTIONS NHICH HAVE BEEN APPRGJED BY THE OFFICE FOR EXAMINATION. Schedule t~o to three examinations per week. The exact number of examinations possible for one week will vary with the size and type of holder. Subeit a list of selected holders for each week of the month being scheduled. Notice will be sent informing the holder that an examination wifl be held at some point in the selected week. The scecific day of the week will not be given. Since you are not pin- pointed to a set day or time this method should help make more efficient use of your wrking time. The office, upon receiving this schedule of your examinations, sends oct the notices of examination to the holders. The notices are sent registered mail, at least 10 days to as rrany as 30 days, prior to the week of the examination. PAGENO="0693" 689 CF 1LI5D1S ~A~T CF F ANCIAL INSTT'1Tn'T(Y~ S~CO1C~ XViSIC~:AL PRCCEtXJRES Procedure-Page No. 19-2-2 1 of 2 Sam-Section ~kL~iED PR~PERrZ Effective Date March 15, 1979 Procedure ~-3AN~ ARID SAVIN~ AND LOAN ASSCCIATIONS approved 2. PREPARING FOR AN E~.I:7i7cI:, D.C. 20515 ~ Rc c~sctrz0~va RCSCI~hLtZ: I;: c~ccc~,dc~I:cA cc~.h foot taqoe&t o~ Oetobo'c 3, 1979, cOnOc7J'~tng w:cc_Dr.ad opo~t0~j oac Lon;ozLte, cnciLo~~ad pCecLSA ~nd thA que tcltVcc IOtOJL ~pac2oC a~tachmcic0s Ith-LciS Izowo bAeJt compCcOed co mcccii itS po~S4LhJLA ~`wm dit ccfCcthCc tt~O/id2 O~ Out p ,~occt czcmowtttn~ ~5y4;teI7I. cc Oct11 bcc o~ CtflIJ ~W~01lC,t (O5S-LUdOOJ1OA dcc ~OLL 0/c cc-c-~/cct/cctc, do 1W/c hC/cC/cLL/cIL do mont/c/cC ItS itt IJOWL t'cctij d'utCtj youJLS, ABANDONED PROPERTY SECTION - John P. Mijiiiio~t, ChLe~ MY TELEPUONENUMUER 75 (301) 383-4985 PAGENO="0716" 712 UNCLATMEV PROPERTY QUESTIONNA1RE COMMERCE, CONSUMER, ANV MONETARY AFFAIRS SUBCOMMITTEE OF THE COMMITTEE ON GOVERNMENT OPERATIONS OCTOBER 1979 1. Unclaimed p'wpen~ty a~twte, n.egua-tion~, and adriinLi~t&a-tLve pn.ognam: a. Man.yland'4 Uai~onin V-i~po~silLon o~ Uncaimed Pn.open.~ty Ac~t wh-Lch -Ls pun.ey cLLotocUa.F~ coveno any banbing and nancia1. LnlLulLon ~n- clad-Lng cw~Lty bn.o!aenage ~Anm~ and ~Ln~wtance compan-Le~. The,'Le an.e no exemptLon,~ a,~ o ~the hof~deno o~ abandoned p'wpvt~ty on. -to -the -type o~ abandoned p'wpen.ty tha-t mu.~t be n.epon~ted. Pn.eoen-ty, Ma-'uj&ind doe4 not pay te're,~t on any f~and6 anden. Lt~ cw~ody and wttached -L6 a 4chedtle LtezmLz-Lng the vaaiouo pe~Lod~s o~ abandon- men-t. b. kt-tached p~ec~oe ~-Lnd copy ofi cwvLen~t n.cle~ and n.egu,ea,tAon4. c. Ocly genen.aUy acceped accoant,Lng pninc~LpILe~o so/i -uvte1LnaJ~ con-tn.o-e. son. do/unctnt on. -Lnacl,Lve accoun-t4. d. iW ownea~ o~ abandoned pn.open.~ty n.epon-ted cong wilh addn.e-~4eJ~ -1n amoLLnt~ o~ ~25, 00 on. mon.e and ad~ien.~tL~ed a~t £ea6-t once each weeta son. i~~o 4acce44~Lve weeb4 ~cin a new4papen. o~ gene/nLL CJJLCUIOlLon -Ln the coa~vty and the ~state wLth-Ln w!vLch -L~ -Loca-ted ~the £a~st tanown addn.e,o4 o~ the ownen.. e. In addLt,Lon -to adven.-t)~-Lng, a noflce -~ ma-~Led to the £a~t lanown addn.eo~ by the ~ta-te and -Ln n.egan.d to unclaimed 4av-Lng4 and checta- -Lng accoanic~ a not,Lce -~ a-L~o maiLed by ~the banleLng and (~-Lnancia2 ongaaizalLon p-'rion. to n.epon~tJng the ~undi~ -to -the 4-ta-te. Then.e an.e no `,-ta-te ~imJla-t,Lon4 on -the aeiion o~ boun-ty hun-ten4, howeven., we n.equL~e all nece44an.y Luppo-'t-t-Lng documen-t6 ai~ well. a~ cen.tL~ed cop-Le~ o~ InhenLtance and E4-ta-te Tax Reee~Lpt~. g. Abandoned pn.ope,~ty ~Ln ;the ~ta-te o~ Man.y-Land L~ de&Lned a~o a~U ~LnangJble pe~oonai pn.open-ty whe~e -then.e ha~ been no ac-t-LuLty son. a 4pecl~-Le numbe~ o~ yean.~ a~ pen. 4eheduLe -Ln queo-tion 1 A. Con-taa-t ~ de&Lned an ponLtLve ac-t~LvLty on pan.-t o~ -the deponLton., nhan.thclden., e,tc.. MaLL no-t n.etwined an ande1iven.alxLe Ln no-t ac- cepted an ac-tivLty by ou.n. 4ta-te. h. Oun. o~-Lce audLto exc-&to-Lvey son. compliance -Ln on.den. -to dclen.m-Lne any de~clen-t on. deLLnquen~t ho-Lden.n o~ abandoned pn.open.ty. Uowev en., othen. V-LvLLLonn o~ -the 5-ta-te Comp-tn.oll.en.n O~-Lce an well. an the banfeLng commonione,'r,s, -Len un.ance common-Lonen.n, Building SavLngn and Loan AnnociatLoen, and Vepan.-tmeivt o~ Labon. and Indunliuj nabmLt ponn-Lb-Le -Ln ~nadllon-n -to oun. V-LvLn-Lon ~on. dn-taLed audLtLng. ~L 145 -U 1.5 -$20,000 LU Benten, BuLPLdLng and Loann, Cn.edLt Un-Loan, V-Lnn o-Lwt~Lon4, Receiven.n h-Lpn and Con.pon.a-t-Lovzn. -Lu None u LLabLLLty, Equity and ca-nh accowvtn v-L None -L. $200,000 - 7 pexno'vn PAGENO="0717" 713 2. 1~rnounts of unclaimed property reported and delivered to owners: a. ~urbers of institutions rerortinc: Thstitutions 10,000 10,000 10,000 Banks 900 900 900 Brokers Insurance companies 850 850 850 All others .~cunt of property reported: All institutions 1,293, 785 2,845,191 2,306,389 Banks B rokers :nsurance ccnpanies fli others c. Amount of property rer~itted: LC~ ~ ~ pc~-Ld bij The All institutions 1,035,182 2,272,141 1,629,044 Insurance cc~panies All others d. iumber of individual accounts in excess of S500 All institutions Banks Brokers Insurance companies All others e. ~unber of names advertised: 10,000 10,000 10,000 f. Dollar amounts returned to owners: 110,847 417,496~ 510,200 g. Delivery percentage: 8.5 14.6 22.0 h. Amounts remitted minus claims By hoJLde,~.a end ~twte 1,035,182 2,272,141 1,629,044 PAGENO="0718" 714 3. a. BLoize/taga FIjun b. Repon_t TotaPL Numbe'L o~ Type o~ Name 6 Addeee~s Va-ce Amount Accounto P'wpewty Atex Bwwn 6/30/78 $ 8,810.67 195 Owolenndlng 135 E. BaLt~mo'te SI. 6/30/77 6, 135.44 224 chec!zo BaLtImoLa, MV 21202 6/30/76 16,067.30 322 MeviLU Lyneic, PLVLce 5/16/78 42.08 2 Vü'Ldend Fenne/L S SmIth, Inc. 6/30/78 3,420.27 27 OutelandLng One LLbeJLty Plaza 6/30/77 1,719.64 12 chectz4 165 B'Loadwcty 6/30/76 1,224.22 18 New YoAm, Ni!. 10080 a. None. PAGENO="0719" 715 4. Comp~Lance a. ~L Wa~LonaI. Banfu Good ~L &tLtte 8anfz~ Good LU Fedeiwl S~wLng~s ~ Loan A~n. Good ü Stct~e SavI~ng~s ~ Loan Good v FedvtoL Ci~edL.t UnLon Good vL Stote C~edli~ Un,Lon Good vU SecwLIty g BLolle/rage FUnve Poo~ `LAL MwtuaL Fund6 FaL'~ Ix Inew'uine.ee Good ~ (lone FLnane,LaL Sa~acto~y b. Gao UtilIty Company - ~Mee annual ~eponLo tated none, howevet, upon audLt It wao detesnvLned ~hat uncLaImed utIIItLeo depo~Lto weee w'Ixlen o~ a~s caedlt to an expen4e~ account - $20, 000. RetaLt ChaIn V/wg Company - annuaL eponto 4ta~ted none, howeven, upon audIt It was detenmIned thal $7,500 In uncLaImed wagee had been wnLtten Into Income. state Banho - neponto ~toted none~ howeven, upon aucUt compwten p/nt-onto IIatlng unctoLmed banlz accounts to $15,000. Money Onden Co'cpo'catlono - neponto ntated none, howeve't,. upon audit It owe dete'cmLned that money ondeno wene ~ e'wLce changed monthLy whIch neoutted In any money onde', undee. $91.00 wan wnLtten ~ to Income be,~one it wan due and owing ~he ntate - $100,000. c. Add tonal uncLaimed p/co penty that In posnIbLy due and owing would be In the catagocy o~ wnltten In t'uomentn that In centI(,Ied checko, money onde't.s, and managen chec(as. lnowtance companien and none ~InancLol conponatlono unuaiLy not In complete complIance In negand to undeiIve'rable on unpnenented checks. 5. Sew-Ice Changen a. SewIce changen queotlons ase unuatly picenented by ;the holdeno o~ abandoned pxope'zty and ~econda'tIe.y by the owne'c o~5 the ,çuvtdo. b. ExcesoIve cha'tgas othen than thone that may be legitImately changed In Manyland do not appea'c ~`cequehtly as pen one audits. c. None, howeven, co'cponatlono wnIte o~ unclaImed ~uncLo Into -Income, nwcpluo on expenne accounts. d. No e. See No. 3 beLow ~. MothLng ext'ceme, howeven, we have noted nenvIce changeo ta(aen easIIen than the £ant two yeaso o~ donmancy an pe'tmItted unden owe Law. g. Yes, see No. 4 8 h. Amounts not avai~labLe. 1. Amounto nat avaILable. j. A banic on ~Inanc,LaL o/cganIzatLon may new-Ice change a navIngs on chec(Lng account a(~ten It han been unclaimed j~on ten yea/tn. I~ the amount doen nat exceed $50.00, they ane entItLed to a new-Ice change 5çon $2.50 ~on the llth on 12th yean~o/c a maximum ~ $5.00. I~ the amount exceedn $50.00, they a/ce entitLed to a s e'wIce change $o/c $5.00 ~oe the llth on 12th yea'c ~oc~a maximum o~ $10.00. 67-440 0 - 81 - 46 PAGENO="0720" 724 of the event that would obligate the holder or depository to return it or its equivalent. (4) Property, when deemed abandoned; Dividends, Stocks, etc: Except as provided in section six A, all dividends, stocks, bonds, money, credits, and claims for money and credits, and all intangi- ble personal property, and the increments of any of them, except deposits and the increments thereon referred to in sections three and four, held by, or in the control of, any person having a resi- dence or principal place of business in this commonwealth, other than a corporation organized under the laws of another state, (but including any fiduciary appointed in this commonwealth for such a corporation, for the benefits of any person, or held by, or in the control of, a corporation organized under the laws of another state but having a place of business in this commonwealth, for the benefit of any person whose last known residence or place of business was in this commonwealth, shall be presumed abandoned unless claimed by the beneficiary or person entitled thereto within ten years after the date prescribed for payment or delivery. Any dividend, distribution, interest or payment on principal de- clared, set aside, accumulated or owed with respect to property presumed abandoned under the foregoing provisions of this section shall itself be presumed abandoned. (5) Property, when deemed abandoned; money paid into Court: Monies paid into any court wi~thi~n this commonwealth for distribution, and the increments thereof, shall be presumed abandoned if not claimed within ten years after the date of payment into court, or as soon after the fourteen year period as all claims filed in connection with it have been disallowed or settled by the court. (5a) Unclaimed dividends or distributions due in Liquidations: In the event of the liquidation or dissolution of a domestic corpor- ation, or dissolution or termination of a domestic trust, joint stock company, partnership, association or any other legal or commercial entity, all with transferable shares, organized and existing under the laws of the commonwealth all unclaimed dividends or distributions due in liquidation which remain unclaimed for one year after the date of t~e final distribution to the shareholders, shall be presumed abandoned. PAGENO="0721" 725 (6b) Presumption of Abandonment of Trave~lers Checks: Any sum payable with respect to a travelers check issued or sold in the commonwealth by a corporation, partnership, limited partner- ship or other business association subject to the laws of the cor.ronwealth, which has been outstanding for more than fifteen years frcr the date of its issuance, shall be presumed abandoned, unless the owner has within fifteen year~ corresponded in writing with such corporation, partnership, limi~ed partnership, or other business association concerning it, or otherwise indicated an in- terest as evidenced by a memorandum on file with such corporation, partnership, united partnership or other business association. Pro~pgped Amendments Pronosed arendrents to C. 200A of MassacI~usetts General Law which are currently unOer consideration by the Massachusetts Legislature. (I) The abandonrent period will be shortened from ten (10) to seven (7) years. (2) Limitation on service charging savings accounts. (3) Requirement that holders of unclaimed money retain adequate records. (4) Interest charce will encourage hold~rs to report accurately and rake it exrsnsive for then not to comply with the law. (5) A limit will be established on the percentage amount a Bounty Hunter" ray charge for locating an owner. (6) Publication of abandoned accounts will be handled by the Treasurer's Office. (h) Yes, State Treasury Department condticts field audits to check corpliance with the unclaimed property law. (i) The audit staff originated in the spring of 1978 and in the en- suing year and a half have conducted over 40 examinations. Please note that this time period included staff training and development. PAGENO="0722" 726 (ii) Staff size is 7 (seven) and the budget available is for 7 (seven) auditors. (iii) Types of institutions audited: a) Banks (Savings, Co-Operatives and National) b) Trust Companies c) Credit Unions d) Stock Brokerage Firms e) Mutual Funds f) Insurance Companies g) Public Utilities h) Various manufacturing firms (See attached schedule for results or completed audits) (iv) None. Field examinations are authorized for all types of institutions. (v) See attached copies of audit program. (vi) No audits are performed by other state agencies. I) N/A not available PAGENO="0723" 727 Schedule of Complo~ed Audits First National Bank of Boston New Enoland Nerchants Natio~l Bank State Street tank Haverhill National Bank Newton 1altham Savinos Bath Farracot Co-Operative tank Foxboro Savinos tank drown Brothers Harriman (private bank) tandolph Co-Cperwtive Bank Everett Co-Operative Bank Niddlesex Family Co-Operative Eank Trwst Connanies 1) Fiduciary Trust Company Credit Unions Hit Credit Union Arsenal Employees Credit Union :o::o:::i:an Credit Union t) Stock Brokerane Firms No completed audits to date B) Nutual Funds 1) Fidelit: Hutual Funds 2) Eaton Howard Nutual Funds 3) Colonial tanagenont Company -Audit staff is currently involved audit of 6 other mutual futds- and documented findings of F) Insurance Cowoanies 1) Blue Cross Blue Shield 2) Obrion, Eussell and Cownany B) Libortv Mutual $1,844,947.77 800,000.00 192,000.00 658,000.00 130,162.55 24,000.00 10,603.84 6,029.15 6,030.00 4,267.51 2,846.95 1,838.21 21,848.00 14,178.81 3,296.17 1,191.33 166,323.39 53,532.05 6,691.28 in the have 1,250,000.00 253,000.00 13,774.09 725,000.00 116,000.00 24,533.37 3,284.70 2,019.62 21,848.00 18,666.36 9,872.25 9,872.25 TOTAL COMPLETED AUDITS 4,502,543.18 :2::: The above amounts except for~ certain mutual funds have been collected or agreed to by the holder, and are in the process Cf collection. However, upon completion of certain other audits it is excepted that findings of $1.5 million will be made. Lan-s I) 2) 4) 5) 6) 11) -0- 1,476,596.72 991,774.09 147,837:69 1; Boston Edison `iassachase:ts Electric a) no~.-e:: Gas Csnpany a000:tOn sOlsOfl H) Manufacturino Firms 1) Milton Bradley PAGENO="0724" (1) - Amounts received are from New York based brokerage firms (2) - Amount represents the results of 3 completed audits (3) Includes audit findings pertaining to 1978 monies (4) Includes Firms reporting under Chapter 200A of Massachusetts Law only. 728 Amounts of Unclaimed Property ~ Numbers of Institutions Reporting and ~ t(~ ~ All Institutions 1) National Banks 2) Savings Banks 3) Co-Operative Banks 4) Savings and Loan 5) Trust Companies 6) Credit Unions 7) Federal Credit Unions 8) Insurance Companies 9) Brokers 10) Mutual Funds 11) Public Funds Utilities 12) Railroads 13) Corporations Amount of Property Renorted 1976 1977 987 1483 55 54 157 166 117 119 28 27 48 4B 159 179 112 9 20 34 1 1 -0- -0- 28 27 2 2 260 817 N/A N/A 1978 1979 1130 5600e 68 165 120 29 60 187 94 39 2 -0- 24 2 340 N/A 10,000,000 (3) 5,104,704.60 2,074,514.70 781,899.61 115,031.62 74,745.67 632,372.54 79,737.33 3,256.99 "~52O,427.7l (1)17,354.39 (2)226,596.72 197,757.99 195.00 380,814.33 e480 10,000 Amount of Property Remitted All Institutions 1,722,367.46 1,763,200.75 1) National Banks 194,145.78 254,821.10 2) Savings Banks 708,689.48 617,566.80 3) Co-Operative Banks 60,453.20 56,948.26 4) Savings and Loan 43,455.88 53,434.33 5) Trust Companies 260,343.15 272,566.78 6) Credit Unions 12,318.48 26,487.53 7) Federal Credit Unions ~ 14,011.14 7,924.44 8) Insurance Companies ~l64 013.67 227,383.34 9) Brokers (1)30.80 (1)9,658.53 10) Mutual Funds -0- -0- 11) Public Utilities 57,064.59 49,730.34 12) Railroads 300.00 153.00 13) Corporations 207,541.29 186,526.30 Number of Individual Accts ~ 500 All Institutions elSO el55 Number of Names Advertised DONE BY BANK 8,000 S Dollar Amount Returned to Owners e956,754.94 1,067,635.73 e3,762,640.22* Delivery Percentace 2lD 2552 28% Amounts Remitted Minus Claims Paid 1,237,404.57 1,155,863.63 2,566,132.96 NOTES PAGENO="0725" Brokers >k~tuai Funds ~tc u~..ttes Railroads Corporations Change in Receipts From 1977-1978 215% 714% 26% 101% 39% 132% 201% (58%) 1, 977% 79% -0- 297% 27% 104% 729 Schedule of % Changes in Yearly Receipts of Unclaimed Nonies For the Period 1976 - 1978 Change in Receipts From 1976-1977 DESCRIPTION All Institutions National Banks Savin;s Banks Cc-Operative Banks Savings and Loan Trust Concanies Credit Unions Federal Credit Unions Insurance Companies (1)5 31% (13%) (6)5 23% 5% 115% 43% 70% 31,260% -0- (13%) (49%) (10%) PAGENO="0726" 730 3) a) The names of individual securities brokerage firms that have filed unciained property reports showing positive amounts of property are as foilows: 1) Merrill, Lynch, Pierce, Fenner and Smith 2) Kidder, Peabody and Company Inc. 3) Bache, Halsey, Stuart, Shields, Inc. Please note that the above listed firms are all New York based. Copies of their reports are included in this report. Also included are copies of two audit reports issued by our own staff at the conclusion of examination of two Massachusetts based securities firms. Compliance with Massachusetts law by Massachusetts based securites firms has been nonexistent. More audits of such firms are planned in the future to bolster the degree of compliance in this area. (b) See included copies of reports for detail. (c) See included copies of reports for detail. PAGENO="0727" 731 a) The degree of compliance with the Massachusetts Abandoned Property Law and related regulations,~ by institution, has been as follows: (i) National Banks (ii) State Banks (iii) Federal Savinas & Loan (iv) State Savings & Loan (v) Federal Credit Unions (vi) State Credit Unions (vii) Securities brokerage firms (viii) Nutual Funds (i~:) insurance Companies (x) Non-Financial Corporations Factors contributing to the poor or oi holders oi thu categories above are a general feeling among the hciders that compliance is not mandatory;that sometimes good faith assertion that the law is not intended to cover their parti- cular type of institution and in some cases an ignorance of the exist- ante of the law itself. (b) Field audits conducted by this office have dramatically in- creased the ancunts of unclaimed property reported. This has been acccnplished in two ways. First, most reporting holders universally fail to include all items of unclaimed property in their reports; audits substan- tially expand the types of property reported. Additionally, audits compel holders to search old records which they otherwise would ignore. Secondly, voluntary conpliance is stimulated by the knowledge that holders know the Treasurer's Office has the capacity to verify the reports they file. The substantially increased reporting by non- audited institutions as described herein confirms the effect of a vigorous and visible audit program. -Poor compliance -Poor compliance -Poor compliance -Fair to poor compliance -Poor or no compliance -Poor compliance -Poor-no compliance - 5oor-no compliance -Poor-no compliance -Poor-no compliance non-compliance by the types 67-~4O 0 - 81 - 47 PAGENO="0728" 732 Please note that the schedule of completed audits prepared in compliance with part (1), question (h) on p~ge (7) of this questionnaire is included in Ibis report. Also, some completed audit reports have been provided to further document the methods and proceduras utilized by our staff. - A final area uncovered by the audits conducted by this office is in the area of mutual fund institutions. As mentioned previously, our office is currently involved in the examination of six mutual fund institutions. What warrants further mentioning of this area is the size of the audit findings. Once access to these institutions was gain- ed, the amounts involved were staggering. The industry, as a whole, has failed to report, citing such reasons as advice of counsel or ignorance of the law. Of the three institutions completed over $225,000 in total has been remitted. The remaining six currently under exam- ination could conceivably approach a findings total of roughly $2,000.000 for Massachusetts alone. The importance of this area should not be overlooked. 5) a) The information we have regarding service charges imposed by banks was obtained solely thru audits conducted by this office and direct inquiries made by the Treasurer's Office. b) The imposition of service charges on dormant accounts is a general practice utilized by banks in Massachusetts. c) At present there are no significant institutions other than banks that impose a service charge on dormant accounts or unclaimed property that have come to our attention. PAGENO="0729" 733~ d) There is no agreement with the customer providing for service charges. In some cases service charge provisions are incorporated by reference ~nd in the fine print of a signature card or passbook. Even then the provision may only incorporate the by-laws of the bank or refer to a charge unspecified in amount. e) Typical service charges ar~: 1) Balance under $10.00 or $20.00 - service charges to the extent of the balance. 2) Other charges are 50~ - $1.50 per month of inactivity. (See copy provided) f) The single largest service charge for inactivity this staff can recall was the instance of a banking institution charging its dornant accouns (no activity for three years) a fee of 510 . OO/month. ~Please note documents are enclosed showing service charges inmosed by institutions we have examined. One of the examples shc;vs the effect such service charges may have on the amount of property reported. The enclosed reveals an amount reported on the initialprelininary report to this office and then the subsecuent reduced balance after the imposition of service charges for dormancy. Also enclosed are copies from this department of letters indicating our desire to confront the bank on this issue. g) Yes, there have been numerous examples of institutions taking their custoser's property as income which should have been report- ed to the commonwealth. SeveraLt examples of this activity have been detected in the audits of mutual funds, stock brokers,trust compan- ies and trust departments of banking institutions. PAGENO="0730" 734 By service charging savings accounts,all but the large ones are reduced to zero and thus the name of the owner is never reported to the commonwealth. A third example is the case of banks writing off to income out- standing exchange items (i.e. cashier's checks and money orders) the result being that these items are never turned over to the state. *Please see included copies of examples of aforementioned cases. h) An estimate of the total dollar amount of service charges we believe was imposed by the banks in Massachusetts, in 1978, would approximate $3 - 4 million. i) The probable magnitude of service charges taken on unclaimed property that would have been reportable but was wiped out by service charges prior to reporting would approximate 2 to 3 million dollars. j) Current state law in Massachusetts does not specifically limit in any way the amount of service charges that banks or other institutions may impose on dormant accounts or other unclaimed property provided that the charge is agreed to by the customer. However, if service charges are waived they may not be imposed against the Treasurer. k) Yes, our state has asserted a claim for refund of any service charges imposed on dormant accounts or oUter unclaimed property. An amendrTent increasing the amount of service charges must similarly satisfy the conditions of a contract, such as notice by letter. In the instance of service charges being imposed on dormant accounts it is our contention that, by law, at the end of the dormancy period the Commonwealth of Massachusetts becomes the owner. During the course of our audits in every case this point was at issue. PAGENO="0731" 735 The institution imposing the service charge would, in every instance, refund the full amount of the service char~je taken in the event, the owner (original) made claim to the account while in its dormant stage. 6) a) Yes, there have been instances in which banks and other savings institutions have stopped paying~interest on dormant savings accountt zany institutions provide for a ninirnum balance such as $10 or $20 as a condition to paying interest. However, when a dornant account is service charged frequently it is reduced below the minimum. In other cases the bank without an agreenent with the customer unilaterally ceases the ~ of interest after 2 or 3 years of inactivity. ~See detail for question 5 - J for evidence of bank regulations in this area. b) ~o, there is no recollection of any cases in which banks or other savings institutions have turned over a dormant account of substant~al size even though the owner of the account was living and receiving nail at the sane addre~s as shown in the records of tz~e inszitut~ons. c) Yes, there have been cases in which banks and other savings institutions have treated their certificates of deposit as exempt frcn the abandoned property laws by automatically rolling them - over into new certificates whenever they mature. Institutions feel the nature of the instrument, not calling for or expecting any activity on the part of the owner~ separates this type of de- posit from a time or demand deposit. d) Other significant cases in which banks or other depository institutions have failed to classify certain property as Un- claimed or dormant because: (i) In the instance of attached accounts issued by co-operative banks, whereby the customer agrees to deposit a certain sum of money (either $100 or $200) in a principal account with the stipulation that any further deposits or withdrawals would be in PAGENO="0732" 736 $100 or $200 increments. The interest which accrues on the principal will be credited to the customers "married sav- ings account, as opposed to having a check sent to the customer. The crediting of interest to the customer account is treated as deposit thereby up-dating the date of last activity on the bank's books. Since the date of last activity is continually being updated these accounts, accord- ing to the banks, are not subject to the unclaimed property law. The accounts never become dormant due to the periodic withdrawal of interest from the principal and subsequent deposit of interest to the attached account. (ii) In the instances of public utilities holding custon~r deposits (necessary to open an account with the utility) periodically offsetting against the customer deposits accounts all bad debts (i.e. other customers who still had outstanding balances after their own deposit was applied against their last bill.) (iii) Other areas include, in the mutual fund area, the switch- ing of transfer agents in the paying of shareholder dividends to the extent that historical data is not maintained and it becomes impossible to identify what accounts are dormant and which had activity in recent years. Even a more generalized problem in this same vein is the problem of historical records not being maintained so auditors cannot access the historical data to determine what property is report- able. This problem, for one reason or another, exists in almost all institutions examined. The most extreme example found by our staff, in this problem area) occurred in our attempt to audit a toy and game manufacturer located north of Boston. The company was contacted due to its failure to report, in any year, to the Commonwealth. The audit could not be undertaken, however., due to the representation of the company that no record over seven years old was in existence. PAGENO="0733" 737 e) One other practice, not previously mentioned in this rewort: that has been uncovered by our staff demonstrates tim evasion of responsibility of an institution to the owners of prowcrty. It cones in the case of a toy and game manufacturer, located in Western Massachusetts that had a habit of taking credit balances in accounts receivable and writing them off to incone. The company does business on a world-wide level and over time, manages to build quite a list of customers who would overpay their bills. Instead of crediting the custoners account the company wo,ild writeoff all of these analter over-waynents justifying it as an offset of the under- waynents they themselves don't bother going after. The company would issue a check or memo to companies with larger balances. As an indication of the money which can be involved in this area the conpany mentioned will be remitting an amount of $138,000.00 over the next ten years in this area alone. 7) The Ccnnonwealth of Massachusetts has not made any claims against the Federal Government for unclai~ned property they are holding for cwners whose last known address is in the Commonwealth. 8) Recommendations relating to Federal legislation or regulations will be sent at a later date. PAGENO="0734" 738 ADVERTISEMENTS i~1.~o=D ~ ~ Legal lIotices Legal Ilotices ~ ~ Nichd~ Fct~e~, ~ Docht~C~?~.M~. ~B~3~dL. O~i~cyM~. ~c5~a E. hrn~c~ PI~.?'~. D~ch~t~,M& * * C5~rie~mMa. -* Jhc~ea~baaLc~se ~ M!~ieG. ?oah~rJr. a.E.Soc~ty ~ - - PAGENO="0735" PAGENO="0736" 740 UNCLAIMED PROPERTY LAW COMMONWEALTH OF MASSACHUSETTS TREASURY DEPARTMENT ONE ASHBURTON PLACE, 12TH FLOOR BOSTON, MASSACHUSETTS 02108 CHAPTER 200A Abandoned Property Sec. 1. Definitions. 2. Property, when deemed abandoned. 3. Same subject. Property deposited. 4. Same subject. 5. Same subject. Dividends, stocks, etc. 6. Same subject. Moneys paid into court. 6A. Same subject. Unclaimed dividends or distribu- tions due in liquidations. 6B. Presumption of abandonment of travelers checks. 7. Reports regulated. 8. Notice. Publication. 9. Surrendered property. Disposition, etc. 10. Claims against surrendered property. 11. Surrendered property. Effect on liability to owner. Payment to bar claims, etc., when. 12. Proceedings upon violation of chapter. 13. Extensions. 14. Certain other statutes.not affected. 15. Funds insufficient. Proäedure. 16. Inconsistent statutes repealed. 17. Unconstitutionality, effect. PAGENO="0737" 741 COMMONWEALTH OF MASSACHUSETTS TREASURY DEPARTMENT ONE ASHBURTON PLACE, 12TH FLOOR BOSTON, MASSACHUSETTS 02108 CHAPTER 200A Abandoned ~roperty 51. Definitions. The following words when used in this chapter, unless the context otherwise requires, shall have the following meanings : -- (a) "Property", all tangible or intangible personal property. (b) "Abandoned property' ,~ property shall be presumed abandoned to which there has been no valid claim or evidence of ownership within a period of~ ten years. (Amended by 1975, 277, §1, approved June 2, 1975, effective by act of Governor June 24, 1975.) (c) "Claim", demand for payment or surrender of prop- erty from the holder `of same, whose duty it is to pay or surrender the property tothe legitimate claimant. ~ er~ef-e -eefpe~a~ieas (f) "Treasurer", the treasurer and receiver general. (g) "Person", any individual, corporation, joint stock companies, estate, trust, partnership, association, govern- ment or political subdivision, public corporation or authority, any bank defined in section one~of chapter one hundred and sixty-seven, savings bank, savings and loan association, credit union, trust company, national banks, federal savings and loan association, co-operative banks, bank holding com- panies and bank subsidiaries, mutual funds and any issuer of travelers checks, money orders, outstanding Ohecks and unclaimed wages or similar monetary obligations or commitments, whether organized or operate under state or federal law; utility companies, insurance companies; two or more persons having a joint or common trust or any legal or commercial -1-- PAGENO="0738" 742 entity. (Amended by 1975, 277, §2, approved June 2, 1975, effective by act of Governor June 24, 1975.) (h) "Date prescribed for payment or delivery", the earliest date upon which the owner of property could become entitled to the payment, possession or delivery thereof by demand or other affirmative act. (1950, 901; 1959, 470, §51, 2.) §2. Property, When Deemed Abandoned. (a) Property which has been bequeathed to any person, shall be presumed abandoned, if not claimed by that person or his heirs, legatees or distributees within ten years after the death of the testator unless the will makes provision in case of a lapse, failure or rejection of bequest or the dis- position of the property. (b) When a person, owning property, is not known for ten successive years to be living and neither he nor his heirs or distributees can be located or proved for ten suc- cessive years to have been living, he shall be presumed to have died without heirs or distributees, and his property shall be presumed abandoned. (Amended by 1975, 608, §1, approved, with emergency preamble., September 18, 1975.) §3. Property, When Deemed Abandoned; Property Deposited. Any deposit of property with a person having a residence or place of business in the commonwealth, or authorized to do business therein, together with the increments thereon, shall be presumed abandoned unless the owner has, within ten years next preceding the date as of which reports are required by section seven:-- (1) Communicated in writing with the person concerning the deposit; or (2) Been credited with interest on a passbook or certi- ficate of deposit at his request; or (3) Had a transfer, disposition of interest or other transaction noted of record in the books or records of the person; or (4) Increased or decreased the amount of the deposit. (Amended by 1975, 608, §2, approved, with emergency preamble, September, I~75.) PAGENO="0739" 743 §4. Property, When Deened Abandoned. Any deposit of property made to secure payment for services rendered or to be rendered, or to guarantee the performance of service or duties, or to protect against damage or harm, and the increments thereof, shall be pre- sumed abandoned, unless claimed by the person entitled thereto within ten years after the occurrence of the event that wouid obligate the holder or depository to return it or its equivalent. (Amended by 1975, 608, §3, approved, with emergency preamble, September 18, 1975.) §5. Property; When Deemed Abandoned; Dividends, Stocks, etc. Except as provided in section six A, all dividends, stccks, bonds, money, credits and claims for money and credits, and all intangible personal property, and the increments of any of them, except deposits and the incre- ments thereon referred to in sections three and four, held by, or in the control of, any person having a residence or principal place of business in this commonwealth, other than a corporation organized under the laws of another state, but including any fiduciary appointed in this commonwealth for such a corporation, for the benefits of any person, or held by, or in the control of, a corporation organized under the laws of another state but having a place of business in this commonwealth, for the benefit of any per- son whose last known residence or place of business was in this commonwealth, shall be presumed abandoned unless claimed by the beneficiary or person entitled thereto within ten years after the date prescribed~ for payment or delivery. Any dividend, distribution, interest or payment on principal declared, set aside, accumulated or owed with respect to property presumed abandoned under the foregoing provisions of this section shall itself be~ presumed abandoned. (Amended by 1975, 608, §4, approved, with emergency preamble, Septem- ber 18, 1975.) §6. Property, When Deemed Abandoned; Moneys Paid into Court. Monies paid into any court~within this commonwealth for distribution, and the increments thereof, shall be presumed abandoned if not claimed within~ ten years after the date of payment into court, or as soon after the fourteen year per- iod as all claims filed in connection with it have been disallowed or settled by the court. (Amended by 1975, 608, §5, approved, with emergency preamble, September 18, 1975.) PAGENO="0740" 744 §6A. Same Subject; Unclaimed Dividends or Distributions Due in Liquidations. In the event of the liquidation or dissolution of a domestic corporation, or dissolution or termination of a domestic trust, joint stock company, partnership, associa- tion or any other legal or commercial entity, all with transferable shares, organized and existing under the laws of the commonwealth, all unclaimed dividends or distribu- tions due in liquidation which remain unclaimed for one year after the date of the final distribution to the shareholders, shall be presumed abandoned. (1962, 248, §2.) §6B. Presumption of Abandonment of Travelers Checks. Any sum payable with respect to a travelers check issued or sold in the commonwealth by a corporation, partnership, limited partnership or other business association subject to the laws of the commonwealth, which has been outstanding for more than fifteen years from the date of its issuance, shall be presumed abandoned, unless the owner has within fifteeh years corresponded in writing with such corporation, partner- ship, limited partnership, or other business association concerning it, or otherwise indicated am interest as evi- denced by a memorandum on file with such corporation, partner- ship, limited partnership or other business association. (Added by 1975, 889, §1, approved January 17, 1976, effective 90 days thereafter.) §7. Reports Regulated. (a) All persons or the agents thereof shall file an annual report under penalties of perjury to the state treasurer relative to any property held by them declared by this chapter to be presumed abandoned. (Amended by 1969, 377, §2, approved June 3, 1969; by §19, effective Jan. 1, 1970; 1975, 277, §3, approved June 2, 1975, effective by act of Governor June 24, 1975.) (b) The report shall be made in duplicate and filed in the offIce of the state treasurer on or before September first of each year for the preceding July first, and shall give the name of the owner, his last known address and the amount and kind of property. It shall also give such other information as the state treasurer may require for the administration of this chapter. All property contained in said report unless earlier claimed by the owner or his legal representative shall PAGENO="0741" 745 be turned over to the state treasurer on or before No~m- ber first each year. (Amended by 1969, 377, §2 approved June 3, 1969; by §19, effective Jan. 1, 1970.) §8. Notice; Publication. (a) Within thirty days after making the report of abandoned property pursuant to the provisions of section seven, the holder shall cause to be published a notice entitled: "NOTICE OF CERTAIN U&CLAI?~D PROPERTY HELD BY [name of holder)". (b) Such notice shall be published once in a news- paper in the county of the situs of the property. All ndespa~ers in which such notice~shall be published shall be newspapers printed in the English language. The state treasurer may waive the requirements for advertising if it appears to him that the cost of said advertising would prove excessive, as it relates to the~value of the property involved or, if he is satisfied that all efforts to locate the person or persons in whose r~ane the property stands were of no effect over a period of not less than three years. (Aended by 1969, 377, §3, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) (c) Such notice shall be approved as to form by the state treasurer and shall contain the name and the city or town of last known residence of the presumed owner; a des- cription of the property; information concerning the inten- tion of the holder to turn over such property to the state shall thereupon cease to be lia~1e therefor; and such other information as the state treasurer may require. (Amended by 1969, 377, §4, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) (c)(l) Such holder shall, on all accounts over the value of twenty-five dollars, ndtify such owner by mail, postage prepaid, sent to his last known address on a form approved by the state treasurer that certain unclaimed or abandoned property pursuant to law is. to be considered abandoned. (Amended by 1969, 377, §5, approved June 3, 1969; by §19 it takes effect on Jan. 1,1970.) PAGENO="0742" 746 Cd) Such holder shall file with the state treasurer on or before November first each year a copy of such publica- tion required in paragraph (b) and also a copy of the notice required by subsection (c) (1). (Amended by 1969, 377, §6, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) §9. Surrendered Property; Disposition, etc. (a) Property which has been surrendered to the state treasurer under provisionà of this chapter shall vest in the commonwealth, subject, nevertheless, to provisions of section ten. (Amende~ by 1969, 377, §7, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) (b) The state treasurer shall proceed with the liquida- tion of property within one year after it has been surrendered to him under the provisions of this chapter. (Amended by 1969, 377, §8, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) Cc) If the liquidation requires that the property be sold the state treasurer shall sell it to the highest bidder at public sale in whatever city in the commonwealth affords, in the state treasurer's judgment, the most favorable market for the particular property involved. The state treasurer may decline the highest bid and reoffer the property for sale if he considers the price offered insufficient. The sale shall be advertised in a newspaper in the county wherein the property was located at the time that it was presumed abandoned, but where the sale will be made in a different county it shall likewise be advertised in such county immediately preceding the sale. The state treasurer may refuse to offer such property at public sale if, in his opinion, it is valueless or, of such little value that the cost of sale would exceed the public pro- ceeds therefrom. (Amended by 1969, 377, §9, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) (d) All monies received by the state treasurer from the holder thereof, or from the liquidation of the property under the preceding paragraphs hereof, shall be retained by the state treasurer as.provided below, but the holder shall be entitled to such reasonable expenses for insurance, advertis- ing, storage and compliance with this chapter as the state treasurer may determine, not in excess of the money,.or pro- ceeds of property, received from the holder. The amount of such expenses shall be certified by the state treasurer who shall, within three months from such certification, unless an appeal is taken from the state treasurer's determination whtin that time, pay over to the holder the amount so certi- fied. (Amended by 1969, 377, §10, approved June 3, 1969; by Sl9 it takes effect on Jan. 1, l97O.~ PAGENO="0743" 747 (e) Monies received by the treasurer under proceed- ings of this chapter shall be placed in a special fund to be known as the abandoned property fund. Whenever such fund exceeds one hundred thousand dollars the excess shall be credited to the General Fund. Payments made by the treasurer under the provisions of paragraph Ce) of section ten shall be made from said abandoned property fund. (f) All sales of property made by the state treasurer under provisions of this chapter shall pass absolute title to the purchaser thereof. (Amended by 1969, 377, §11, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) §10. Claims Against Surrendered Property. (a) Any person claiming an interest in property sur- rendered to the state treasurer under the provisions of this chapter may establish his claim at any time thereafter. In the event that said property has not been liquidated at the time said claim is filed the state treasurer shall, forth- vith, delay liquidation proceedings that may be in process until such tima As the rights of the claimant have been finally determined. (b) The state treasurer shall possess full and complete authority to determine all suchälaims and shall, forthwith, send a written notice of such determination to the claimant. At any time within twenty days thereafter such claimant may apply for a hearing and redetermination of his claim. After an appropriate hearing before the state treasurer, or person duly designated by him, the state treasurer shall make a final determination. Cc) The state treasurer, or any person duly designated by him, is empowered to take testimony under oath and shall have the power to subpoena and require the attendance of witnesses and the production of books, papers and documents which may be pertinent to such hearing. Cd) The state treasurer shall render a decision within thirty days after such hearing. A claimant adversely affected by such decision may appeal to the district, municipal or superior court of the county wherein he resides and shall be entitled to a trial de novo. Such appeal shall be perfected by the claimant within twenty days after receiving notice from the state treasurer. Any party adversely affected by a 67-440 0 - 81 - 48 PAGENO="0744" 748 decree or order of the district, municipal or superior court may appeal to the supreme judicial court within twenty days from the date of the decree. (e) If the validity of a claim shall be determined in favor of the claimant, the state treasurer shall pay over to the claimant only that amount which the state treasurer actually received less all expense incurred by the common- wealth, with interest at the rate of one percent per annum from the time when it was received by the state treasurer to the time when it was paid by him to the claim- ant. If the property has not been liquidated and still remains in the hands of the state treasurer he shall forth- with turn it over to the claimant. (f) If the claimant is domiciled in a country or state outside the United States or its territories and the state treasurer determines that there is not a reasonable assur- ance that the claimant will actually receive the payment to which he is entitled under this section in substantially full value, the superior court, upon petition of the state treasurer or~an interested party, or in its discretion, may order that the state treasurer be permitted to liquidate the property if it has not already been liquidated and to turn over the amount of the payment to a recognized public or private agency for the purchase of goods in the form of necessaries of life, food, clothing and medicines, to be sent to the claimant upon his written request, order or assignment. Such order shall be final and binding upon all the parties in interest. (Amended by 1969, 377, §12, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) §11. Surrendered Property. *Effect on Liability to Owner. Payment to Bar Claims, etc., When. (a) A person who surrenders property to the state treasurer under the provisions of this chapter shall be relieved of liability to the owner of said property, or any person claiming under him, arising from such surrender. (Amended by 1969, 377, §13, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) * (b) A payment by the treasurer as provided in para- graph (e) of section ten shall forever bar any claims or demands of any person or persons against said property. (1950, 801.) PAGENO="0745" 749 (c) Any seller or issuer of travelers checks who has surrendered funds to the treasurer under the provisions of this chapter may nake payment to any person appearing to such seller or issuer to be entitled thereto, and upon proof of. such ravment and proof that the payee was entitled thereto, the treasurer shall forthwith reimburse the seller or issuer for such payment. (Added by 1975, 889, §2, approved January 18, 1976, effective 90 days thereafter.) §12. Proceedings Upon Violation~of Chapter. (a) If the state treasurer~believes that a person has failed to report property that should have been reported under provisions of this chapter, the state treasurer shall petition the superior court for an order to allow the state treasurer or his agents to examine all appropriate business records of such person. The state treasurer shall give notice by registered mail of his intention to such person torether with a copy of his petition at lease ten days prior to a hearing thereof. (Amended by 1969, 377, §14, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) (b) If upon an examination of the records the state treasurer believes that such person has violated the provi- sions of section seven, he shall petition the superior court for an order to reouire the holder thereof to turn over said property to him. (Amended by 1969, 377, §15, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) (c) If the court shall determine that the holder of such property has violated the provisions of section seven he shall be liable to a penalty of not more than five hundred dollars. However, no pe~sOn shall be penalized for failure to report property as provided herein if the court shall find that such person has acted in good faith. (1950, 801.) §13. Termination of Guardianship. The state treasurer is hereby empowered to extend the date for the filing of the report regui~ed in paragraph (b) of section seven for such periods up to six months if, in his opinion, such extension is advisabLe. Where the state treasurer grants such an extension the requirements with respect to the turning over of the property in paragraph (b) of section seven and the filing of the published notice with PAGENO="0746" 750 the state treasurer as required by paragraph Cd) of section eight shall be extended for an additional two months. (Amended by 1969, 377, §16, approved June 3, 1969; by Sl9 it takes effect on January 1, 1970.) §14. Certain Other Statutes Not Affected. Nothing in this chapter shall be construed to affect the provisions of section six of chapter one hundred and fifteen A; section eight B of chapter one hundred and twenty-one; sections two C, two D and two E of chapter one hundred and twenty-two; section twenty-seven of chapter one hundred and twenty-three; sections ninety-six A and ninety-six B of chapter one hundred and twenty-seven; sec- tion five A of chapter one hundred and twenty-eight A; chapter one hundred and thirty-four; chapter one hundred and thirty-five; sections six A, six B, six C and six D of chapter one hundred and forty-seven; and sections one hundred and forty-nine A, one hundred and forty-nine B, one hundred and forty-nine C and one hundred and forty- nine D of chapter one hundred and seventy-five. (Amended~ by 1970, 888, §22, approved Sept. 1, 1970; by §31 it takes effect on July 1, 1971.) - §15. Funds Insufficient; Procedure. If during any session of the legislature there are insufficient funds in the Abandoned Property Fund to pay all claims which have been allowed by the state treasurer or ordered to be paid by the court, the treasurer shall so certify to the legislature and shall request the legisla- ture to appropriate from the General Fund to the Abandoned Property Fund an anourit sufficient to pay such claim. (Amended by 1969, 377, §17, approved June 3, 1969; by §19 it takes effect on Jan. 1, 1970.) §16. Inconsistent Statutes Repealed. All provisi~ons of the General Laws inconsistent here- with are hereby repealed. (1950, 801.) §17. unconstitutionality, Effect. If any section or clause of this chapter is held invalid or unconstitutional by a court of competent juris- diction the remainder shall not be affected thereby. (1950, 801.) PAGENO="0747" 751 INTERNAL CONTROL QUESTIONNAIRE FOR BANKS COMMERCIAL BANK.& TRUST COMPANY INTERNAL CONTROL QUESTIONNAIRE NAME OF BANK ADORE SS Yes No 1. Date of incorporation_______________________________ 2. Name of officer responsible for compliance with the unclaimed property law.___________________________________________ 3. Name and title of person assigned to prepare report___________________ ~e reports filed a. By branch? - b. Consolidated? 5. Are file copies of reports maintained by the bank currently available? - a. Where are they located? b. Who has custody?________________________________________________ 6. Are policies relating to escheatable property documented in procedure or policy manuals? 7. Maya any policies relating to escheatable property or service charges thereon been adopted by a formal resolutfon of the Board of Directors Cr a corr~ittee thereof? PAGENO="0748" 752 INTERNAL CONTROL QUESTIONNAIRE DEMAND DEPOSITS Yes No I., Are accounts classified as inactive or dormant after a specified period of time? - - 2. What causes an account to be classified as inactive or dormant? a. No deposit, no withdrawal - - b. No deposit, no withdrawal, no passbook posting - - c. No corrmunication from customer d. No response to attempt to locate - - e. other-specify________________________________ - - 3. What is the length of period of inactivity before classified as dormant or inactive? ~. Are no service charges imposed on accounts classified as dormant or inactive other than the original contractual charges? - - 5. What is the length of period of inactive or dormant status before service charge is imposed? 6. What is the amount of service charges on inactive accounts? a. Monthly charges b. One-time charge 7. Are service charges which are levied on accounts prior to being classisfied as inactive or dormant continued, after being classified as &rmant or inactive? 8. Specify service charge amount on active accounts. 9. How is the customer advised of service charge? a. Informed before charge is taken - - b. Letter at the time of the charge - c. When the account is opened - - d. Other-Specify 10. Uner what circuastances, if any, are excess service charges removed from accounts?_____________________________________ 11. Is there a followup procedure prior to an account becoming inactive? - 12. Are letters sent out on closed accounts by someone other than the tellers or bookkeepers? PAGENO="0749" 753 DEMAND DEPOSITS~ (continued) Yes No 13. Are tellers independent of bookkeepiñ~ functions relating to inactive or dormant accounts? 1L~. Are signature cards co~pleted as to: a. Date b. Reason - _______ C. ~rnount d. and initialed by an officer - _______ when an account is closed. 15. Are all inactive accounts segregated and considered dormant? 16. Are the ledgers, accounts, and signature cards r&noved from active files for closed inactive or dormant demand deposits? _______ 17. Are the railings of statermnts surpressed on dormant demant deposits? - 18. After 10 years of inactivity are demand deposits reported as required by law? PAGENO="0750" 754 INTERNAL CONTROL QUESTIONNAIRE SAVINGS AND TIME DEPOSITS Yes No 1. Are savings and time deposits classified as inactive or dormant after specified period of time of inactivity? 2. What causes accounts to be classified as inactive or dormant? a. No deposit, no withdrawal b. No deposit, no withdrawal, no passbook posting c. No cocrrnunication from customer d. No response to attempt to locate e. Other - specify 3. What is the length of period of inactivity before classified as dormant or inactive? ~. Are no service charges imposed on accounts classified as dormant or inactive? 5. What is the length of period of inactive or dormant status before a service charge is imposed? 6. What is the amount of service charge on inactive accounts? a. Annual charges b. One-time charge 7. Specify service charge amount on active accounts. 8. How is the customer advised of the service charge a. Informed before charge is taken b. Letter at time of charge c. When the account i~ opened d. Other - specify 9. Under what circumstances, if any, are service charges removed from.j accounts? 10. Are all inactive accounts segregated and considered dormant? PAGENO="0751" 755 SAVINGS AND TIME DEPOSITS (continued) Yes No is the leroth of period of inactive or dormant status before interest beir: credited to an account is reduced or discontinued? 2. is the cust~r advised of discontinuation or change in interest not hem: credited? 13. Under what circLrnstances, if any, are accrued interest charges not posted? lli. Is interest not posted to inactive savings ~ccounts in the records? 15. Are inactive interest earning accounts he1d~open: a. When the posted or accrued service charges equal the account balance? 5. When the posted or accrued service charges equal the account balance plus the unposted interest? c. When the account would be reported to the State if there wore any balance to be paid the State? 16. Is there a fol1~aup procedure prior to an account becoming inactive? 17. ~re tellers independent of bookkeeping functions relating to inactive or dormant accounts. Are signature cards completed as to: a. Date - b. Reason c. and initialed by an officer when an account is closed 19. Are periodic comparisons made of inactive or: dormant savings accounts numbers and pledged savings accounts numbers? 20. Are ledgers, accounts, signature cards removed from active files for closed inactive or dormant savings accounts? 21. Are the mailings of statements supressed when an account is classified as dormant? 22. Are l099s mailed after an account is classified as dormant? PAGENO="0752" 756 INTERNAL CONTROL QUESTIONNAIRE EXCHANGE ITEMS Yes No. 1. Are inactive or dormant exchange items separately controlled? 2. When is an exchange item considered inactive or dormant? 3. Are register copies of exchange items designated as inactive separately controlled? ~ What is the length of time of inactivity before service charges are imposed? 5. What is the amount of service charge on an inactive exchange item? a. Monthly charges b. One-time charge 6. How is the holder of an inactive or dormant exchange item advised of the service charge? aft' Informed before the service charge is taken b. Informed at time of purchase c. Other-specify 7. Under what circunstances, if any, are service charges rebated on dormant exchange items? 8. Are dormant exchange items which have been service charged off refused payment when they are presented? 9. Are dormant exchange items reported as required by law after - the statutory period of inactivity? 10. Ooes the Bank issue: a. Bankmoney orders? b. Personal money orders? c. Cashiers' checks? d. Certified checks? e. Escrow checks? f. Travelers checks? g. Other? PAGENO="0753" 757 INTERNAL CONTROL QUESTIONNAIRE TRADE AND PAYROLL CHECKS OUTRTANDING Yes No all bank accounts reconciled properly at least rr~nthly? - 2. ~-e the reccncilaticns prepared by persons having no cash receiptc cr disburse-rents functions with respect to the accounts being reccnci led? 3. Are such reconcilations reviewed by an officer? ~ Does an officer investigate all old and unusual reconciling items which have not promptly cleared? 5. Are all stale-dated checks periodically transferred to a separate liability account? 6. -e all entries above nentioned liability account reviewed or acrrcved by an officer or independent enployee? 7. Are no service charces or fees charged against outatanding checks at any tine? a. ~-rount of service charge b. Frequency of charge c. Are the service charges rebated the check is presented? 8. Are follo--jp letters sent on outstanding checks? 9. Are outstanding interest checks reversed and~ credited to the payee's savings or checking account? 10. Are outstanding checks never reversed to the account for which they %.ere dra~n? stale-dated checks always honored by the bank if the payee presents a check c- recuest a duplicate check? 2. Has the bank never charged outstanding checks directly to an income or surplus account? 13. Are outstanding checks reported as required by law after the statutory period of inactivity? PAGENO="0754" 758 INTERNAL CONTROL QUESTIONNAIRE UNIDENTIFIED DEPOSITS AND REMITTANC~_ Yes No 1. Are all unidentified remittances and deposfts promptly investigated? - - 2. Are all unidentified remittances and deposits recorded in special liability or suspense accounts under dual custody? - - 3. Are all transactions into the above accounts reviewed or approved by an officer or independent employee? - - ~4. Are no service charges or fees charged against unidentified remittances or deposits? - - - - a. Amount service charged b. Frequency of charge c. Are service charge rebates refused if the owner of the item is identified? 5. Has the bank never charged unidentified remittances or deposits directly to an income or surplus account? 6. How is the owner advised of the service charge? a. Not informed b. Other-specify 7. Under what circimistances, if any, are service charges removed from the accounts? 8. Are service charges which are levied on unidentified items prior to being classified as inactive or dormant continued, after classified as dormant or inactive? 9. What is the amount of service charge on inactive or dormant unidentified items? a. monthly charges b. One-time charge 10. Are unidentified remittances and deposits reported as required by law after the statutory period of inactivity? PAGENO="0755" 759 INTERNAL CONTROL QUESTIONNAIRE SAFE.OEPOSIT BOXES AND SAFEKEEPING Yes No -e safe.-deposit boxes on which the rent has remained unpaid forced c~en? ~fter what period are such boxes forced open? - - 2. ~e twc officers present when the safe-deposit boxes are forced cen an~ inventoried? 3. Are the contents of forc~ safe-deposit boxes placed under dual custcdy irrrediately after being forced and inventoried? L+. Are periodic examinations made of items placed under dual custody by an independent party? 5. Are the safe-deposit box signatures and record cards of forced safe-deposit boxes separately controlled? 6. fre the contents of forced safe-deposit boxes reported as required by after the statutory period has run? 7. f the Ear~< offers safekeeping services, are items in safekeeping that have re~ained unclai~d for 7 years reported as required by law after the statutory period has run? PAGENO="0756" 760 EXAMINATION REPORT-HAVERHILL NATIONAL BANK ______ 2~ ~ oft.1~ HAVERHIIL NATI~AL BANK I~VERHflL, ??SSA~HUSE~IS Dat~ August 4, 1979 ~DBERP Q. CRANE ~TRaSUP~ AND RBEr/ER G~ERAL C~DNWEALTH OF W~SSA~HUSETTS PAGENO="0757" 761 Boston, Massachusetts Augu.st 4, 1979 ~crab1e R±ert Q. Crane ~easurer an~ Receiver General State ~cu.se Bostnn, Massachusetts ~crab1e Sir: We have rr~de an exanination of the Haverhill National Bank as of July 1, 1979 for thu purpese of dete~nining c~1iarxe with the Massachu.setts ar~on~ Property L~, G. L. C.200A.. Our ex~cinaticn inc1t~ thu application of certain united e~nining prccedures and various tests of the aonrnmting records as we considered necessary in thu circ~xnstances and which are e~lained in detail in the r&ainier of this repnrt. Tne examination covered all prope~ty repurtable as of July 1, 1979 for thu 10 year cutoff at July 1, 1979. Tr~ aconrnanying ~ OF ~z~wrS ES~iE~T~BLE TO ~SS~CHUSETTS presents amrc~.rits d~r.ar~able of $126,486.09; arro'.rits repertable of $3 ~676. 46; and amrcnits reinstatable as liabilities of $4,599 * 96; totaling $134,762.51 at August 4, 1979. PAGENO="0758" 762 HISIO~ P~ OP~TI~S Haverhill National Bank was incorporat~ ix 1839 under tha laws of Massachusetts. The Haverhifl National currently has six branches through- out Massachusetts with total assets at 12/31/78 of $42,000,000. Haverhill National has fil~ Annual Reports with the Treasurer in the foU~ing years: 1950-1978. Haverhill National has report~: 1.) Caxrrercial Deposits 2.) Savings Accounts H~ever, the Haverhill National has not report~: 1.) Any fo~n of Exchange Itens Annual Reports fil~ by Haverhill National have been (understated) by $130,162.55 as rrore fully described in the S~LEME~7T OF A~Dt3NI'S ESCHEATABLE TO M'~SS~HUSLTIS in this report of examination and in the accar~anying notes thereto. PAGENO="0759" Haverhill Nat:ional hank Statement of 2seunts E~icheatab1e to Maactm~cLt:s and Reinstatabia as Liabilities as of 7/1/79 at: 8/4/79 ItITVDUflt MDunt Reportable Peinstatable at 9/1/79 Throuqh 1988 1,896.53 $ 351.41 $ 4,599.96 $ 31,750.76 3,325.05 76,545.13 24,570.09 .1. 1IUL.J.L P~tount D~nandab1e at 11/1/78 r~ccount.g Closed to Inccme Outstanding Itans Written Of f Savings 1~ccounts Checking 1~ccounts Total Findings Less 2'iwjunts Reported/Reirtitted * Balance not Reported Reirtitted Check received on 9/11179 $ 1,896.53 26,799.39 73,220.08 24,570.09 126,486.09 0 126,486.09 Total 2~anunt 4,599.96 3,676.46 3,676.46(1.) 134//62.51 *S~ accarponying notes to this report of examination. PAGENO="0760" 764 - LIMITS) ~Nfl~ING P1O~tJR~ P~O~ Our procedures were as foll~s: - I. We evaluated the systan of internal control over property that becaties reportable under the abandoned Property law and interviewed personnel ]at~i1edgeable about the bank's reporting systan for abandoned property. II. Check the integrity of the date of last transaction (DLT) by a cariparison of the conversion trials on a test basis. No exceptions were reported. III. Reviewed transaction r~uisition fran the First National Bank systan (NBS) for non~transaction changes (NDL). No exceptions were noted to ti-a OLT field. This review was done for the first week of the conversion as well as randanly through May, 1979. IV. Other Incane a. Scheduled debits andcredited daily fran the monthly accural sheets to the other incane account for the years 1975-78. We then took a pilot sarrple of every other month for a two year period (1975-76) and pulled the actual debit and credit tickets for the days concerned. The description on the tickets were noted on the work papers for the purpose of tracing any small inactive savings account balances that nay have been closed and credited to this account. Conclusion: We could find no evidenceof any stall inactive savings accounts being closed and credited to other inoone. The credits noted were for legitimate charges incleding a $1.00 fee for closing a savings within 60 days of opening. The debits noted were for refunds of overdraft charge and for club bonuses. b. Located in the vault detailed inccrne breakd~n sheets for the years 1961-69. These sheets listed in detail the monthly activity for each carponent of ti-a bank's incare accounts. We noticed that under the "other incare" category there was a car~nent entitled "closed savings and club accounts". These amounts were scheduled on a yearly basis arid totaled as possible evidence that savings and club accounts were being closed to other incane. Conclusion:. It is the opinion of this auditor that these stounts night not be write-of fs of savings arid club accounts but could be only the fee that is charged for early closing of savings arid club accounts. TTha fee, as doaxriented by a written policy, is $1.00 for closing of a savings account within 60 days and 50~ for the early E~~ig of a club account. They were scheduled ~o that adequate proof of the amounts could be provided by the bank to either affirn or disaffirn the above opinion. PAGENO="0761" 765 c. Also located in the vault were detailed sheets s1~ing various custarer accounts being closed to other inccrne on 12/15164. They were not labeled as to what type of account they were (savings, DDA or loan). The only infonnation contained on the card was the custarer' s nane and address. We searched through daily fiarn for 12/15/64 arid found a credit slip for $727.54 (pheto provided) but this rerount did not ~a1 the total of the sheets which was $849.95. It was represented by Dick Arnidio that lea did not know what tyoe of account these were berause heck in the 60's accounts were filed a~rding to custcrrer nere and not by type of account. We also noted that these accounts were being service charced $1.00 on 11/30/69 but could not deteunine the reason for the chance. These closincs were scheduled arid totaled. Ccnclusicn: It is the opinion of this auditor that these are closings of anne fcn of denarid or savings account and will be danandable unless the bank can provide evidence to the contrary. V. Service Coerce Inccrre a. Fran the inccxre breakdovn sheets under the catagory Service Charge incare we scheduled out by year the arrounts captured on the `Closed Savings Accounts" line. It was represented to us by Dick A-aidio that these night have been ~ra1l credit balance accounts that were closed by preparing a debit rnaro for the total. He doesn't }r~o~ wnew this was dnne and eaid this was not the nonnal palicy of the bank. He ventured further to say that these might have bean savinre accounts which were opened for a custaner when he craned a V.I.P. cherking account. These savings accounts may have bean inactive for six rrcnths are ncer being closed and credited to income. We vioved both the daily arid statarrant fibre for March of 1965 to try to detenaine bow the $788.07 of cks~ savings was generated. Sara copies of various debit and credit tickets were taken for reference purposes. Conclusion: It is the opinion of this auditor that after viawing the daily film that the arrounts scheduled recresent write-off s of custarer accounts. Due to the lack of integrity of the microfiJin retention systarn, it was irrssible to detennine the catcosition of the arrounts representing closed savings accounts. The total represents only the net activity for the rronth. b. Scheduled every credit to the service charge incane account fran the accrual ledger sheets for the conchs of May and dune 1975. Next, pulled the tickets for the corresponding days in order to determine if an~balance savings accounts were being service charged and closed to incane. Both the description on the ticket arid the ntrrerical value were recorded on the workpapers. Most of the entries were for itr~osition of a $5.00 charge for overdrawn checks. Sane ccirrrerical checkings accounts were charged as much as $145.00 for overdrawn checks. The $5.00 charge applied to both business and regular (personal) cl~king acco~.rots. Conclusion: It is the opinion of this auditor that after viewing the credit tickets that no savings accounts were being service charged and subsequently closed to service' charge incare. PAGENO="0762" 766 VI. Other Losses Charged Off Scheduled all credits which represented a write-off of any outstanding iteas fran the accural ledger account1 "Other lossea3 charged off for the years 1965-78 (69,73 and 74 were missing). We then located in the vault detailed lists of outstanding checks being written to undivided profits fran 1942-71. We next attampted to trace the write-off s to the undivided profit a~ount by lc~king for credits to the account or the specific date.? referenced by the lists. Checked undivided profits for t e~42-7l on a randan basis, but found no credits to it on the dates mentioned. But, for any write-off that occurred between 1966 and 1971, we found it credited to other losses charged of~ on the exact date and exact mmount referenced by the lists. Any wae~e-off occurring before 1965 could not be traced because there were no accrual ledgers prior to 1965. We also check debits to the various check accounts fran 1943-71 on a randan basis for the dates referenced by the lists to verify the amrount being rEmoved fran the check accounts. In all cases a debit for the exact anount of the write-off was found but there was no description referencing the fact that this was a write-off. Conclusion: It is the ~inion of this a~itor that no write-off s had been made to undivided profits but had instead been made to other losses charged off. As a result of the abcve situation, the original schedule of credits to other losses charged off was merged with the schedule obtained fran the lists fran the vault. VII. Sundry Account On 12/29/77 $38,831.60 of official checks was debited out of other losses charged off and credited to a sugdry liability account. The credit to sundry was verified by inspection of the sundry liability control ledger. There was no list of checks to back up the $38,831.60 figure but the actual check backers were available. The backers were grouped together according to type of check and an adding machine tape was provided for each groups total. The totals fran the adding machine tapes were separately totaled and carpared with the $38,831.60 entry made on 12/29/77. No variance between totals was found. We then proceded to total the individual backers in order to verify the accuracy of the totals presented on the adding machine tapes. Same of the checks listed on the tapes bad subs~uently cleared and the date the check cleared was written on the tape next to the amrount of the check. A total of three checks were found and the corresponding debits to the sundry account were verified. A discrepancy of $6,934.73 was found in the registered check group. The check amounts were listed on the adding machine tape but the backers were not inclt~ed in the group. The sundry account was checked for any debits representing the $6,934.73 discrepancy but none could be found. PAGENO="0763" 767 Conclusion: It is the opinion of this at~itor that the sundry was riot used prior to 1977 to control any outsanding checks and that the $6,934.73 is a write-off due to the fact that the oldest check in the registered check groun is dated in 1969 while the checks in the other crouns date hack as far as 1961. It appoars that all, checks dated crior to 1969 had teen written off. VIIL Test for L~sticn of Service Charge Scheduled savincs aoncunts on a ranfcra basis with a balance of less than $20.00 and a date of last activity in the 1960 `s or early 1970 t fran the 9/18/78 trial balance. The account was folla~ied through by carparing it with the rronth end trial balances fran 10/30/78 to 4/30/79 to test for irroosition of a service charged on l~r balance savings acco~ts. Ccnclusicn: it is the oninian of this anditorthet the bank is not inrrsing any service charge on savings accounts due to the fact that except for three ac~rite which had been legitimately closed, the accounts were still carried on the 4/30/79 trial with the sane erount and date of last activity that was on the 9/18/78 trial balance. z~:. Sevinrs cocunts Sc-adulef all savings accounts with a date of last activity prior to 6/30/78 and these with a date of last activity between 7/1/68 - 6/30/69 fran the dounant run preduced try First Na!tonal Bank of Boston. Vie~med the result of the ceiling cc 7/16/79 and checked off all these that the verifications had teen returneiby custanier and these returned by the Post Office. A ns~r darandable and reportable totals ware then cubed. X. Scheduled all checking accounts to which no response was received by the bank urcn its railing of audit vehfications. Then ccrnarped these accounts with a current trial balance (7/15/79) to deteronine if a waiver of the service charce was in effect. For all those that the service charre was not waived, the rocunt of service charga taken fran 11/1/78 cc 3/31/79 was adtoz~ bath to the balance apporing on the 5/31/79 Dccrent/Lriactive/Restrained recort (source docirnent). The total arrount darnandable was then ccrrputed. PAGENO="0764" 768 Haverhill National Bank Notes to RE~1~' OF ~NI~ThTIa~ Datnd August 4, 1979 1. Au~i~t r~nit~ inc1tx1~ that thnandable on 11/1/78 of $126,486.09 and the ~rot~t re~rtab1e on 9/1/79 of $3,676.46 for a total of $130,162.55. This r~nittance exc1u~es the bank fran any further re~xting liability for 1979. PAGENO="0765" 769 The courtesy and cooperation extend~ by Haverhill National during the course of this e~conination is hereby acc~iledged and appreciated. DIVISi~ OI',/?B~D P~P~Y j4%~/ ~ PAGENO="0766" Stephen Galvin Examiner-in-charge 8/3/79 Date. Presented COMMONWEALTH OF MASSACHUSETTS OFFICE OF THE TREASURER AND RECEIVER GENERAL DIVISION OF ABANDONED PROPERTY Boston, Massachusetts STATEMENT OF EXAMINATION FINDINGS for Haverhill National Bank for Property Escheatable as of 7-1-68 at 8/3/79 Code Section 1) ,-`s-ôp 2) 2000 3) 3ôcX) 4) ~ 5) 6) 7) 8) 9) 10) Description Z~ccts. closed to incaan $ Amount Demandable At 11-1-78 1,896.53 Outstanding Ithes W/D 26,799.39 . Savings accounts * 73,220.08 Checking accounts 24,570.09 Amount Amount Reportable Reinstatable ____________ ___________ 9-1-79 Through(1988 ). _________________ ________$________ $________ _______ ______________________________ _____________ 351.41 4,599.96 ____________ ______________________________ _____________ 3,325.05 - TOTAL FINDINGS 126,486.09 _3,676.46 - $..4.~9.96 ____________ LESS AMOUNTS REPORTED/REMITTED ( 0 - )( 0 BALANCE TO BE COLLECTED $ 126,486.09 $ 3~676.46 -- Interest on amounts demandable from 11-1 through .totals $_____________ $ in interest accrues per day after - until payment of the above sum. Total Findings $ 1,896.53 31,750.76 76,545.13. 24,570.09 $~4,2$2~L_.... PAGENO="0767" 771 EXAMINATION REPORT-BLUE HILL CREDIT UNION PAGE 1 REPOF~T OF EXAMINATION OF THE BLUE HILL CREDIT UNION BROOKLINE, MASSACHUSETTS MARCH 7,1979 ROBERT Q. CRANE TREASURER AND RECEIVER GENERAL COMMONWEALTH OF MASSACHUSETTS BOSTON, MASSACHUSETTS PAGENO="0768" 772 PAGE 2 Boston, Massachusetts March 7,1979 Honorable Robert Q. Crane Treasurer and Receiver General State House Boston, Massachusetts Honorable Sir: We have made an examination of the Blue Hill Credit Union as of July 1,1978 for the purpose of determining compliance with the Massachusetts Abandoned Property Law, G.L. C.200A. Our examination included the application of certain limited examining procedures and various tests of the accounting records as we considered necessary .:.::::jn the circumstances and which are explained in detail in the remainder of this * report. The examination covered ~`~(a1l property) reportable as of July 1,1978 for the 10 year cutoff at July 1,1968. The accompanying STATEMENT OF AMOUNTS ESCHEATABLE TO MASSACHUSETTS presents amounts demandable of $114,178.81; amounts reportable of $19,198.87; and amounts reinstatable as liabilities of $ -s-- totalling $33,377.70 at (last day of field work) March 7,1979. PAGENO="0769" 773 PAGE 3 HISTORY AND OPERATIONS Blue Hill Credit Union was incorporated on January 3,1921 under the lawa of the Co~rrnonwaalth of Massachusetts. The Credit Union currently has threc branches thro~ichout Massachusetts with total assets at January 1,1978 of $7S,736,Oll. Blue Hill Credit Union has filed Annual Reports with the Treasurer in the folicwin~ years: 1951, 1972, l978.~ Blue Hill has reported Savings Ac~ounts only. However, the Credit Union has rot reported Recistered Checks, Ca~hiers Checks, money orders. Arr~ial Reports filed by Blue Hi11~ Credit Union have been (understated) by Si!4,178.81 as more fully described in the STATEMENT OF AMOUNTS ESCHEATABLE TO MASSACHUSETTS in this report of examination and in the accompanying notes thereto. PAGENO="0770" 774 BLUE HILL CREDIT UNION Statement of Amounts Escheatable to Massachusetts and Reinstable as Liabilities as of 7-1-68 at 2-6-79 DESCRIPTION AMOUNT - Y2~~ AMOUNT REPORTABLE 9-1-79 AMOUNT REINSTATABLE Through (6-30-79) TOTAL AMOUNT Savings Accounts Savings $15.00 L~,O83.29 Note 1 5,5148.21 17,893.58 681.68 21,976.87 6,230.13 Money Orders 3,886.57 456.145 4,31+3.02 Registered Checks 660.68 167.00 827.68 Total Findings $114,178.81 $19,189.89 $33,377.70 Balance not ReporFed/Remi tted Note 2 $15,178.81 $19,189.89 $33,377.70 PAGENO="0771" 775 PAGE 5 LIMITED EXAMINIP~G PROCEDURES PERFORMED Our procedures were as follows: We evaluated the system of internal control over property that becomes re;ortable under the Abandoned Property Law. I interviewed Credit Union Personal to determine thier controls over dormant accounts. From our review sc~e~rs that controls were nc~ existant in that all accounts remain open and were nmt flscced. PAGENO="0772" 776 PAGE 6 AUDIT PROCEDURES FOR BLUE HILL CREDIT UNION 1. Schedule the accounts from the share account trial balance of all accounts with a date of last activity of 00-00-00. These accounts have been inactive since they went on the computer system in 1971 and years prior to 1971. II. Went to the old shareholder cards and checked each account previously listed to determine if the date of last activity was prior to 7-1-68 and if so listed it as demandable. III. Prepared a schedule of the accounts listed as demandable consisting of the customers name, account number and amount and gave a copy of it to Tony Smith so that he could mail out notices to the customer notifying them that their account would be escheated unless the notice was returned to Blue Hill signed accordingly by the customer. IV. Prepared a schedule of all demandable Money Orders, and Registered Checks and Shareholders accounts under $15.00. The money orders taken as demandable were determined as such by viewing all the outstanding money orders available and grouping them together by year and series on a judgemental basis. The series A - F appeared to cover the years 1956-1968. b.) The club and registered checks were dated and we picked up all those dated for 1968 and prior. Also picked some old checks for which no year was indicated. c.) The S~p~e,Ac~ounts under $15.00 were separately controlled in Acct./1002-8888-88 of which $.7~,~L42.5~-&6 is demandable based upon our reliance of the test run by the bank examiners to determine the period of inactivity of these accounts. V. Returned on 2-5-79 to view the results of their mailing and to finalize the working papers. Checked thru the letters which were returned signed; checked thru a current savings trial balance date l_214_79 to see if any of the accounts on the list were updated by presenting the passbook personally and also checked thru the old share cards to see if any of the returned letters were stapled to the old ledger cards. PAGENO="0773" 777 VI. Returned on 3-7-79 to view results of~the procedures used to determine ~f the Credit Un~on had an ongoing relationship (mortgage or personal loan) with the customers in the under $15.00 account file. All customers which were listed as having ongoing relationships were checked for validity and all were deemed to be correct. This was last day of field work check~received $lL~,l78.l8. PAGENO="0774" 778 BLUE HILL CREDIT UNION Notes to the REPORT OF EXAMINATION Dated 2-6-79 (Note 1) Total amount in that account is $8,690.39. The amount deemed to be demandable was determined by viewing and testing a listing of all the customers accounts contained therein and omitting those who have a current ongoing relationship with the Credit Union. (Note 2) This $19,189.89 represents amounts that will become demandable at 11-1-79 unless the accounts are claimed or reactivated by the owner prior to 7-1-79. PAGENO="0775" 779 The courtesy and cooperation extended by Ralph Cataldo of Blue Hill Credit Union during the course of this examination is hereby acknowledged and appreciated. William 0. Casey Cnef Examiner DIVISION OF ABANDONED PROPERTY Ex~i ncr-i n-Charcc Staff Assistants 67-~~O 0 - 81 - 50 PAGENO="0776" 780 MICHIGAN QUESTIONNAIRE RESPONSE STATE OF MICHIGAN DEPARTMENT OF TREASURY TBEASURY BUILDING WILLIAM 0. MIUIKEP4, 0~R,~,w? LANSING. MICHIGAN 48922 LOREN E. MONROE. StRt~ T~R~ November 6, 1979 3. The Hon. Benjamin S. Rosenthal, Chairman Commerce, Consumer, and Monetary Affairs Subcommittee of the Committee on Government Operations Rayburn House Office Building, Room B-377 Washington, D.C. 20515 Dear Mr. Rosenthal: Enclosed herewith is our reply to the questionnaire which accompanied your letter of October 3, 1979. This reply was drafted in the Escheats Division office and in the office of my legal counsel, Irving S. Feldman, State Public Administrator and Assistant Attorney General. If any portion of the enclosed requires clarification please do not hesitate to inquire. Sincerely yours, DEPARTMENT OF TREASURY Escheats Division ~ ?~~ Rubie Nicholson, Adminis trator tm Enc. . Mica A.1155 R~. 9'Th) PAGENO="0777" 781 UNCLAIMED PROPERTY QUESTIONNAIRE 1. a.(i) The Michigan Code of Escheats, 1947 PA 329, MCLA 567.11, et.~q., MSA 26.1053(1), ~ applies to any "holder" of abandoned property. Holder is defined by Sec. 5(a), MCLA 567.15(d), MSA 26.lO53(5)(d) as: "Cd) `Holder' means any person, as defined [in subdivision (a)], having possession, custody, or control of the property of another person, and includes but not by way of limitation, a bank, either state or national; a savings and loan association; a credit union; a trust company; a depository; a bailee; a trustee; a receiver or other liquidating officer; a fiduciary; a federal or state governmental department, official, officer, board, public corporation, commission, constitutional~body, court, institu- tion or agency, or political subdivision of the state; a municipal corpora~jon and the fiscal officers thereof; a custodian or officer appointed by the court to receive, keep, handle, or disburse money or other property; a public utility, insurance or service corporation; and every other legal entity doing business in this state. This definition shall be construed as distinguishing the tern `holder' of property from the tern `owner' of property." "Any person" is further defined in Sec. 5(a), MCLA 567.15(a), MSA 26.l053(5)(a): "As used in this act: (a) `Person' includes a natural person, a corporation, a partnership, voluntary association, estate, trust, 2 or more persons having a joint or common interest, or any other legal or commercial entity; the United States government, including any official, officer, agency, department, authority, instrunen- tality, board, bureau, or court thereof, and any corporation organized by the United States for public purposes; [every] state [of the United States of America including this state], including any official, officer, agency, department, board, commission, constitutional body or court thereof, or any body politic and corporation created by the *state for public purposes; and any political subdivision of the state.' The term "property" is~ defined by Sec. 5(b), MCLA 567.15(b), MSA 26.1O53(5)(b) as follows: `(b) `Property' means pers~nal property, of every kind or description, tangible or intangible, in the possession or under the control of a holder, as hereinafter defined, and includes, but not by way of limitation: -1- PAGENO="0778" 782 " (i) Money. (ii) Bills of exchange. (iii) Stocks, bonds and other securities. (iv) Credits, including wages and other allowances for services earned or accrued on or after January 1, 1958, and funds due and payable on checks certified in this state or on written instruments issued in this state on which a banking or financial institution or any other holder is liable, including but not limited to certificates of deposit, drafts, cashier checks, money orders, and travelers checks; also proceeds [or property interests represented by] unredeemed gift certificates. (v) Deposits, howsoever evidenced, including accrued interest and increments thereon. (vi) Dividends, cash, or stock. (vii) Certificates of membership in a corporation or association. (viii) Amounts due and payable pursuant to the terms of any policy of insurance; also [moneys] held and owing by any life insurance company doing business in this state which shall have remained unclaimed and unpaid for 7 years or more after it is established from the records of such company that such moneysbecame due and payable under any life or endowment insurance policy or annuity contract which has matured or terminated. A life insurance policy not matured by actual proof of the prior death of the insured shall be deemed to be matured, and the proceeds thereof shall be deemed to be due and payable within the meaning of this act if such policy is in force when the insured shall have attained the limiting age under the mortality table on which the reserve is based. Moneys otherwise admittedly due and payable shall be deemed to be held and owing within the meaning of this act although the policy or contract shall not have been surrendered as required. (ix) Security deposits. (x) Funds deposited by a holder with fiscal agents or fiduciaries for payment to an owner of dividends, coupon interest, and liquidation value of stocks and bonds. (xi) Funds to redeem stocks and bonds. (xii) Amounts refundable from excess or increased rates or charges heretofore or hereafter collected by a corporation for utility services lawfully furnished by it, which have been or shall hereafter lawfully be ordered refunded to consumers or other persons entitled thereto and any interest due thereon, and which have remained unclaimed by the persons entitled thereto for 7 years from the date they became payable in accordance with the final determination or order providing for the refunds. (xiii) All other liquidated choses-in-action of whatsoever kind or character." a.(ii) Exempted property is set forth in Sec. 5(b), supra, as follows: "The word `property' does not include credits or deposits evidenced by cash balances on unclaimed or refused personal property, nor any property, except the items specified in [sub-paragraphs] (i) to (xii), the right to recover which in a proceeding PAGENO="0779" 783 brought by the owner would be barred by the provisions of any statute of limitations, state or federal. `Property' does not include sewage tap or connection fees or charges which a court has ordered to be refunded by a local government to property owners or other persons paying the fees or charges and which are unclaimed within a period of 7 years from the date of the court order and are used to retire judgment bonds issued to refund such sewage tap or connection fees. This act shall apply to unclaimed property held by a life Insurance company as defined in subparagraph (viii) where the last known address, according to the records of the life insurance company, of the person entitled to such property is within this state. If a person other than the insured or annuitant is en~itled to such property and no address of suc1~ person [is] known to such company or if it is not definite and certain from the records of such company what person is entitled to such property, then it shall be presumed for the purposes of this act that the last known address of the person entitled to such property is the same as the last known address of the insured or annuitant according to the records of such company." a. (ili) The period of dormancy under the Michigan Code of Escheats is seven years during which time the owner has "ceased, failed or neglected to exercise dominion or control over his property or to assert a right of ownership or possession; or to ake presentment or demand for payment and satisfaction; Cr to dc any other act In relation to or concerning such property." MCLA 567.15(f), MSA 26.l053(5)(f). A holder must report all abandoned property under his possession by June 30 of each year. MCLA 567.16, MSA 26.1053(6). A holder may report and deliver to the Board of Escheats, property which he possesses for a period of two years during which the owner has failed to exercise dominion or control and be relieved ci further responsibility to it. 1949 PA 63; MCLA 567.201, et. seq., ~sA 26.1054(1), et. seq. a. (iv) The Board of Esche~ats holds abandoned property as trusted and conservator for the absent, incapacitated or missing owners or their heirs. MCLA 567.74, MSA 26.1053(64). a. (v) The Code of Es cheats does not provide for interest to be paid on funds held by it. The Board of Escheats PAGENO="0780" 784 does hold property as trustee and pays interest on those funds when ordered to do so by the court. b. The State Board of Escheats has no administrative rules regarding refunds. The redemption procedure is set forth in the Code, MCLA 567.63 -- MCLA 567.65, NSA 26.1053(53) -- NSA 26.1053(55). c. There are no statutory provisions as to financial institutions in regards to dormant accounts other than the Michigan Code of Escheats, supra. d. The eseheat procedure in Michigan is judicial in nature, either through an estate in the name of the owner which is processed through probate court, or by a determination that property is abandoned by the circuit court. MCLA 567.33, NSA 26.1053(23) or MCLA 567.38, NSA 26.1053(28) Under the probate process, a public administrator is appointed as administrator of the estate, and that administrator must post notice to the owner on the courthouse door or bulletin board. In addition, the administrator must publish notice of hearing of his final account in a newspaper circulating in that county for three weeks prior to the date of hearing. MCLA 567.36, NSA 26.1053(26). The circuit court procedure requires the Attorney General to file suit against the owners of the alleged abandoned property. Service is made on the sheriff of the county in which the property is located. Within 15 days of service, the sheriff must post the summons and complaint on the courthouse posting board or courthouse door. MCLA 567.38, NSA 26.1053(28). e. See (d) above. f. The Michigan Code of Escheats, sup~ra, provides in Sec. 40, NCLA 567.40, NSA 26.1053(40), that information acquired from the Board of Escheats may not be used to seek a fee or contract with another to disclose such information. A violation -4- PAGENO="0781" 785 cf that section is a misdemeanor. In addition, an agreement for compensation between one who has secured access to such data and an interested party to such property is invalid if it is in excess of 5~ unless a signed, written agreement is attached to a petition for redemption. The State Treasurer is also empowered to send warrants directly to the person entitled, as opposed to one acting as attorney-in-fact, assignee or holder of a power of at to: ney. g. Abandoned property is defined as: (e) `Abandoned property' means property against which a full period of dormancy h~s run. `(f) `Period of dormancy', ~except as provided in section 7a], means the full and continuous period of 7 years, during which an owner has ceased, failed, or neglected. to exercise dominion or control over his property or to assert a right of ownership or possession; or to make presentment and demand for payment and satisfaction; or to do any other act ~n relation to or concerning such property. This definition shall be construed as excluding any act or doing of a holder of abandoned property not done at the express request or authorization of the owner. In the case of a life insurance policy not natured by actual proof of the prior death of the insured, the period of dormancy shall commence to run from the tine that the insured shall have attained the limiting age under the mortality table on which the reserve is based, provided the policy is in force at that time." MCLA 567.15(e) and (f), MSA 26.l053(5)(e) and (f). Under Michigan law, it is activity or control over the pro~erty, not contact which is determinative. PAGENO="0782" 786 SCHEDULE ~ DEPARTMENT OF TREASURY ESCHEATS DIVISION FINANCIAL INSTITUTIONS REFERENCE - Escheats Statute - Act 329 - P.A. 1947, as Amended Act 63 - P.A. 1949; Act 67 - P.A. 1978 WHAT SHOULD BE REPORTED Any personal property tangible or intangible, whose owner cannot be located after a diligr! search. This includes money; bills of exchange: stocks, bonds and other securities; credits tuch as unclaimed wages; outstandi; checks, drafts, money orders, cashier's checks, traveler's checks, certificates of deposit or gift certificates; deposits, however evidenco dividends in cash or stock: funds deposited with fiscal agents to pay dividends,interest and liquidation value of stocks and bon~ and any other ascertainable liquidated choses in action. - - DORMANCY - Savings or checking accounts are considered dormant if there has been no action on the part of the depositor (no deposits or with- drawals or interest posted to a Pass Book) for the dormancy period of either two* or seven years. *Usually applies to snail accounts under $10. - Uncashed checks, money orders, drafts, etc. are dormant after seven years. - Uncashed travelers checks are dornant after fifteen years, however these are usually escheated by the parent company rather than -- a local issuing agent. SCOPE OF EXAMINATION - This form should be completed only for Financial Institutions which have been in existence for two or more years. 1. Name and address of Financial Institution ___________________________________ 2. Date of Charter ________________ 3. Manager's lane___________________ 4. Has this Financial Institution filed a current Abandoned or Unclaimed Property Report? Yes No If yes, as of what date? - December 31, 19 5. Are inactive/dormant accounts separated from active accounts for accounting purposes? - Yes - No If yes, after what period of dormancy? ______________________________ 6. Does the Financial Institution make an effort to locate the owners of abandoned property? - Yes - No 7. Have all outstanding escheatable liabilities been reported including official bank checks, certified checks, cashier's checks, drafts, personal or bank money orders, drafts, the institution's own payroll checks, Certificates of Deposit, etc. as well as well as savings and checking accounts? - Yes - No If no, explain more fully (or attach a separate sheet) ________________ 8. How was reply to Item 6 established?________________________________________ PAGENO="0783" 787 9. Has the Financial Institution reported any undeliverable Stock Ce-rti- ficates of its own stock or accumulated uncashed dividends on its own stock? (Does not apply to Credit Unions.) Yes - No 10. Does the Financial Institution act as a Transfer Agent or Dividend Dis- bursing Agent for other Corporations? - Yes - No 1f yes, have undeliverable stock certificates and uncashed dividend - checks been reported? - Yes - No 11. Does the `Other Income" or "Undivided Profits' ledgers indicate any items which should have been reported but were not? - Yes - No According to your findings what is the date, account number, name and amcu~t ci the cidest unreported inactive or dormant account?__________ A. Date, mu~ber, payee and/or purch~ser(if available) and amount of the oldest outstanding check, money order, etc. _________________________ 13: Are dates of last activity (or contact) properly recorded and carried forward on ledger cards or data printouts? - Yes - No ii. Does the Financial Institution have a Safety Deposit operation? If yes, have the boxes upon which the deposit or rent has not been paid been drilled, iflventoried, amd escheatcd in accordance with statute? Yes ~o Examiner's Conmemts - Please explain briefly any action you have taken cc any suggestions you have for future or further action. Signed: ______________________ Date: _____________________ 67 440 687 PAGENO="0784" 788 SrATE OF ~ lIGAN SCHEDULE B DEPARTMEN! OF TREASURY - TBEASURY BUILDING WiLLIAM 0. MILIJEEN, GeRetee? LANSING, MICHIGAN 48922 WREN E. MONROE. State Teeae,t~, October 5, 1979 Pursuant to the provisions of the Michigan Code of Escheats, this office has scheduled an examination of your records for the purpose of determining compliance with Act 329 of the Public Acts of 1947, as amended, (MCL 567.1 et seq). Our examination will include a review of reports filed with our Escheats Division by your company and the verification of those reports as provided in your records. In addition, we shall examine to discover any property not reported or underreported based on the law. The examination will be conducted by auditors of the Revenue Division, Department of Treasury, in conjunction with a scheduled audit of Michigan taxes. The auditors will discuss fully the findings of the examination with you or your representative prior to finalizing the items subject to escheat and payable to the state, if any. We will appreciate your cooperation. Very uly yours /4' ~ R Do las Trezise Deputy State Treasurer ROT: c RECE1VEP ~. ~ OCT S'~Z F1ELE~ OFFJC~ O~ 1. `~ ~ M~ik `Mi~ PAGENO="0785" 1976 l'fl id ~pts. 1ipta. Fatal SCHEDULE C 1977 -0- Paid .!ia.i~ Rpta `Fatal I 9 78 -0- Pa Id Rpti. I~p_ç,n Total 15,000 1,700 16,700 17,000 1,837 18,837 16,000 1,984 17,984 2. a. Number of Institutions Reporting All Institutions Banks, Credit Unions Savings & Loan Asan. -~-- Brokers 671 Unknown 666 * 1,337 667 ~--~-~ Unknown 658 1,335 534 695 Unknown 1,229 ~ . Insurance Companies 658 240 898 655 267 922 593 275 *868 All Others 13,671 794 14,465 15,678 912 16,580 14,873 1,016 15,887 cc PAGENO="0786" 790 2. Amounts of unclaimed property reported and a.) b.) See Schedule C c.) d. The number of individual unclaimed property accounts of over $500 is not available but there are hundreds and possibly thousands of accounts of over $500 reported each year. e. The total number of names advertised each year is not available. Schedule D attached is a sample of advertisement by National Bank of Detroit - the largest bank in Michigan. Also, the County Public Administrators publish the names of owners accounts involved in each probate file at the time of probating. 1976 1977 1978 f. Dollar Amo~.nt Returned to Owners $ 589,969. $1,061,556 $ 916,959. g. Delivery percentage 9.054% 16.787% 13.028% h. Amounts Remitted minus claims paid 5,925.994. 5,262,125. 6,121,333. PAGENO="0787" Ill; 3)(T!~3) ..9~.., Ab,144,As (4$) C~g.1)) U. (00) Ck~.K11hto9~o A. (41) K,o~b59. JAA (77) N . )li~~ rI (22) Ado~o, V09* L. (00 Clo),,, (lobo9 9. ((5) COo, Kohk00 (07) K,4o~, M.i~ (00) )1,.o,4d K. 6?. (01 Ad*~,R8y C. (26 COo LIds C. fl7) GIi~oy, Mkho( 6. 7))) K9*o~, (Oo7.) 17. 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(55) IViIIbo6, buy (18) Goy.J~., 9,oto4 (56) Ooio,I. MOod 0. ((5) l5'( (010,041, 157) 0917,. )3,.o)) V. (79) .THEDETROIT NEWS-FrId.iy Mi~ 1979 Ady.qt(*.n~m0 A4000j(419,fl$ Below is a list of customers who have dormant accounts with us claimed. Owners of these accounts can come to their NBD office that are liable to escheat. The law requires us to turn over funds and enter a claim. The numbers listed next to names indicate from all such neglected accounts to the State of Michigan unless branch office locations which arc shown at the bottom of the listing5----- PAGENO="0788" SCHE~J~J~~ E 2. b. Amount of property (Cash) reported: All Institutions: Banks, Credit Unions, Savings & Loan Assn. Brokers Hospitals & Nursing Homes Insurance Companies State of Michigan All Others* All Institutions: Banks, Credit Unions, Savings & Loan Assn. Brokers Hospitals & Nursing Homes Insurance Companies State of Michigan All Others* $6,323,681. $7,038,293 2,624,447. 3,351,044. Unknown Unknown 6,515.963. 6,323,681. 7,038,293. 2,577,070. 2,624,447. 3,351,044. Unknown Unknown Unknown 84,837. 56,403. 93,733. 584,312. 694,168. 729,649. 798,756. 1,000,398. 823,227. 2,470,990~. 1,948,265 2,040,640. 1977 1978 792 1976 $6,517,122. 2,578,227. Unknown 84,837. 584,312. 798,756. 2,470,990. 56,403. 694,168. 1,000,398. 1,948,265. c. Amount of Property (Cash) remitted: 93,733. 729,649. 823,227. 2,040,640. *Note: Amount Reported 1~ztnot Paid is not available for this category. PAGENO="0789" 793~ Ii. Field Audits or on-site investigations for compliance: We are just initiating such audits. In cooperation with several other states we participated in the audit of several copanies throughout the United States Nichigan Department of Treasury Field Auditors are de- a procedure for auditing for Escheats along with their audits for tax compliance. This is very new and at the present tire is still in an experimental and development stage. In addition, we have arranged with the Financial Insti- tutic:is Bureau of the Michigan Department of Commerce for the Fioancial Institutions Examiners to make a preliminary check of the state controlled financial institutions for compliance with the Esoheata Statute tc deterine if Mich~igan Department of Treasury Auditor should conduct a more in-depth audit. (i) See above (ii) The Escheats Division of the Michigan Department of Treasury has no audit staff of its own. (iii) Corporations only. (iv) None (v) Attached is a copy of a suggested Survey (Schedule A) to be used by the Financial Institutions Examiners. The Field Audit Divisi~n of the Michigan Department of Treasury has not yet written exact procedures for auditing for Escheats as this is just being initiated. Attached i~ a sample of a letter (Schedule B) sent to a corporation which is being audited. (vi) Michigan Financial Institutions Examiners and Michigan Department of Treasury Field Auditors. i. The Escheats Division budget is included in the over-all budget for the Michigan Department of Treasury. The only figures available are for the Fiscal Year 1978/79 - S133,500. The Eacheats Division has seven full-time employees and one part time student assistant employee. -11-- PAGENO="0790" 794 3. Brokerage firm reports: a.) Note: We maintain no separate files on brokerage b.) c.) firm reports. The information requested is not available. However, we can state that we do receive reports from several brokerage firms reporting both stock and dividends. 4. Compliance with the Escheats Statute of Michigan a. Description of degree of compliance: (i) National Banks - Excellent (ii) State Banks - Excellent (iii) Federal Savings & Loan Associations - Excellent (iv) State Savings & Loan Associations - Excellent (v) Federal Credit Unions - Excellent (vi) State Credit Unions - Excellent (vii) Securities Brokerage Firms - Unknown (viii) Mutual Funds - Unknown (ix) Insurance Companies - Excellent (x) Nonfinancial Corporations - No definitive figures are available. However, it appears that at least most of the larger corporations are in compliance with the Michigan Escheats Statute. b. Our audit program is too new to have had any material effect upon reports received. c. Estimated amount of additional unclaimed property held by the following which would be reported if there were full compliance with the statute: (i) Financial Institutions - Probably minimal (ii) Brokerage firms - unknown (iii) Insurance Companies - Probably minimal (iv) Nonfinancial corporations - Probably a material amount - due for the moat part to a lack of understanding of the statute and its purpose. -12- PAGENO="0791" 795 SERVICE CHARGES 5. a. Service charge abuses were discovered through exanination of reports filed with the State Board of Escheats which disclosed that banks were not reporting any accounts under $15.00 (Fifteen Dollars) as dormant. b. It appeared that service charges were generally applied to dormant accounts or unclaimed property. c. Service charges have been imposed by banks, savings and loan institutions and Travelers Express Company. d. Resolutions are generally nade by banks to charge for services on dornant accounts, and such is posted somewhere in the bank. Customers usually sign, a document indicating they have been apprised of the rules and regulations of the bank, after which they receive such rules. It appears that the service cba:ge on dormant accounts is not disclosed to customers verbally, mc: is it specifically brought to~ their attention in the written ma: erials. e. Typically, service charges were between $0.50 and $1.00 per month on dormant accounts. Travelers Express charged $0. 25. f. See above, as it appears the amount is excessive although not unusual. g. In prior years, a great amount of deposits were taken up by service charges, although the amount is not known. h. By 1978, imposition of service charges by banks on dormant accounts was eliminated. See (k) below. i. The problem has been eliminated. j. In 1970, the Board of Escheats refused to accept the report of the National Bank of Detroit in that the small accounts were reduced or eliminated by improper service charges. The National Bank of Detroit filed a Complaint for Declaratory Judgment and the state cross-complained for superintending control. (A copy of the Complaint and Answer and Cross-complaint -13- 67-~0 0 - 81 - 51 PAGENO="0792" 796 are attached hereto.) The Court's opinion and Order held that the service charges were inproperly utilized and a consent judgment was entered. See attached. The consent judgment authorized a service charge of $1.00 for each year of inactivity, not to exceed $2.00 after which the property should be reported and turned over to the Board of Escheats. This is the present practice in this state, as all other institutions followed the order in National Bank of Detroit v State of Michigan, Inghan County Circuit Court, Civil Action No. 13460-C. -14- PAGENO="0793" 797 OTHER PRACTICES 6. a. Various banks and financial institutions have passed resolutions whereby accounts of under a certain amount no longer earn interest. If accounts are reported and turned over to the Board of Es cheats, the holder is no longer required to pay interest. MCLA 567.28, NSA 26.1053(18). However, even if reported, if no delivery is made, after seven years when property is escheated, the bank ~ias to re-figure interest. ~CLA 567.40, NSA 26.1053(30). b. Under the Michigan Code of Escheats, the address of the owner is not determinative, but rather the activity or control over the property itself. c. National banks and savings and loans by contract provide for the "roll-over" of certificates of deposits for their accounts. d. The Michigan Code of Escheats, Sec. 16, MCLA 567.26, ~SA 26.1053(16) specifically provides that crediting of interest does not toll the period of dormancy as defined by the act, nor relieve a holder of any responsibility under the act. We have had cases which a holder does not report property because of an alleged exemption. However, the Code of Escheats, ~ provides that the Attorney General may institute action to compel a report and, if necessary, the question of exemption can be litigated under those circumstances. MCLA 567.27, MSA 26.1053(17). e. Various corporations have been known to absorb unclaimed dividends. This practice was found to be illegal in court action in another jurisdict~ion. f. A particularly vulnerable situation exists, with documentation in other jurisdictions, that some bank employees maintain a watch over dormant accounts which are subject to PAGENO="0794" 798 raiding by the employees. This is also directed at accounts in the name of deceased customers for which no one makes claim. Several banks are attempting to control the problem by trans- ferring accounts such as these to the main office for supervision instead of leaving then in the branches. 7. Unclaimed Property Held by Federal Government. The State of Michigan has contemplated making claim for property held by the federal government, but declines to comment further. PAGENO="0795" STATE OF NICHIGAN IN ThE CIRCUIT COURT POE ThE COUNTY OF INGHAM 1NE C~ DETOCIT A 350ciatlon, Plaintiff, -vs- TN: PEOPLE OF THE STATE OF NICHIGAN: ALLION R. GREEN, Treasurer of the State of :~ich1~a~, FRANK 5. KELLEY, Attorney General of the State of Michigan; IRVING B. FELONAN, State Public Administrator, SYLTIA S. HART, ALFRED A. NAY, AND RALPH R. GOLOSNITH, Fayr.e Ccunty ?utl!c Adm!n~strators, and as AdmInistrators of the Estat~of Robert G. Drummond, et a!, Tayns County Probate File Ens.' 617-777-760, 517_9t5_9116, and 617-837-838, Defendants. __________/ CONSENT JUDGMENT FRANK J. KELLEY DICKINSON, WRIGHT, Mc HEAR & cuDLI: Attorney General of Michigan CiT. Gerald Warren) Attorneys for PlaintIff IRVING B. FELDMAN NatIonal Bank of Detroit BERNARD ROSNEN 800 First National Building E. BOOKIE MIKRUT DetroIt, Michigan 48226 Assistant Attorneys General (313) 952-5860 Attorneys for the State of Michigan 2003 CadIllac Square Building Detroit, MichiFan 118226 (313) 222-1827 ALAN A. NAY Attorney for Defendant-Adninistraters 1150 First National Building DetroIt:, :iichiran T12726 (313) 961-2818 799 CONSENT JUDGMENT IN NATIONAL BANK OF DETROIT vs. STATE OF MICHIGAN `\ kj~ 9 No. 131460_c PAGENO="0796" 800 STATE OF MICHIGAN IN THE CIRCUIT COURT FOR THE COUNTY OF INOHAM NATIONAL BANK OF DETROIT, A National Banking Association, Plaintiff, No. l3~460~C -vs- * THE PEOPLE OF THE STATE OF MICHIGAN; ALLISON R. GREEN, Treasurer of the State of M~ch1ran, FRANK J. KELLEY, Attorney General of the State of Michigan; IRVING B. FELDMAN, State Public Administrator, SYLVIA S. HART, ALFRED A. MAY, AND RALPH R. GOLDSMITH, Wayne County Public Administrators, and as Administrators of the Estates of Robert G. Drummond, et al, Wayne County Probate File Nos., 617-777-780; 6l7_9145_9Z~6; and 617-837-838, Defendants. ________________________________________________/ CONSENT JUDGMENT At a session of said Court held in City Hall, in the City of Lansing, Ingham County, Michigan, on the ~ day of ~ j~, ,~ -, ~- PRESENT: HON. MARV1~1 J~ SALMON Circuit Judge This~Court having considered Count I of Plaintiff's ComplaInt for*~eclaratory Judgment; the Defendants' Answer to Count I of the Complaint for Declaratory Judgment; Plaintiff's Motion for Summary Judgment and Defendants' Answe±'s thereto; Briefs having been submitted by all parties, and oral arguments presented by W. Gerald Warren, on behalf of the Plaintiff, and Bernard Rosner, Assistant Attorney General, and Alan A. May, Attorney for the respective Defendants; the Court having been fully advised in the premises and having Issued its written o~InIcn on April 211, 1972.; PAGENO="0797" 801. And this matter being presented for judgment by the consent of all parties hereto, their consent being evidenced by the Stipulation attached hereto;~ IT IS HEREBY ORDERED, ADJUDGED AND DECREED THAT: 1. Section 16 of the ?4ichigan Code of Escheats [ECLA 567.26; NSA 26.1053(16)] as a matter of law, neither authorizes nor prohibits a contract between a Bank and its Depositor, whereby the Bank may impose a service charge on dormant (InactIve) savings accounts; and, 2. SectIon 228 of the~ ~anking Code of 1969 ENCLA 187 528~ NSA 23.710(228)] does not authorize nor prohibit a Bank from entering into a contract with its depositors whereby the Bank may impose a service charge~on a savings account; and, 3. The Plaintiff shall account for and pay to the Defer.dants bereln, as their respective interests may appear, the amounts heretofore deducted as service charges against dormant (inactive) savings accounts, during the years 1961 through 1971, wIth interest thereon at the rate of ~4% per annum; that the method of arriving at such sums shall be as computed from the Plaintiff's records, or in the event the records are unavailable, then the method of arriving at such basic sums shall be the one used by the parties heretofore to determIne the service charges computed for the Report of UnclaImed Property filed by the Plaintiff for the year 1969, in the year 1970; against the total sun computed for the years 1961 through 1971, and accumulated interest thereon, the Plaintiff shall be allowed a credit in the sum of $lO,ltO.OO, which is the sun previously paid to the De~fendant - State of Michigan, in the year 1970; and, PAGENO="0798" 802 ~. (a) Plaintiff may retain possession of dormant (inactive) minimal savings accounts, as hereinafter described, for the full seven (7) year period of dormancy as provided in the Michigan Code of Escheats; however~ the Plaintiff shall not (must not) enter into a contract with its Depositors whereby the Plaintiff is permitted to levy a service charge, i.e., a charge of any type or nature against the dormant (inactive) accou~it for any reason; or, (b) Plaintiff may enter into a Contract of Deposit with its Depositors, to apply prospectively only, which provides for the levying of a service charge as herein- after set forth; provided that Plaintiff must turn over the remaining balance of the savings account, if any, to the State of Michigan at the end of two (2) years inactivity of the accounts, in accordançewith Act 63 of the Public Acts of l9~9; (c) A service dharge in the amount of One Dollar ($1.00) may be levied against each savings account having a balance of $10.00 or less for each year inactivity; the gross total service charges to be imposed on any account shall not be more than Two Dollars ($2.00). Inactivity is defined to mean that there has been no deposit or withdrawal made by the Depositor or his representative; (d) If the.Owner of any minimal savings account which has been reported and turned over to the State of Michigan shall apply for the return of the funds, such funds shall be returned and refunded by the State as pro~ided in Act 63 of the Public Acts of l9~9; Plaintiff has no obligation to return any of the service charges levied or~ the account; and, PAGENO="0799" 803 5. The terms of this Consent Judgment shall be b~ndir~ on the parties hereto, unl~ss and until material changes concerning such service charges are made by the Legislature of the State of Michigan by amendment of the State Banking Code, the Michigan Code of Escheats, or unless and until the Constitution of the State of Michigan is amended pertaining to such service charges cm savings accounts; and, 6. It is the intention of the parties herein that the foregoIng ~rovIsions of this Cbnsent Judgment and by Letter of Understanding, are to provide a complete settlement of all controversIes between them concerning service charges on dormant savIngs accounts, as well as to be a complete settle- ment for all other claims and Counter-Claims filed by any and all of the parties hereto; and, 7. The Complaint in this cause is dismissed with prejudice and wIthout costs arid the Counter-Claims herein are also disnlssed wIth prejudice and without costs. MAR~/~N i. SALMON CIRCUIT JUDGE r~U5CCP~fl PAGENO="0800" 804 DATED: We hereby stipulate and agree to the entry of the attached Consent Judgment. _______ DICKINSON, WRIGHT, HcKEAN & CUDLIP By: ~ rSld Warren - Attorneys for National Bank of Detroit NATIONAL BANK OF DETAOIT, A Nati a~)cThg ? sociation By: Rodney C. Linton, Cashier PEOPLE OF THE STATE OF MICHIGAN FRANK J. LEY, Attorney Gener By: LEON S. CONAN, Deputy Attorney General of Michiga: FRANK J. KELLEY, Attor e General TI !5/1~ By: ~ _________________ 1,-~i.ng B/ Feldman t'~ssistan~ Attorney General By: 1~?M44~JL4 7rj~~L~~ By: ~ )t~L~ Bern d Ros ALLISON R. GREEN As stan orney Ge r State Treasurer E. Bo ie Mikrut y _______ Assistant Attorney Genera]. (S'tate Banking Co. ssioner B~fi4/~ i/'~ ~ IRV~G B. FELDMAN Sta,~'e Public Administrator ~zd2~4~ S VIA'S. HART A ..istrátrix Estates of Gussie Gar~inkle, et Estates of Clyde C. Travis, et a Estates of H. Victor Leventritt, et al Estates i Robe ~G. Druxnmond,et - R LDSMITH, ~dmiiiistrato Esta~te of Della Bave, et al Estates of Janet Brar.d, et al Estates of Ora Bovill, et a]. Attorneys for State of Michigan, Frank J. Kelley, Attorney General, Allison R. Green, State Treasurer, Robert P. Briggs, State Banking Commissioner, Irving B. Feldman, State Public Administrator _____ (2/ ~ ~ ALAN A. MAY Attorney for: Sylvia S. Hart, A inistratrix Ralph R. Goldsmith, Administrator Alfred A. Nay, Administrator ALFR~b A. MAY, ~ministrator Esta~s of C. ~ Barthell, et al Estates of Julia Amelia Allen, etal PAGENO="0801" 805 OPINION OF THE COURT Iv ç ç STATE OF MICHIGAN ~-*. IN THE CIRCUIT COURT FOR THE COUNTY OF INGHAM NATIONAL BANK OF DETROIT, a National Banking Association, - Plaintiff, v No. 13460-C T~ PEOPLE OF THE STATE OF MICHIGAN: ALLISON R. GREEN, Treasurer of the State of Michigan;FRANK J. KELLEY, Attorney General of the State of Michigan; IRVING B. FELDMAN, State Public.Adninistrator; SYLVIA S. HART, ALFRED A. MAY, and RALPH R. GOLDSMITH, Wayne County Public Administrators and as Administrators of the Estates of Robert G. Drurmond, et al, Wa~qne County Probate File Nos. 617-777-780; 617-945-6 and 617-837-8, Defendants. ___________________/ OPINION OF THE COURT The parties to this action were previously before this court on Defendants' Motion for Accelerated and/or Sutun~ty Judgment. That Motion was denied by an Opinion of The Court dated Novenber 11, 1971, and an Order to that effect was filed on November 18,1971. The parties are presently before the court on Plaintiff's. Motion for Summary Judgment onCdunt I of its Complaint, which was filed on October 12, 1971. Answers to this motion were filed by the State defendant on October 21, 1971, and by the individual defendants Hart, May and Goldsmith on November 29, 1911. It should be noted that various motions have been filed by the parties in this cause both prior to and after the filing of the notion presently under consideration, to wit: September 20, 1971: Interrogatories filed by the State; October 12, 1971: Motion for Protective Order filed by PAGENO="0802" 806 the plaintif( October 15, 1971: Motion for More Definite Sta-térnent or Order to Strike, filed by the State; October 21, 1971: Answer to Plaintiff's Motion for Protective Order, filed by the State; December 13-, 1971: Motion to Strike Count I of Complaint filed by the State; December 13, 1971: Motion to Dismiss the Defendants - Hart, May and Goldsmith; or In The Alternative to Dismiss the State Defendants, filed by the State. December 16, 1971: Motion for Joinder of Proper Party Defendants, filed by Defendants Hart, May and Goldsmith; December 16, 19-71: Motion to Strike Count I of. Plaintiff~ Complaint, filed by the Defendants Hart, May and Goldsmith; December 16, 1971: Motion for Summary Judgment in Favor of Defendants Hart, May and Goldsmith. A hearing was held on December 17, 1971, at which time this court advised all of the parties that it would proceed on plaintiff's Motion for Summary Judgment in the belief that a decision on that Motion may dispose of all or a part of the lawsuit. Briefs were requested on the Motion, the final brief being received January 10, 1972.' The present case arises out of a controversy concerning certain service charges imposed by the plaintiff, National Bank of Detroit,'. on dormant savings accounts of its depositors. The plaintiff, in its Complaint, alleged that the Board of Directors of National Bank of Detroit adopted a resolution on May 8, 1961, that a "maintenance charge of 50~ shall be charged to each savings account of a depositor, with a credit balance of less than $10.00, for each six months such account has been inactive.' Pursuant to said resolution, the plaintiff has deducted the said service charge on all dormant accounts of less than $10.00, and has reported the remainder to the Escheats Division of the -2- PAGENO="0803" ~8O7 Department 01 Treasury in accordance witn section 16 of the Michigan Code of Escheats, MSA 26.~lO53(l) et seq. Defendants Hart, May and Goldsmith, acting as administra- tors of certain estates, notified the plaintiff in July, 1971, that plaintiff had arbitrarily deleted suns of money from certain dormant saving~ accounts. The defendants individually demanded an immediate and full accounting df all funds in the accounts, and further demanded the immediate payment of all amounts debited to the accounts in question. Shortly thereafter, plain- tiff instituted the present suit by filing a Compla~int for declaratory judgment. In Count I of its Complaint, plaintiff requeststhis cour for a judgment declaring thai the National Bank of Detroit is entitled to impose the service charges set forth in the Board of Directors' resolution of May 8, 1961, and to report the rernainder~ if any, of dormant accounts affected by such service charges in accordance with section 16 of the Michigan Code of Escheats. EFFECT OF §16 OF THE CODE OF ESCHEATS The plaintiff would have this court hold that section 16 of the Code of Escheats, being MCLA 567.26, grants plaintiff precisely the right it here asserts; that is, the right to impose, by contract, a service charge on dormant savings accounts1 The defendants, however, contend that section 16 neither authorize nor allows the plaintiff to impose any charge on a savings account * * Section 16, in its entirety, states: "The period of dormancy as~ defined in this act shall not be tolled or in any manner suspended, nor shall any holder be relieved of the duty of making any report as in this act required, by any act of the holder in charging an account, or other item of property,~ with a carrying or service charge, counterclaim, or debit of any kind, or in entering a credit thereto after the last action or transaction by the owner in relation to said account or other item of property. Nothing in this~ section contained shall affect a contractual right of the holder to charge such carrying or service charge, counterclaim or debit of any kind or to enter a credit thereto or any lien of such holder upon such account - -3- PAGENO="0804" 808 * or other item of property or its right to enforce said lien by sale or otherwise. In the event of the charging of such account or other item of property with such a contractual. carrying or service charge, counterclaim or debit of any kind, or in the event of the. enforc~rnent of such lien by sale or otherwise, the reports required by this act shall be made and filed by the holder with respect only to the remainder, if any, of such account or other item of property, or to the proceeds arising from the enforcement of said lien after paymeOt therefrom of all charges secured by said lien and the expenses of the enforcement thereof." It is apparent from a clear reading of the statute that it neither prohibits nor authorizes a contract between a bank and its depositors concerning charges on dormant savings accounts. The provision itself expressly states that "Nothing in this section contained shall affect a contractual right of the holder to charge such carrying or service charge. . . upon such account. . ." The statute was not intended to affect the contrac- tual right to impose a service charge on an account one way or the other. It is irrational to conclude that section 16 either authorizes or prohibits a holder to assess a service charge. merely because it provides for the escheat of property subject to a service charge. If the plaintiff in this case has the right to contract with its depositors concerning the imposition of service charges on dormant savings accounts, it possesses that right wholly independent of section 16 of the Code of Eschea ts. . Section 16 merely provides for the escheat of certain property subject to service charges or debits of any kind. More specifically, the statute prescribes the effect such charges shall have on property subject to escheat, and the manner in which such property shall be reported. In this regard the effect of the statute is twofold. First, it provides that if there is a valid contractual right to impose a service charge upon aF~ account the charging of such an account with the service -4- PAGENO="0805" 809 charge will not toll the period of dormancy. Second, if there is a valid contractual right to impose a service charge upon an account the holder may so charge the account and report only the remainder, if any, of such account to the Escheats Division. Thus, if the plaintiff has a valid contract with its depositors to impose a service charge on dormant savings accounts it may do so, and, under section 16, report only the remainder, if any, of such an account so charged. The defendants contend that such an interpretation of section 16 allows the depletion of dormant and escheatable property and is, therefore, unconstitutional because that purpose is t.c~t stated in the title of the Act. This contention is wholly unfounded. Under this court's construction of section l6of the Code of Escheats, that section merely provides for the disposi- tion of escheatable property subject to charges, and prescribes the manner in which such property shall be reported. The pu~pose~ contained in the title of the Act, MCLA 567.1 et seq. are, among others, "to provide for the. .dispoaitiori of eacheatable, abandoned and eseheated property, to prescribe the procedure to declare escheatable and abandoned property escheated;" and "to prescribe the procedure for the administration of this act..." It is, therefore, the opinion of this court that section 16 of the Code of Escheats, MCLA 567.26, neither authorizes nor prohibits the contractual right to impose service charges on dormant savings accounts. Further~, if the plaintiff has a valid contractual right to impose a service charge on dormant savings accounts it nay so charge such an account and report only the remainder, if any, of the account in accordance with the provi- sions of section 16 of the Code of Escheats. EFFECT OF §228 OF THE BANKING CODE The defendants contend that the plaintiff is prohibited from assessing a service charge or~any charge against *the savings -5- PAGENO="0806" 810 account of a depositor by section 228 of the Banking Code of 1969, MCLA 487.528 (MSA 23.710 (228)). -. Section 228 reads as follows: "Subjec-tto section 193, all savings deposits shall be repaid to the depositor, or his lawful representatives, at such tine, with such interest and under such regulations as the board of directors of the bank may prescribe from time to time, which regulations shall be conspicuously posted in each banking off ice where savings business is transacted. A copy of the regulations shall be furnished to each savings depositor at the time of the initial deposit." * The defendants stress that part of the statute which states that "all savings deposits shall be repaid to the depositor," They then contend that the word "shall" means "must" and that the word "all" has a twofold meaning. "It means that each and every account must be repaid to the depositors or their lawful. representatives as well as meaning the full amount deposit- ed with the bank must be repaid to the depositors." (p 17, *Stâte Defendant's Brief) Thus, the defendants conclude that the plain- tiff is prohibited from entering into any contract which would in any way diminish .the amount deposited in the savings account by the depositor. The plaintiff, on the other hand, contends that section 228 not only allows the imposition of servicecharges upon savings accounts but also authorizes their incorporation into the contract in the manner followed by the plaintiff in the present case. To arrive at its interpretation, the plaintiff places special emphasis on that portion of ~he statute which states "under such regulations as the board of directors of the bank may prescribe from time to time." The plaintiff contends that the term "regulations" includes service charges and, therefore, concludes that such charges may be prescribed.by a resolution passed by the board of directors. The plaintiff, however, would also require that Ihe resolution must be inserted, by reference or otherwise, into the contract between the owner of the deposit and -6- PAGENO="0807" 811 the bank. It is apparent that section 22S does not expressly contain the neaning attributed to it by either the plaintiff or the defendants. while the section could be interpreted in favor of one side or the other by stres~ing certain provisions of the section and ignorin~ others, this court believes that the section should be read in its entirety, with equal emphasis given to all of its provisions. It is the opinion of this court that when read and viewed in its entirety, section 228 has neither the meaning attached to it by the defendants nor that advanced by the plaintiff. The present section 228 of the Banking Code has been i~ existence in this state for well over 80 years. It was contained in the Public Acts of 1887 under section 26 of the bank~ng.law which stated: "All deposits in said banks shall be repaid to the depositors, or his or her lawful representatives, when required, at such time or times, and with such interest and under such regulations, as the board of directors of the bank from time to time prescribes, which regulations shall be printed, and conspicuously exposed in some place accessible and visible to all in the~business office of said bank." . -. The effec.t of the above statute was presented to the court in Ackenhausen v People's Savings Bank, 110 Mich 175 (1896) In that case the defendant bank had passed a by-law stating that it vould not be liable to a depositor for payment to a third party who presents the depositor'~ passbook even though the third party acquired possession of the book by stealing. The by-law was printed in the plaintiff's passbook but the plaintiff's attention was not specifically called to the by-law. The defendant contended that the by-law was within the provisions of thei~ section 26 of the banking~law, and since it had complied with those provisions the plaintiff had no cause of action. In discussing the effect of the statute upon the alleged contract between the defendant and the plaintiff the court -7-. 67-4'~OO-8l-52 PAGENO="0808" 812 stated, at p 182: "We think the requirement of the statute that the deposits shall be paid to the depositor or his legal representatives cannot be changed by a by-law, unless the attention of the depositor is called to the by-law, and he assents thereto, actually or impliedly." It is important that the court did not hold that the section prohibited any contract changing the requirement that all deposits shall be repaid to the depositor. Indeed, the court expressly held that such a requirement could be changed by a valid contract; that is, where the depositor has actual knowledge of the regulation and assents thereto, either expressly or inpliedly. It is also important that the court held that a change in the debtor-creditor relationship between a bank and its depositor cannot be accomplished merely by passing a by-law and complying with the provisions of that section. The present section 228, as it appeared in the Compiled Laws of 1929, section 11920, was also considered by the Attorney General in 1933, (1933-34 OAG, p 177) and given the same inter- pretation as it was in Ackenhausen. The Attorney General was called upon to render an opinion on the authority of the board of directors of a bank to prescribe rates of interest and regulations for withdrawal of money from savings accounts under the statute here in issue. The issue was phrased as follows, p 178: "In other words, does the board of directors have the power to vary the contract in this respect, or does it merely have power to change the rules and make a new contract." The issue was answered in the following manner: "If it only has the power to do the latter, the * statute is ridiculous and superfluous.' "It is more reasonable to assume that this statute means something. It was passed after the wild cat banking stage during an era of hard times and bank failures, and undoubtedly the legislature which enacted it had learned by experience that savings banks cannot be expected to repay deposits upon demand or upon any fixed and inflexible notice, but that for the sake of safety they must be allowed a certain flexibility governed only by .t.heir own judgment and, of course, the limitation -8- * PAGENO="0809" 813 that they cannot impose such unreasonable restrictions as to amount to a repudiation or refusal to pay. Theyare to be allowed to vary the terms of withdrawal from `time to time', This could only mean that when they deemed it wise they~cou1d restrict withdrawals upon savings accounts by mere action of the board. The posting of the rule in the bank should reasonably be construed to merely mean that one, coming into the bank to make a deposit, should have the right to know what the rules are at that given moment." In a prior interpretation of the statute (1930-32 OAG, p 443), the Attorney General followed the reasoning of a case from California, which had a statute similar to the one under consideration. The following language from State v San Francisco~ Savings & Loan Soc., 225 Pac 3O9,~ was cited with approval, On- p445: "Nor will it be doubted that, by dealing with the bank, every depositor~ adopts its regulations which are in existence at the time, and it may be conceded to be true that where, as here, the by-laws of a bank at the time an account is opened therein by a depositor contain a provision authorizing their amendment the hank may, under such authoriztjon and without notice to such depositor, amend the by-laws so as to bind the latter, insofar as such amendment may affect only those general -rules and regulations, common to all banking and other corporations, which relate to the general administrative policies thereof. But `the fact that a by-law of which a depositor has notice authorizes the amendment of the by-law does not operate to change the depositor's contract where a material amendment to the by-law is made, without notice to him, and without his consent.'" From these interpretations of the predecessors of the present section 228 it is apparent that the section wa~s not meant to prohibit a bank from entering into contracts with its depositors concerning service charges or repayments of deposits. The section was passed to allow the banks to vary certain terms of its contract with its depositors without having to enter into a new contract in each instance. Thus, a bank could change its interest rates in respect to savings accounts by the passage of a board of directors' resolution and compliance with section 228, ~and would not be required to enter into a new contract with its -9- PAGENO="0810" 814 depositors before it could do so. The statute does not have that meaning attributed to it by the defendants. On the Qther hand, the statute does not have that meaning advanced by the plaintiff in this case.. The contract was meant to allow the bank to vary only certain terms of the contract such as the rates of interest and time of withdrawal and "only those general rules and regulations, common to all banking and other corporations, which relate to the general administrative policies thereof." The Attorney General inter- preted the' statute with .!`the limitaticrn that they cannot impose such unreasonable restrictions as to amount to a repudiation or refusal to pay." The proposition that the statute did not authorize a material change in the contract by adoption of a by-law was cited with approval by' the Attorney C'neral in the earlier opinion of 1932. The court in Ackenha~isen also held that a material change in the debtor - creditor relationship between a bank and its depositor cannot be changed by a by-law, but must be made bya contract. The resolution passed by .the plaintiff's board of direc- tors in the present. case changed the debtor - creditor relation- ship between the bank and its depositors. Prior to the resolu- tion the bank had to repay the entire deposit to the depositor. After the resolution, the bank had to repay only that part of the deposit remaining after the assessment of aservice charge. Such a regulation does not come within the meaning of section 228 as it has been interpreted and applied. In order for the resolu- tion to be effective, the depositors must have had notice of it and given their assent, either expressly or impliedly. It is the opinion of this court that section 228 of the Banking Code of 1969 does not prohibit a bank from entering into a contract with its depositors imposing a service charge on savin~ accounts. . It is further the opinibn'Of this court that section 228 - I 0- PAGENO="0811" 815 of the Banking Code of 19E9 does not apply to a rule or regu1a~j0~ which changes the debtor - creditor. relationship between the bank and its depositors. PUBLIC POLICY The defendants claim that the alleged contract between the plaintiff and its depositors violated the public policy of this state as-set forth in the Banking Code of1969, MSA 23.Tlo(2) and the public policy as set forth in the Code of Escheats, MSA 26.1053(64), and is, therefore, void and unenforceable. This court has determined that neither~section 228 of the Banking Code nor section iS of the Code of Escheats prohibits the imposition of a service charge on savings accounts. It has found no section in either Code which expressly or~inpiiedly prohibits sucha contract between a bank and Its depositor. This court finds that such a contract does not violate the public policy of this state as declared in the Banking Code or the Code of Escheats. IS THERE A VALID CONTRACT BETWEEN THE PLAINTIFF AND ITS DEPOSITORS AUTHORIZING THE IMPOSITION OF A SERVICE CHARGE Having determined that a -contract between a hank and its depositors imposing a service charge on dormant savings accounts Is not prohibited by any statute or public policy of this state, the sole re~naining issue is whether there is a valid contract between the plaintiff and its depositors in this case. The plaintiff alleges the following facts to prove the validity of a contract imposing the service charge here in issue: 1) That on December 1, 1941, plaintiff adopted section 9 of the Terms and Comditions Governing Savings Deposits which provides as follows: "Sec. 9. No charge shall be made to cover the expense of opening an account, unless it is closed within three months from the date of the opening thereof, in which case a charge of fifty cents (50~) will be made, which may be retained by the bank out of the funds on deposit prior to their withdrawal. . - The bank reserves the right to make such service charges on savings accounts for excessive -11-. PAGENO="0812" 816 activity or otherwise as may be fixed from time to time by the Board of Directors." 2) That all savinga account pa~sboohs issued by piüintif~ subsequent to December 1, 1941, have contained the above-quoted section 9 as part of the Terms and Conditions Governing Savings Deposits; 3) ~That savings account signature cards issued subsequent to 1941 have referred to the Terms and Conditions Governing Savings Deposits as set forth in the passbooks; and That on May 8, 1961, the plaintiff adopted the resolution imposing a service charge on all dormant savings accounts of less than $10.00. The defendants admit the adoption of section 9 of the Terms and Conditions, and the resolution imposing the service char on dormant accounts. They neither admit or deny that section 9 appeared on all passbooks issued after 1941, and deny that all signature cards issued after 1941 referred to the Terms and Conditions set forth in the passbook. For the purposes of this opinion the court will assume that section 9 appeared in all passbooks issued after December 1, 1941, and that all signature cards issued after that date referred to the Terms and Conditions contained in the passbook. The plaintiff makes no allegation that any of its depos- itors had actual knowledge of the resolution imposing the service charge on dormant accounts. There is no allegation or claim that the resolution was ever posted nor that it was ever printed in any passbook or anywhere else. The plaintiff's claim that a valid contract has been made concerning such service charges rests wholly upon the fact that its depositors had notice of section 9 of the Terms and Conditions and that section authorized the imposition of a service charge for inactivity. Whether section. 9 provided sufficient, notice for the adoption of the fifty cent service charge, and whether it authorized the adoption PAGENO="0813" 817 of such charge are issues of law to be determined by this pourt. The pertinent part of section 9 states only that "The bank reserves the right to make such service charges on savings accounts for excessive activity or otherwise a~ may be fixed Iron time to time by the Board of Directors." (emphasis added) There is no mention of charges for inactive accounts, dormant accounts or accounts of less than $10.00, If there is any notice of a' charge for inactivity it must be contained in theterms "or otherwise," The tern "or otherwise" by~ itself is vague and meaningiesa or, at most, ambiguous, but when placed in context the term may be capable of definition. In this~ instance "or otherwise" fo11ow~ the words "for excessive activity.~" However, the plaintiff contends that the term when used in this context means just the opposite; that is, inactivity. Such a reading of the phrase "or otherwise" would allow the plaintiff to impose a service charge for any reason whatsoever under section 9 of the Terms and Conditions. it tne phrase "or otherwise" has tne meantng attached to it by the plaintiff it is so broad~ as to be unenforceable for want of mutuality. It is a well-established rule that any ambiguities-in an alleged written contract must be construed against the drawer. Michigan Chandelier Co. v Morse, 297 Mich 41 (1941). It is the determination of this court, therefore, that section 9 of the Terms and Conditions, in particular the words "or otherwise", do not authorize the imposition of a service charge on inactive or dormant accounts,, and do not provide notice that such a charge could be imposed. However, even assuming that section 9 did give notice that a service charge could be inposed.on inactive accounts, it is the opinion of this court that such notice is insufficient to establish a valid contract to impose such a charge by a board of directors' resolution. - 13-. PAGENO="0814" 818 The plaintiff contends that the depositors had notice of section 9 of the Terms i~nd Conditions contained in the passbook, and that they assented thereto by signing the signature cards. Plaintiff then claims that since section 9 authorized the imposi- tion of a service charge on dormant accounts, the board of directors' resolution is a valid part of the contract. While a bank may amend certain terms of the contract by a board of directors' resolution, pursuant to a regulation of which the depositor had notice authorizing the amendment, it cannot change the contract itself by such a method. Thus, a bank may prescribe new interest rates by a resolution, if the depositors had notice of a regulation or condition authorizing such action. This procedure is expressly allowed by section 228 of the Banking Code. However, it has been noted that section 228 does not authorize a change in the debtor -~ creditor relationship between a bank and its depositor,. This court has previously determined that the imposition of a service charge on a savings account changes the debtor - creditor relationship between a bank and its depositors. In discussing the effect of a by-law or resolution which materially changes the depositor's contract with the bank, the court in Ackenhausen v People's Savings Bank, 110 Mich 175, 181 (1896) stated: "A by-law passed by them is a by- law of the bank, and not of the depositor, and if the effect of it is to change the relation of the * creditor to the debtor so as to relieve the * obligation of the debtor to the creditor, must not the creditor have his attention called to the by-law in such a way that tie shall uhderstand its effect before he shall be bound by it?" The court answered affirmatively by concluding that it "cannot be changed by a by-law, unless the attention of the depositor is called to the by-law, and he assents thereto, actually or imp 1 i ed 1 y." * * .The language from State v San Francisco Savings & Loan -14- PAGENO="0815" 819 Soc., *supra, cited by the Attorney General (1930-32 OAG p 445), states the proposition that this court finds controlling; "...`the fact that a by-law of which a depositor has notice authorizes the~amendment of the by-law does not operate to change .the depositor's contractwhere a material amendment to the by-law is made, without notice to him, and without his consent." It is the opinion of this court that a board of directors resolution imposing a service charge on savings accounts is not a valid and binding part of the contract between a bank and its depositors unless the depositors have notice of it, and assent thereto, either actually or impliedly. The plaintiff's resolut-ioj imposing a service charge on dormant accounts is, therefore, not a valid or binding part of the contract between it and its depositors because the depositors had no knowledge of it, and, necessarily, did not assent to it. The plaintiff had no contract. ual right to charge any savings account pursuant to its May 8, 1981 resolution. Plaintiff's Motion for Summary Judgment on Count I of its Complaint is hereby denied. Circuit ,Judge DATED: ~ 1972. I / / PAGENO="0816" 820 MINNESOTA QUESTIONNAIRE RESPONSE MINNESOTA UNCLAINED PROPERTY QUESTIONNAIRE 1. unclaimed property statute, regulations, and administrative a. How does the state unclaimed property or abandoned pro- perty statute apply. to banks and other financial in- stitutions (including trust companies, savings and loan associations, securities brokerage firms, mutual fund, credit unions, and insurance companies)? ANSWER: (i) Institutions Covered Banking and Financial (must be doing business in Minnesota) Banks Trust Companies Savings Banks Savings & Loan Companies Bu4,ding and Loan Associations Credit Unions Industrial Loan & Thrift Companies Investment Companies Safe Deposit Companies Business Organizations (need not be doing business with Minnesota) Corporations Partnerships Cooperatives Joint Stock Companies Business Trusts "Any association for business purposes of two or more individuals . . . " Note: The Unclaimed Property Division considers the above categories to include trust companies, savings and loan associations, securities brokerage firms, mutual funds, credit unions, and casualty and liability insurers. Life insurance companies are also covered, but under a special provision. Types of Property Covered: See UP-9 checklist (attached). PAGENO="0817" 821 (ii) Specifically Excluded Property: Any property, the owner of which is known to reside in a state which: (a) Has a law which allows that state to claim the property, and (b) That state's law has a reciprocal provision preventing it from claiming other states' money. No institutions are specifically excluded. (iii) In the case of corporate Dissolutions: 2 years after date for final distribution. In the case of Travelers Checks: 15 years after issuance or last customer contact, whichever is later. In the case of All Other Typ~ of unclaimed property: 7 years after the date the property became payable to the owner or the last date of contact with the owner, whichever is later. (iv) Minnesota holds these funds in purely custodial capacity~ (v) Minnespta pays no interest or other income from the property it holds. b. What administrative rules or regulations of your office or agency apply to the handling and reporting of Un- claic~ed property to the state by banks and other financial institutions? ANSWER: 1MCAR 3.001-3.015 (see attached copy) c. Are there any provisions of~your sta~'s other banking, insurance, or general commerce laws or regulations.that impose certain requirements on how banks and other financial institutions must~ handle dormant deposit. accounts or other unclaimed~property, especially re- quirements for the protection of the rights of the cwmers of the property? ANSWER: According to the Department of Commerce, there are no such state statutes or regulations governing banks or insurance companies. ci. What is the practice in your state as regards to ad- vertising the names of owners of unclaimed property being turned over to the state? PAGENO="0818" 822 ANSWER: (1) The names are advertisedin the newspaper with the largest number of subscribers in each of Minnesota's 87 counties. The name is listed in the county of the last known address of the presumed owner. If the address of the owner is unknown, the name is advertised in the county the holder is located in. If the address of the presumed owner is unknown and the company reporting the money is not located in Minnesota, the name is advertised in the Hennepin County newspaper which has the largest circulation in the state. (ii) The State of Minnesota places the advertisements. However, there are some large banks in the Twin City area that place ads of the~ir own before turning the names over to the Treasurer's Office. (iii) Both names and addresses are listed in the ad- vertisements. (iv) The State advertises names that have $25.00 or more owing to them. Almost all safe deposit box owners are advertised. (v) The names are advertised twice for two consecutive Sundays only in the year they are reported. Owners of property still unclaimed from earlier years are not put in the ads. e.. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance with state requirements) to locate the owners of unclaimed bank accounts and other financial property? ANSWER: In addition to the ads, the Treasurer's Office mails a notice to every owner for which the holder has provided a mailing address, advertises names in a weekly television publication called "TV Times" and annually releases a publication called Names of Persons Appearing to be Owners of Abandoned Funds' which lists all the names of owners whose property has not yet been returned to them. This publication is sent to all libraries, newspapers, radio stations, etc. *and is available by request to the general public. Newspapers have also featured articles explaining the Unclaimed Property Law and informing individuals to contact the State re- garding any abandoned funds they may have. The PAGENO="0819" 823 Treasurer also makes visits to out-state Minnesota with lists of presumed own~ers asking that they contact the State to receive their money. f. Are there any state limitations on the actions of "bounty hunters" who seek out'the advertised owners of unclaimed property in the hope of getting a share of the property? ANSWER: Section ~ 345.515 of the Minnesota Unclaimed Property Law prohibits finders from locating property - prior to seven months after the date df delivery of the property by the holder~ to the state treasurer. The law also requires a signed agreement by the owner specifying the amount to be recovered and the former holder of the account for any fee exceeding 10% of the recoverable property. g. What is the definition of "abandoned" or "unclaimed in your state? ANSWER: Property is presumed abandoned if the last transaction or other contact with the customer was 7 years or more ago, except in the case of a corporate dissolution1,or in the case~ of traveler's checks. Contact may be written communication received by the holder, mail to the owner which was not returned un- deliverable, or verbal contact which is evidenced by a memorandum on file with the holder. h. Does your office (or some ~ther state office acting in cooperation with your office) conduct field audits or on-site compliance investigations devoted ex- clusively to checking compliance with the unclaimed * property law? ANSWER: (i) 1979 - 10 to-date 1978 - 9 1977 - 4 (ii) Presently, there are three examiners. A fourth ex- aminer is expected to be hired soon. The budget available for fiscal 1980 is $67,182. PAGENO="0820" 824 (iii) Banks Brokerage Houses Insurance Companies Corporations (iv) We have examined only one national bank, but that was prior to a directive from the Comptroller of the Currency's Office, informing the banks: It is our opinion that pursuant to 12 U.S.C. 484 that this office has sole visi- tonal powers over national banks for the en- forcement of the substantial provisions of state laws which are applicable to national banks. One bank told us recently that even if it wanted to let us examine it, it was prevented from doing so by the Comptroller of the Currency. We had hoped that the Comptroller would cooperate with us and other States and conduct its own examination * for unclaimed property or at least not block our *efforts. We have decided to test this directive and last week we sent a letter to one of the state's larges~ national banks, notifying it that we planned to `examine it for unclaimed property. * Cv) Copy of audit program/internal control questionnaire (enclosures) (vi) No other state agency currently conducts audits for us, but we are about to enter an agreement -- with the State Banking Commissioner, whose staff will be examining for unclaimed property in state banks. i. What is your state's budget for administration of the unclaimed property program? ANSWER: $358,100 How many full-time (or full-time-equivalent) persons are assigned to the unclaimed property program? ANSWER: Nine full-time employees. PAGENO="0821" 825 State Treasurer's Office Rules Govemin~ the Uniform Disposition of Unclaimed Property Act I MCAR §~ 3.001-3.015 Chapter One: General § 3.001 Purpose. The rules and regulations contained in this subchapter are for the purpose of implementing provisions of the Uniform Disposition of Unclaimed Property Act, Minn. Stat. § § 345.3 1-345.60, as amended. § 3.002 Service charges. The term "service charges" means any type of de- duction by a holder (as defined in Minn. Stat. § 345.31, subd. 5) from prop- city presumed abandoned pursuant to the Uniform Disposition of Unclaimed Property Act, and also shafl include: A. For the types of property described in Minn. Stat. §~ 345.32, 345.33, 345.35 and 345.37, deductions by a holder from property prior to the pre- sumption of abandonment, which deductions are made by reason of the non- occurrence of the events or acts that prevent the presumption of abandon- ment as described in those sections, or by reason of the inactivity, dormancy, or unclaimed status of the property; and 1r B. For the types of property described in Minn. Stat. §~ 345.34, 345.36, 345.38 and 345.39, deductions by a holder from property prior to the pre- sumption of abandonment, which deductions are made by reason of the inactivity, dormancy, or unclaimed status of the property. Chapter Two: Service Charges Lawfully Withheld § 3.009 Report of service charges. If service charges have been deducted, a holder shafl include or attach as part of the report filed pursuant to Minn. Stat. § 345.41: A. The citation of the authority or a copy of the form of contract author-. izing such service charges; B. The value or amount of each item of property before any service charges were deducted therefrom; C. The amount of service charges deducted from each item and the date or dates on which such service charges were ~1educted; and D. Such other information or documentation as the State Treasurer may reasonably require to explain the deduction of service charges. Such docu- mentation may include records of communications or correspond~nce with 3 PAGENO="0822" 826 the owner, passbook provisions, signature card, rules and regulations, by-laws, and any other documents concerning any agreement between the holder and the owner. This rule shall also require the reporting of service charges if the total of such charges deducted from an item of property equals or exceeds the value of the item. Chapter Three: Interest or Dividends § 3.011 Report of discontinuance. If payment of interest or dividends on property presumed abandoned pursuant to the Uniform Disposition of Un- claimed Property Act was discontinued, before or after the property was pre- sumed abandoned, by reason of the inactivity, dormancy or unclaimed status of the property, the holder shall include or attach as part of the report filed pursuant to Minn. Stat.~ 345.41: A..A copy of the form of contract which authorized such discontinuance of payment of interest or dividends; or B. The citation of the authority for such discontinuance of payment of interest or dividends. Chapter Four: Miscellaneous § 3.0 13 Reporting period. The provisions of Minn. Stat. § 345.32 (a) (4) and (5) and (b) (4) are effective ~ of July 1, 1977. Unless such sections are satis- fied subsequent to said date the property shall be reportable to the State Treasurer. § 3.0 14 Receipt of statement. For purposes of Minn. Stat. § 345.32 (a) (4) and (b) (4), a tax report of regular statement of deposit shall be deemed to be "the statement" referred to in said sections. § 3.0 15 Negative property report. A holder which has no property which is reportable pursuant to the Uniform Disposition of Unclaimed Property Act shall report that fact if so requested in writing by the State Treasurer. 4 PAGENO="0823" 2. Amountn of unclaimed pro~rty r~portru1 and delivored ANSWER~ DATE TOTAL NAT'I BANK STATE BANK SAy. S LOAN 1975 Number Reporting N/A 70 128 14 Ant. Reported N/A $ 179,300.26 $ 49,657.54 $ 30,341.06 Ant. Remitted $ 339,331.43 $ 126,399.72 $ 41,687.09 $ 17,064.13 Over $500.OO.(Est.) 180 1977 Number Reporting 2,502 119 346 29 Amt. Reported $ 3,108,820.02 *$ 524,167.68 $ 479,360.69 $ 91,415.01 Ant. Remitted $ 2,332,420.62 *$ 420,205.84 $ 269,125,25 $ 35,869.77 Over $500.00 (Est.) 576 1978 Number Reporting 1,418 134 282 33 Amt. Reported $ 5,543,002.86 $ 2,306,072.10 $ 360,500.08 $ 1,O95,897.89~ Ant. Remitted $ 2,608,104.23 $ 1,560,777.88 $ 166,056.02 $ . 265,825.47 Over $500.00 (Est.) 873 NUMBER Ô~ ANTS. REMITTED NAMES DOLLAR ANTS. DELIVERY DATE ADVERTISED RETURNED çT~1s PAID PERCENTAGE 1975 4,268 (Est.) **$ 40,602.12 $ 298,729.31 1977 17,165 $ - 874,206.83 $ 2,234,623.09 28% 1978 15,329 $ 3,180,153.05 $ 2,362,849.81 57% ** = Amount returned by state only * = Includes examination findings (F&M 1977) $220,296.84 (Reported) S $176,890.28 (Remitted) N/A = Figure not available PAGENO="0824" 2. Amounts of~un~claimed~property reported and delivered to owners? ANSWER: CREDIT CASUALTY T BROKERS 8 DATE UNIONS LIFE INS. INS. OTHER FIN. 1975 Number Reporting 18 64 43 3 Amt. Reported $ 2,266.09 $ 42,549.85 $ 105,593.09 $ 272.35 Ant. Remitted $ 2,002.34 $ 33,338.37 $ 95,813.64 $ 95.45 Over $500.00 (Est.) 1977 Number Reporting 95 148 61 10 Ant. Reported $ 31,755.45 $ 473,716.65 $ 86,190.39 $ 150,895.58 Ant. Remitted $ 28,206.71 $ 427,345.43 $ 58,231.25 $ 39,889.80 Over $500.00 (Est.) 1978 Number Reporting 5~ 105 64 15 Ant. Reported $ 19,330.27 $ 83,278.72 $ 76,146.04 $ 20,834.12 Ant. Remitted 15,059.26 $ 69,793.09 $ 61,830.30 $ 15,732.09 Over $500.00 (Est.) -2- PAGENO="0825" 2. Amounto of uncloimed property reported and delivered to ownoro? ANSWER: DATE ALL OTIIEfl~ 1975 Number Reporting N/A Ant. Reported N/A Ant. Remitted $ 22,930.69 Over $500.00 (Est.) 1977 Number Reporting 1,694 Ant. Reported $ 1,371,328.47 Ant. Remitted $ 1,053,466.47 Over $500.00 (Est.) 1978 Number Reporting 727 Ant. Reported $ 1,350,940.78 Ant. Remitted $ 444,030.12 Over~$500.00 (Est.) -3- PAGENO="0826" * 3. Brokerage firm reports? ANSWER: NO NAME AND/OR SECURITIES DOLLAR AMT. ADD. AMT. NAME REPORTED REPORTED REPORTED Bache, Halsey, Stuart, Shields, Inc. a. 75/76 No $ -0- $ -0- b. 77 Yes 62~25 -0- c. 78 No 8,480.05 8,480.05 Dam, Kalman, Quail, Inc. a. 75/76 No -0- -0- b. 77 No -0- -0- c. 78 Yes -0- -0- Engler & Dudd Co. a. 75/76 No -0- -0- b. 77 No -0- * -0- c. 78 ; Yes -0- -0- Merrill, Lynch, Pierce, Fenner and Smith, Inc. a. 75/76 No -0- -0- b. 77 No 30,803.15 23,944.01 a. 78 No 4,503.93 1,622.96 PAGENO="0827" 3. Brokerage firm reports? ANSWER: NO NAME AND/OR SECURITIES DOLLAR ANT. ADD. ANT. NAME REPORTED -~ REPOflTED flEPORTEP Kidder, Peabody & Co., Inc. a. 75/76 No $ 116.30 $ 10.62 b. 77 No -0- -0- c. 78 No -0- -0- Pain, Webber, Jackson & Curtis, Inc. a. 75/76 No -0- -0- b. 77 - -- - No - -- - 9,924.22 9,703.81 ~ c. 78 Yes 1,288.16 506.93 Piper, Jaffray & }Iopwood, Inc. a. 75/76 No -0- -0- b. 77 ~ Yes -0- c. 78 No -0- -0- ~_- Shearson, Hayden & Stone, Inc. a. 75/76 No -0- -0- b. 77 No -0- -0- c. 78 Yes -0- -0- PAGENO="0828" 832 * (ii) Investigations: (In-office compliance) - - SAMPLES HOLDER REPORTING YR. TYPE ADDITIONAL ANTS. . -Marquette Natl Bank 1978 (S/C's & Rev. $4,655.71 (Mpls.) * Int.) * -Duluth Nat'l Bank 1978 (Bank Instr's) 1,237.57 -P.N.B. (Rochester) 1978 (S/C's on Port- * (Trust Dept.) folio Div.) 460.00 . -F.N.B. (Austin) 1979 * (Bank Instr's) 2,341.65 (iii) Field Audits: HOLDER -F&M Svg. Bank -Green Giant Co. -Summit. State Bank -Soo Line R.R. SAMPLES TYPE (S/Cs) (Vendor Cks.) (Svg. A/C's) (Payroll Drafts) ADDITIONAL ANTS. $220,000.00 45,000.00 5,600.00 59,400. 00* PAGENO="0829" 833 c. If possible, please give a rough estimate of additional unclaimed property? ANSWER: Ci) A 1977 estinate by our~consultant David Epstein, which he based upon California and New York re- porting experiences, indicates that Minnesota night expect annual reporting figures in the area of $20 rillion. To date, however, even our largest re- porting year (1978) has fallen far short of that figure at approxinatel~ $5.5 million. PAGENO="0830" 834 4. Compliance a. How would you describe the degree of compliance with your state's unclaimed property laws and related re- gulations? ANSWER: (i) National Banks - Fair Compliance, although some of the larger ones openly challenge our authority to demand disclosure of service charge and interest withholding data, and to examine them for unclaimed property. (ii) State Banks - Fair Compliance (iii) Federal Savings & Loans - Fair Compliance (iv) State Savings & Loans - Fair Compliance (v) & (vi) Federal & State Credit Unions - Difficult to say; we don't get much in the way of positive reporting, but these are often very small institutions. Having no examination experience, we really don't have much of a handle on this area. (vii) Securities Brokerage Houses - Fair to Poor Compliance (viii) Mutual Funds - Fair to Poor Compliance (ix) Insurance Companies - Fair to Good Compliance. How- ever, the industry presently disputes its obligation to report drafts as an item of unclaimed property, since drafts may be regarded as an offer to settle and not as a liquidated debt. b. How have field audits, investigations, or litigation altered the amounts reported to your office? ANSWER: (i) Litigation: None PAGENO="0831" 835 5. Service Charges a. Have you information about service charges imposed by banks and other financial institutions on dormant accounts and other unclaim~ed property? ANSWER: Our information regarding service charges imposed soley by virtue of, dormancy or inactivity comes from the annual reports filed with our office. Holders are required by rule to make this disclosure, though some holders neglect to do so. In those cases, the practice can sometimes be discerned by observing discrepancies between the bank's November report and June remittance. b. Amcnc banks, does the imposition of service charges cm dormant accounts and other unclaimed property ammear to occur only occasionally or to he a general rractice? ANSWER: Between 10 and l5~ of Hinnesota banks appear to impose dormancy service charges, but the percentage is e>:pected to rise. This figure does not take into account those banks that fail to report S/C's; it merely represents the perc~ntage of Hinnesota banks that have d~sclosed them to this office. c. Among vhich other types of institutions do you find that service charges have been imposed on dormant accounts or unclaimed property? ANSWER: We've seem instances of trust companies (F.N.B. (Npls.)) and life ibsurers (Physician's Hutual in Omaha) imposing S/C's on unclaimed property for which no valid contract appears to exist. d. In most cases are the customers properly notified in advance that service charges will be imposed if their accounts remain dormant? ANSWER: Recently some banks have mailed notices to all their customers, disclosing their service charge policy. Prior to this, however, customers had either tasted notice in the bank lobby or passbook provisions for those with savings accounts. Checking customers and savings custcmers, whose passbooks contained no notice, had no real notice unless they consulted the PAGENO="0832" 836 bank's rules and regulations, which usually provide for the imposition of a reasonable charge' for dormancy. This would not seem to constitute reasonable notice. Our feeling is that the vast majority of customers whose accounts were service charged had no idea of the bank's policy. This is often demonstrated by telephone inquiries we receive. e. How large are the typical service charges imposed by banks? by other institutions? ANSWER: S/C's of from five to fifteen dollars are fairly common, but twenty and twenty five dollars are typical. We will challenge any bank taking more than that on grounds of reasonableness, and they usually back down to a lower figure. f. How large have the service charges been in unusual or extreme cases? ANSWER: The largest we have seen to date was a single service charge/interest reversal $900.00, takenby Marquette National Bank of Minneapolis (see attached for this and other examples). g. Have there been any cases in which unclaimed property that would normally have been reportable to the state after a certain number of years was entirely taken into income by the financial institution holding it, either through service charges or in some other way? ANSWER: There are many accounts zeroed-out by S/C's (see attached samples) "Charge-Offs" are common as well. This is where an item is simply taken directly into income. (see examples from examination work-papers). h. If possible, please estimate in rough magnitude the total dollar amount of service charges that you be- lieve was imposed by all banks in your state on the unclaimed property they reported to you in 1978? ANSWER: Total reported S/C's in 1978 were approximately $70,000.00. Almost no banks reported S/C's on zeroed- out accounts in 1978, 50 the actual figure can he ex- pected to be much greater than that. Furthermore, we are aware that many banks simply do not make ~y dis- closure of service charges, so the total figure is very much in doubt. PAGENO="0833" 837 i. If possible, please estimate also (or give some state- ment of probable magnitude)~ of bank service charges taken on unclaimed property that would have been re- portable but was wiped out by the service charges prier to reporting. ANSWER: At F&M we learned that $10,058.63, otherwise reportable in 1978, had been zeroed-out by service charges prior to reporting. Of those accounts which were re- ported im November of 1978, $1,125.00 had been deducted in service charges. While this ratio may not hold true in all or even most cases, it should serve to give some iDression of the magnitude~of service charges which zero-out accounts prior to reporting. 5. Does state law limit in any way the service charges that banks or other institutions may impose on dormant accounts or other unclaimed property? ANSWER: N.S.A. § 345.32 limits service charges taken by banking or financial organizations to one year. Our office considers this to mean that.a bank may not al- locate dormancy-type charges over a period in excess of 12 rone:~s, Also, an;' s~rvice charges imposed must have been con- tracted for according to the same statute. k. Has your state asserted a claim for refund of any service charges imposed on dormant accounts or other unclaimed property? If so, please explain, including an explanation of the legal basis for the claim. ANSWER: This office has a s~tanding policy of demanding a refund of service charges where: (1) The bank cannot show a contract with the customer allowing the charges. (Req'd by N.S.A. ~ 345.32); (2) The bank waives the charge to the customer when he claims the account, but attempts to enforce it against~ the state (see: Bank of America v Cory, memorandum opinion of 6-20-76, (copy attached)); (3) The bank has imposed a clearly unreasonable service charge. (Most bank rules and re- gulations lin~it the bank to taking a `reason- able service charge'. For those banks whose rules and regulations *have no such limitation, PAGENO="0834" 838 we feel that a charge in excess of $25.00 is unconsionable and violative of public policy in any event, and so challenge such service charges as we become aware of them. Minnesota's statutes do not address the reasonableness of service charges, although a Supreme Court case here has indicated that "reasonable" provisions appearing in a depositor's passbook are binding on the customer. (Brunswick Corp. v North western National Bank and Trust Co., 214 Minn. 370, 8 N.W. 2d 333 (1943)). The clear im- plication is that unreasonable provisions are not so binding). PAGENO="0835" 839 6. Other Practices a. Have there been any cases~ in which a bank or other savings institution has stopped paying interest on dormant savings accounts, or has reversed or taken away interest that had previously been credited to do ant savings accounts, before reporting these accounts to the state? ;~:swz?.: We believe that this sort of practice will probably be found in many Minnesota banks. However, the only documented cases~ are Northwestern National, the one national hank that our examiners have in- vestigated, and the Marquette National Bank of Ninn- eapolis. b. Have there been any cases in which a dormant account of substantial size (several hundred dollars or more) was turned over to the state even though the owner of the account was living and receiving mail at the same address as shown in the records of the institutions? ANSWER: This type of thing undoubtedly happens quite commonly, but we do not normally keep track of such occurrences. Some examples that we know of are: SAMPLES EOLDER OWNER AMOUNT 1st Trust Co. of St. Paul ~niv. of Iowa $8,166.00 N/W Nat'l (St. Paul) U of H 170.00 F & H Svgs. Bank Dreng Bjornaraa 104.88 c. Have there beer, any cases in which banks or other savings institutions have treated their certificates of deposit as exempt from the unclaimed property laws by automatically rolling them over into new certificates whenever they mature? ANSWER: It was learned at N/W Nat'l Bank of Npls. that the bank rolled-over C/D's even after they had lost mail contact with the cus~omer on several C/D's. Often banks fail to report C/D's and we suggest that this practice is the reason in many such cases. d. Have there been any other significant cases in which banks or other depository institutions have failed to classify certain property as unclaimed or dormant? PAGENO="0836" 840 ANSWER: (1) None that we are aware of. (ii) Duluth Nat'l Bank at one tine had a practice of writing off all bank instruments after a certain period. They are now reporting these items, how- ever. e. What other practices have been observed by which banks or other financial institutions seek to evade the intent of the unclaimed property laws or evade their re- sponsibilities to the owners of the property? ANSWER: Certain larger Minnesota banks act as paying or disbursing agents for corporations and other legal entities. These banks may be failing to report sign- ificant amounts in the form of bond premiums, dividends, and the like, by considering all dividends they hold to constitute an account of their principal with whom they have not lost contact. The principal~ meanwhile, has made its lump-sum dividend payment to the bank, and therefore might maintain on its report that it holds no unclaimed dividends, with the result that the funds are never r~ported. . PAGENO="0837" 841 7. Unclaimed property held by federal government? ANSWER: Yes a. Conferences were held with representatives of the Department of the Treasury with regard to undelivered and uncashed IRS tax refund checks. Additionally, in correspondence, requests have been made regarding the amount and existence of the items. b. Attached are copies of correspondence setting forth the position of the Department of the Treasury. c. Minn. Stat. §~345.38 Subd. 3. PAGENO="0838" 842 8. Suggestions for federal action? ANSWER: a. The federal regulatory agencies, which undertake periodic examinations of their licensees, should include in the scope of their examination com- pliance with the unclaimed property law. Such examination is justified since, in most instances, the present practice by the holders in accounting for unclaimed property results in an overstatement of income and understatement of liabilities. Additionally, such regulators should consider the holders' compliance record when making decisions regarding the granting of regulatory approval. b. Federally regulated holders of unclaimed property should be required by law to comply with the state laws to which they are subject in the various jurisdictions in which they conduct their business. Regulators should be prohibited from approving or condoning practices which result in unclaimed pro- perty being taken by the holders as their own income instead of returned to the lawful owner. For example, apparently the Federal Energy Agency requires utilities to account for unclaimed security deposits as their own income rather than carrying such amounts as liabil- ities owing to their customers. Congress should protect the interests of bank de- positors by enacting legislation which prohibited the imposition of service charges and the cessation of the payment of interest solely by reason of the inactivity of an account. PAGENO="0839" 843 [See aDpendices attached to prepared statement of Jim Lord for additional rar~rts of bank service gharges in Minnesota,- examples of newspaper adver- ~seents listing Minnesota-owners of unclaimed property, the Minnesota unclaimed property law, and other materials (See pages 14-l't2).] 67-~O 0 - 81 - 5'~ PAGENO="0840" 844 SERVICE CHARGES. MARQUEVIE NATIONAL BANK A Mai'iioeUe Naiollal Dao~ Downtown 777 Marquette Avenue . Minneapolis, Minnesota 55480 * Phone (612) 370-2222 July 30, 1979 Treasurer, State of Minnesota - Unclaimed Property Division G-21 Administration Building St. Paul, MN. 55101 Gentlemen: The enclosed checks are for the interest and service charge for those savings accounts which were reported on the 1977 and 1978 Unclaimed Property Report. We have reimbursed all service charges taken from these accounts and have paid interest from the year interest stopped accruing on these accounts through July 31, 1979. If you have any questions please don't hesitate to contact me. VJM:ld End. RECEIVED IWL~ 2 19I~J UNcLAIMED PROP~jy oiy. PAGENO="0841" 1978 REPORT OF UNCLAIMED PROPERTY PREVIOUSLY NOT REMITTED Interest & ,ccount - Service Charge Number Name Not Reported _________ _________ Accounts 83121 Anderson Axel H. ITF Deborah $ 146.43 7000227 Anderson, P.M. 9.68 210500 Bohien, Geraldin Gunderson ITS Tbnmas Gunderson 9.72 174753 Boliue. F. C. 31.51 1-74748 BoRne, Mrs. Marie E. 31.51 51862 Clement, Robert 48.85 13854 Daugherty, Mary Towles 117.65 77917 Doss, Mrs. Ruth or Trapp Mrs. Bertha 96.30 5026711 Ellenson. Bruce or Mrs. Bruce ITF Tina Marie 2.19 5209010 Ernard, Debbie A. 42.14 81828 Fischer, William F. 123.99 66688 Fjeld, Robert or Mary 138.&9 49494 Fouchee, Adolph ITF Maden, Ernest or Priscilla 697.45 5-4023 Gielselman, August J. 136.31 1016 GilberfiO~, Mrs. T. E. ITF John D. 75.73 - 84053 Gullump, Cornell 0. or Lucille M. 6.01 171892 - Hallberg, Carl J. & Knox, Cyril 84.95 196014 Hausmann, Alvin 25.38 31567 Jones, Eugene W. or Grace L. - ITF David Dean 85.00 186148 Jordan, Harry W. of Helen T. 31.29 185447 Kakish, Marwan Y. 57.33 - 231381 Kasner, Edmund D. 2. 65 - 161216 Krohn, Roy T. or Eleanor C. 88.76 62885 Kurz, Guenter 86.18 ?.ol.cI ~ ~ ~557/~J~L 845 - Total Amount Owing to Reported Customer $ 139.85 $ 286.28 62.85 72.53 47.55 57.27 13.30 44.81 13.30 18.86 67.71 182. 18 299.81 46.85 143.15 14,25 16.44 3.00 45.14 365.09 - 489.08 172.88 111.57~: 1,162.57 1,860.02~ 226. 51 362.82~ z es 89.86 165.59 39.07 45.08 160.69 - 245.~ 40.61 65.99 25.80 12.75 84. 61 13.04 113.56 559.2k 110.80 44.04 141.94 15.69 202.32 645.44 - PAGENO="0842" 846 1978 REPORT OF UNCLAIMED PROPERTY PREVIOUSLY NOT REMITTED Interest & Total Service Clx rge Amount Owing to Not Reported Reported Customer umber Name Savings Accounts 169847 17004 Lind, Mrs. Patricia $ Malmsten, Margaret 31.51 62.92 $ 13.30 $ 15.02 44.81 - 77.94 265306 Merrill, Betty H. 9.02 44,24 53.26 73759 Mutual Service .Agents Assoc 166.89 177.88 344.77 28209 Nystrom, Craig 63.07 15.34 78.41 41772 Overton, Ralph E. 46.32 12.94 59.26 30726 Photopoulos, Ted or Nina 3.66 14.40 18.06' 57810 Pultz, Georgene A. *or LaVerne 82.09 20.48 102.57 16568 Roach, John 64.65 169.79 234.44 251579 120642 199687 Sandford, Janice Schei, Robert C. or Elizabeth Schwagel, Louise J. ITF Laurie Ann 9.61 6.74 16.81 * ~ 37.77 33.02 12.31 47.38 39.76 29.12 88492 Sexton, Rev. Dr. Charles M. ITF Callender, Tyrone 31.09 * 12,15 43.24 l77147-~ Smith, Robert Dean or LOis Marilyn - 31.44 - 13.16 ~44.60 177154 Smith, Thomas Lee or Natalie A. 31.44 * 13.16 44.60 14654 Stensrud, Berniece 77.00 85.65 162.65 211268 Stubbs, Sally- Louise 3.14 . 20.36 23.50 5035068 Svir, Audrey 2.16 14.09 16.25 63560 Theis, Minnie 46.54 13.50 60.04 1446 177824 Thorpe, Christian Todd, Isabel H. 60.91 162.55 . 47.51 374.59 108.42 537.14 251835 Townsend, Mr. or Mrs. Steve ITF Julie 3.81 15.00 18.81 20073 5014261 83048 to-,,;- `y Wallen, Oscar 183.47 Whitney, Lavern or Mrs. ITF Rachel 2. 98 Woolhiser, Willard or Alexanderia do Semple, William ___________ 338.46 14.50 521.93 17.48 157.18 474.20 631.38 $3, 660.76 $5, 989.46 $9,650.22 - Totals PAGENO="0843" 847 1977 REPORT OF UNCLAIMED PROPERTY PREVIOUSLY NOT REMITTED Interest & Total Account Service Charge Amount Owing to Number Name Not Reported Reported Customer Savings Accounts 9266 Breitzke, 3. W. $ 94.25 $ 43. 07 $ 137. 35 21865 Lurid, Alice 0. ` 900.13 1,539.07 2,439.20 Totals $994.41 $1,582.14 $2,576.55 PAGENO="0844" 848 INTEREST REVERSAL, NORTHWESTERN NATIONAL BANK OF MrNNEAJPOLIS /)AJ ,~ eeefl /tI~V~)j~ t'P /~/t~C 3. A. Coseen, Aset. }tgr. R. C. Carleon Tellers Departnent Controllera Departnent As requested, the following is an outline of the Savings Tellers requireniants in reporting abandoned funds to the State. 1. Using the d.ai=ant account list as a guide, create a list of eccounts which have not had any activity eunept interest postings since l2~3l~47. 2.~_Put thru entries reversing the interest credited to these accounts for the last 10 years.. / 3. Deliver to Ray Carlson the list of presunably abandoned accounts including account nunber, title, address, and adjusted balence by Priday, January 26, 1968. 4. Atteapt to locate by letter, owners of these accounts to they nay either update the balance in these accounts or return a card ~ acknowledging that these d~inds are not aband:ed. PAGENO="0845" 849 WITHDRAWAL ORDER * SN/INGS OEPAI1TMENT LINCOlN OFFICE )~Ti!W2STEZ~.V NATIONAl. BANK OF MINNEAPOLIS .SI,~s~v 55403 / ~ 19 Pk.~. cbs,g, ~y c~d: s~~d sh~d( ~] ~ ~ Li Th~ S ~ ss~tIs~. R d f,~ ~ S;~. A~s,t. ~psss t~k~s ~.sIs~d) 1~ 1~ YrJ~LLCCL_~I)~T]~D.II.?5. $ 55.21 SIGN HERE _Llrs. Borg thy f~urny 60u115'I I in netive over 20 years c çt4c1 to state 01 I AGDUE5S ________________________________ `:o~ Losooc~I: ~ L'~ L5t~IP 20L1 - WITHDRAWAL ORDER SAVINGS DEPARTMENT LINCOLN OFFICE ~DETH'.~.'ESTERN NATIONAL BANK OF MINNEAPOLIS _______________ 19 PI~s. ~ ~y ~d; ..~d ~h.sh fl s~Iip ~ ~E~Ei~g ~ccs~t 9 .~.S. d ~ ~y Ss~5ç. (d~.;, t5k., ~ 3186.00 to state of Ninn. /,L/ 1503.981nt for 10 Yr revers~d ~44 ~ t~89.98 SIGNHERE Fflna B. ~~i1bu 5051 437 1 Inoctive over 2O yrsx i~j~ to state of Io~ ~o~oo~I: ~ LiL~3~?u' 2O~ - -~... -~ -- - WITHDRAWAL ORDER - SAVINGS DEPARTMENT LINCOLN OFFiCE ~ORTHWES75p~y NATIONAL BANK OF MINNEApOLIS ~ i(rn~Op5 55403 / 0 - ~ 19 is ~sI1 PI.~s.chc~, sc~o~a o~d; s.~d ch.ckEJ ~ ~ ~ R .s.5, 4 ~ ~y Ss~i~;. ~ (d~.s;, ,ick.t ~s~sl~s.d) 0 * - 33.~7 to state of Minn. 15.75 10 yr intererst rev. / ~ $ 9.22 ~ SIGH HERE E. 0. Rodberg 6062 835 Inactive 51~U yrs senc iosrwte-uf-- ADDRESS J~ktin. - - z;QQs.oocjcjj: 6O"8~2'~E3Si' 2O~ I,sikre~~ ~?zvo.rnL A - pcs~:c~~3oY? R'~ ~ `v3Er~L(.0~frJ ~ ~ PAGENO="0846" 850 S4~2 WITHDRAWAL ORDER SAVINGS DEPARTMENT LINCOLN OFFICE NORTH WESTERN NATIONAL Bu1NL OF MINNEAPOLIS /0 - ~- ~ 19 ri Th ~o,I ~ Pk~' £h~~g~ my mrnd; sm~d ~ ~ rndi, my ~k~~himj j Th~ t,t~. R~i~d f,~m my Sj,~;~ ~ (d~p~&It i~k~i ~Io~d) Li 63.81 10 SteLe of t-linn. JJ 30.10 mt for 10 year rev. ~ 93.91 F SIGN HERE N;tte Wholcy 6062 579 Inactive over 20 years sent tostaee of ______________________ ADDRESS ___________________________________ I:o~LoztoocHs: ~On~2n5flhs 208 S 452 WITHDRAWAL ORDER SAVINGS DEPARTMENT LINCOLN OFFICE NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS / ~ ~ 7 ~ Mirsrstapolu, Minnesota 55403 - j This is molt t oootioo. Pies ashosge my ooonant sod; sood ehsek~J c~dit~y chocki:~ccsunt toosootiso. R I loom my Sooioogs Aocooot. 6~L81 to state of Ninn. 31.11 lOyear mt rev ~` ~ $ 95.92 SIGH HERE Brison Robert Wood 736 Inactive over 20 years sent to state of ADDRESS _________________________________ i:O~LO"o0t~RJ: ~Os~J~s?3~i' 208 WITHDRAWAL ORDER SAVINGS DEPARTMENT LINCOLN OFFICE NORTHWESTERN NATIONAL BANK OF MINNEAPOLIS Msnneapohs, Afinmropta 554DI~ ~ 19 ThIs is moil tonsoot,os. Pisos. choog. toy occoost sod: send ch.cis~J ceodit toy oheolci5g Th,s is coontet toonscotion. R.c.in.d(tom my Scoings AccoonA (doicosit ticket ettolosed) D 37.87 to state of Minn. 17.82 Int. for 10 yr ~Dciio,s, $ __________ SIGN HERE Juneg or Bess Delich 6062 886 Inactiver over 20 years sent to ~ of ADDRESS Minn. `:o~ Lo~'oo~i: ~0sz:8 21E88nh 208 ~ ~ A 1~1)~yZG~ *I~1~* 5~-~ ~rr \~r~ NW~\14 PAGENO="0847" 851 BT*O~N~4N~ ~ - ACCOUNTHO ~2O8?' t1~NATu*rs ~½~couNT WITh `1~7TN CT'rY ~thT. `~ 1YtE MAKFRs CLU~~-' 0 - /~ ,~%` 3912 ~ L'r~ Sp~occupA~W:f~ ~ .A ii' _____ _____ - - - ~ ~ -~-~$1GP4ATURL4 ~;~-: -~ ~ q ~ .**4tJ1 ~***1j3~4~ ~D: ~ A O~; ..-.~.- ~:T~ *-~:~-~~ ---~ o*~4io ***14~3 v ~ 0 ~ ~:. ~ ~ .**416' ~A c9/~. A -~ 3/ ~ .4~25~ * t~7 **~~5'~ A~ L?~~-~ ~ ~ D~TZ WITWD*AWA~. - --. --. - --- -. _tmn o~a - -.: -~ - ,--- - - NOIThW~T~ NATiONAL IA1~ 0! MD4NEAPOUS - ~~~-;-i--- ----- PAGENO="0848" / I, 852 `~ii4 -- øaJ. ~ ~ 1OJ7L /0 ~ ~En~'-e~ ~-i0c/ ,¼ ~ ~/ ~ ~, NbMt~ k~n2~M ~cfki ;~,4445i- ~n~r~L (~~)L &~~jr~ Pr)!( ~~-3~~T) S~r~ ~ - - :.~ 73 -~ -:.- - -~ 2 (4. 4~( yc,j. g~ ~ I ôì. ~1~iT~ii /~ `3 ~ (\JW!4~ T~3~ V PAGENO="0849" Josephine Hervey 529 Morgan Avenue N. Francis L. Mutter 55L~ `flst Avenue S. -~~;;~-" Margaret Beyhan 97 North 17th St. Ce1c~t~izecky ~3~S~i~est 2~~th St. Henry Vicenus Dora Broner t~O1t~ Minnehaha Ave. Mrs. Peter L. Smith ~Ra. J. Knaffla SO~(Lt? :. \)Jc~f~~rv5 `c~r 853 NORTHWEST BANCORPORATION INTRA-GROUP CORRESPONDENCE - ~T- ( .5' To Mr. Ray Carison r~~j.t -1- i. Controllers Department `~. `~V ~-~Jl~ e3f JQ~4.4L. Bin~c Main Office LI~PI ~ r~>r~4 ~-z~ From V. R. Sorensen Controllers Department B.r~ Lincoln Office Dear Mr. Johnson: Following is a list of savings accounts which have been inactive for over 20 years with a balance of $5.00 and over; ACCOUNT NAME A/C# .3. N. West, in Fr. 605-116-2 a~halto~,Iow~ Joe Forese~_- 605-121-8 _-_-~f--R~ssell Avenue N. Mrs. E. A. Haugen in 605-130-6 Trust for C. N. Haugen PRESENT BAL4NCE $52.39 $~0 .83 606-122-6 $58.62 605-150-9 $158.30 606-15'I-8 ~12L06 606-170-1 $1a8.49 606-180-8 $l26.'U) 605-188-3 $i~9.O8 605-189-1 $87.61 606-l90-~E $218.67 $1371.29 \.k~1.cL; ~ 10 yrs. withheld PRESUI ED interest ABANDONED $13.62 _ $3Z..77- $10.61 ~)e-$3O.22 `T/r $10.61 $30.23 $Li3.36 $4]~.38 $116.92 $31~38 $88.68 $lOY.5LE ~- $3fl&,~~«= $33.01 $93.39 $12.78 $36.30 $22.86 $6tL75 $57.18 $161.'E9 $358.23 $1013.06 Sincerely, I~. ~ V. R. Sorensen C.ntroller Department VRS/robb PAGENO="0850" 854 Missoui~i QUESTIONNAIRE RESPONSE ~Lk~T~c ~ ~ ~L\~I~F3t ~YW ~ ~ ~ JAMES LSPAINHOWER ~4GrFs- October 18, 1979~ ~ 2'~ 979 Consumer and Monetary Affairs Subcomittee Rayburn House Office Building Room B 377 -~ Washington, D.C. 20515 Dear Sir: Your letter of October 3, 1979, written to Mr. Frank Blankenship of the Office of Escheats was referred to our office. Mr. Blankenship adminis- ters Missouri law as it pertains to estates that have been escheated to the State of Missouri. I am enclosing a copy of this law for your reference. Missouri recently passed a law in regard to unclaimed bank, savings and loan, and credit union accounts. I am also enclosing a copy of this law for your information. Many of the questions asked on your inquiry can be answered by the provisions of this measure. Statistical information and answers to some of the other questions are also included. The respective financial divisions, as stated in the law, are charged with approval of all claims that are submitted to the State Treasurer for payment. Very truly yours, Bill J. Crigler -~ Assistant State Treasurer cc: Frank Blankenship Enclosures PAGENO="0851" 855 1-cl. YGLI 4E~E hEREBY NOTIFIED THAT BY ALTHORILY CF 1HE tUS~QuRI ~ PFCPtRTy Li~, YtJUR INACTIVE ACCCtJNT iN ThE CLAYTCI~ METRC BINi< HAS EEEt~ FLR%~RUED TO THE STATE TREASoR&R S~ OFFICE. A CL~IR NAY EE FILED ~ITh TFE DIVISION OF F1NA~CE ~T ANY TIME I~ITHIN 21 YEJRS LFTE.-~ SF1 CATE C.~ ~H1Ch lOCH ACCCLNT i~AS FIRST PAESUMEC ~EAS~CCNEC. LAA CC~NERCIA~ SIR JANES I. SPA1N1-ChER C3000 STATE TREASURER P.C. ECX 210 L 1 JEFFERSON CITY, NJ. 65102 PAGENO="0852" 856 3a 2. Amounts of unclaimed property reported and delivered to owners: (Abandoned Deposits) ~g75 19Th lg7g a. Numbers of institutions reporting: N/A N/A N/A All institutions 495 Banks 421 Brokers Insurance companies All others Savings & L 45 Credit U. 29 b. Amount of property reported: All institutions $2,430,174.52 Banks Brokers Insurance companies All others c. Amount of property remitted: All institutions 2,301,246.50 Banks 1,890,571.86 Brokers Insurance companies All others Savings & Loans 375,827.83 Credit Unio s 34,846.81 d. Number of individual accounts in excess of $500 All institutions Approx. 896 Banks More Than 1/2 Brokers Insurance companies All others e. Number of names advertised: (Notices sent) * 6,082 f. Dollar amounts returned to owners: 91,643.86 g. Delivery percentage: 4% h. Amounts remitted minus claims. 2,209,602.64 * Some account addresses were unknown - out of 6,957 accounts, approximately, 6,082 were mailed to account owners. PAGENO="0853" 857 UNCLAIMED PROPERTY LAW SECOND REGULAR SESSION [TRULY AGREED TO AND FINALLY PASSED] SENATE COMMITTEE SUBSTITUTE FOR HOUSE COMMITTEE SUBSTITUTE FOR HOUSE BILLS NOS. 896 & * 897 79TH GENERAL ASSEMBLY AN ACT To repeal sections 362.390 and 362.395, RSMo 1969, relating to escheats of certain unclaimed property, and to enact in lieu thereof four new sections relating to the same subject. Be it enacted by the. General Assembly of the State of Missouri, as follows: Section 1. Sections 362.390 and 362.395, RSMo 1969 are 2 repealed and four new sections enacted in lieu thereof, to be known 3 as sections 362.390,362.395,362.396 and 362.397, to read as follows: 362.390. 1. In the month of September in every seventh year, 2 and beginning in September, 1978, and on or before the tenth day 3 thereof, every national bank or trust company, every federal and 4 state credit union, every federal and state savings and loan 5 association, and every state bank or trust company shall make a 6 written report, in the case of a bank or trust company to the director 7 of the division of finance, in the case of a savings and loan to the 8 director of the division of savings and loan supervision, and in the 9 case of a credit union to the director of the division of credit unions, 10 verified by the oaths of the president or vice president and cashier 11 or assistant cashier or secretary or assistant secretary, containing 12 a true and accurate statement~ of all deposits made with the 13 company, except any deposits held in a fiduciary capacity, and all 14 dividends declared and interest ~ccrued upon any of its deposits or PAGENO="0854" 858 S.C. S.RC.S.H.B. 896 & 897 2 15 other evidences of indebtedness, which on the first day of August 16 preceding the report amounted to fity dollars or over and had 17 remained unclaimed by any person or persons authorized to 18 receive the same for a period of seven years. 19 2. The statement shall set forth the date of each deposit, its 20 amount and the name and last known place of residence or post 21 office address of the person making it, the name of each person in 22 whose favor and the time when the dividend may have been 23 declared or the interest may have accrued, its amount, and upon 24 what number of shares or upon what amount of deposit or other 25 evidences of indebtedness of the company it was declared or 26 accrued. 27 3. If the company holds no such unclaimed deposits. dividends 28 or interest, it shall at the time above specified make a written 29 report to the director so stating, which report shall be verified as 30 hereinabove provided. 31 4. No deposits, dividends or interest shall be deemed unclaim- 32 ed within the meaning of this section if it appears from the books of 33 the company or from other written evidence on file with the 34 company that the person or persons authorized to receive them 35 have knowledge thereof. 362.395. 1. Every company which reports any unclaimed 2 deposits, dividends or interest under the provisions of section 3 362.390 shall cause to be published once in each week for two 4 successive weeks in a newspaper qualified to publish public 5 notices as provided in chapter 493, RSMo, published in the county, 6 or if no such qualified newspaper is published in the county, then 7 in a county adjacent to such county, and in the village or city in 8 which the company is located, if there be a qualified newspaper 9 published therein, or in the city of St. Louis if the company is 10 located there, a true copy of the report, and shall file with the 11 director on or before the first day of October thereafter proof by 12 affidavit of such publication. 13 2. The expense of the publication shalibe paid by the company, PAGENO="0855" 859 S.C.S.FLC.S.H.B. 896 & 897 3 14 and, on or before the first day of August in that year, the company 15 shall mail, postage prepaid, to each person authorized to receive 16 the unclaimed deposit, dividend or interest, at his last known place 17 of residence or post office address, a statement showing the 18 amount to which the person is entitled and requesting written 19 acknowledgment thereof, together with a warning that failure to 20 acknowledge will result in the state making claim and taking 21 possession of such deposit, divi~Iend, and interest, subject to the 22 claims, supported by proof, of the apparent owner. The company 23 may reimburse itself for its expenses by deducting the amount 24 thereof from the sums due the person or persons who shall not have 25 made written acknowledgment before the filing of the required 26 reports with the director, so that such expenses are uniformly 27 deducted from sums not acknowledged. 28 3. Each claim for deposits, dividends and interest where the 29 last known address of the apparent owner of the claim is in this 30 state or where no address of the apparent owner of the claim 31 appears on the records of the company for which no acknowledg- 32 ment is received within one hundred eighty calendar days after 33 mailing of the statement shall become abandoned funds. For the 34 purposes of this act, one hundred eighty calendar days after the 35 mailing of the statement, is the date funds are first presumed 36 abandoned. Within thirty days after the funds are first presumed 37 abandoned, each company shall transfer such abandoned funds to 38 the state treasurer, and refile their written report with the director 39 of the division, deducting the expenses and deleting such funds 40 that were acknowledged. 41 4. Within thirty days of the receipt of such abandoned funds, 42 the state treasurer shall record the name and the last known 43 address of each person appearing from the company's reports to be 44 entitled to the abandoned funds~ cause to be mailed to the last 45 known address of the apparent owner of the abandoned funds a 46 notice that the state of Missouri has claimed the abandoned funds 47 along with an outline of the apparent owner's rights, and cause 67-~'~OO-81-S5 PAGENO="0856" 860 S.C.S.RC.S.H.B. 896 & 897 4 48 such funds to be deposited in a special fund to be known as the 49 "Abandoned Fund Account". Records made herein shall be 50 available for public inspection at all reasonable business hours. 51 5. From the fund created by this act the treasurer shall make 52 prompt payment of claims duly allowed by the director as 53 hereinafter provided. At any time when the balance of the fund 54 exceeds five hundred thousand dollars, the treasurer may, and at 55 least once every fiscal year shall, transfer to the general funds of 56 the state of Missouri the balance of the abandoned property fund 57 which shall exceed five hundred thousand dollars. Should any 58 &laim be allowed or refund ordered under the provisions of this act 59 in excess of five hundred thousand dollars, the treasurer shall 60 transfer from the general funds of the state any amount ap- 61 propriated which is sufficient for prompt payment of the claim. 362.396. 1. The payment or delivery of such abandoned funds 2 to the state treasurer, whether voluntary or required, by any 3 company shall terminate any legal relationship between the 4 company and the apparent owner to receive the deposits, dividends 5 or interest, and shall release and discharge the company from any 6 and all liability to apparent owner or his heirs, personal 7 representatives, successors and assigns by the delivery or 8 payment, regardless of whether the funds are in fact and in law 9 abandoned property, and the delivery and payment may be pleaded 10 as a bar to recovery and shall be a conclusive defense in any suit or 11 action brought by the apparent owner, or his heirs, personal 12 representatives, successors or assigns, or any claimant against 13 the company by reason of the delivery or payment. Nothing 14 contained in this section shall be construed as ~n assumption by 15 the state or the state treasurer of any liability of the company to the 16 apparent owner authorized to receive the same, which is greater 17 than the value of the funds at the time of delivery to the state 18 treasurer together with interest on such funds for the period held 19 by the state treasurer at the same rate, if any, which was contracted 20 for, nor as depriving the apparent owner, his heirs, personal PAGENO="0857" 861 S.C.S.FLC.S.H.B. 896 & 897 5 21 representatives, successors and assigns of the right of redemption 22 provided in this act. 23 2. The state treasurer shall reimburse any company which is a 24 national bank or trust company~ a federal credit union, or federal 2.5 savings and loan, and which cannot be relieved of liability by this S section for all liability to the apparent owner, his heirs, personal 27 representatives, successors and assigns incurred by reason of any 23 delivery or payment to the extent of the value of the deposits, 29 together with interest on such funds for the period held by the state 30 treasurer at the same rate, if any, which was contracted for, on the 31 date on which it was paid or delivered to the state treasurer. 32 3. Any person claiming an interest in any such abandoned 33 funds paid or delivered to the state treasurer under this act may file 34 a claim thereto on a form prescribed by the director, together with 35 reasonable proof which the dire~tor may specify by rule. A claim 36 may be filed at any time within twenty-one years after the date on 37 which such abandoned funds were first presumed abandoned 38 pursuant to the terms of this act, notwithstanding the expiration of 39 any other period of time specified by statute or court order during 40 which an action or proceeding may be commenced or enforced to 41 obtain payment of the deposits. 362.397. 1. The director shall promptly consider any claim 2 filed in proper form and supported by proof as required by this act 3 and shall allow or disallow it within ninety days after its filing. If 4 he is satisfied with the proof submitted, that the claim is valid, he 5 shall immediately allow the same, subject to the provisions of 6 subsection 5 of this section, and process the same for payment. If 7 the director is not satisfied that such claim is valid, he shall 8 disallow the claim and notify the claimant in writing, by service in 9 person, or by registered or certified mail, return receipt requested. 10 The written notice of disallowance shall specify the reasons for the 11 disallowance. 12 2. Any claimant whose claim is disallowed is entitled to 13 submit additional proofs or, within forty-five days after he PAGENO="0858" 862 S.C.S.I-LC.S.RB. 896 & 897 6 14 receives notice of disallowance, request a hearing. A hearing shall 15 be held within ninety days after the director's receipt of the request 16 for hearing unless there is a postponement or continuance for good 17 cause. The hearing held pursuant to this section shall be held by 18 the director or his representative or deputy duly designated in 19 writing. All of the pertinent provisions of chapter 536, RSMo, 20 compatible with the provisions of this act, shall apply to and 21 govern the hearing, including the power and the authority of the 22 director or his duly designated representative or deputy in 23 conducting the hearing in the administrative procedures in 24 connection with and following the hearing, except that; 25 (1) if the claim in question was located in a county within this 26 state immediately before delivery or payment thereto to the state 27 treasurer, the hearing shall be held in that county; 28 (2) an order of the duly designated representative or deputy of 29 the director who conducts the hearing shall have the same force 30 and effect as the director. 31 3. After the hearing and the consideration of all the testimony, 32 evidence and record in the case the director or the director's duly 33 designated representative or deputy shall make and enter an order 34 deciding the claim in question. The order shall be accompanied by 35 a findings of fact. A copy of the order and accompanied findings 36 shall be served upon all parties and their attorneys of record, if 37 any, in person or by registered or certified mail. The director shall 38 also cause a notice to be served with the copy of the order, which 39 notice shall advise the parties of their rights to judicial review, in 40 accordance with the provisions of section 536.100, RSMo. The order 41 of the director or duly designated representative or deputy shall be 42 final unless vacated or modified upon judicial review thereby in 43 accordance with the provisions of section 536.100, RSMo. 44 4. The order and the accompanying findings of fact shall be 45 public records. When a claim is allowed by the director or his duly 48 designated representative or deputy, whether with or without 47 hearing, the same shall be paid by the state treas~urer forthwith PAGENO="0859" 863 S.C.S.H.C.S.I-LB. 896 & 897 7 48 from any funds appropriated for this purpose without deduction 49 for cost of notice of sale or for administrative charges, subject to 50 the provisions of subsection 5 of this section. ~51 5. Any other provisions of this act to the contrary notwithstan- 52 ding, where it appears that the person entitled to allowance of a 53 claim, his heirs, legal representatives, successors or assigns or 54 the holders in due course of negotiable instruments would not have 55 the benefit or use or control of the claim due him or where special 56 circumstances make it appear desirable that payments should be 57 withheld. or where it appears that the person entitled to the money 58 or property is a resident or national of a foreign country, and the 59 federal statutes or federal regulations preclude the sending of 60 moneys from the federal treasury to such person, the director may 61 deny the claim and direct that the money be held for the apparent 62 owner or his heirs, legal representatives, successors or assigns, or 63 the person who may thereafter appear entitled thereto. The 64 deposits shall be paid out only by further order of the director or a 65 court of competent jurisdiction. PAGENO="0860" 864 NEBRASKA QUESTIONNAIRE RFI~PONSE NEBRASKA Unclaimed Property Questionnaire Commerce, Consumer, and Monetary Affairs Subcommittee B-377 Rayburn Building Washington, D. C. 20515 1. Unclaimed property statute, regulations, and administrative prpgram: a. The Nebraska Uniform Disposition of Unclaimed Property Act closely parallels the 1955 Uniform Disposition of Unclaimed Property Act as issued by the National Conference of Commissioners of Uniform State Laws. (Exhibit 1) (i) The Nebraska Unclaimed Property Act covers all types of checking and financial institutions, business associations, and any person holding property owing to another person, without exception. (ii) When the Nebraska Act was enacted in 1969, property of value that did not exceed $50 was not required to be recorded. This provision has been amended out of the law and now all amounts are reportable and remittable to the State. (iii) The holding period which must elapse before property is reported to the State is seven (7) years for all property except Travelers' checks which are reportable after 15 years. Property that is distributable due to a dissolution of a business association is reportable after two years. (iv) The Nebraska Unclaimed Property Act is purely custodial. Owners may lay claim to property at any time after it is remitted to the State without limitation. The Nebraska Unclaimed Property Act does not provide for a permanent escheat of the funds remitted under the Act. (v) The Nebraska Unclaimed Property Act at present does not provide for any interest on funds while in the custody of the State Treasurer. We are examining the possibility for future planned legislation. (vi) The Nebraska Unclaimed Property Act has not been changed substantially from the Uniform Disposition of Unclaimed Property Act as propagated by the National Conference of Commissioners of Uniform State Laws. However, the State Treasurer has proposed comprehensive amendments to the Act that will make the administration of the Unclaimed Property program more efficient and effective. (See attached exhibit of proposed amended law - Bxhibit 2) b. The State of Nebraska has not adopted any administrative rules or regulations as of this date. However, the Treasurer's office feels the adoption of rules and regulations in the near future advantageous. c. The State Treasurer's office is not aware of any other banking, insurance or financial commerce laws or regulations that relate to the handling of dormant deposit accounts or other unclaimed property. d. The Nebraska Unclaimed Property Act follows the same publication and notice procedures as are found in the Uniform Act. (i) Names are advertised in newspapers of general circulation in the county of the last known address of the owner. In addition to the foregoing required advertisements, names are placed in the TV TIMES, broadcast as a public service over radio and television stations, and listed in a newspaper of state-wide circulation. (Exhibit 3) PAGENO="0861" 865 Unclaimed Property Questionnaire - Page 2 NEBRASKA (ii) The State is responsible for all publications and there is no requirement that the holders publish under the Nebraska Act. (iii) Currently, only the names and city of last known residency is published. (iv) The Nebraska Act provides that all property whose value is $25 or more be published. However, the State Treasurer has published amounts down to he has deemed it to he in the public interest. advertisements include only the names of owners of unclaimed property is being reported for the first time. They do not include any owners of frun prior reports that still remain unclaimed. This possibility exists with computer service. e. In addition to advertising the names in newspapers and other media, staff members of the Treasurer's office regularly attempt to locate owners of unclaimed property via telephone calls, correspond~nce, and other investigative methods. The Nebraska Act limits professional~ finders' fees in Section 69-1317 as follcws: "A professional finders' fee shall he limited to ten per cent of the total amount of the property presumed abandoned if any claimant is contacted with ir. mime months of the date the property was reported to the State Treasurer. claim amy such fee, the nature and location of the property must he disclosed to the claimant by the finder." In Nabr:e~c the terms "abandoned" and "unclaimed" are used inrerchangeably. haliirg period for the determination~ of property being unclaimed or abandoned is ~eyei to the lack of owner generated activity. However, as evidence by some affirmative action by the owner. In the case of hank deposit, if a letter is mailed first class and is not returned by the Post Office, the law presumes that customer contact has been made so as to rehute the presumption of inactivity. h. The Treasurer's office currently does not have a full-time auditor on the staff to conduct field audits specifically for unclaimed property. However, in the past the Treasurer has contracted with a public accounting firm to conduct investigations into the report practices of various major corporations throughout the United States. In all, 23 major corporations~ at random, were selected for imvesmigation. Several of these refused to admit the inspection of their records cm various legal grounds. The Treasurer's office currently retains the services of an independent public accountant for the purrose of making limited inquiry into the reporting practices a-i procedures of various holders. However, this effort is not full time and is severely subject to budgetary restraints. i. The budget for administration of Nebraska's unclaimed property program is 5S7,472. Personal Services - $39,263 (2 full-time employees and an auditor will start December 20) (Part-time CPA consultant) Operating Expense - 44,124 (data processing charges already total $33,163 and a deficit appropriation has been requested) Supplies B Materials 650 Travel 2,485 Capital Outlay 950 S87,472 PAGENO="0862" 866 Unclaimed Property Questionnaire - Page 3 NEBRASKA 3. Brokerage firm reports: a. Individual securities brokerage firms that filed unclaimed property reports to Nebraska -- Merrill Lynch, Pierce, Fenner 5 Smith Inc. and N. R. Grace I Co. b. Dollar amounts of cash, dollar values individual accounts reported: Merrill Lynch, Pierce, Fenner 5 Smith Inc. 1979 - $309.76 - 16 items 1978 -$1326.66 - 92 items 1977 - $36.00 - 1 item $1672.42 109 N. R. Grace 5 Co. 1979 - $73.19 - 2 items 1978 - $45.00 - 2 items 1977 - $23.26 -4 items $141.45 8 c. See attached reports - Exhibit 4 4. Compliance a. Degree of compliance: (i) national banks - poor compliance ) received 44 reports out of 451 State (ii) state banks - show poor or no compliance) ~ National Banks (iii) federal savings and loan associations - poor compliance (iv) state credit unions -poor compliance - received 6 reports out of 20 (v) federal credit unions - received only 1 report (vi) state credit unions - poor compliance - 5 reports out of 72 (vii) securities brokerage firms - ~o compliance (viii) mutual funds - poor compliance (ix) insurance companies - poor compliance (x) nonfinancial corporations - poor compliance Our observations above are based on responses to our annual mailings of unclaimed property reports. Approximately 30,000 reporting forms are sent to companies doing business in Nebraska and throughout the United States. As indicated in our response to the number of reports filed under the last three years, it can be seen in the past year less than 20% of the companies receiving the reporting forms actually filed the report with our office. A large percentage of those that are returned are negative reports which should indicate that the company is holding no property subject to the Unclaimed Property Act. In addition, when contacted, most holders indicate a total lack of awareness regarding the Unclaimed Property Act, and are unfamiliar with the procedures necessary to review their books and records to ascertain what monies are being held that may be subject to the Act. b. The Treasurer's office has only recently begun investigations into various industry practices relating to the holding and reporting of unclaimed property. However, it became apparent, through recent efforts that several practices have been employed by holders of unclaimed property that have resulted in the non-reporting of such property. In many cases the holders argue that they are PAGENO="0863" a. Numbers of institutions reporting: All institutions Banks Brokers Insurance co~panies All others b. k~ount of property reported: All institutions Banks Brokers Insurance cc~panies All others C. Arount of property re~itted: All institutions Banks Brokers Insurance cmrpanies All others d. ~u5er of individual accounts Th~excess of 5500 All institutions Banks Brokers Insurance companies All others e. Nur~ber of names advertised: f. Dollar amounts returned to owners: g. Delivery percentage: h. Amounts remitted minus claims 867 3a 2. Amounts of unclaimed property reported and delivered to owners: 1000 e" 44 2 80 ~ N/A $67, 177 $40,000 "e' $264 N/A N/A *Same as above (request remittance when report is filed) 1978 6000 "e" 400 "e' 2 116 N/A $330,121 $58,923 $1,371 N/A N/A 700 "e" N/A N/A N/A N/A 12,000 `e" $168,343 51% $161,788 1000 "e' 50 "e" 2 97 "e' N/A $519,360 $149,028 $59 N/A N/A 450 "e' N/A N/A N/A N/A 8,000 `e" $38,054 8% $481,306 300 "e" N/A N/A N/A N/A $5,357 8% $61,820 PAGENO="0864" 868 Un~laimed Property Questionnaire - Page 4 NEBRASKA exempt from the Unclaimed Property Act or assert various legal defenses as the statutes of limitation, gestapo or the very constitutionality of the State's right to assume custody of the unclaimed property. In the case of one of the largest insurance companies in the country, located in Nebraska, no reports of unclaimed property have ever been filed disclosing any items reportable under the provisions of the Unclaimed Property Act. When confronted with this situation, counsel for the insurance company indicated that the company was exempt from the provisions of the Unclaimed Property Act and asserted various other legal arguments inconsistent with the spirit and intent of the Uniform Disposition of Unclaimed Property Act. In other cases banks have deducted service charges and failed to credit interest to savings accounts without any apparent authority either by statute or contract. Several business corporations have asserted that the records do not provide information that is necessary to properly file unclaimed property reports or to identify the names or last known addresses of the owners of unclaimed property. c. (i) - two to five million dollars (ii) unable to estimate (iii) difficult to estimate, but could run into a few million dollars; especially with one major insurance company in Nebraska. (iv) three to four million dollars per year. 5. Service Charges a. See attached copies of complaint letters and bank ledger cards relating to the service charging of dormant accounts. Through inquiry and other verbal sources, this office has received information over the past few years that indicates that banks, as a regular practice, are service charging savings accounts out of existence and that many of the accounts reported to the Treasurer's office are net after service charges. (Exhibit 5) b. The imposition of non-contractural service charges on dormant accounts appears to be a general practice of the banking industry. c. In the case of one major stockbroker, reporting to Nebraska, this office is aware of a service charge imposed against inactive customer accounts. d. This office has determined that in most cases customers are not properly notified in advance that service charges will be imposed if their accounts remain dormant. e. The typical service charge imposed by banks range from $1 to $5 per month. f. $14 g. Yes, copies of relevant correspondence attached. h. Between 4 or 6 thousand dollars i. One to two million PAGENO="0865" 869 Unclaimed Property Questionnaire - Page 5 NEBRASKA j. Although there is no specific sectio~i in the law relating to the limitation of service charges, it is the position of the Treasurers office that service charges ray only be ircosed if authorized by a statute other than the Nebraska Lh-caired Property Act or by a valid and enforceable contract between the depasitor and the bank. In addition, if, it is the banks practice to waive a charpe irrased solely by virtue by the dormant or inactivity of the account, than such charge cannot be assessed against the State Treasurer at the time of such account as unclaimed property. It is the policy of the State Treasurer to press a claim for refund of any service charges imposed solely by virtue~ of the inactivity or dormancy of an account that are not contracted for by the depositor. The legal basis for such a claim resides in the case of Bank of Ai~erica versus Cianson, California Supreme Court l96S. 6. Other Practices a. This office has become aware that various banks cease to credit interest to dcrmamt savings accounts. The extent of this practice is unknown at this time area is subject to an ongoing investigation by the State Treasurer's There have bean cases in which dormant accounts of substantial size have beer turmed over where the owner of the account was living and receiving mail a: the same address as shown in the reco~ds of the institution. The State Treasurer's office is aware that at some banking institutions certificates of deposit automatically renew upon initial maturity and are cantinued either rolled over or reverted to the status of a regular passbook savings account. d. Although the State Treasurer's office has only recently begun to investigate banking practices with respect to dormant savings accounts below the level of ccmmliamce demonstrated through reports filed by banking institutions tends tc surrort cur feeling that several practices are in effect that are wholly hmccnsistemt with the spirit and intent of the Unclaimed Property Act. See f. ~o specific programs that are offered by banks appear to be more vulnerable to service charge abuse than others. 7. The State of Nebraska has never made a claim against the Federal Government or any of its agencies for property being held on behalf of Nebraska residents. However, State Treasurer Frank Marsh has met with representatives of the Internal Revenue Service to discuss the ispects of unclaimed property being held by the Federal Government, and the SEC regarding enforcement activities relating to Wall Street transactions. S. Suegestiocs for Federal legislation will follow under separate cover. PAGENO="0866" © w H ( I ~ 1] ~ nil 1~ 870 ADVERTISEMENTS 4'- PAGENO="0867" 871 PAGENO="0868" 872 PAGENO="0869" 873 S 2 hg S 22 2 12 2 22 7 I. - 72 ~2 A .1 ~ 1' 2 2 2 2 ~ Li 2 21 57 2 22 S 2 2 2 2 LI.. 2 2 2 2 2 7 * S I - 5 2 .27 52 `5 I - 5 fl 77_ 2~ 2 2 2 L 2 PAGENO="0870" ,`~ r `~ `~ "-, r~'~ OF NAMES OF PERSO~1S APPEAR1~G ~O ~E OWNERS OF ABANDONED PROPERTY ~ Y~.It~L~tI J~ .`~ r\ rH)~Th flr~Jn ,2~\r~t7 L-~~ ~ ~ ~ ~m ~ 1\fl fl r\fl (p~ ~~)~iJUU'J'~) The State Treasurer of Nebraska trying to locate the owners of cash and other valuables. These items, left in accounts (often forgotten) and unclaim- ed for. more than 7 years, become the responsibility of the State Treasurer who Is the Administrator of the Unclaimed Property Act.. The State Treas- urer, since January 1, 1978, has already returned $94,500 to owners or heirs. It your name appears in tuis listing, please write us using the exact name printed here. By writing you will help us speed up proceasing your claim. We are requesting letters, not phone calls, as our permanent records are being processed for computer use. Due to limited help in our Unctaimed Property Division, please allow a reasonable amount of time (3 weeks) to process your responses. r~"~°~" pc~a-~ ~t IleU4tiv..31 ~ State Treasurer, Unclaimed Property Division tea 04700 ca-ret p,;ij;~ Lincoln, Nebraska 68509 Notice is hereby given that pursuant to Revised Statutes of Nebraska, Sec- tion 69 1301-1329, substantIal proof of claim must be presented to the State Tressurer to establish ownership. This property includes savings accounts, chocking accounls, life insurance proceeds, unpaid wages, stock dividends, uti';ty deposits, etc. This property is perpetually maintained In the Permanent School Fund by the State Treasurer. Alt investment profits from this Fund ire distributed to lhe schoot districts of Nebraska. 9.5 Sund~h'Wlrld.1teraI4, ,Tarch25, 1979 eeeaadea .aaea. eea~ a, V PAGENO="0871" I ri flU 875 ~!!~itI 4 1H LJt~ 1.i~L Ifji!:J11i1i J~ J~ Un L1 Li l St a C_sI U S. Sf~ ~ 67-'S'SO 0 - 81 - 56 PAGENO="0872" 876 I - S ~ *&y_.--,t S -: .1 ;5d25 2 5 2 ~ :2 2 ~ ~ 2 e 26 2 2 PAGENO="0873" 877 ACCOUNTS WIPED OUT BY SERVICE CHARGES 111? ::. :r. -- l5'~5 `1 8~.53* 2.03- 16'C5 6 85.83* ~~19'G5 7 72.43* 2.73- ~72O~5 9 64.65* AFit13~65 63.B7~ 40.00+ ~-~?Y19'G5 ~O3.37* L~13O'7O 57.87* i~1 -: D~C 1'72 4537* vc i'~ ~ L~EC 174 33~7:- ~ZC 1'75 2?.~7* ~-T~Th ~ C C 77 OD H L~2 ~ ~ :-~ ~ * ~ /~4J~:~ ~ *L~IVIL) t~~Y 22 1978 STATE PAGENO="0874" 878 Ft rst National Bank and Trust Company of Lincoln Box 81008 Lincoln. Nebraska 68501 402 471-1231 ~ November 22, 1978 - Mrs. Lucille Johnson 1608 Washington Memorial Drive St. Cloud, Minnesota 56301 Dear Mrs. Johnson: Re Savings Account, First Federal We did have a savings account for you which had been open for several years. This account was closed in November of 1966, at which time the balance was $16.34. It is difficult for us to determine the exact disbursement of this balance due to the fact the account was closed twelve years ago. It does appear this account balance of $16.34 was credited to our service charge income. We are permitted to charge a maintenance fee if we lose contact with a customer and our statements are returned. It would appear the *service charge absorbed all of the remaining balance which closed the account. Slncer&y yours, D. D. Dlschner Vice President and Manager Customer Services Division DDD:cw 03/17 PAGENO="0875" I, LL~ ~ -cJL~~i 879 / ~ I ? -~ ~-~_-C~2~) ~ (~ ~.-` ~ ~ ~ -~`:~7 :--``---~.: ~ - \.!~ -:~R~ ~ _~._~(_ - - ~- 2~L~ -~`~ ~ -I L ~ C j .- ~ -:L~. ~ ~ :. -- ~f / (~/~~j ~ ~-`--~-~ ( ~ ~ ~ __I~,~_~ - ~ I , ( ~(/c~- - - -~ ~/`~ - ~ -/(,.~-~ ~ ~ / ~7_. -;- - -/__---~-_. ~ I, -/--~------------ ~i: (?-`---z_-:~-----. -`-~-~- - -. .`,;*~_~ _/~p~_1 ~ ~~7; ~ / ~ ~-(~-~~_- / ~- ,-,,_-; ~ ~ ~ .- ~ -. - fir ~ ~ ~ ~ --~iL-~ I L;L 972) `I */-.~.- ~ PAGENO="0876" 880 E~A4 d~ ~ bcc: Dale Young / January 19, 1979 Mrs. Lucille Johnson 1608 Washington Memorial Drive St. Cloud, Minnesota 56301 Dear Mrs. Johnson: This is a slow response to your letter of December 12 for several reasons. 1. I called the First National Bank regarding your savings account. 2. They searched for some records causing some delay. 3. The holiday season descended. 4. Our Legislature convened and I am helping to break in my eighth Governor. I visited with Mr. B. B. Dischner, Vice President and Manager of Customer Services Division, First National Bank. He remembered the correspondence with you, and if you will forward a letter to him, he will see that your claim is honored for the amount that was in the account. We discussed his closing paragr~~h which I feel does not apply when a customer comes forward to claim a previous balance. Mr. Dischner assured me that this matter would receive his prompt attention, and I hope this will discharge the matter to your satisfaction. Thank you for calling this to our attention, and rest assured that we are watching practices like this and trying to be of service and guidance whenever possible. Sincerely yours, FRANK MARS!! State Treasurer cc: B. B. Dischner Pirst National Bank Lincoln PAGENO="0877" 881, NEW }A~1PSHIRE i1~ ~xl ~Unt4l~1~iri~ ~r~t~ur~ ~t~±n~itl ~tcn~m 122 ~tat~~mtca (~cnt~irb, ~ fl~WI December 10, 1979 Benjamin S. Rosenthal, Chairman Commerce, Consumer, and Monetary Affairs Committee Congress of the United States House of Representatives Rayburn House Office Building, Room B-377 Washington, D. C. 20515 Dear Mr. Rosenthal: This is in reply to your letter of October 3, 1979~ I am answering below the questions as listed in your letter. 1. a. SeeRSA471-A b. None ci. Once each week for two successive weeks in our statewide newspaper. The ad is placed by the state treasurer. It lists names and addresses, if available, includes any accounts over $10.00 and only includes those items being reported that year. e. No f. No g. Fifteen years contact in connection with a financial institution for the depositing or withdrawal of funds or the presentation of a passbook for the posting of interest. Mail returned as undeliverable does not establish a contact. h. No i. Zero PAGENO="0878" 882 Page 2 December 10, 1979 Benjamin S. Rosenthal 2. During the fiscal year ending June 30, 1977, we received $92, 547.00 and paid claims of $8, 721. 00. For the year ending June 30, 1978, we received $7, 270.00 and paid claims of $6, 307.00. During the year ending June 30, 1979, we received $51, 516. 00 and paid claims totalling $8, 705. 00. 4. a. Fair compliance 5. a. No k. No 7. We have not received any unclaimed property from federal agencies, neither have we made claims to federal agencies. Very truly yours State Treasurer RWF/c Enc. PAGENO="0879" 883 NEW MEXICO QUESTIONNAIRE RESPONSE STATE OF NEWMEX/CO )~ TAXATION ~ REVENUE DEPARTMENT ERUCt KING sz~rirr&m*rr October 30, 1979 ~ m7-3m ~ 827-3221 Benjamin S. Rosenthal, Chairman ~ 1356005 Commerce Consumer & Nonetar~ Affairs T,~s50-~ 827-3221 Subcommittee of the Committee on Government Operations Rayburn House Office Bui1ding,~ Room B-377 Waxhington, D.C. 20515 Dear Rr. Rosenthal: i-~-~i--~-~ sm-cm: This is in reply to your letter of October 3, 1979 in which you requested information regarding the administration of the New Nexico Disposition of Unclaimed Property Statute. N-~s-'-s'-~ 8Zi--3221 Ue have secured all available information to us and provided answers to c--i-me cst of your questions. For additional information see the attached T~~m7-cmi exhibits. & a&z o-mm 8305105 If we can be of further assistance please feel free to contact us. TeIephs~e 827-2537 A064!NISTRATIYE Sincerely, StRY1CES DIV. T&epw'-~ 827-3221 ~ ~~::;::~:; D'3T~CTOET)~ fred Nuniz, Se retary- Taxation & Re enue Department S~-s~ F. PtU i-.wsV~, 827-22-30 FN/ml orors. c- O~-s. MM. T~4~hs~~ 763 5515 Enclosures DISTRICT 3 50Vphss, 622-1750 DISTRICT 4 L.~ ~ NM T5~35~~ 523-4530 ri-i-mci T~i-~i~ 502-3211 AN EQUAL OPPORTUNITY EMPLOYER OFFICE OF THE SECRETARYU P. 0. Box 630u Santa Fe, New Mexico 87509 PAGENO="0880" 884 BY NEW MEXICO STATUTES THE DISPOSITION OF THE UNCLAIMED PROPERTY ACT APPLIES TO THE FOLLOWING: A. To Banking or Financial Organizations, Business Associations, Life Insurance Corporations, Utilities, Piduciaries, State Courts, Public Officers and Agencies, Federal Government. (i) Banking, Financial Organizations, Business, are responsible for the reporting of tangible or intangible property namely, Savings Accounts, Dormant Checking Accounts, Uncashed Cashier Checks, Personal Property removed from a safe deposit box, Certificates of Deposit, Drafts, Money Orders and Travelers Checks, Unclaimed wages. (i) Life Insurance Corporation would report all monies held and owing which are unclaimed and unpaid. (i) Utilities would report Security Deposits, Refunds Due, Unclaimed Wages. Ci) Business Associations would report stocks, Certificate of Ownerships, Dividends, Profit, Distribution, Royalty, Interest, Unclaimed Wages. Ci) Fiduciaries-Would report intangible personal property or any income or increment. (i) State Courts, Public Officers and Agencies would report all intangible personal property held unclaimed. (i) Federal Government-All tangible personal property. All debts owed or entrusted funds. (ii) The only type of property not to be reported under the Disposition of Unclaimed Property would be Real Property. Ciii) Holding period for Banking Financial 10 Years Travelers Checks --- 15 Years Disolution of Business Associations -- 2 Years Federal Departments - 5 Years State Courts 10 Years In case of other types of holding 10 Years Civ) The Role of the State of New Mexico is Custodial for a period of 25 years prior to escheat proceedings. Cv) The State of New Mexico does not pay a~y ipterest on funds held in custody. Cvi) None B. Excerpts of the Disposition of Unclaimed Property Statute CExhibit 1) and Ruling 77-450-1 CExhibit 2) and 71-450-2 CExhibit 3). PAGENO="0881" 885 Page 2 2-i Ph~lings are written statenents of the Secretary, of limited application to one cr a sn.all nunber of taxpayers, interpreting the statutes to which they relate, ordinarily issued in response to a request for clarification of the tax consequences of a specified set of circumstances'. 7-1-5 B(2) NMSA 1978, (Exhibit 4). C. We do not administer, please contact the Financial Institutions Division, Co=erce & Industry Department, Lew Wallace Building, Santa Fe, New Nexico 87503 and the Corporation Commission, Insurance Department, P.E.R.A. Building, Santa Fe, New Nexico 87503. D.(i) English language newspaper of generalcirculation in the county in this State in which is located the last known address. (Exhibit 5). (ii) The State of New Maxico. (iii) Nana and address and account nunber of~owner and name and address of Holder. (Exhibit 6). (iv) All ite=s below $5.00 are not advertised. (v) Advertisenants include only the owners of unclaimed property that are being reported for the first time. E. Individual letters to owners at last known address. F. None. The records shall be available for public inspection at all reasonable business hours. No records are allowed to be removed from office. P. Any tangible or intangible property is considered unclaimed property when the cvner thereof has not nade any claim thereto or evidenced any interest therein for the prescribed nunber of years applicable to the institutions. H. (1 thru 6). This activity is accomplished by office audit. I. Approx. Budget $12,000 yearly; one person fuiltime. 2. (A thru H). The unclaimed property unit is a manual operation; therefore, the data you request is not available by types of institutions on such short notice. In order to provide you with the specific information that you request, an indepth research would have to be conducted. We are providing you with information that is now available, and a three-year record (Exhibit 7). 3. (A thru C). Xerox copies of Brokerage Firm attached (Exhibit 8). L.. A. All institutions reporting have given us complete compliance. B. No Field Audits Conducted. C. No information available. PAGENO="0882" 886 Page (5) 5. A. Bank Institutions are currently imposing a service charge on items under $5.00. B. Occasionally. C. Financial D. No information E. $5.00 F No extreme cases C. None H. $5.00 I. $5.00 J. As per regulation of the Banking Commission. K None 6. A. None B. None Recently C. None to our knowledge D. None N. None F. No 7. A- ~- None 6. N' feel that the Statutory requirement of the State of New Nexico is adequate. PAGENO="0883" 2. AMOUNTS OF TJNCLAINED PROPERTY REPORT of fosritutions rp~tingj iftuticos aro:ers Insurance Companies All Others b. Amount of Property ~ institutions nro~:ers Insurance Companies All others c. Amount of~roperty remitted: All institutions Banks Brokers Insurance companies All others c. ~umber of individual accounts in excess of $500 All institutions Banks Brokers Insurance companies All others (cont. next page) 887 AND DELIVERED TO OWNERS: 1977 1978 259 304 154,552.20 146,720.29 154,552.20 146,720.29 375 360 1976 213 75,713.08 75, 713.08 250 PAGENO="0884" 888 e. Number of names advertised: 213 259 30 f. Dollar amounts returned to owners: 6,154.02 3,447.66 15,720.2 g. ~ .0813 .0223 .1071, h. Amounts remitted minus claims paid: - 69,559.06 l5l,l04.54~ l3l,000.O0~ PAGENO="0885" h~1 ( U 8 ~ ~ ~ t1~i r~c ~ .~.. ~.. ft~1it ~ ~ :~i J~ : ~I~I~'t~ PAGENO="0886" * THECO Th924TALINE cu CLENNFALLS INS. Co.: 80X960 ., * DALLAS TX 75221r Bosa,JtiliusL&Mrs. 23o119915R~tSW Roberta IL DEPARTh9ENTOFTRANSPORTATION MOTOR VEHIC..EDWISION -MANULLLUJANBSJILDING S06TrAFX~oMs7So3. 9-21923996 HanbiaH.B. Urireoma 12-8-831962 VMontoya,Paot . Unknown - 3-12-819447 Roroirea,Jubercin Unknown. FAP.LTOISTNSURANCEEXCI4ANGE 4060 WS.SHI3IEBLVD. 4601-99-51 Cromp,Ae.rnetK. 2ll3AGer.ieLmpSE FSDELITY& GUABANTYLIFEINS.CO. - P.O. BOX 1137 .BALTIMOREMD21213 V -. - 17413-8 Snyder,PaulA. - 111 RkbardSE - GAMBLEALDENLIFEINS.CO. - SI000AkTBLEDR - * ST.LOUISPARK.90N55481 90163. Sedilln,VictoniaP. 902(4Edith 91397 Williams, Phil G. 4549Co11e DelPradn CEkT.RALAMERICANLIFEINS. CO. P.O.B0X394 - ST.LOUIS,M061366 V 1195792 %Vinohester,Williaon - UrtOorown GREATNATIONALLIFEI71S. CO. P.O. BOX 35944 . - DALLASTX73283 - 1 Mierra,l'ercy . 212 WayneRil.NW. - HOMELOFEISOSURANERCO. V 2S3800ADWAY NEW YORSO, N. Y. 10007 704004-2 - - 704504-2 VV V 713074-2. V V V 751500-2 ChormeArthony GeneralDellvery I INSURANcECO.OFNORTHAMERICA V P.O. B0X7728 V PO4ILAOELPHOA,PA 19103 - V V 133038 PaulkiC.R. P.O. 196n722 IOOTERNATIONALSERVIOXINS.CO. V P.O.BOXIO4O V FT. WORTH TX 76101 180063 Hendrix,Horlendjaroes Unknown J000NHANCOCKMUTUALLIFEISOS.CO. V ONEHANCOcKPLaZA V V BOSTON,MA02117 V V~ - 5154732 Miiuan,SteneD. V Boxl70-ARL4 V V - V JONATHANLOGAN,1NE. V SOTEROONALRD. V V :syp)c7Js9.Njo793.r McCornoanlgMini V I7Mornkegrlne LFACOUNTIELECTRICCOOP.,INE. V V V DRAWER 1447 V LOVISOGTOSONM8O260 V V 17718 - BarneteJeonesE. Brr:heorfd8eTX 17608 V Banter, Herman 33O2OakLauooViotnnia,TX V 22007 BowenEdon Bon259FtStnoktnn,TX V 17698 Brones Bar Unknown 17723 Collios,W.B. 313896. Muskiogoion,OdennaTX 17737 .DilgersCleaners B~oinaTX 17754 Garcia,T. G. V Unknown 17761 (SnalsbyS. S. V Unknown 17768 HalIJecobH. 47lOQtenterfieldE1 PasnTX 22292 HileJesse 0. V Unlnrnwn 17793 - JacobsW.A. Unknown 18233 * KimbrnnghBrrteMrz. Unknown 17813 V I.cngJamesA. - Bwx8S7Kernolt,TX - V 18309 LopesPete llOS2ndPlnneLoubbnok,TX 17920 .tJeynGeorgeW. Gen.DeL,CentesCO 17818 Marthkaonesl( Muleshm,TX 17834 NewtonJ.L Unknown 22264 ParaBay Urboono 17843 PerryD.E. V AtLD-94tbBorgerTX 22358 Rcedling,Jaones Unknown 17648 RenIPrenton * SlorRte. 0-oath - Miroere.lhpringsAR 1201 V V RidgewayLC. Ur.koown 29376 Rnberss.C S. Gno.DnLOdesoaTX 17850 RubyB1II Ur.lorno-n 17863 Spears,B. B. Unknown 17867 Tanqnard.AusthoH. 35B30th~Iwb9ocbTX 17872 TnokerJ. H. Boo 1537,0w-n An~e1o.TX 17873 Tnoker,Jack (Son. Del.,Wese.aTX 17877 WaldenClyde Unknown 17891 WihiwosJ.W. (Sen. DeL,Aoke0r~TX 17009 WollioonoBiU VI. (Sen. DeI.LubbockTX 17964 3Vi1soo,P.W.3anre~ Unknown LIBEOIT6 90UI1JOLINSURANCECO. - 173 BERKELEY BOSTON,MA02117 V E99116616 CredisBnrennnfAlbuq. - Ur&000n 009Kb CASUALTY INSURANCECO. OF TEk?oESSEE LiFE & CASUALTY TOWER NASHVILLE TN 37219 472051 V RunonllRkkwrd - RussellEdoord ~ V ICilIjlrscSoDr0E (Oenekooary) - V rHELOPIC0LNNAfl02OALLIFEIkS.C0. V 1306S. CLONTONST. - - V FT. WAYNE 196 46801 890 St MADOo-..i AVE. * 5r'EWYORlCtl.Y. 10010 - DekuongeGnyB. 92.3 AteaoarNE * * LewsonLaray N. * Z23EnpunnlaNE Me.rtin,AInioH. * 2lI3Alrea WionWilliaroW. * - 1146.83k ACCIDEo'FALLIFEINS.CO. OFCALIFORNIA P.O. BOX 2101 TERMINALA0o'NEX - LOS/r7IGELES,CA96051 * 9203113 CarniaMau-y - * *1608('rraOdOE 6541204 * Cft~-of Albuquerque P.O. Box 1393 REPU0UCNAT1000ALUFEINS. CO. 3000 NORTHC0020R.AL92OPRESsWAY DALLASTX7S254 V * 2919 * BurotznnLiJOaonL 3135036307853 Meo-er..InkolLRIII I STATEFARM LIFE0NSUOOANCECO. OkESTATEFARM PLAZA * * BLOOMINGTON1L6170I 1456% &aflyJ9n * Unknown 147249 Berth Le.nyD. - Unknown * 146871 Heos,EdortlCraig Unknown 034010 V&oRythoJamen C. Uoknown TRUCK IN900ANCCEXCS1ANOE 4600 WILSH1REBLVD. V LOS ANGELESCA9001O 4004-01-69 DeBuckJnho (S. * 4721 PernhingSE UNIROYALM!RCHA2IDIS1SIGCO. INC. P.O.BOX2I4O * * V 1400JSTONTX77000 * - LunernLE. - * * Unknown UNITEDBE7E9ITLIFEL'OSUBAZOcECO. DODGEAT33RDST. OMAHA,kE66131 . . 904333/870154/31370I Aronanr-nrgPennyE. P.O.Bun4037 U5OIVEOSITYU9EIS0OURASICEOF,MERICA I P.O:0OX68192 * : 12DLANAPOIJS1N46268 * * V - 71333 Hobbs Mnnlnlpol Unknown 81977 Lea General HnspAal Ur.kenwn 72716 - NorthHighSdool Unknown - 72724 North HighSchnol .. Urinronn 75518 Reyno!dsPauI Urhnnon - WAOHIkGTOkHATIO5IALINS3JRANCECQ V 9 1f3OC9ICAGOAVE. 0 EYASSTUN, 1060201 * MaesRnhertD - Unknown ATSTAMKR1CANINSUSOANcECO. V I36NORTHTS(SRDST. - HAMILTON 051 45026 277858 CntnreilRichanlM * Unknown 300215 Coooy& Corny Unknown WEST COASTLINE INSURANCE CO. * P.O BOX 7923 . - V SANPRAN02SCOCft04I2O V - * 2140 Mlrobell,Jnhn - - 321N.SndSt. O 69ESTE9071 LIFEIIOSURANCECO. 0 P.O BOX 43271. - ST.PAU~MNsSI64 * V 662372 (1uanez,Inesleidro 1319%Marqneto5W 1 494031 EwiogJenkBL 3401 R000roodaBind. 133703 MoCollnghL NeilM.b. Urkrown I TNEWE0nSlN&SotJI905014u9EINS.CO. 400 BROADWAY CINCIkNATI0H45202 14990330 * SohurtLoolsT.II 19SSCokonhia 15112859615112860 Scoo-illeJnSooEJr 2314 Inlets Hn-y. 1495233-Sb 149523.39 ScovillThomou C 2314 IaletaHwy. WISCOP0517INATIONALLIFEI76S. CO. 220 WASHINGTONAVE. V OSH200SRL 99154901 - 204902 - .Lcrnlrer,PatsyA, - Albuquerque - WORLDSERVICELIFEINS.C0. - - 327 WEST7IHST. - - FT.WORTHTX761O2 MoGreath DntnresEltes 402L*ndingDr.SV' V ARTHURB.S7EAD DIRECTOR Jrornnl:Seprernber 12,19,1979 PAGENO="0887" 891 NEW YORK ~i. STATE OF NEW YORK :. DEPARTMENT OF AUDIT AND CONTRbL ~ S 270 BROADWAY. NEW YORK CITY lobo7 EDIARD V. REGAN Stole Cot~pt~oT~t In Replying Refee To October 30, 1979 :teorahle Senjatin S. Fosenthal titet States FaDresentative and (lairman CcrrTerce, surnar, and ~onetary ~ffaiis Subom~rüttee House of FaDresentatiVeS 3-377 ?ayb.rmi Building Hashington, D.C. 20515 Ocar Fapresentative Rosenthal: In accordance with your request of October 3, 1979 we have prepared a respcuse to the furnished questionnaire to the extent feasible within the eshaclishni carpet dates. Cur response is keyed to the questions asked. If you should recuire clarificatidn or further detail with respect of the data furnished, please identify the specific information ate we will cIa our best to provide it where possible. Sincerely, S MR:sfj Marvin Rosen, Director Bureau of Ithandoned Property 67-~'~0 0 - 81 - 57 PAGENO="0888" 892 (Page 1 of 27) New York Response Th Unclaiinsd Property Questionnaire 1. Unclairred property statute, regulations and administrative program. a. The Abandoned Property Law, as regards cash and intangible personal property is custodial; the State has the use, hat net the ownership, of any such property aoguired through operation of the statute. Banking organizations tBfinition: Banking organizations subject to the Abandoned Property Law of the State of New York are defined by §103 (c) of such statute: "Banking organizations" means all banks [i.e. cxxrrnercial banks], trust amr~anies, private bankers, savings banks, industrial banks, safe deposit carpanies, savings and loan associations, credit unions and investmant cxzrpanies in this state, organized under or subject to the provisions of the laws of this state, or of the United States, hat does not include Federal reserve banks. AU of the institutions set forth in this definition are subject to Article III of the Abandoned Property Law: "tinclained Property He3 d or (Y~iing by Banking Organizations." In addition Article III, by its own terms, applies to agencies of foreign banks (Abandoned Property Law §300(4)). Unclaiied property covered by statute: Article III of the Abandoned Property Law is applicable to the folldefi~ unclaimed property held or awing by banking organizations in this State: (a) savings deposit accounts (dormant five years) (b) checking accounts (dormant five years) (c) proceeds of negotiable instrarents on which the issuing bank is primarily liable (dormant five years) (d) proceeds of certified checks (dormant five years) (e) distrihation (dividends, interest and redanption payments) to holder of securities of corporations which have ceased to do hasiness (dormant five years) (f) cash and securities found in safe deposit baxes and the cash surplus of the sale by the bank of tangible personal property so found (dormant three years) (g) dividends, interest and securities held for unknown owners where the record holder of the underlying securities is the banking organization or its naninee (dormant three years) (h) dividends on the banking organization's own capital stock (dormant three years) (i) lost property found on the presises of the banking organization (dormant five years) PAGENO="0889" 893 page 2 of 27) New York Pasronse To Unclaicad Property ~estionnaire Cj) credit balances raintained in agannies of foreign banking organizations (c-ant five years) Unclaimed procerty specifically excluded fran application of Article III ci the nndcned Procerty Law by §300 of such statute: (a) enr,unts payable only at or by a branch office of New York-based bank located in a foreign country or which are payable in other than United States currency. (b) ancents held or ewing by a banking organization as paying agent for an extant corocraticn as agent or as trustee and/or negotiable instrarents issued to effect such parent. (c) necociabie instrc-:ents payable o~tside continental United States. d) nscctiabie instmcrents payable in other than United States currency. (a) deconits cafe p~rsusnt to court order for the benefit of an infant c-tii tecninsticn of the infancy. Interest pa~cents by State: The State pays 5% interest per annan on abandcned savings a~unts for the first five years which the State helds such accounts. The legislative and regulatory authnrization to make such ps~cents became effective on August 13, 1977. Seourities Brokerage Finns Dii initicn: Sevirities brokerage finns subject to the Abandoned Property :aw are defined by §510(4,5) of such statute: 4. `Broker' shall include any individual or corporation engaging in than scare in the ourckase, sale or exchange of securities for or on behalf cf any cristarar bit shall not include a banking organization as defined in section one hundred threc~ of this chapter. 5. `Dialer" shall include any individual or corporation engaging in this state as a regular Jxisiness in the purchase, sale or exchange of securities for his or its cen account, though a broker or otherwise, but shall not include a banking organization as defined in section one hundred three of this chapter. Brokers and dealers so defined are subject to Article V-A of the Abandoned Property Law: "Unclaimed Property Held by Brokers." A mutual fund is considered a `dealer' with the definition set forth above. PAGENO="0890" 894 (Page 3 of 27) New York I~sponse TO Unclaimed Property Questionnaire Unclaimed property covered by the statute: article V-A of the Abandoned Property Law is applicable to the folio i~un.claizned property received or held in this state by brokers and dealers: (a) dividends, both cash and stock (dansant three years) (b) bond interest (dansant three years) Cc) custarers balances (dansant three years) Cd) securities held for custarers (dansant three years) (e) wages due esployees (dansant three years) Unclaimed property specifically excluded fran application of Article V-A of the Abandoned Property Law by §511 of such statute: (a) Any annunt, although specifically unclaimed for the reguired three years, which is reflected in an account regarding which the person entitled to such unclaimed annunt has indicated knowledge in writing during such period. Interest pa~ewnt by state: Interest is not paid on abandoned property held by the State Carptroller pursuant to Article V-A of the Abandoned Property Law. Life Insurance Qurporations Qufinition: Life insurance corporations subject to the Abandoned Property Law are defined by §103 (e) of such statute: "Life insurance corporation" means any insurer corporation organized under the laws of this state or any foreign corporation authorized to do either one or both kinds of insurance tesiness authorized in paragraphs one and two of section forty-six of the insurance law, as arended fran time to time. The term life insurance corporation shall include a fraternal benefit society as defined in section four hundred fifty of the insurance law." Unclainwal property covered by the statote: Article VII of the Abandoned Property Law is applicable to the following unclaised property payable to insureds or beneficiaries having a last-known eddress in New York State: (a) arounts payable on matured endownent policies (dansant three years) (b) arrounts payable on whole-life policies, when insured would have reached the limiting age (next reporting date) (c) arrounta payable to unlocatable beneficiaries when the insured has died (dormant three years) PAGENO="0891" 895 (Page 4 of 27) New York Basponse To Unclaired Property Questionnaire refunds, lying ividands (doorant three years) Locares: ortent by State: Interest is not paid on abandoned property toe State Otrotroller pursiant to rticle VII of the Abaodoned Property b. The attached advance coop of our u~x~ated "~baodoned Property law Psaftock For Banking Organizations" contains all the pertinent rules and instruction's as well as the relevant sections of the Abandoned Property Law, relative to the handling and reporting of unclaimed property to the State by banks. A :-ehebcck for life insurers and istrurtions for brokers are also attached. c. Several provisions in statutes oth~r then the New York State Abandoned Property Law govern the disposition and handling of certain unclaimed property held by barks and other financial institutions. These provisions are as follows: ycr:: State Banking Law (NcNirney' s Qunsolidated Laws of New York, Bock , Secooco 7. has a two-fold purpose. It provides that a banking organization cr icreico. ccrcoraticn transacting business in Nra York may not discontinue paynant of interest or dividends on any deoxoait solely because such deposits are ir.acoive or unclaired. The banks nay, hon-never, discontinue payment of interest or dividends on such deposits after June 30th of the year that the anounts are turned over to the State Comptroller as abandoned property. This section also provides that banking organizations may not impose a service charge on an inactive savings account ndnich is greater than that imposed on'. an active savings account. Bce-ever, the banking organizations may impose a reasonable service charoe cn an inactive savings account for costs related to or ±nrurred as a result of the pa~oment or delivery of abandoned property to the State on-caroller. This section liniting the irmpo~ `-ion of service charges savinos accounts was added to the Banking in 1978 (L. 1978, C. Section 7 of the Banking Law does not apply to national banks doing business in York, since the definition of banking~ organizations in the New York State Banking Law does not include national banks. New York State Banking Law, Section 335. This section of the law provides for the disposition of unclaimed property renaming in safe deposit boxes. In the event that the lessee of the box fails to pay the rental fee for a period of one year or does not remove the contents of the box within 30 days after the expiration of the lease, the bank may notify the lessee that if the rent is not paid or the contents are not removed f ran the box, the box shall be ooened and the contents removed fran the box and in- After a period of two years fran the openir~ of the safe deposit bonn and the r.aflirc of a certificate of the inventoried items to the lessee, the bank ray auction the items of apparent value and retain for itself the arrrued rental f ass and ewnanses of ooening the safe deposit box. At the ax- ciraticn of three years f rot the opening of the safe deposit box, all cash, PAGENO="0892" 896 (Page 5 of 27) New York Response ~Eb Unclaimed Property Questionnaire securities and any reraining proceeds fran an auction of the contents of the box must be paid to the Caoptroller as abandoned property, unless sooner claimed by the lessee. New York State General Business Law (McKinney' s Consolidated Laws of New York, Book 19), Sections 710-716. This provision, which was enacted in 1975, is intended to subject unclaimed consumer credit balances to the provisions of the Abandoned Property Law. Covered entities are those which regularly extend censurer credit, including banks. Consumer credit is generally defined as credit extended to a consumer under a plan which: allows the custacer to make purchases or obtain loans directly fran the creditor or indirectly by use of a credit card; allows the custaner to pay the balance in full or in installments; and, authorizes finance charges to be axsputed on an outstanding balance. In the event that there is a credit balance greater than one dollar rmnaining in the custaner' s account, and the creditor, after due diligence, cannot locate the custaser to make a refund of the ranaining balance, the creditor must maintain the arount in a separate trust fund for three years and then torn such arounts over to the Omnptroller pursuant to the provisions of the Abandoned Property Law. New York State Personal Property Law (BoKinney' s Consolidated Laws of New York, Book 40), Section 256. This section provides for the disposition of lost property which is discovered upon the enclosed safe deposit pranises of a safe deposit caspany or safe deposit department of a bank. In the first instance, such property is required to be turned over to the police. After six nonths, the property is returned to the bank or the safe deposit onnpany. The entity then acts as a bailee of the property for the person entitled thereto. After a period of five years, lost noney is required to be turned over to the (bgutroller. The bank is then required to sell at a public sale such property not con- sisting of rroney, and turn over the proceeds, less expenses, to the Omnptroller as abandoned property. d. Banking organizations are required to publish the names and last known addresses of persons appearing to be entitled to abandoned property anounting to $50 or mere in a newspaper published in the city or village (county in the case of New York City) where such property is payable. Life insurers mist publish the names and eddresses of persons appearing to be entitled to property arrounting to $50 or mere in a newspaper published in the county of the last known eddress of the policy holder. The notice published by utility ccmpanies merely states that a list is on file at the principal office and open to public inspection. Names of entitled persons are not included in the notice. PAGENO="0893" 897 (Page 6 of 27) Has York ~sponsé To Unclaimed Property ~iestionneire Chant-? fisoal officers retorting claimed otort funds rrust publish end addresses) in too nassnanars (three in New York City) published 00 ins coo. are ins n-rcnsrtv is held. Possessors of confercation ma-mrs roost -oblish the notice in a newspaper in the county there the condauned parcel is situated. The notice toss not contain i-eras but only a steterent to the effect that a copy of the abandoned `rrcoertv reoort is on file and open to public inspection. Other types of renorting organizations are not required to pr~iblish a notoce of unclaimed property. All new-s arors used for publication ro1st~ be designated by the State Cococtroller. Ohe State Curotrofler ccv waive publication of the notice whenever in his on-inicn the cost thareef would be unreasonable in relation to the accuno of abandcned prcr-t involved. He ray also consent to the anission address of any carson when soecial circurstances make anission rezrtinc orcanication cost file with the State Cu otroller proof of cub:iroaticn. of pubLication is charged en-rally by the repurting organization asau-at each itet which was listed in the new-soaper notice. All notices of unclaimed property n-ada p~irsuant to the abandoned Property Law- pertain only to unclaimed property being reparted for the first time. - - - e. Addotional efforts are cafe to locet~ osners of unclaimed property as State: Ohs State publishes sari-annually in a Supplerent to the New State Rao±ster thin to the Federal Paoister) a list of the nan-es and ataresase of ~-arscns a-rd c izationa asoorentlv entitled to abendoned property Of s~: or core or reoresanoonc personal procerty of sufficient value to warrant sale, received by the State Canotroller during the six month peried. These suoolerents to the State Register are available to subscribers and are maintained in Gounty, City and Ton Clerk offices througt~out the State for public access. In addition, the. State has prorated and cooperated in the-publication or airing of information concerning the State's abandoned- property program and has encouraged the suthrission of inquiries fran the public regarding any property~ held which may belong to thee. These inquiries are checked to our records with- art charge and the public inquirers are thereafter notified whether or not arcoertv is held in their nate and, if so, how to claim it. PAGENO="0894" 898 (Page 7 of 27) New York Response Th Unclaiired Property Quebfi~rinaire The State also maintains an alphabetical index of nanes and addresses -of persons and organizations apparently entitled to abandoned property held by the Qsnptroller. This is a public record which can be examined by interested parties. ~y Holders. Different practices are followed by the various categories of abandoned property holding organizations. (1) Banking organizations, pursuant to statute, are required to send by first clams mail a written notice to each person appearing to be the caner of property listed in its preliminary report of abandoned property~ The notice is required to state that the property will be paid to the State ~nptroller during the first ten days of the succeeding Hoveither unless claimed before then. This mailing is to the address listed in the preliminary report. It is required to take place before advertising in the news nedia and over three manths prior to the banking organization's suirnission of its final report of abandoned property and pa~ewnt to the State O3nptroller. *(2) Stockbrokerage firms. It is a normal practice of stockbrokerage firms to coordinate with its sales representatives handling a custaner' S account for which account stateirenta are returned by the post office as undeliverable. The finn will seek a corrected address or other pertinent information based on current contacts between its sales representative and the custaner. In addition, New York Stock Exchange regulations (NYSE Qiide-Rule 409) require quarterly mailings to costumers of their accounts. (3) Insurance companies. Sare of the larger insurance companies such as The D~uitable Assurance Life Society of the United States, The Prudential Insurance O:xnpany of Zsrerice and The Hotual Benefit life Insurance airpany, to name three, have separate units in the caripany devoted to the location of policy holders and beneficiaries. These companies make en intensive effort to locate owners of property before such property is deemed abandoned and transferred to the State (lrnptroller. f. At the present tire, there are neither state statutory nor regulatory limitations on the actions of "bDunty hunters" who trace advertised owners of unclairred property for the purpose of sharing in the proceeds. Legislation was introduced during the 1979 session of the New York Legislature to place limitations on such tracers; it is anticipated that such legislation will be reintroduced in the 1980 session. It ~has been the long-standing policy of the State Cltrptrofler to deal directly with the alleged a~ers of abandoned property or through their duly retained attorneys at law or through the reporting institution acting on en alleged owner's behalf. All tracers who correspond with this office regerding abandoned property are advised of this policy end, under no cir- cumstances is a claim processed through, or payment made to or through such tracers. PAGENO="0895" 899 (Page 8 of 27) New York Besponse (lb ~ed Property Quaitionnaire c. lair~sd v. `~bandored": Before property can be statutorily to n-urt be unclained for a cert~in nueber of years. The periods of veers for which erocertv Trust rerain unclaired in order to achieve the starts cf a endoned erccertv are set forth follawing the itanization of pronert-: cowered bw the statute in l,a, abo-:e. Until the conclusion of this rind of inaotiwitv (h-!twa as the `doorrancy" period), the "unclaired" prro~artw is not "abandoned property". Upon the conclusion of the period ir,artivitv as set forth in the statute, the property becares legally "abandoned", and is to be reported and paid to the State Qrerptroller. Contact definition. Bankinrr orcanizations: ~ntact suffi~ient to toll the running of the carried of inartrvitv prior to abandorrrent includes: (a) ctoxrsits into and/or withdrawals f rat deposit accounts (b) postirr of interest in the passixok (c) the rersiot and filino by the bach of a written earirarnication fran the `arson a esrino to be entitled to the procarty. Attached is the adrninis- tram-a fetarcinatict of the State ~otroller as to what ray constitute a crrrr-rntoation sufficient to satisfy the statute. Stockbrokerage fiorms: Unntact sufficient to toll the running of the period of inactivity prior to abandorrent includes: (a) the receipt and filing by the firs of a written oarTrrlnication fran the person aopearino to be entitled to a particular arrount or security indicating therein that such person is aware of his account with the finn and such amount is reflected on his statement of account. Life insurance caro-snies: Unntact sufficient to toll the running of the oer±mx( of umartr'oty prior to abendorrrent includes: (a) assiconent, readjust-rent or reinstatement of the policy )b) p-at-rent of the prarairin or a polic~' (c) the taking of a loan against the policy (d) the receipt and filing by the crapany of written cxmnunication fran the person appearing to be entitled to claim under the policy. PAGENO="0896" 900 (Page 9 of 27) New York Pesponse ra tJnclain~ Property ~iestionnaire In all of the above situations, the contact' must flow fran the person appearing to be entitled to the property to the bolder of the property. Carrnunications fran the bolder to such person which have not been returned by the postal authorities as "undeliverable" are not sufficient to constitute "contact" within the ireaning of the statute. h. The Bureau of Abandoned Property of the Departhant of Audit and ODntrol (State Qsrptroller' s Deparhrent) performs field audits devoted exclusively to checking rarpliance with the New York Abandoned Property Law. (i) The Bureau released 50 audit reports in the last carplete fiscal year ended March 31, 1979. (ii) There were 32 auditors authorized for the fiscal year 1978-79 budget at an annual cast of approximately $532,276 before personnel fringe benefits of approximately $163,400. (iii) The audited institutions have included State regulated banking organizations, national banks, life insurance carpanies, utilities, stockbrokerage firms, and generaL corporations. (iv) Casualty insurance omrpanies have not been audited because of a lack of coverage in the New York Abandoned Property Law. (v) Capies of our general audit programs are enclosed with our response to this questionnaire. (vi) The New York State Banking tepertxnent and the New York State Insurance Department include coverage of unclaimed property in their field examinations. In addition, the New York State Department of Taxation and Finance requests organizations being audited to carplete a questionnaire concerning abandoned property which is transmitted to this Bureau for evaluation and possible follow-up. i. The New York State budget for the abandoned property program which included field audit for the fiscal year ending March 31, 1980 was $1,270,000 and provided for 84 full-tire personnel. An additional, $389,666 was authorized for personnel fringe benefits, (retirement, health insurance, etc.). PAGENO="0897" 901 (Page1~of 27) Now York Pesponse Sb Unclais~ Property Questionnaire 2. Anrrsts of urelafref property reported and delivered to owners: FY 1976-77 (1) FY 1977-78 (1) FY 1978-79 (1) a. L-au.tuticns reporth-~ (At firnatively): (3) All ~utions 2,221 684 286 Life insurance arrrenies 172 All others 1,079 b. Alcrst of property reported (prelnmnary report data yes used ~t~ere arolicable): (3) All institutions $82,506,299 Banks 53,651,511 9,411,648 iesnsanro cxrpanies 1,960,417 ~.ll ctners 17,482,723 c. c~nr of property reritted (final reverts): All institutions $129,879,037 (4) $65,728,758 $58,507,820 Banks 80,151,736 30,173,583 30,215,041 Brokers 21,790,526 7,749,043 9,411,648 Life insurance cosoranies 3,764~334 1,134,850 1,573,188 All others 24,172,441 26,671,282 17,307,943 L-~ividaa1 eusts in excess cf S500: (3) All institutions 16,141 13,488 Brokers 1,755 Life ins-~ranre nsr~anies 898 All others 6,280 e. Number of nares advertised: (3) 97,963 f. Peturned to owners by holders: (3) All institutions $23,998,479 Banks 23,436,470 Life insurance canpanies 387,229 All others 174,780 Returnet to ceners by State $ 3,715,445 $11,068,334 $11,302,738 Interest paid thereon by State: (2) - 70,266 304,247 Total raid to camers 3,715,445 11,138,600 11,606,985 PAGENO="0898" 902 (Page II of 27) New York Besponse To Unclaiired Property ~iestionnaire FY 1976-77 (1) FY 1977-78 (1) FY 1978-79 (1) g. Delivery percentage: By aU institutions By banks By insurance cceganies By ail others Delivery percentage by State: h. ~anunta remitted to State minus claims paid by State: Notes: (1) The State's fiscal year ends March 31, 1977, 1978 and 1979, respectively. (2) Interest payments by the State on claims paid sore first authorized by statute, effective August 1977. `3) The data requested is only ascertainable by means of a detailed manual analysis. - Accordingly, it was necessary to confine our efforts to the last available fiscal year. (4) Mapresents a multi-year reporting due to a legislated shortening of dormancy periods, effective during this fiscal year. 3. Brokerage firm reports: a.b.c. The information requested on nares of stockbrokerage firms and anounta of abandoned property reported are set forth in a schedule separately attached to the questionnaire response. 4. Caspliance a. The following are the requested ratings of caspliance with the New York Abandoned Pregerty law: 29. 09% 45. 55% 19.75% 1.00% 2.86% 16.83% 19.31% $126,163,592 $54,660,424 $47,205,082 (i) National banks (ii) State banks (iii) Federal savings and loan associations (iv) State savings and bank associations (v) Federal credit unions (vi) State credit unions ii) Securities brokerage firms (viii) Mitual funds (ix) Insurance cxrnpanies (x) Nonfinancial corporations Degree of (Yxtipliance Fair to poor but improving Substantial ccnpliarice Substantial caspliance Substantial catipliance Substantial compliance Substantial cxxiipliance Fair to poor bit improving Unrated Substantial compliance with sane exceptions Poor to none PAGENO="0899" 903 (Page 12 of 27) New York Pasponse To Unclal-red Property Questionnaire The above ratings reflect the results of our field examinations chich indicated that there were substantial arounts of unreported abandoned property thich were only recr;ared tirraugh such audits. The situation has been improving over the past three years particularly with the greatest irnprovmnent shown (since they hat a great need for incroverent) shewn by national banks. National banks have becure core ksewledgeable of state requiranents and past reourd keeping probless, oarticclarly in their trust dsnarbrents, are being corrected. Securities brokerage fans record keeping problans due to the nature of their market transactions, rat have the stability of banks due to fluctuating profitability in a volatile rarkat, ant rrann' ranrcrenize or liquidate each year. Such firms, therefore, require rontinaing attention. Their core recent reports have shceo iirgrovanent. Sun- farntal curporaticns dc not lent therselves to a generalized rating, although it is above as tour to fair, because the nunber of flora involved and the erncrcus variations in size ant nature of Inesiness. Their oaroliance failures ac-carartly arise cost frequently fran unfamiliarity with the requirmrents of the statute. b. 9uresu field audits hare resulted in substantial additional arrounts of ahacatta-at pro~erry transferred to the State Onrtroller. The types of institutions the rurduar of institutions audited, and the arount of audit recoveries frrrr each type fcr the cast tree fiscal years ended March 31, 1978 and 1979, respeccavaLy, arc laster belew: Fiscal Year 1977-78 ~e. of Audits Audit Pacoveries Natacnal banks 2 $ 5,006,234 State barks 2 16,232 Stcckbrckerage flos 11 1,949,640 Life na-trance orrrnanies 4 52,012 Gararal anrcoraticns 8 3,791,128 Financial ccrccraticrs 3 6,142,368 $16,957,614 Fiscal Year 1978-79 barks 7 $ 1,751,694 State banks 15 1,336,992 Stockbrokerage finns 15 2,843,859 Life insurance canpanies 2 198,788 General cornarations 14 1,175,678 TOtal 53 $ 7,307,011 In addition to the srnecific audit recoveries identified above, there were additicral, bit indeterminate, arraents of abandoned property voluntarily reported the audited orcanizations ansi other organizations in the sane industries or fields of endeavor by reason of such audits. These additional anounts arose as a reaction to our audit presence in sane oases in others by reason of better understanding of abandoned property law provisions and requiranents as a - result of our audits, and in still other cases because of improved record keeping and record retention procedures initiated based on our audits. On occasion, audits PAGENO="0900" 904 (Page 13 of 27) New York Response 1t Unclaimed Property Questionnaire disclosed a carrron misunderstanding or lack of knewledge concerning specific provisions of our statute. We attmspted to correct this by circulating an explanation by mail to the omopanies which we believe sould benefit therefrcrn, without the necessity for field audit. c. We do out believe it is possible to give a meaningful estimate of additional abandoned property that woild be reported if there were substantial onepliance with the law. The only valid basis for such a projection sould be our field audit experience. Yet, our past audits of specific organizations have often covered many years in an effort to bring our caspliance effort to a mere current status and often proxiuced significant additional abandoned property pa~ewnts for only certain categories of activities in certain industries. It would take a very carplex analysis to relate such audit results to specific itans and arrounts of voluntarily reported abandoned property which were audited to calculate an experience rate, which may or may not be valid in the future, for projection purposes. Also, we have been constantly correcting misin- terpretations of the law and record keeping and record retention weaknesses in reporting finns through the means of audit, circular letters and the issuance of reporting instructions and guides. These procedures are also used in a continuing effort to inform organizations covered by our law of the requiresents of the statute. As a result, our past audit experience is not reflective of what may still rarnain as unreported abandoned property and we have no other means of estimating such arrount with any degree of confidence. All we can state with accuracy at this time is that over the past three fiscal years, actual direct audit recoveries have averaged about $12.6 million each year and for the six nonths of this fiscal year we have recovered through audit an additional $4.6 million. 5. Service Charges. a. Information about service charges irrposed by banks or other financial institutions on dormant accounts have cans fran three sources; canpliance audits performed by the Bureau of Abandoned Property, referrals received fran the New York State Banking Eapartirent as a result of bank examinations performed by that department, and, in sane instances, fran subnitted reports of abandoned property which shewed charges as deductions fran reported line itarns. b. Irrposition of service charges by banks on dormant accounts and other unclaimed property is a widespread practice which has occurred with sufficient frequency to warrant our careful attention to this possibility in the cairse of field audits. Other unclaimed property also being serviced charged by banks include issued but uncashed bank checks (negotiable instrnrmnts) and trust acom]nt balances. c. We have found two instances of service charges imposed on dormant accounts by a stockbrokerage firm. Upon challenging this practice, one firm .) maintained that it was a customary practice in the industry bet we could not verify this or accept this contention based on our experience. The other also contended that it had heard that many finns are imposing service charges. The Securities E~cchange Osrmission (SEC) PAGENO="0901" 905 (Page 14 of 27) New York Response ¶Re Unclaimed Property Questionnaire issued a release criticizing the practice of imposing such charges witbeut crior advice to custaners bit we were unable to obtain any details fran SEC as to the instances or institutions involved. d. Ln cur cinion, custci-rers were not always adequately notified in advance that service charces would be irrcxssed if their deposit accounts re- rained dot, althocgh the benk' s service charge policies or a provision cectittine the icgositicn of a `reasonable'~ service charge against a dormant doxrsit aunt were usually set forth in the bank by-laws. However, sara harks did set forth their service charge policies in savings account passbooks or in notices given to depositors upon opening a danand deposit account. L-i addition, sass banks notified~ depositor whose account was inactive that unless the account was reactivated, it~ would be deered dormant and service charged. Wnen the service charges were imposed on outstanding necotiable instruments or to unclaimed trust deroarthent dividend and interest mayable balances, there was no advance notice. In rest cases of service charges, we have found that the charges are reimoded to the d-cresitor or claimant if th~r account was clairred prior to its transfer to the 5tete Oorptroller as abandoned property. In such instances, the charce was tantanount to a charge only against abandoned rrrcmerzv raritted to the State. Claimants thereafter could receive as a refind friar the State only such amounts as were received by the State. e. Generally, barks have acelied service charges to deposit accounts at the rate of $1 a veer for the five year dormancy period on bank accounts of $25 or less. Sara banks have service cherced all accounts regardless of account balance. Hith respect to dormant dsr.and deposit accounts, service charces ha-a often been acolied on the same basis as if the accounts were arrive. ardinc other types of unclaimed property, usually unclaimed cash dividends, :rzerest, and the proceeds of negotiable instruments, service charges ha:e varied from $1 a year or $5 over a five year dormancy period to up to $3 par month or $180 over a five year period. Tne service charge rate arotieri to unclaimed dividends and interest accounts, rrost often by the barks' ti-cat decarti-ents, are even higher then they appear on their fare since the charge is irgosed by treating each dividend quarter for each security end for each bank nanrinee as a separate account. f. Sara examples of high service charge rates are as follows: Unclaimed cash dividends and interest accounts were service charged at the rate of $2.~0 per nonth fran the date the itan was payable to the date it became abandoned. The charge ~ imposed when the unclaimed amounts were to be paid to the State and was applied retroactively to the uncla~iined dividend or interest ca-rant received on each security. PAGENO="0902" 906 (Page 15 of 27) New York Nesponse Tb Unclaimed Prpperty Onestionnaire This procedure had been uncovered as a result of our audit. The bank nc~ lists the service charges on the abandoned property reports filed with the State. Unclaimed cash dividends and interest ware service charged at the rate of $3.00 per rronth fran the date the itmn was received to the date it became abandoned. The charge was irgosed sesi-annually in June and Decenber and was imposed on each separate jives received constituting the unclainod dividend payments on each security. The service charges applicable to negotiable instruments was $.50 per nonth fran one year after the instru- ment was issued to the date it became abandoned. The charge was imposed when the preliminary abandoned property report was prepared. Unclaiired cash dividends and interest ware service charged at the rate of $1.00 per month fran the date the item was received to the date it became abandoned. The charge was imposed semi-annually in June and Nevember and applied to qjiarterly unclaimed payments on each security. The service charges applicable to negotiable instruments ware inipmsed in January 1970 at the rate of $1.00 per month per item. In July 1977, the rate was raised to $1.50 per month per item. ?dunthly service charges of $2.00 per month were initiated in August 1978. These charges ware cede after the instrument had been transferred to the unclaimed ledger. Such transfers ware cede tSsO years after the year issued in the month of December of the second year (i.e. 1973 checks in December 1975). The service charges applied to savings accounts was $1.00 per quarter for all accounts with balances under $500.00. This charge was applied to active as well as dormant accounts. The bank informed all depositors of this procedure by mail in July 1977. A service charge fee paragraph was included in the rules and regulations printed in the passbook. g. There have been a number of instances, disclosed by our audits, where abandoned property had been or weuld have been taken into innsne by holding financial institotions. One prevalent method is through the imposition of service charges which served at times to wipe out the entire balance of an unclaimed account. Another method, eeployed by sane large trust departments of banks, involved the handling of unclaimed dividends and interest. In those instances, unclaimed dividends and interest (payables) ware offset against unrelated, uncollected dividends and interest (receivables). The effect was to reduce potential losses by applying the proceeds of abandoned property. This practice was also ormronly found in stockbrokerage firms which had catparable problems emanating fran securities transactions, as discussed baby. A frequent justification for this practice was that the open balances, receivables and payables, merely represented record keeping and mismatching errors which produced then and ware not truly open items. Cer audits largely proved otherwise. PAGENO="0903" 907 (Page 16 of 27) New York Response To Unclaimed Property Diestionnaire Dir audits of stockbrokers have also disclosed instances of unclaimed property being taken into incare both directly and indirectly. This was done indirectly for examole by: (1) offsetting unclaimed cash and stock dividend and bond interest ravable arenrits arainst unrelated, uncollected receivables which wauld othervise represent a bad debt expense. (2) transferrine unclaimed dividend and interest amounts recorded in payable accomnts to suspense, error or other tarporary accounts where they lose their identity. These successor account balances are subsequently reduced or offset by entries for unrelated transactions with the result that unclaimed dividends and interest are absorbed by finn operations. (3) transferring unclaimed dividend and interest arroxmnts into sore currant veer balances so as to avoid shzmxing that the statutory doorency reminds preceding ahardonrent had elapsed. (4) in one instance, transferring unclaimed stock dividends to charitable instititions as contribitions in the none of the fins or its partrars. (5) selling unclaimed stock dividehds and transferring the proceeds to firm tradino accounts or using the proceeds to boy securities in a snort prsiticn. (6) paying current year claims arid charging prior year unclaimed accounts. h. 1k have not acrrmnlated nor is it possible to estimate the total dollar arsoirit of service charges imposed by banks in 1978 on reported unclaimed prsoartv. This infooratmun is not required to be subiritted in reports of abandoned proporty arid is therefore largely unknawn Estimate based on information obtained by audit is not feasible due to variations in bank service charge policies and the trerendous voJare of itens involved. i. It is even sore difficult to estimate the amount of abandoned property wiped out by service charges for the reasons indicated in 5.h. and also since these items are not reported at all in reports of abandoned property. j. Prior to 1978, there were no specific statutory prohibitions against the irrosition of service charges on donnant accounts or other unclaimed procortv. The Nov York State Banking Department, in 1971, issued a suggested coideline (Supervisory Policy G-l) in order to provide guidance to banking organizations ndsich had adapted service charges on small inactive savings aocorints. The poilcy provided that the irmcesition of the charges only could be made pirsuant to an appropriate provi~ion in the bank s by-laws, regulations or contract with the depositor. ~ny charge imposed was to bear 67-'4~4O 0 - 81 - 58 PAGENO="0904" 908 (Page 17 of 27) New York Basponse ¶[b Unclaimed Property ~iestionnaire a reasonable relationship to the cost of servicing the account. Prior to the imposition of the charge, the custarer was to receive written notice of the imposition of such charge. The policy stated that an annual charge of one dollar per year on savings acamints with balances of $25 or less which have been inactive for at least three years wauld not be considered unreasonable. It was recanrended that no charge be collected until the end of the third year of inactivity, at which time a rnaxinrrn of three dollars could be collected. The charge could thereafter be collected quarterly (at the rate of twanty-five cents per quarter). Although this supervisory policy did not have the force of law, the Omnptroller used it as a guideline to help deter- mine whether service charges imposed on inactive savings accounts ware properly applied by banks. The only other limitation on the imposition of service charges to be found affirmatively set forth in the law, prior to 1978, was an advisory opinion issued by the Na; York State Attocoey General in 1948. This opinion stated that no charges could be deducted fran unclaimed property once abandoirrant had occurred (i.e., the statutory dormancy peried had expired). Although not having the force of judicial precedent, this opinion was relied upon by the Qmptroller in determining whether there was a proper imposition of service charges. In 1978, an amendment to section 7 of the New York State Banking Law (chapter 184 of the Laws of 1978) provided that a service charge imposed on an inactive savings account could not be any greater than a service charge imposed on an active savings acanunt. Banking organizations could, however, now deduct reasonable expenses incurred for the payrrent or delivery of abandoned property to the Ctgutroller. This provision is applicable to state banks and foreign banking corporations doing besiness in New York. By law, this provision does not apply to national banks. Independent research, and information received fran legal counsel to the Oxrrptroller of the Currency, has revealed no state or federal statute or regulation which in any way authorizes or prohibits the imposition of service charges by a national bank. As a result of this amendment to the Banking Law, the Supervisory Policy was repealed. A recent decision by an administrative hearing officer appointed by the Gmnptroller held that certain service charges imposed on unclaimed cash dividends and proceeds of negotiable instruments ware unauthorized (~iestion 5k, infra). An appeal fran this decision may-be taken in the State's courts by the banking organization against which the decision was rendered. In surrmary, New York has taken the following position with respect to service charges imposed by banking organizations and other entities holding abandoned property: Service charges imposed on abandoned property may only be taken where specifically authorized by law; PAGENO="0905" 9d9 (Page 18 of 27) New York Response ¶tb Unclaiirad Property~ ~iestionnaire Such a'itharization Iray take the fore of a statute specifically aliovinc such charges to to deducted; a by-law or regulation of the tolding entity which alive for the deduction of such charges; a contract bet~en the entity and its costocer or the rightful owner of the funds which allows s~ich charges to be ingosed; * In any event, such charges rrust be irrgosed prior to the expiration of the statutory danrancy period; and - The charges mast be equally imposed against the owner of the funds as weil as against the State COmptroller. Because the State Ctxrptroller' 5 rights are derivative (i.e., ha stands in the shees of the claimant), the entity which imposes the service charge mast pay to the State COmptroller that erount which would be paid to the veer of the funds should the veer subsequently icake a claim. Thus, even if service charges are properly deducted, the entity cust pay to the Crrq)troller the entire mrcent ultirrately cvipo to the claimant account if it is the policy of the entity to restore the deducted charges to a rightful owner who subsequently claims tics mcrs. k. New York state has formally ass~rted claims for a refund of service charges imposed on unclairrod property in two instances. In the first fr-stance, an Edge Act corporation doing (rosiness in the State of New York had dr-nosed service charges on unclaimed cash dividends held for unc veers and cm the proceeds of negotiable instruments held fcc un-canm payees. These charges had bm~en imposed after the expiration cf the statutory doncancy period S or determining abandorrrent and prior to the tire that the orounts were required to be turned over to the State. The entity asserted that there was no statutory prohibition against the irccaiticn of the charoes, and that it had performed a valuable service for the State (maintaining the unclaimed accounts) for which it ought to be cxrcensaced (under the theory of quantnrn meruit). The state based its claim for refund of the service charges on the following: ~y excenses inrurred as a result of carplying with a statutory duty are not recoverable fran the state ninless specifically auttorized by statute; Such charges could not be imposed by the entity unilaterally in the absence of (1) specific authority; (2) a valid contrast betwoen the entity and the persons entitled to the proceeds of the funds; (3) an existing rule, rogulation or by-law of the specific entity; An opinion of the State Attorney General prohibited the imposition of charges on unclaimed property once such property has became abandoned (i.e., after the expiration of the statutory dormancy period.); * The rights of the State Cnrptroller are derivative (i.e., the ~otroller stands in the shoes of the rightful veer of the funds). The PAGENO="0906" 910 (Page 19 of 27) New York Pesponse To Unclaimed Property ~estionnaire creptrofler is therefore entitled to receive fran the reporting entity the' entire anount to which the rightful ewner of the funds weuld be entitled if he subseguently made a claim for the funds. In this case, there was evidence, obtained via audit, that an owner who subsequently claimed funds sasnld be entitled to the entire amount without a deduction of the charges which sanuld have been imposed had the funds been turned over to the state instead of a claimant. An administrative hearing was convened by the Ctirptroller, pursuant to his authority under the Abandoned Property law, for the purpose of determining whether these charges were properly imposed. An independent hearing officer, appointed by the Ooiptrofler, made a determination that the charges imposed by the holding entity were improper and must be paid to the State carptroller as abandoned property. The hearing officer accepted the Qenptroller' s argirnents that (1) no deductions fran abandoned property could be imposed without statutory authorization; (2) the entity could not assert an action in g~antinm meruit against the State under the particular fact situation; and (3) the opinion of the New York State Attorney General, that such charges could not be imposed on abandoned property, was relevant and entitled to great weight. This opinion was recently issued by the hearing officer and is presently under study by the holding entity. The holding entity has four rronths fran the date of the decision in which to appeal the decision to the New York State courts or to pay the amounts due to the Omnptrofler. In the other instance where a formal demand for the restoration of service charges was made, a state bank had imposed such charges on unclaimed cash dividends and proceeds of negotiable instruments. The State s legal bases for its claim that the charges must be restored and paid to the State as abandoned property were essentially the same as the previous instance. An administrative hearing was convened and opening argunonts were sulinitted. The case was adjourned for the production of withesses and the taking of evidence. Prior to the reconvening of the hearing, the holding entity agreed to pay the entire amount clairred by the State. A stipulation was signed, wherein the bank agreed to pay the entire amount claimed by the State without either party conceding the validity of the legal position of the other party with respect to the imposition of the service charges. This stipulation was signed and approved by the hearing officer prior to the rendition of the decision in the case previously discussed. In several other instances, audits by the State Carptroller have revealed service charges imposed by banking organizations, and, in a few cases, brokerage houses. Although formal demands have not been made for the payment to the Carptrofler of the amounts deducted, several of the organizations involved have been requested to turn these amounts over to the State of New York. In the cases where requests for payment have been made, the organization in question did not meet the Ctrrptroller' s criteria for proper imposition of service charges as set forth in Qiestion 5j, supra. -For example, a brokerage house asserted ~)its custarer contracts allowed for the imposition of service charges PAGENO="0907" 9 1~ 1 (Page 20 of 27) New York Response ¶L~ Unclaimed Property Questionnaire on unclairrod cash dividends. The Office of the ~sptrol1er was of the ccLnioc that the agreerents did oct allcw for the deduction of such charges. The brokerage honse has presently decided to pay the anounts deducted, with- cot admitting that its position is legally incorrect or that the Cbeptroller's position is legally correct. At present, the Ocrptrofler and ~everal other entities which have ded~irtsd such charges are in the process of reviewing the method of the deduction of the charges to determine whether such charges are proper. The Orgetroller has consistently taken the position that there can be no cxxrprucise of the acounts due as service charges (i.e., the entity wculd offer to pay a lesser amount than the amount claimed by the Ocoptroller rather than contest the validity of the state's claim at an administrative hearing) if he believes that the charges were improperly applied. 6. Other Practices. a. There have been cases over the years in which banks, pirsuant to their by-laws, ceased tha pa~rant of interest prior to the termination of the period of inactivity necessary for legal abandonment. This practice was oct illegal se, in that such termination of interest was provided for in the rm-itract between depositor and bank. Since 1968, however, the Banking Law of Nov York State (67) requires that banking organizations s-fcject to its jurisdiction continue to pay interest during the entire period of inactivity until the account becomes abandoned property. This statute does not apply to national banks. Federally Pagulated Banks (1) As we understand it, accoddIt~g to the Orrptroller of the Cirrency there is rio reguirerent for national banks to post interest to dormant savings a~cios. (2) Sre national banks post int~erest up to June 30th of the year cavmect is made to the State, a practice which is required of State regulated banks. (3) One major national bank posted interest only until the acooent became dormant, June 30th of the fifth year of inactivity (prior to 1976, the 10th year of inactivity). Once dormant, interest was not credited even t1~igh the account renamed dormant and was not yet reported as abandoned property . ~nother national bank instituted the practice of stopping pa~mant of interest once an account was inactive for five years. This provision was incorporated in the custarers' pass- hooks. PAGENO="0908" 912 Page 21 of 27) New York Response 7b Unclaimed Property ~.iestionnaire (4) Anotber major national bank wha had originally posted interest up to June 30th of the year the itmss were reported to the State atteapted to offset statutory late fiinu interest charges with the interest posted to the individual accounts State Regulated Banks (1) Section 7 of the New York State Banking Law requires state regulated banks to credit interest up to June 30th of the year abandoned and payed to the State. (2) We have no knowledge of any State regulated banks attmpting to reverse interest due on a dormant account. b. There have been canes in which dormant accounts in reasonably substantial arrounts have been dearned abandoned property and transferred to the State Cbmptroller when the depositor continued to reside and receive mail at the address of record. Since 1974, however, banking organizations have been required by statute (Abandoned Property Law §301 (6)) to give notice, by first clans mailing to the depositor's address of record, of prospective abandonment of an account. This requirarnent has reduced the incidence of abandonment of accounts where the depositor continues to reside at the address of record. Nevertheless and although we have kept no separate record of these occurrences, we have continued to encounter cases where tha address of the owner at the time of the claim submitted to the State Ozsiptroller was the sans as was given in the holder's report of abandoned property. A few of the organizations we found with cases of this type were Sane of these accounts were in excess of $3,000. Cbsiplaints were also sanetimes received fran the owners that they had never received the required first class mail notice fran the bank. c. Rest banking institutions appear to have autanatic renewal clauses for their certificate of deposits. The banks had requested en interpretation of the applicable Abandoned Property Law as it related to time accounts. Pursuant to an administrative rule, prasulgated on June 25, 1976, the Oneptroller issued a clarifying letter to all banking organizations. In this letter, it was stated: `When a time deposit by its terms is autanatically renewed on maturity without affirmative action by the owner, the five- year period of inactivity preceding abarsionrent will causence to run upon expiration of the original term of the deposit. When such autasatic renewal without affirmative action by the owner is for a pericxi in excess of five years, pursuant to the contractual terms governing the original deposit, the deposit need not be reported until the renewal term has expired without the occurrence of an exclusionary action. PAGENO="0909" 913 (Page 22 of 27) New York Response To Unclairrod Property (~iestionnaire One to poor controls on the renewal process, saie banks ters5ed to ignore the dormancy status of an account once it was autanatically renewed. One bank in particular - `) was escheating to York outstanding interest checks on twa time accounts while autanatically renewing the accounts therselves. Upon audit, it was discovered that the o'~nacs were deceased with no ~mewn heirs and the accounts theirselves ware actoally dcccsnt. Since the bank autanatically renewed the certificates, the accounts woolf have renamed indefinitely at the bank. Based on the audit, these acro ts ware turned over to the State in 1978. d. ?~e have, on occasion, had acme difficulty with bank procedures in utrating costorers' accounts by rreans of automatically crediting interest, service charging or as a result of advertising charges. While these probless rio exist, they do rut constitute a significant probbes in terra of abandoned procerty because of the snall anoints involved. In actuality, these problem tend to be the exception rather than the general rule. There was one bank in particular - bed not eacheetef docrnnnt a~unts due to hold" codes. A `hold" code tiacef on an aunt then the bank was notified of a lien, the custarer' a smctal aeourity rucbsr was rissing, an inrorrect address was indicated, then the account becere foment, and for several other reasons. Their data processinc systur did not provide for a d~,rrnant account to be identified and seoaracelv listed as such if there was an additional "hold" code, other than the cicocnsnt code, place on the acoount. As a result of our audit, considerable additional abandoned property was reported to the State in 1978. Most of the additional ituns of abandoned property reported as a result of the audit ware a result of correcting this "hold" code problas. We have also ford throuoh audit that various banks because of faulty erocranroino of data processino eguirirent, had classified accounts as active then notices sent to inactive custarers had not been returned as undeliverable. the Wew York statute such accounts are Ceased abandoned and should have been escheated to the State Carrotroller. Other situations we have enrountered are discussed in our answers to cuestion 5g. e. A rooter of practices observed which have served to evade the intent of the unclaimed property laws have already been oorrrented in our other responses to the ojestions posed in the cruestionnaire. Sane other situtations observed are as follces: (1) Several of the savings banks in ~cew York city have used outside "tracer" agencies to help their in locating dormant customers. These tracers provide this service to the banks at no charge. However, once a custarer is located by the tracer, with the custarer information supplied by the bank, a fee is often collected fran the costaner. A problem has also arisen whereby these tracers have forwarded a copy of a death certificate of the custarer along with the tracer' s letter stating that the bank did not have to consider this particular account dormant. The banks then hove updated the account PAGENO="0910" 914 Page 23 of 27) New York Response ¶flo Unclaimed Property Onestionnaire based on this information even though the tracers are not acting in any properly authorized legal capacity for the custaner. (2) We have also had several instances where key books and records necessary to establish the existence of unclaimed property have been lost or destroyed prior to audit and, in one instance involving a stockbrokerage firm during the audit. ~zrounts of abandoned property voluntarily reported by such firms, if any, ware substantially below industry experience. (3) There have been one or twa instances of the transfer of abandoned property or operations to other states which either had no abandoned property law or longer dormancy periods than prescribed by New York. In the forcer instance, the firm ) maintained that although the transaction (pirchase of a traveler's check) occurred in New York, the property (liability) did not becrmre abandoned due to the expiration of the dormancy period until after the firm had reorganized and relocated in another state. ¶Ib our knowledge, the anoints in question have not been paid to any state. (4) We have noted a few cases where banks have recorded a transaction in a dormant account to activate it although the custarer did not initiate the action. Rer exarrple, a bank made one dollar deposits unauthorized by the depositor in twa large dormant accounts to reactivate the accronts. In another example, money found in a forced-open safe deposit box was deposited to activate a dormant account of the lxix renter. f. In the matter of Savings Bank Life Insurance, policy holders are required to pay their preniums in a timely manner. If the policy holder fails to pay his premiums, the bank can use unpaid dividends that have accroed on the policy to keep the policy in force. The bank can also provide a loan to the policy holder (up to the cash surrender value of the policy) in order fOr the policy to remain in affect. A problem arises when the policyholder stops paying his prasiurns and is not aware that the bank is continuing his policy through the use of dividends or a loan. Once the bank has expended all the insured's available resources to continue the policy, the policy is then terminated. We have found one instance where, the policy holder died and payments of premiums ceased. The bank did not inguire as to why the preninars stopped; it just automatically used their available financing procedures. Reanwhile, the heirs did not present the death claim and the policy was terminated. This bank and perhaps others need to be sore diligent in their responsibility of determining the status of the policy holder. 7. Unclaimed Property Held by Federal Government. For sane years New York has been trying to obtain various items of money held by the Federal GoverrnTent and owed to New Yorkers wham the United States could not locate. In 1969, Article 12-A was added to the Abandoned Property PAGENO="0911" 915 (Page 24 of 27) New York Pesponse To Unclaired Protertv C~iestionnaire to e the State s clear riGht to such rrcney after seven years. thereafter, the State Orrptroller initiated efforts to get infocration from the Internal Povenue Service as to the identify of New Yorkers with unclaired Federal income tax refunds. This infomoation sruld renstitute the basis for orcrt proceedings to obtain the r~oney. In 1972, I1~ officially rejected the rereest for the infonration on the ground that its divulgence would violate secrecy provisions of the Internal Nevenue Code. In 1977, New York turned to a mare direct approach. We tried to interest cur Congressional delegation in a legislative direction for Treasury to deliver the unclaimed rrcney to New York and other states with similar laws. We areret aware of the reaction to this proposal, but there was no action. On Cctober 17, 1977, New York Onnrtrofler Levitt wrote U.S. Treasury Secretary Sl~ct~mi askinc for a turnover of all types of money and property thich had bean untlatred for seven veers. L-xrare tax refunds were but one type. The letter cUd not ad: for tax and other infonration. Fe thought it aocrtccriate or stain seek action, this tLm~ fran the Carter adsinistration, before re or-tino to legislation. Copies of the Ortober 17, 1977 letter were sent to our Concressional delegation. A reply by Secretary Elticenthal sidestepped the basic issue ansi dealt ccclv with income tan: refunds. He said he was referring the matter to the General Counsel's Office of rre ansi that we wnuld hear fran that office soon. Nethino further having been heard either fran I~ or the Secretary, Oncgtroller Levitt wrote Hr. Bhrrenthal again on June 20, 1978. A reply was received in July 1978 to the effect that the scatter was still under study by the Office of the General Counsel of the Eepartnrent of Treasury. Ccc Seoucoter 27, 1978, the State Attorhey General, Louis J. Leftkowitz wrote to Treas-~c-' Sscretacv Clvrenthal raking a decand for transfer to the York Coctrollec of all unclaimed money an-si other property belonging to New York State residents which had teen held by the U.S. Dspartncent of the The letter also rernested a list of the New York State residents entitled to unclaimed incane tax refunds. An October 10, 1978 reply fran the Treaa-rrv General Counsel, Hobert H. 9tindseim, advised that it was their ourrent legal position that the Federal Goverirrent was not subject to the State's chocend. No resconse was made to the request for the list of residents entitled to unclaimed tax refunds. As these exchanges proved fruitless, the New York Attorney General is preparing to rarrrence legal proceedings designed to remover the funds in question. a. No specific amount of money or other property has as yet been established as due to New York residents. However, we have estimated that unclaimed incarre tax refunds due to New York residents for the seven taxable years 1968 up to end including 1974 totalled approximately $22 million. Fran I~ data for the years 1965, 1966 end 1967, there is at least another Sl.5 million in unclaimed income tax refunds due New York residents for those years. There are, of course, other types of unclaimed moneys in eddition to cc-.clair-ed income tax refunds, which are being held by the Federal Caverrnrent for New York residents. These include interest on registered obligations PAGENO="0912" 916 (Page 25 of 27) New York Response ~b Unclaimed Property Qiestionnafre and the principal on such obligations which have matured (i.e. "E" and "H' }x)nds), veterans' pensions, the proceeds of servicanen's ai~7eterans' c.i. life insurance policies, dividends on such policies, and Social Security and Railroad iètirmnent payments. Re airounts have been estimated for any of these categories of unclaimed debts. b. Answered above. c. The State's claim for this property is based on Article XII-A of the New York Abandoned Property Law. New York also relies on the Freedan of Information Act (5 USCA §552) to obtain the names and addresses and arrounts of property being held for New York residents. 8. Suggestions for Federal Action. a. Suggested regulatory steps by federal regulatory agencies would include the following: (1) In enhance cairpliance with state unclaimed property laws: (a) Federal regulatory agencies should cooperate in establishing and maintaining en effective liaison with state agencies administering unclaimed property laws to exchange information on current changes in relevant laws, on curpliance problarns concerning a particular provision of the law or a particuler organization(s), and to improve audit or examination procedures and techniques. Such liaison would also help in the selection of entities for audit, avoid over-lapping audits and strengthen enforcarnent action. (b) Field audits and examinations performed by the federal regulatory agencies should verify that auditee officials are reasonably familiar with the requirarrents of state unclaimed property laws to which they are subject, and that the auditee is in canpliance with such requiranents. Indications of lack of knowledge by holders of unclaimed property of relevant state laws, should be referred by the regulatory agencies to the responsible state agency on a regular basis for appropriate action. (c) Financial record keeping and reporting requirements of the regulatory agencies should provide for edequate record retention, accounting practices, armS information reporting, to satisfy the needs of state unclaimed property laws. We would suggest retention of underlying books and records for at least five years fran the date of sutmission of a report of abandoned property. (d) Current regulations of the CFmrptroller of the Currency (Inter- pretive Riling on 12 U.S.C. §484) imply that state agencies do not have the authority to audit national banks to determine armmpliance with state unclaimed property laws. Although, we believe that states, nevertheless, do have such authority and have established same in at least two state courts, it would facilitate matters if this interpretive ruling was revised or withirawn. PAGENO="0913" 917 (Pace 26 of 27) Naw York Fas~nse To UnclajJTad Property Questionnaire (2) On protect the rights of ewners of dormant bank accounts and other unclaitad property: (a) Federal regulations controlling the service charging of dormant accounts by national banks would be beneficial. Such regulations could inclyde provisions requiring that such charges could only be made when ware acthcrized by an enforceable contract with the depesitor who bear. eder~ately notified of this provision and then such charges sure stently arched in the nocral course of business to all of the bank's darcsircrs. A reasonable ceilinc or raxirorn charge should also be established decendinc `reon abs sire of the account. Sir,ilarlv, reculatorp controls should be established for bank service cheres arched to uncashed negotiable instrunents (bank checks, etc.) and or unclaired trust account (divid9nids and interest payable) balances. In these instances, the holders of the negotiable instrcrents or the miners of the trust departrent arounts tray be third parties with no prior contact with the bank. Such holders would, therefore, have had no contract or agree- rent providing for service charges. Their interests would be best protected by federal reculations. Ct) Federally regulated banks should be required to continue to credit interest to decosit accounts even while in the dormant status and until accc'onts are raid to the states as abandoned property. A regulation irjrrld be deveicced sirilar to Section 7 of the York State Banking Law. b. S~oguested federal legislation would include the following: (1) To enhance ocouliance with state unclairrad property laws: (a) Federal legislation should require the Federal Goverrtrent to trans- fer unclairad prorarty which it is holdin~ to the owners' states of residence. Scot legislation was introduced in the Senate in 1961 as $1414. A revised version of this proposal has been recently formulated by the National Association of Unclaimed Property Asministrators and will be made available by this association if it has not already done so.~ (b) The U.S. Suprase Court Oncision expressed in Texas v. New Jersey (379 U.S. 674 (1965)) is in apparent conflict with the provisions of tha unclainwsI property laws of various states including New York. In single terms, the Scorove Cccrt decision in resolving confli~ting clairrs to abandoned property ben-men sTates, held that certain unclaired debts owed by the Sun Oil Onrgany (orirarilv uncasted stridend checks) to various creditors sure subject to the state of last known address of the creditors, as s~axcn on the records of the debtor; and there no such address existed or such address was in a state not providing for escheat of the property in question, the state of corporate dcxnicile could escheat, subject to a subsequent claim by another state if the creditors address was subsequently discovered. The court's decision was by it own admission not according to precedent or logic but according to facility of administration and the equities involvad. PAGENO="0914" 918 (Page 27 of 27) New York Response Te Unclaimed Prooerty Coestionnaire Various state courts have since rendered decisions which have applied the rule in Texas v. New Jersey (1) absolutely (State v. Nnsted Industries, New Jersey Suprese court), (2) on a considerably narrowed basis (State v. Li- quidating Trustees of Republic Petroleum Ctlrçpany, Suprase court of Texas), arid (3) not all (O'Keefe v. State Repartment of Revenue, Suprene Court of Washington). In addition, the aspect of the Texas v. New Jersey decision which dealt with unknown address of creditors has the potential of producing the very inequity which the court had tried to redress. It permits the escheat of obligations incurred all over the country by the state in which the debtor (holder) happened to incorporate itself, regardless of the absence of any connection between the state of incorporation and the place where the debtor creditor relationship was established or the site of the creditor's dcsiicile. The passage of a ccrrprehensive unclaimed property law in the State of telaware in 1962 and the steadily increasing number of corporations dcsniciled in Dalaware, will give rise to sizeable windfall to that state at the expense of others. This inequity was apparently addressed, in part, in 1974 by federal legislation (P.L. 93-495, Title VI, Sec. 601) which dealt with the disposition of abandoned ironey orders and travelers checks. This law provides, in part, that since last known addresses of purchasers of rroney orders and travelers checks are generally not known, but purchasers generally reside in states where such instruments are purchased, the state entitled to exclusively escheat such unclaimed instruments shall be first, the state where purchased; and second, if the state of purchase in unknown, the state in which the selling organization has its principal place of business. This 1974 federal legislation, therefore, attenpted to rectify the "illogical" windfalls that can be realized by an individual state in a given situation but only for certain transactions. ridditional federal legislation with a broader approach is needed to cope with a wider range of transactions, including those where the place the debtor creditor relationship was first established (place of sale or principal place of business) may not be easily ascertainable. Such federal legislation is also needed to establish uniform ground rules for the escheat of unclaimed property even where the address of the creditor is known, so as to preclude disputes between states as to the applicability or interpretation of the Texas v. New Jersey Supreca Court decisions. PAGENO="0915" 919 Attachment New York Response ~Ib Unclaired Property Questionnaire O~esticr.raLre Itan 3. Erokerare finn recorts. a. The rnres and addresses of the si~ockbrokerage finns which reported (Article V-A, andcnad Property law) affinnatively over the last three years are given in the attached printout. b. The total cash airamt received fran stockbrokers in each of the last three fiscal years as shown in our fiscal records are as follows: FY 76-77 FY 77-78 FY 78-79 $21,790,626.11 $7,749,043.17 $9,411,648.09 arcunts rereived fran each stockb~oker as shown in the printout radars on abandoned prccertv reports due each year during the first ten days cf ~arcTn whether or not received after the fiscal year ended March 31, plus pa to rasultinr fran field audits which n~re received during each of the three fiscal years. Qonsequently, the total of airounts given in the printout for each year wifl not ual the fiscal year totals shown ahove which are based solely on dates of actual receipt. Firms which reported and delivered securities are indicated by the letter S encircled in red. Where cash arrounts are also entailed, the S appears at the right of the cash arrount. As to the rrrntor of individual itains received fran stockbrokers, the anc~otis listed in the printout for 1979 aggregate 42,367 individual items. total arount of these itains is $7,707,635.82. c. Va est±nate that of the total anount of cash reported ty brokerage up to ninety percent are reported without nenes. PAGENO="0916" 920 Attachrrent I New York Response ~Ib Unclaimed Property Questionnaire Questionnaire Iten 3. Brokerage finn reports. a. The namas and addresses of the stockbrokerage finns which reported (Article V-A, Abandoned Property Law) affirmatively over the last three years are given in the attached printout. b. The total cash arrount received fran stockbrokers in each of the last three fiscal years as shown in our fiscal records are as follci~is: FY 76-77 FY 77-78 FY 78-79 $21,790,626.11 $7,749,043.17 $9,411,648.09 The anounts received fran each stockbroker as shown in the printout relate to abandoned property reports due each year during the first ten days of March whether or not received after the fiscal year ended March 31, plus pa~nents resulting fran field audits which were received during each of the three fiscal years. Onsequently, the total of arrounts given in the printout for each year will not equal the fiscal year totals shown above which are based solely on dates of actual receipt. Firms which reported and delivered securities are indicated by the letter S encircled in red. Where cash airounts are also entailed, the S appears at the right of the cash arrount. As to the nunber of individual itains received fran stockbrokers, the annunts listed in the printout for 1979 aggregate 42,367 individual itains. The total arrount of these iteers is $7,707,635.82. c. We estimate that of the total arrount of cash reported by brokerage finns, up to ninety percent are reported without narrars. PAGENO="0917" 921 Attactnrent I New York I~sponse ~b Unclairred Property ~iestionnaire Crastionnaire Itco 3. Brokerage finn re~x)rts. a. The narres and addresses of the stockbrokerage finns which reported (Article V-A, Abandoned Property Law) affirmatively over the last three veers are riven in the attached printout. b. The total cash arrount received fran stockbrokers in each of the last three fiscal years as shce'n in our fiscal records are as follows: 76-77 FY 77-78 FY 78-79 S21,793,626.U $7,749,043.17 $9,411,648.09 The arrarnts received fran each stockbroker as showe in the printout relate to abandoned property reports due ~ach year during the first ten days of Y.srch whether or not received after the fiscal year ended Na.rch 31, rius cauronta resulting fran field audits which were received during each cf the three fiscal years. Qrnsequently, the total of arrounts given in the printout for each year will not equal the fiscal year totals shown above whirh are based solely on dates of actual receipt. Furs which rer~orted and delivered securities are indicated by the S encircled in red. Where cash anouhts are also entailed, the S at the richt of the cash amount. As to the iurrinr of individual itarns r~ceived fran stockbrokers, the amounts llsted in the printout for 1979 aggregate 42,367 individual iteas. The total amount of these itana is $7,707,635.62. c. We estimate that of the total annunt of cash reported by brokerage finns, up to ninety percent are reported without nanes. PAGENO="0918" 922 NORTH CAROLINA STATE OF NORTH CAROLINA DEPARTMENT OF STATE TREASURER RETIREMENT AND HEALTH BENEFITS DIVISION October 22, 1979 TO: Benjamin S. Rosenthal, Chairman *(3!~ ,,, Coimnittee on Connierce, Consumer and Monetary Affair~J!~~( ~ B-377 Rayburn Building Washington, D. C. 20515 FROM: Escheats Office - State of No th Carolina We ar~sing our ~~~toyour~estionnaire. You will note that some are answered direct, some in a more detailed manner, and some are not answered at all. Our operation is not as sophisticated as some states which have placed a great deal of emphasis on abandoned property over a number of years. Our chart information is correct in all cases except where we make estimates. The information is available here, but we just cannot take the time to dig it out and carry on our regular duties. Exhibit "A" is a list of names and escheated properties for the County of Pitt. We chose one county, out of 100, which we felt would be in a middle range as to number of names and funds escheated. We are sure our more densely populated counties would produce more, and sparsely populated counties much less. Exhibit "B" is a list of properties escheated from the broker, Merrill Lynch, Pierce, Fenner and Smith, Inc. You will note there is a discrepancy in the amounts escheated in 1976 and 1977. This is the type of thing that bothers us. We want to do more comparing, and we will. We hope to get to the place where we can ask questions, and get some answers when a report shows great discrepancies from year to year in the same business, and the same kind of businesses. Our proposed law will accomplish this purpose. We are not well acquainted with what the Feds are doing in this area. We do think your idea of studying the present activities of the states is wise, and hope it will result in new laws that will be fair to all. LH/smp Enclosures PAGENO="0919" 923 ANSWERS TO QUESTIONNAIRE The annual report of banks and other~financial institutions is due on. June 1 of each year for the previous~caiendar year, January through Dece-bar. I. The type of property from finar~cial institutions is normally in the forn of saving accounts, checking accounts, stocks and bonds. Il. `o type of property is excluded if the person involved is deceased or has died intestate. I II. The holding period for banks is 5 years, except for checks renaming unpaid, and that is 3 years. Savings and Loans and Credit Union periods are 3 years. IV. The role of the State is not purely custodial. If the funds are not clained by the rightful owner within the 7 year period by docu-~ented evidence, they are not recoverable. `orth Carolina does not pay any interest on funds in its custody. VI. Certain types of funds such as money orders, liquidation funds and travelers checks. (List is entitled Exhibit A in the package.) 5. The banks and financial institutions ~re furnished forms by the Escheat Division to make reports. They are not mandatory, however, the institutions may design forms of their own but they must include all essential information called for on the State form. C. In addition to the regular escheat laws for banks and other financial institutions, there are laws to cover the liquidation of state and 67-~O 0 - 81 - 59 PAGENO="0920" 924 national banks. All assets are to be held in trust for a period of 7 years and will be returned to the rightful owner on the basis of documentary evidence without any State liability for interest or profit. (Banks and financial institutions are allowed only their normal charges or out-of-pocket expenses in servicing an account that is to be escheated to the State.) D. Once each year the names of all persons whose property has been es- cheated to the State from banks is posted in the courthouse of each county. The Escheat Division furnishes this list to the Clerk of Court of each county. The North Carolina Department of Insurance furnishes a list which is also posted at the courthouse of all funds escheated by life insurance companies only. I. These are newspapers that are local, and if the local unit does not have a daily or weekly newspaper, it is in a newspaper with general circulation in that area. II. The Escheat Division places the ad for the State. III. The last known address is given. IV. The names, addresses, and amounts are published, and there is no minimum. V. Advertisement covers only the names for the previous year. E. After publishing of the names, there is no additional effort on the part of the State to locate owners. F. At the present time, we are not bothered by bounty hunters and if we were approached by bounty hunters, the bounty hunters would have to receive permission by the State Treasurer, who is also the State Escheat Officer, and ground rules would have to formulated and estabi ished. PAGENO="0921" 925 G. Abandoned property is the result of the failure of a person legally entitled to the property to make a valid claim against the holder of the rroperty within a prescribed period of time, as defined by statute, or by a person dying intestate, or partially intestate without any knc~:n or discoverable heirs. In financial institutions, there are varying periods of time for contact.~ Contact means activity in the account, deposits or withdrawals. If the mail is returned to the financial institutions, it is assumed that the property is abandoned." Our office, at the present, is small and the best working arrangement we have is working with the insurance department. It has auditors and conducts field audits to comply with insurance laws, as well as audit- ~ng for escheatable property. This is an on-going year round opera- tion. The banking industry also is checked by the banking comission ~uditcrs. 1. ~s stated above, we have no auditors or field workers. We have local governrent financial advisors, but they are not auditors and do not look for escheatable property. 2. See above. 3. Insurance industry, only, and banks which are checked primarily for abandoned property. We have the best compliance with banks and insurance companies. We do, not have the staff nor the authority at the present time to enforce compliance by all other types of institutions. We are amending our law to get that authority, which should be passed in 1980. Then we feel that we would be able to do a better job of collection and be able to document the need for an expanded staff. PAGENO="0922" 926 3a 2. Amounts of unclaimed property reported and delivered to owners: Fiscal Years 1976 1977 1978 a. Number of institutions reporting: All institutions 7,000(E) 7,500(E) 8,000(E) Banks NA NA NA Brokers NA NA NA Insurance companies NA NA NA All others NA NA NA b. Amount of property reported: All institutions 2,124,644 2,289,149 2,400,882 Banks 600,835 499,866 555,980 Brokers NA NA NA Insurance companies 300,296 408,826 737,180 Public utilities 161,799 164,492 208,981 All others 1,061,714 1,215,965 1,498,831 c. Amount of property remitted: All institutions 149,133 214,811 178,597 Banks NA NA NA Brokers NA NA NA Insurance companies NA NA NA All others 149,133 214,811 178,597 d. Number of individual accounts in excess of $500 All institutions 40(E) 47(E) 54(E) Banks 18(E) 22(E) 26(E) Brokers Insurance companies 12(E) 16(E) 18(E) All others 10(E) 7(E) 10(E) e. Number of names advertised: 12,800(E) 14,400(E) 16,000(E) f. Dollar amounts returned to owners: $149,133 $ 214,811 $ 178,597 g. Delivery percentage: .07% .0935% .0744% h. *Amounts remitted minus claims paid: * No amounts were remitted unless request was accompanied by a valid claim. N/A Not Available PAGENO="0923" 927 4. We are so lacking in this area, that I would be reluctant to comment. 5. As stated previously, the insurance department does deal with the insurance industry and outside of that we have no auditing capability to speak of. i. Approximately $66,000. We have four full-time employees and in rush tine we are able to get additional help from other sources without additional cost. 6. I nsurance departments. Brokerage Firms A. le feel the job of taking every category of business and reviewing our entire files is too much of a job for this purpose at this time. B. e are enclosing the abandoned property report for the brokerage firm of ~errill Lynch, Pearce, Fenner and Smith, Inc. These remittances are for the years of 1976-1977. The total for 1976 is $1,526.08 and the total for 1977 is $19,748.45. We note the discrepancy in the 2 years and that is one of the things that we are watching from now on. C. These are the amounts escheated and from these we do not have the a~ounts that were remitted to the rightful owners, once the proper docu-entation was nade. We did not check the other brokerage houses but since Werrill Lynch is one of the largest, we are concluding that all others in our files would escheat less in a year's time than Merrill Lynch. PAGENO="0924" 928 Trends are upward for banks and insurance companies and brokers. A new law that has been proposed and has passed one house of our legislature puts a little more teeth into the law allowing for fines and ways to enforce compliance. (Enclosed is a Merrill Lynch escheated property, List for 1976 and 1977.) 0. In our opinion, the degree of compliance is as follows: 1. National Banks - good, 2. State Banks - excellent, 3. Federal Savings and Loans - fair, 4. State Savings and Loans - good, 5. Federal Credit Unions - fair, 6. State Credit Unions - fair, 7. Brokerage firms - fair, 8. Mutual firms - fair, 9. Insurance bonds - good, 10. Financial, non-financial corporations - poor, E. As state above, we are not large enough for field audits, so there has never been a litigation involved. Where there was controversy, we have always been able to work out an amicable settlement with the Attorney General's Office serving as our counsel. F. We will give only a rough estimate and we firmly believe that our in- come can increase 4 to 5 times as much. That is roughly $5 million to $6 million a year with full compliance with the law. As stated PAGENO="0925" 929 elsewhere, we are asking for char~ges in the law and the growth of our staff to improve our collections. G. Service charges: ~ do not have an identifiable record in the area to build statistical infornation. We do allow what we considered to be reasonable charges and question those we feel are unreasonable. H. We have no record of such case. 1. This has happened on a few occasions, but the funds were returned without ever finding out what really happened. 2. ~ot to our knewl edge, 3. ~ot to our knowledge. 4. We have not had an opportunity to study this situation and would rather not comment. 5. While we have no proof of examples, we believe the area of lock boxes and trust«=could be areas of abuse by banks. I. No comments: Not enough information on operations or experience to comment on federal actions. J. The federal regulatory agencies have specific functions and not many of them do or could have direct bearing on individual unclaimed property or abandoned bank accounts. We beleive in cases which the Federal Insurance Corporation has a claim PAGENO="0926" 930 as a result of a bankruptcy or theft, the Social Security Administra- tion or the Veteran Administration may help in locating individuals according to individual account holders. Social Security could identify the person where they work, or if retired, where the check was being sent. Even if the owner of the account was deceased, the Social Security Administration would know about his wife or dependent. K. We are not to familiar with federal laws that have a bearing on unclaimed or abandoned property. We do feel that State laws should be respected and State claims not be rejected without a hearing, if such an occassion arises where there is a conflict of interest or ownership. PAGENO="0927" 931 NORTH DAKOTA State of North Dakota State Land Department ~ (7C1)225-2000 UNIVERSITY & SCHOOL LANDS (701)224.2803 October 24, 1979 Cornerce, Consu-ner, & ~onetary Affairs Scbccmittee B - 377 Raybuim Buildinc Washincton, D.C. 20515 2scr Co~resentative Rosenthal, ?~ease find enclosed the Unclairad Propert~ Questionnaire which yoc recoested be co-noleted. Also, please find several enclosures included jr response to various questions. Sincerely yours, -- - crier r. o~ei~a ~ssistant Attorney General State Land Department BRB/ch Ends. PAGENO="0928" 932 UNCLAIMED PROPERTY QUESTIONNAIRE 1. Unclaimed property statute, regulations, and administrative program: a. (i) 1. business association - see §47-30-01 (2) 47-30-02 (3), 47-30-05 and 47-30-06 of N.D.C.C. 2. financial institution - see §47-30-01 (3), 47-30- 02, 47-30-06 of N.D.C.C. 3. Holder - see §47-30-01 (4), 47-30-07, and 47-30- 08 of N.D.C.C. 4. Insurance Corporation - see §47-30-01 (5), 47-30- 03 of N.D.C.C. 5. Utility - see §47-30-01 (8) and 47-30-04 of N.D.C.C. (ii) nothing is specifically excluded (iii) the holding period varies depending, upon the type of property being considered - see §47-30-02 (1), (2), (3), (4); 47-30-03 (1) (b), (2) (b); 47-30-04 (1), (2), (3); 47-30-05; 47-30-06; 47-30-07; 47-30-08; 47-30-09. (iv) the state assumes ownership of the property - see §47-30-17 (1). (v)no (vi) none b. There are no regulations, however, the department has several forms required to be filled out by various parties. I have in- cluded a copy of each. c. none d. (i) see §47-30-12 (1). No other media is used (ii) the state (iii) names and addresses (iv) see §47-30-12 (3) and (6). Please find enclosed a copy of a recent advertising notice. e. See §47-30-12 (4) and 47-30-11 (5). f. The only limitation is that professional finders are asked not to obtain contracts for the return of property until after the state has advertised the property, in accordance with law. This generally means a five month lag time between the time the report is filed and the time at which such contracts can be executed. g. The definition of abandoned property is found in separate statutory sections from 47-30-02 through 47-30-09. Yes, property is presumed abandoned if there has been no contact for a certain number of years. Contact is defined in the individual statatory sections pre- viously cited. Unclaimed property, even if mail addressed to the owner is not being returned as undeliverable, is presumed abandoned. h. yes (i) Only one audit has ever been done (ii) The audit was performed by an independent accounting firm. Funds to pay for it came from the audit budget of the State Land Department. (iii) Oil companies, Insurance companies, and nationwide retail outlets (iv) none (v) A copy of the audit program is not available (vi) as previously mentioned, the audit was conducted by an independent accounting agency, in cooperation with several other states 3. a. Merrill Lynch - received $32.00 in 1977 b. only the $32.00 received in 1977 c. same as (a). 4. a. not aware of noncompliance by any firms listed. All appear to be in substantially complete compliance. b. No - except for a report filed by a nationwide retail outlet c. Information not available PAGENO="0929" 933 5. a. some banks do deduct service charges. Information came from the report filed by the banks. b. only occasionally c. unaware of any d. don't know e. noninal f. unaware of any c. no h. nominal anount i. unaware of any j. There are perhaps no `lawful charges' that a corporation could dsd~ict fro~ property presu-~ed abandoned and reportable to I~orth Ewkota since ~orth Dakota does not require the company to adver- tise or take other extraordinaiy steps to locate the legal owner of the property. no 6. a. ot to our knowledge b. yas - a fe,q banks during the first years of compliance reported such property, however, they are now in compliance and no longer ra~it such property. c. ~ot to our knowledge d. Not to our knowledge e. Unaware of any f. no 7. Yes, for United States Savings Bonds and Stamps a. 57E5.45 frc~ the U.S. Department of the Treasury 5. Refused to remit - please find enclosed a copy of the Treasury Da~artrsnt's response. c. The opinion of the Treasury Department's Attorney that its obli- Ration would not be discharged by remittance. 8. a. (i) O~ir department believes that the Department of the Treasury should remit to the states all funds received from Series E Savings Bonds which are unclaimed in accordance with state law. We feel there is no legal basis for distinquishing such bonds from other remitted property, as the State of North Dakota will pay any valid claims made on property previously remitted to us. The state has no statute of limitations in regards to such claims. (ii) no suggestions b. no suggestions PAGENO="0930" a. NIMRNRR (17 INSTITUTIONS REPORTING: BROKERS P(1MPAMT~~ 934 11N~U1W1Lb ArT. nrRlpq BROKERS TNATTPAIWP rnMPA1ATP' ALL OTHERS c. AMOUNT OF PROPERTY ~`~"~-~` - ALL INSTITUTIONS BANKS BROKERS ALL OTHERS 1976 1977 7?, 73 2~0 ~ ~s JO, `(-1.31 .L~, i9q.g~ P1~, ~3c3-~o `~ 9, 7 72. ~ `7, 35'. .~(2 `(_, 79/. 2-9 (27 7,5 "7' /~/, 1'.'(- 1978 3. AMOUNT OF PROPERTY REPORTED: ALL INSTITUTIONS 7'? BANKS `7' 1(2, ~zi.~- ,,22, ol.Ac (~, 5, 9S~.29 /3, /3C. ~`/~ ,L,,,c, ~~`~"o ~ct_3. ~-1. 1(22, 3 ~ 177, S~7i, 4'~ `~`7 ALL INSTITUTIONS BANKS -$_(2 ~`? -~" 57 ~,, ~7 9,~ I /7~, laO d. NUMBER OF INDIVIDUAL ACCOUNTS IN EXCESS OF $500.00 All institutions BANKS (~`) 2~. 93~"7 (o~ /975' 31' (3) BROKERS INSURANCE COMPANIES (`) ~ (o~ (,) . ALL OTHERS ~, ~` 7~. ~ *(3J ~ ~ ~ (I) 1o, 9~,. /~, e. NUMBER OF NAMES ADVERTISED: 13 Z. "° ~5' / ~` (-, 5. DOLLAR AMOUNTS RETURNED TO OWNERS: 3 o, 737. / 7 .3 I, 0 3.,,. `77 7 -. /. VS' g. DELIVERY PERCENTAGE: h. AMOUNTS REMITTED MINUS CLAIMS PAID: 7 `~ 5" !7~9~-5'37 /75'/5'~~~s" 59 /5, 5'3o'. V9 £ s5/. `ft /2, .2///. 2.~. /55', 9/5.19 ,.,ig, 3,~(2s9 PAGENO="0931" 935 OREGON Division of State Lands ~oSA~ESREE SALEM OREGON 97310 PHONE 378 3805 Honorable Renjamin S. Rosenthal, Chairman Cc:=.erce, Consumer, and Monetary Affairs Co=ittee cn Government Ocerations Rayburn House Office suilding, Room s-377 Mashington, 0. C. 20515 Dram Mr. Rosenthal: Questionnaire - Unclaimed/Abandoned Property Division of State Lands, for the State of Oregon, as adminis- trator of unclaimed funds belonging to persons whose last-known address is within Oregon, files the enclosed questionnaire in response to your request. Information desired where appropriate in the questionnaire has been responded to by reference to the srecific paragraph of the unclaimed property statute. Oregon's record system is manually maintained, not computerized, and figures have been compiled to reflect the nearest estimate available. As an overview, the Division is maintaining some 200,000± individual accounts, with a dollar value in excess of 2.5 ,cillien in cash plus a significant number of U.S. savings bonds, and undelivcrcd stock certificates as well as personal items from safe deposit boxes. If your staff should desire more information, further detail of a specific nature, please feel free to have them contact us. Sincerely, WILLIAb S. CDX Director C. P. Brcnna - - Fiscal Manager CJB:bks Enclosures PAGENO="0932" 936 STATE OF OREGON ad Property Puestionnaire 1. Unclaimed property statute, regulations, and administrative program: a. C i) - Life Insurance Corporation - refer to OPS 98.302(6). - Bankina Organization - refer to ORE 98.302(1). - Financial Organization - refer to ORE 98.302(4). - Types of Proaerty - refer to ORE 98.306(1), (2), (3), (4). ii) - Tangible pronerty excluded except safe deposit box and/or safe respository ORE 98.306(4) - No institutions excluded. (iii) - Seven years from last activity date except travelers checks which has fifteen years last activity date. Also refer to OPS 98.326 (has two year clause if organization is held in the course of dissolution.) iv) - Custodial for twenty-five year after received at the Division Escheats -to the State of Oregon with no recourse upon twenty-five year date period. v) - No interest accrues to an account. Proceeds deposited in the Cormmn School Fund. b. - See enclosed State of Oregon Revised Statutes. c. - Explained in ORE 98.306. d. ( i) - Newspaper of general circulation in county of last known address of owner. - If address of owner is unknown then advertised in county where holder does business. - If address of owner is unknown and holder is out-of-state business then advertised in county with most population. ii) - Refer to ORE 98.352(5) Holder's obligation before reporting. - Refer to OPS 98.356(1) Division obligation - (iii) - Names only. iv) - Refer to ORE 98.356(4) Division advertises accounts with value of $50 or more. Does not apply to money orders or travelers checks. v) - First time unless items sold at an auction exceeds $50 or more in which case they are advertised. e. - Refer to ORE 98.356(4) Nail letters to owners if value $50 or more. f. - NONE g. - Refer to OPS 98.306 (1) (a), (b), (c), (d), (e), (2) (a), (b); ORE 98.316(1), (2); ORE 98.322: ORE 98.326: ORE 98.332; 98.336; ORE 98.342. - Nail not returned to Financial Institutions (banks, credit unions, etc.) Constitutes activity on the account, there- fore not presumed ahandoned. h. -Yes I) - E' veenty Five ii) - One person for in-state audits; accounting firm on one time basis only and audits were performed for out-of-state audits. - Budget: "5" $18,000 per Biennium. (iii) - Banks, Credit Unions, Business Organizations, County agencies, City agencies. iv) - Federally chartered Banks or Federally chartered Credit Unions which are to do their own internal auditing. v) - Dormant check registers, cash journals, bank reconciliations, Dormant Dividend registers. - vi) - Division of State Lands is designated the State agency to perform specific audits for the purpose of detecting accounts which could be presumed abandoned. i. - 2.0 Full Time Employees, $113,200 per Biennium. PAGENO="0933" 937 3a - 2. ~.-~ounts of unclairued property reported and delivered to owners: a. ~urubers of institutions reporting: All fnstttuticrrs ~anks Erokars Insurance cccpanies All others b. Amount of property reported: All institutions Banks Brokers Insurance cc~panies All others i 975 58 210 106 257 151,728.~6 165,703.14 .00 42 , 578. 07 141,068.41 51,909.96 135,265.69 .00 37,808.51 135,893.38 10 27 0 9 15 1,162 * 37, 812 . 23 104~ A~ount of oro~erty remitted: All institutions Banks Brokers Insurance cocpanies All others Uurcber of individual accounts 1977 51 217 126 230 314,011.68 256,526.78 .00 48,367.52 131,525.06 71,730.29 174,299.28 .00 51,472.23 116,874.30 8 54 0 4 6 1,277 42,289.54 .1020 1978 42 225 139 235. 202,749.82 254,819.62 .00 65,948.65 116,131.96 52,924.62 189,616.66 .00 62,579.45 95,817.84 - 4 30 0 6 1,285 67,582.03 .1686 c. d. e. f. 0. h. in excess 01 S5UU All institutions Banks Brokers Insurance coropanies All others Number of names advertised: Dollar amounts returned to owners: Delivery percentage: ~rounts reroitted minus claims 323,065.31 372,086.56 333,356.54 PAGENO="0934" 938 3. Brokerage Firm Reports: Not Available 4. Compliance: a~ C i) - Very Good ii) - Good iii) - Fair C iv)-Fair v) -Fair vi) - Fair vii) - No (viii) - Poor ix) - Poor x) -Poor b. - Bank: Audit Results Audit Results Not all reporting Not all reporting Audit Results Audit Results Not reporting Not all rbporting Not all reporting Audit Results Investigation: The bank had not been reporting. Have reported annually since contact made concerning abandoned property laws. - Bank: Audit performed. The bank has increased the number of accounts considered abandoned - Federally chartered Credit Union: Audit performed. Seports are being filed annually since the audit period. c. - No posible way to determine a "rough estimate" of the additional unclaimed property in: i) - Banks and other depository institutions il) - Brokerage Firms iii) - Non-Financial Corporations. 5. Service charges: a. - Service charges are levied against depository accounts with Einancial institutions. Audits performed have determined this. b. - General practice c. - Occasionally by a utility company d. - Undetermined e. - By banks, the service charges usually a maximum of $6 to $10 per year. f. - $10 per year. g. - Yes. Bank: Was service charging cashiers checks, money orders, drafts and certified checks. Sn audit performed at the bank uncovered this policy. Has since been discontinued. h. - No1 possible to estimate. i. - Hot possible to estimate. j. - No. k. - See (g) above. The Division of State Lands is currently pursuing the legality of service charges assessed against dormant depository accounts, especially where the policy of the bank is to return the service charge to an owner upon demand. The Division, acting in its legal custodial capacity feels such a practice by a financial organization justifies the Division to demand the sane consideration on all dormant accounts. As mentioned above legal opinion is being sought on the matter of service charge policy. 6. Other Practices: a. -No b. - Yes. Several reports have been received by the Division where, upon receipt the Sbandoned Property auditor has checked the address listed in the telephone book against the address listed on the report and was found to be the same. c. - No. d. -No. e. - None f. - No. PAGENO="0935" 939~ 7. Unclained property held by federal governoent: a. - Claims have not been filed as yet. The State of Oregon does consider Series E Savings Bonds as escheatable under the Uniform Disoosition of Unclaimed Property Act. The Divisicns abandoned property auditor is now in the process of recording all such bonds by number. Once it has been determined a duplication of a bond has not been issued to the original owner, a claim will be made to the Federal Goverr.ment for all outstanding and dormant Series "E" Bonds which the Division has in its possession. - Also, a letter has been written to the Seattle Federal Ragio~al Office of the Depar~oent of Labor, Wage and Hour Division concerning funds being held by the Department which belong to residents whose last-known address is in the State of Oregon. These funds are back wages collected by the Wage and Hour Division but cannot be disbursed because the whereabouts of ti~e owner is unknown. Ho reply to the letter has been received as yet. The back wages amount to $41,608. 67-4'~O 0 - 81 - 60 PAGENO="0936" 940 RHODE ISLAND QUESTIONNAIRE RESPONSE ANTHONY J. SOLOMON GENERAL TREASURER state of ~I,obe ~sIanb anb ~robibtnu ~tantation~ TREASURY DEPARTMENT November 9, 1979 Commerce, Consumer, and Monetary Affairs Subcommittee B-377 Rayburn Building Washington, D.C. 20515 Dear Sir: Enclosed please find the completed questionnaire. Feel free to contact this office if we can be of any further assistance. Sincerely, Samuel A. Lazieh Chief Escheat Division SAL: rt Enclosures PAGENO="0937" 941 1. Unclaimed mromertv statute, regulations and administrative program: a. -~cw does the state unclaimed pr~perty or abandoned property statute ar~ly to banks and other financial institutions (including trust companies, savings and loan associations, securities brokerage firms, mutual funds, credit unions, and insurance companies)? (i) the types of property and institutions covered banks, credit unions, and savings and loan associations rust report the following property: (a) ~nv demand, savings, dr matured tine deposits, together with any interest or dividends thereon, that have been unclaimed for 10 years. (b) ~nv funds paid toward the purchase of shares or any deposit made and any interest or dividends thereon, that have been unclaimed for 10 years. (c) ~ny sum payable on checks certified in this state or on written instruments issued in this state that have been unclaimed for more than 5 years from the date it was payable. - (d) ~ny funds or other per~onal property removed from a safe deposit box that have been unclaimed for 5 :ears from the date on which the lease or rental ~ericd exoired. (e~ ~nv tangible personal property and any income or ircrerent thereon, held in a fiduciary capacity for the benefit of another person is presumed abandoned unless the owner has within 5 years after it becomes ravable or distributable, increased or decreased the crincipal, accepted payment of principal or income, corresponded in writing concerning the property, or othei-~,ise indicated an interest as evidence by a memorandum on file with a fiduciary. Insurance companies must report: ~NSyER: (a) Funds held or owing under any life or endowment insurance policy or annuity contract which has matured or terminated escheat to this state if un- claimed and unpaid for more than (five) 5 years after the funds became due and payable as established from the records of the corporation. (b) a person other than the insured or annuitant is entitled to the funds and no address of such person is known to the corporation or if it is not definite and certain from the records of the corporation what person is entitled to the funds, it is presumed that the last known address of the person entitled to the funds is the same as the last known address of the insured or annuitant according to the records, of the corporation. This presumption is a presumption affect- ing the burden of proof. (c) A life insurance policy not matured by actual proof of the death of the insured according to the records of the corporation is deemed to be matured and the proceeds due and payable if: (1) The insured has attained, or would have attained if he were living, the limiting age under the PAGENO="0938" 942 mortality table on which the reserve is based. (2) The policy was in force at the time the insured attained, or would have attained, the limiting age specified in paragraph (1); and (3) Neither the insured nor any other person appearing to have an interest in the policy has, within the preceding five (5) years, according to the records of the corporation (i) assigned, readjusted, or paid premiums on the policy, (ii) subjected the policy to loan, or (iii) corresponded in writing with the life insurance corporation concerning the policy. (d) Any funds otherwise payable according to the records of the corporation are deemed due and payable although the policy or contract has not been surrendered as required. (e) Any stock or other certificate of ownership, or any dividend, profit, distribution, interest, payment on principal, or other sun held or owing, that has remained unclaimed for five (5) years or more. Security brokerage firms and mutual funds must report: ANSWER: (a) Any dividend, profit, distribution, interest, payment on principal, or other sum held or owing by a business association for or to its shareholder, certificate holder, member, bondholder, or other security holder, or a partic- ipating patron of a cooperative, who has not claimed it or corresponded in writing with the business association concerning it, within five (5) years after the date pre- scribed for payment or delivery, eschests to this state. (b) Any intangible interest in a business association, as evidenced by the stock records or membership records of the association, escheats to this state if (1) the interest in the association is owned by a person who for more than five (5) years has neither claimed a dividend or other sum referred to in subdivision (a) nor corresponded in writing with the association or otherwise indicated an interest as evidence by a memorandum or other record on file with the association, and (2) the association does not know the location of the owner at the end of such five (5) year period. With respect to such interest, the business association shall be deemed the holder. (c> Any dividends or other distributions held for or owing to a person at the time the stock or other security to which they attach escheats to this state also escheat to this state as of the same time. Any intangible personal property and any income or increment thereon, held in a fiduciary capacity for the benefit of another person escheats to this state unless the owner has, within five (5) years after it becomes payable or distributable increased or decreased the principal, accepted payment of principal or. income, correspond in writing concerning the property or otherwise indicated an interest as evidence by a memorandum or other record on file with the fiduciary. PAGENO="0939" 943~ (ii) any tyces of property or institutions specifically excluded ~ry certificate of deposit made in this state with a banking organization together with an interest or dividend thereon with a maturity date equal to ten (10) years is exezpt fron the time limit provisions of this chapter. (iii) the holding period which must elapse before the property is reported to the state Property escheats to the state when there has been no contact within ten (10) years for savings and share accounts; and for five (5) years for checks, money orders, etc. (iv) whether the role of the state is purely custodial, or wrether the state assures c~nership of the property :he role of the state is purely custodial and at no time does ownership pass or the owner's right to claim lapse. (v) whether the state pays interest on funds under its custody If the validity of a claim shall be determined in favor of the claimant, the general treasurer shall pay over to the clamant only that amount which the general treasurer actually received without deduction for costs of notices or sale or for service ch~rges~ together with interest at a rate of 1/12 of 1% per month from the time when it was received by the general treasurer to the time when it was raid by hir to the claimant. Provided, however, if the property claired was interest, bearing to the owner on the date of surrender by the holder, then the general treasurer shall instead add interest at a rate not to exceed 5/12 of per north or such lesser~ rate as the property earned while in possession of the holder. Such interest on ir.terest-bearing property shall begin to accumulate on the date rroperty is delivered to the general treasurer and shall cease on the earlier of the exoiration of fifteen (15) years following delivery of the date on which payment is rade to the owner. No interest on such interest-bearing property shall be payable for any period prior to the effective date of this amendment. Any holder who pays to the owner property which has been delivered to the state and which if claimed from the general treasurer would be subject to this section as interest-bearing property shall add interest as provided in this section. Such added interest shall be repaid to~the holder by the general treasurer in the sane nannier as the principal. (vi) an'.- cther inrortarit characteristics of the law as it applies to financial institutions. ::o service, handling, naintenance or other charge or fee of any kind nay be deducted or withheld from any property subject to escheat under this act unless specifically permitted by law. Even when specifically permitted, such charges or fees may not be excluded, withheld or deducted from property subject to this act if, under its policy or procedure, the holder would not have excluded, withheld or deducted such charges or fees in the event the property had been claimed by the owner prior to being reported or remitted to the general treasurer. The general treasurer may at reasonable times and upon reasonable notice examine the records of any person if he PAGENO="0940" 944 has reason to believe that such person has failed to report property that should have been reported. If in connection with such examination property which should have been reported is discovered, the holder shall pay a per diem rate equal to actual costs per examination as the cost of conducting the examination. Any person who wilfully fails to render any report or perform other duties reauired shall be punished by a fine of one hundred dollars (100.00) for each date such report is withheld. In addition to any damages, penalties, or fines for which a person may be liable under other provision of law, any person who fails to report or pay or deliver unclaimed property within the time prescribed by this act, shall pay to the general treasurer interest at the rate of one (1) percent per month on such property or value thereof from the date such property should have been paid or delivered but in no event prior to the enactment of this subsection. b. What administrative rules or regulations of your office or agency apply to the handling and reporting of unclaimed property to the state by banks and other financial institutions? Please attach a copy of any such administrative rules. ANSWER: See attached reporting forms. Exhibit A c. Are there any provisions of your state's other banking, insurance, or general commerce laws or regulations that impose certain requirements on how banks and other financial institutions must handle dormant deposit accounts or other unclaimed property, especially requirements for the protection of the rights of the owners of the property? ANSWER: None d. What is the practice in your state as regards advertising the names of owners of unclaimed property being turned over to the state? In particular: ANSWER: Within 120 days from the filing of the reports, the general treasurer publishes the names of the abandoned owners and mails a notice to the last known address to the person who appears to be entitled to the property. (i) In which newspapers and in which other media are the names advertised? ANSWER: Any English language newspaper of general circulation in the county of this state in which is located the last known address of the person named in the notice. Specifically we advertise in the Providence Journal, Evening Times, Newport Daily News, Westerly Sun and Woonsocket Call. (ii) Who places the advertisements, the state or the individual institutions holding the property? ANSWER: The Unclaimed Property Division of the General Treasurer's Office. (iii) Are addresses given in the advertisements, or only names? ANSWER: The names in alphabetical order and last known addresses are advertised. PAGENO="0941" 945 (iv) Do the advertisements~ccver all amounts of unclaimed ProPerty, or only property whose value exceeds a certain minimum? If there is a minimum, what is the minimum? The general treasurer~is not required to publish any item of less than S25.00 unless he deems such publication in the public interest. (v) Do the advertisements cover all amounts of unclaimed property that is being reported for the first time, or do th"y include also owners of property still unclaimed from reports of one or more earlier years? available, please supply a copy of your state's most recent advertising notice. Only the names that have been filed with each companies annual report. Unclaimed accounts from prior years are not advertised but kept on file. See Exhibit 2, September 5, 1979 advertisement. a. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance with state recuirements) to locate the owners or un- claimed bank accounts and other financial property? Yes, a notice is ~ailed to each person having an address :isted who appears to be entitled to property of $25.00 or more. Exhibit C, notice to owners of Unclaimed Property. S. ~re there any state limitations on the actions of r~0-. hunters' who seek out the advertised owners of umolaimed property in the hope of getting a share of the property? Yes. It is unlawful for a person to seek or receive from another person or contract with a person for a fee or compensation for locating property which he knows has been reported or paid ordelivered to the general treasurer prior to seven (7) months after the date of delivery of the property~by the holder to the general treasurer. ~o agreement entered into after seven (7) months from the date of delivery of the property by the holder to the reneral treasurer is valid if a person thereby undertakes to ~ooate rrorerty included in a report for a fee or other compensation exceeding ten percent of the value the recoverable property unless the agreement is in writing and siguad by ~ owner and discloses such other information as the general treasurer may require and in no event shall the fee exceed thirty-three and one-third (33 1/3%) percent. Nothing in the law shall be construed to prevent an owner from asserting at any time that an agreement to locate .property is based upon an excessive or unjust consideration. g. What is the definition of "abandoned" or "unclaimed" in your state? In financial institutions, is property presumed abandoned when there has been no "contact" for a certain number of years? How is "contact" defined? If mail addressed to the owner is not being returned by the Post Office as undeliverable, can the bank or other institution presume that there is still "contact" and the property is not ~bandoned? PAGENO="0942" 946 ANSWER: An account in which the financial institution shows no action or contact with tihe apparent owner, (the person who appears from the records of the holder to be entitled to the property held by the holder) for the period of time specified by law. Property escheats to the state when there has been no contact within ten (10) years for savings and share accounts; and for five (5) years for checks, money orders, etc. Contact is determined by whether the owner has within the time period: (1) increased or decreased the amount of the deposit, or presented the passbook or other similar evidence of the deposit for the crediting of interest or dividends; or (2) corresponded in writing with the banking organ- ization concerning the deposit; or (3) otherwise indicated an interest in the deposit as evidenced by a memorandum on file with the banking organization. Contact must be verifiable and direct. Undelivered mail does not establish contact that can be verified. h. Does your office (or some other state office acting in cooperation with your office) conduct field audits or on-site compliance investigations devoted exclusively to checking compliance with the unclaimed property laws? If so ANSWER: None at this time. (i) How many such field audits or investigations are conducted each year? ANSWER: None at this time. (ii) How large is the staff assigned to this function, and what is the budget available for this work? ANSWER: One auditor's position has been approved but has yet to be filled. (iii) What types of institutions have been given field audits within the past three years? ANSWER: None. (iv) What types of institutions, if any, have not been checked for compliance in this way because of lack of authority to conduct field examinations or because of some other legal impediment? Please elaborate. ANSWER~ None. (v) What items are checked in such a field audit? ( A copy of your audit program Or instructions would be satisfactory.) ANSWER: An audit program has not been established at this time. (vi) If the field audits are performed by another state office or agency, which office or agency is that? ANSWER: None. PAGENO="0943" 947~ is :~our state's budget for administration of the ur.claized property program? How many full-time (or f~L-ti~e-ecuive1ent) persons are assigned to the un- ciai~ed prcrerty ~ro~rar? The budget for the unclaimed prqperty program is about S35,500.C3. This covers the salaries for a chief and 2 assi~ts~ts. auditor at an estimated salary of $12,000.00 has been apprcved but has not been filled. PAGENO="0944" 948 2. Amounts of unclaimed property reported and delivered to owners: 1976 1977 1978 a. Numbers of institutions reporting: All institutions 142 227 287 Banks 16 17 17 Brokers ? ? Insurance companies 35 88 107 All others 91 122 163 b. Amount of property reported: All institutions $229,558.79 $288,066.34 $577,552.93 Banks $159,273.30 $171,236.33 $288,598.90 Brokers ? Insurance companies $38,604.66 $69,963.54 $179,655.57 All others $31,680.83 $46,866.47 $109,298.46 c. Amount of property remitted: All institutions $185,305.35 $235,316.03 $474,634.00 Banks $124,532.57 $140,182.73 $245,910.96 Brokers ? ? ? Insurance companies $29,215.21 $50.036.22 $135,000.00 All others $31,557.57 i~45,097.08 $93,723.04 d. Number of individual accounts in excess of $500 All institutions Less than Less than Less than B k Less than Less than Less than ans 15 20 25 Brokers ? ? Insurance companies Less than Less than Less than All others Less than Less than Less than 5 5 10 e. Number of names advertised: 1,879 800 1,721 f. Dollar amounts returned to owners by: $83,900.94 $93,378.39 $174,691.88 State I $39,647.50 $40,628.08 $71,772.95 Holders 2 (B-c) $44,253.L~4 $52,750.31 $102,918.93 g. Delivery percentage: (f/i,) 37,~ h. Amounts remitted minus claims paid: (c-fl) $145,657.85 $194,687.95 $402,861.05 ALL FIGURES HAVE PEEN ESTIMATED *** PAGENO="0945" 949~ All others tátal Ereakdcwn of all other institutions 2. ~~ros of u~olaired rrotertv reported and delivered to owners: 1976 1977 1978 a. N~moers of i~stituticns reportlng: 91 122 163 Utilities 0 3 8 Credit Criors 0 12 11 A Loan Associations 0 0 ~aiFu~ts ? orroratior~s 91 107 144 of ~rorerty reported: ~3i,680.83 $46,866.47 $109,298.46 0 $3,767.34 $43,114.84 Crez~io Uoicrs 0 $11,555.09 912,226.31 Saviors A Loan Associations 0 0 0 Fur.ds 7 ? ? Corporatiocs $31,680.83 $31 ,54L.04 $53,957.31 c. Aro~r.t of rrorertv reritted: 931,557.57 $45,097.08 $93,723.04 0 $3,767.34 $42,179.98 0 99,892.75 $12,042.51 Loar. ~ssociaticns 0 0 0 ::utualFunds ? ? Corporations $31 ,557.57 $31 ,436.99 $39,500.55 of individual accounts Less than Less than Less than in excess of 9500 5 5 10 Utilities None None None Cradit Uricr.s None None None Loan Assooiations None None None ? ? ? Corporations Less than Less than Lesa than 5 5 10 *** ALL FIGURES HAVE BEEN ESTIMATED ~ PAGENO="0946" 950 3. Brokerage firm reports: For each of the most recent three years. a. Please identify the names of the individual securities brokerage firms that filed unclaimed property reports showing positive amounts on unclaimed property. ANSWER: Information not available. b. For the aggregate of all reporting brokerage firms and for each reporting brokerage firm, please give the dollar amounts of cash, dollar values or listings of securities reported, and numbers of individual accounts reported. ANSWER: Information not available. c. If these figures are available, or if an estimate can be constructed, please give the breakdown of the aggregate cash reported by all brokerage firms as between cash belonging to individual named owners and cash Without names. ANSWER: Information not available. PAGENO="0947" 951 4. Compliance a. How would you describe the degree of compliance with your state's unclaimed property laws and related regulations by (i) national banks, (ii) state banks, (iii) federal savings and loan associations, (iv) state aavinga and loan associations, (v) federal credit unions, (vi) state credit unions, (vii) securities brokerage firms, (viii) mutual funds, (ix) insurance companies, and (x) nonfinancial coroorations? For each type of institution, please indicate whether you find that these institutions are in substantially complete compliance, show fair compliance, or show moor cr no compliance, and please indicate what factors contribute to mn~s evaiuat~on. (i) national banks Fair compliance. Reports have been filed but there are indications of a failure to report all unclaimed property due to the application of service charges and nonpayment of interest. (ii) state banks Fair compliance. Reports have been filed but there are indications of a failure to report all unclaimed property due to the application of service charges and nonpayment of interest. (iii) federal savings and loan ~ssociations Poor compliance. Reports have been filed for only the last few years. However, most of the reports show little or no unclaimed property. (iv) state savings and loan associations Poor compliance. Reports have been filed for only the last few years. However, most of the reports show little or no unclaimed proPerty. (v) federal credit unions Form compliance. Reports have been filed for only the last few years. However, most of the reports show little or no uncls~r.ed property. (vi) state credit unions Poor compliance. Reports have been filed for only the last few years. However, most of the reports show little or no unclaimed property. (vii) securities brokerage firms AHSyER: Poor or no compliance. No~reports are on file. (viii) mutual funds Poor or no compliance. No reports are on file. PAGENO="0948" 952 (ix) insurance companies ANSWER: Fair compliance. We have notified and contacted all the insurance companies but only 19% reported abandoned funds. (x) nonfinancial corporations ANSWER: Poor to no compliance. Due to the fact that not all corporations are filing and most that file only report nothing or small amounts. Only 1L~% of the larger 1000 corporations have at any time filed reports. b. How have field audits, investigations, or litigation altered the amounts reported to your office? Please cite individual cases of audits or investigations performed or litigation conducted and the additional amounts of unclaimed property reported as a result of audit, investigation, or litigation. ANSWER: No audits have been conducted. However better follow-up and administration has resulted in accounts being reported and better compliance to a limited extent. Examples: 1. A large insurance company based in R.I. never filed an unclaimed property report, until they were notified. 2. A bank failed to include unclaimed checks or money orders until they were notified by this office. 3. One major R.I. utility company never reported. They were contacted and sub- sequently filed reports averaging over $30,000.00 a year. c. If possible, please give a rough estimate of (or indicate in some other way the probable amount of) the additional unclaimed property in (i) banks and other depository institutions, (ii) brokerage firms, (iii) insurance companies, and (iv) non- financial corporations that is not being reported but that would be reported if there were substantially complete compliance with the letter.and intent of the law. (i) banks and other depository institutions ANSWER: The Unifornr Disposition of Unclaimed Property Act for all businesses was adopted in 1968 (banks have been subject to the law at least since 1910) and required all abandoned monies on which the statute of limitations had not run to be reported. Therefore, we feel there are very substantial amounts of abandoned monies now available to be reclaimed by Rhode Island residents. Past due amounts owing by Rhode Island banks were estimated by an outside consultant. His estimate was based on the audit experiences of other states. Rhode Island banks and financial institutions have total assets of approximately $7 billion. Based on the size of Rhode Island banks assets and the past reporting practices of these banks, it was estimated by our consultant that over $1.75 million in abandoned savings accounts, checki~i~ccounts, money orders, trust funds and other property is likely to be due and o~ting. (ii) brokerage firms (iii) insurance companies (iv) nonfinancial corporations See chart on following page. PAGENO="0949" 953 NUMBER OF COMPANIES THAT REPORTED ABANDONED PROPERTY TYPE OF HOLCER NUT~ER IN 1978 A) Financial Institutions Savings Banks 6 cnnerciai Banks 13 ~aticna1 Banks 5 Federal Savings & Loan 2 CrediT Unions 109 Suilding & Loan Assn. t~ ________ 139 26 B) Insurance Companies Foreian Life Ins. 267 C~zesTic Life Ins. 7 czesnic Fire & Casualty 2LL Foreign Fire & Casualty b39 _________ *73_7 77 C. Corporations Active Corporations chartered in Rhode Island (estimated) 25,000 Uon-Rhode Island publicly held corPoraTfons (estimaTed) 25,000 2L~3 50,000 TOTALS ~O,o7o 3L~6 PAGENO="0950" 954 Property estimated to be due and owing. Accordingly, out of a potential 50,876 corporations, only 3L~6 corporations or .0068 percent have filed an abandoned property report during 1978 indicating escheatable property. (Holders of abandoned property are required to report annually; in many cases companies listed in the above summary filed only a few such reports during the past 10 years. Many reports have been filed indicating that no abandoned property is being held by the company). An examination of the reporting practices of the largest 1000 corporations in the United States as ranked by Fortune Magazine documents an extraordinary level of noncompliance by these major holders of abandoned property. Of the largest 1000 corporations as ranked by Fortune Magazine, only 1L~3 companies have liled abandoned property reports for the period 1968-1978. Of these 1L~3 corporations 68 have filed reports that total less than $100 for the entire 10 year period. Only 21 of the companies have reported $1000 or more over the past 10 years. Many of these corporations take no affirmative steps to report unclaimed property until requested to do so by a particular state, In addition to the banks there are more than 50,876 other companies such as insurance companies, manufacturing concerns, department stores, stock brokerage houses and others required to report abandoned property. Unaudited reports previously filed with the General Treasurer have averaged $162 per company. It is reasonable to expect that the initial reports for these noncomplying com- panies will continue to average $162 per report. (California for the fiscal year 1976-77 ~veraged $8,762 per report; adjusting that figure for the lesser population in Rhode 1sland, the $tate could expect almost $356 per initial report). Thus using the $162 average figure, Rhode 1sland can conservatively estimate that there is now and owing more than $~,21million by these companies and an additional $1.75 million by the banks for a total of approximately ~.1Q million. Annual Receipts of $3.5 million estimated California and New York have recently initiated vigorous collection and audit programs in connection with their unclaimed property laws. New York last year collected $12L~ million in unclaimed monies. New York's population is approximately 18 million people yielding a $6.85 per person annual amount. California has estimated annual receipts of more than $90 million. Based on a population of 21 million residents, the per capita average would be $)~.29. Rhode Island with a population of approximately .893 million residents can reasonably expect to receive abandoned property reports averaging $L~ per person which would yield at least $3.5 million a year, PAGENO="0951" 955 5. Service c:oarges ~oo inforration about service charges imposed by banks and other financial institutions on dorc~nt accounts and other sroaired nronertv? hat sources does this information cone rvstorer conplair,ts, reports filed `.ith the state, or in'.'astigations, or other sources? Exarple Thstooer conclainos. etter dated June 20, 1979. Passbook ~38621. Exhibit 0. savings account s6~-000-36621-9 Ereakdo;n of `ccount 1. ~77.79 balance as of Cay 1907 ~77.79 2. :nterest stopped :.:ay 1967 - 3. `Service Charges assessed -Li.oo beginning `av 1967 91.il/rvarter or Sls.CEi'year Escheatei 12/0/75 536.79 The bank will pay the principal, accuroulated interest, and the service charges if obey process the account directly for she cvoer prior to escheatnent. ohose accounts that the dank escheats to the state, accum- ulated interest is `.`ithheld and service char~es are applied. letter dated ~u~ust 31, 979~ Thhibit E. Thrrant savings account yC~1L~-5l26535 Ereakdown of ~ccount That date of activity Ju~ie 1950 5 ? 2. ~oour,t rlaced in Cornant Status?! LL8.25 ~s es ec -~5 00 -. Ealar,ce July 25, 1979 3.25 5. Service charges recovered~~ugust 31, 1979 ÷L~5.O0 6. Interest earned (Since June 1960) +26.82 7. Aroount received s75-;-07 The owner was contacted by the~ bank prior to the account being escheated, and notified that she had a dormant account worth 93.25. She inquired about past interest and service charges a eventually collected 375.07. If this account were escheated~to the state only 33.25 would be reported and 971.82 would be absorbed by the bank. 67-4'~O 0 - 81 - 61 PAGENO="0952" 956 Example d3 Reports filed with the state. Letter dated February ia, 1979. Exhibit F. Audits or investigations, or other sources. No audits or investigations have been conducted by the state in this area up to this time. b. Among banks, does the imposition of service charges on dormant accounE~i~d other unclaimed property appear to occur occasion- ally or to be a general practice? ANSWER: Only among certain banks it appears to be a general practice. c. Among which other types of institutions do you find that service charges have been imposed on dormant accounts or unclaimed property? ANSWER: Unable to answer at this time. d. In most cases are the customers properly notified in advance that service charges will be imposed if their accounts remain dormant? ANSWER: No. In rany cases it appears that there is no valid contract entered into with the depositor at the time of opening the account providing for service charges. (In some situations the bank relies on unilateral changes made to its by laws or rules and regulationa, even though never agreed to by the depcsitor, as authority for these practices). There there was a contract it generally appears in the fine print on the signature card or in the passbook and the depositor was normally unaware of it. However, since the banks in virtually every case waived the service charges against a complaining customer, this practice is intended as a service charge only against the Treasurer. e. How large are the typical service charges imposed by banks? by other institutions? ANSWER: There appears to be a practice among some banks to deduct a service charge ranging from T~1L~.OO to ~U8.OO over different periods of time, from a savings account prior to reporting it as abandoned. Accordingly, some small savings accounts which would otherwise be returned to their rightful owners are wiped out of existence and taken into the bank's own income. Some banks are deducting service charges from items such as money orders, cashier's checks, and other similar bank drafts prior to reporting the amount to the General Treasurer. In the case of one bank all money orders under gi6.80 were service.. charged out of existence. f. How large have the service charges been in unusual or extreme cases? ANSWER: Unable to answer. PAGENO="0953" 957 Have there been any cases in which unclaimed property that would normally have been reportable to the state after a cer- cain number of years was entirely taken into income by the financial institution holding it, either through service charges or in sore other way? ~::s~'~R: Yea, it appears that savings accounts where service charges are applied are considered abandoned by the financial institutions and are not reported to the state. See letter dated October 26, 1979. Exhibit G. Also one bank absorbed all money orders under $16.80. See letter dated Parch 23, 1979. Exhibit H* :i rossible, ~lease estimate in rough magnitude the total dollar azount o~ service charges that you believe was imposed by all banks in your state on the unclaimed property they reported to :ou in 1978 (or the most recent year for which figures are available). :n 1975, a total of h288,$98.90 was reported by the banks. a rough estimate, if there were no service charges, the arount reported should be 25% g~'eater or $72, 1L~9.73 more. :~ possible please estimate also (or give some statement of probable magnitude) of bank service charges taken on unclaimed property that would havg been reportable but was wiped out by the service chargec prior to reporting. Ic estimate that one bank in 1978 has deducted as a service charge 556,CC.CT. This applies to those check/money orders reported. Those over s16,Eo were eb$orbed and not reported~ lIe suspect that the amount absorbed and not reported could be twice as much as the amount we can identify. Therefore, there right be as much as 5100,000.00 wiped out prior to reporting it. Thea state law limit in any way the service charges that banks or other institutions may impose on dormant accounts or other unclaired crooertv? state lay smecifies chat only `lawful charges" can be an account. a recent enacted amendment, "lawful charges" were clarified. lee Section 33-21-12, 3S-2i-lLL,~33-21-19, and 33-21-23.1. Has your state asserted a claim for refund of any service charges irposci on dorrant accounts or other unclaimed propertyt If so, please explain, including an explanation of the legal basis icr the claim. we h:ve not audited any banks or ordered any charges returned. However, under Section 33-21-23.1, we have specifically addressed this area and will proceed under the provision of this law. See exhibit I. PAGENO="0954" 958 6. Other Practices a. Have there been any cases in which a bank or other savings institution has stopped paying interest on dormant savings accounts, or has reversed or taken away interest that had previously been credited to dormant savings accounts, before reporting these accounts to the state? ANSWER: Yes, see answer ~(a) example I and 2. Also, one bank has refunded, at our request, interest it has deducted or stopped payment thereon. Exhibit J. b. Have there been any cases in which a dormant account of sub- stantial size (several hundred dollars or more) was turned over to the state even though the owner of the account was living and receiving mail at the same address as shown in the records of the institution? ANSWER: Yes, there are numerous instances of dormant accounts belonging to the:_ State Government - Federal Government - Rhode Island Cities and Towns - Financial Institutions being escheated. It is apparent that the owners were never notified of the account or the escheatment. Some banks have reported accounts that belong to another bank which has an office within a few blocks of the holder. c. Have there been any cases in which banks or other savings institutions have treated their certificates of deposits as exempt from the unclaimed property laws by automatically rolling them over into new certificates whenever they mature? ANSWER: Section 33-21-36 exempts certificates of deposits. Exhibit K. This amendment took effect January 1, 1979. Prior to the law we do not have the information to answer the question. d* Have there been any other significant cases in which banks or other depository institutions have failed to classify certain property as unclaimed or dormant because (i) automatic crediting of interest or dividends was treated as customer activity; (ii) the property was believed to be exempt from the law; or (iii) of any other reason? (i) automatic crediting of interest on dividends treated as customer activity ANS'IER: Unable to answer because an audit program has not been instituted. (ii) the property was believed to be exempt from the law ANSWER: There has been a widespread confusion or lack of under- standing among the financial community of their duties and responsibilities concerning unclaimed property. This office has proceeded to meet with the members of the financial community to advise and educate them. We have recently completed a large project of listing all the unclaimed safe deposit boxes held by the banks in the state. Some boxes have been dormant since the 1900's. PAGENO="0955" 959 (iii) any other reason AiS~TER: One major credit union in 1969 transferred from a manual bookkeeping system to a coniputerized system. They can not determine the last date of activity on their accounts because the information~was not carried over. All they have is the date the acôount was placed on the computer in determining escheatment. e. `That other practices have been observed by which banks or other financial institutions seek to~evade the intent of the unclaimed property laws or evade their responsibilities to the owners of the property? Generally, in the past most institutions have not fully complied with the law because: 1) record keeping systems did not address the need to report dormant accounts 2) no significant effort was made to notify owners of the abandoned accounts 3) general lack of understanding of the law Gem you indentify any other pa~'ticular banking services or that appear to be particularly vulnerable to service oharee abuse or other abuse of public trust by the banks? appears that banks with trust departments (personal and/or corporate) and trust comoanies~are in almost every case failing to report the abandoned property in their possession. Such items as unclaimed dividends and stock and uncashed trust checks are regularly taken as the banks own income. A review of reports filed by oanks with trust departments disclosed that little trust property has been reported to the General Treasurer. In few instances trust checks were reported. No unclaimed dividends were reported. PAGENO="0956" 960 7. Unclaimed property held by the federal government: Has your state made any claims, or contemplated making any claims, for unclaimed property held by any agencies of the federal government? Please explain covering the following points: a. How much money or other property was claimed, and with which agency or agencies was the property claim filed? ANSWER: No specific amounts were claimed. An inquiry was made as to the status of abandoned accounts belonging to Rhode Island residents. We contacted the Internal Revenue Service and the Bureau of Public Debt. b. What was the federal agency response to this claim? ANSWER: Internal Revenue Service Newspaper article - Exhibit L Letter requesting information Exhibit N Response Exhibit N Newspaper article Exhibit 0 Bureau of Public Debt Letter requesting information Exhibit P Response Exhibit Q c. What did your state rely upon as the legal basis for this claim? ANSWER: The trustee for abandoned accounts belonging to Rhode Island residents was the basis upon which the General Treasurer proceeded. Effective January 1, 1980, funds held by the federal govern- ment will be specifically addressed. Exhibit R. PAGENO="0957" 961 ANTHONY J. SOLOMON ~taU' uf ~1jiibi~ Jh~Inub aiili ~rnutb TREASURY DEPARTME july 15, 1980 The Honorable Benjamin S. Rosenthal ~ ~ Chairman, Commerce, Consumer, and Monetary Affairs Subcommittee B-377 Rayburn Building Washington, DC 20515 Dear Representative Rosenthal: In response to your inquiry about major points to be included in the hearings, I would like to have the following covered if possible: - f e d e r a 1 regulatory agencies should follow the "uniform unclaimed property act" guidelines in reviewing financial institutions; - during examinations and audits of financial institutions, federal agencies should notify state treasurers of evidence of violations of the uniform unclaimed property act; - federal agencies should require strict control over dormant accounts. including requirements for specified search procedures to be followed in attempting to locate owners or heirs; and - for states, such as the State of Rhode Island, having statutes that prescribe procedures for administration of unclaimed federal accounts, the federal governmentshould cooperate in the effort to return unclaimed funds by returning federal accounts to the atates for location of owners or heirs. 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Ci PAGENO="0962" ~ ~7~J __ 6~49 ~ ~ ~ ,~J 2.. * ~ ~ 2~z~ea4 ,~- ~ 2e~ ~ ~ ~ ~ ~ ~t/~-~ 4~ ~ ~ ~ ~r~: ~L ~ ~ *. -~ F ~ 2~~Z* sz ~ Z~ ~ 42~ ~ EOWARD 1. FISHER 32 STUART STREET WESTERLY, R.~. ~ 02891 / A,T/~? /~//~8~ PAGENO="0963" 967 IndustTial National Bank, in account with of Thvvidence PAGENO="0964" 968 ~J2~irEIT E ~IiIf4 ~ INBRNJ~ *,vfl, August 31, 1979 Ms. Sam Olshansky 94 Brewster Street , R. I. Dear Ms. Olshansky: On July 26, 1979, you arplied for a lost passbook in our `ain Office. The information has been transferred to our Hope Street Office 6~r follow-through research. Your savings account was on a dormant (unused) status since p August 1968. The date of your last transaction was in June, 1960. A balance of $48.25 was transferred to the dornant account. Since that time a service charge for maintaining the account was imposed of $45.00. Which made the balance $3.25 on the date that yourinquired about your account. To ,~. bring your account up-to-date, I have reversed th. serviCe I ~ \ charges and added the interest earned on the aocount ai~ u the last transaction, which anounted to $26.82. I have added the transferred balance (original) with the interest earned amount and reopened your account with a balance of $75.07. Should you have any further questions concerning your &oooi~t please feel free to call me at the Hope Streat Office. Yours very truly, ~ Verna L. Baylor / Official Assistant PAGENO="0965" 969 ~tat~ u~ !D1?ir INTER- DEPARTMENTAL COMMUNICATION Sept.. 6, 9.79. - Service charges on dorrant accounts llv 0?shans»=y, a iaenber of this office, v~s contacted by the ~r.~sirfu? lihtional Bank about an dorrar.t account that urs set to cscheated to the State. Ear ira~irv af 7/26/7, the bank r2incainec' that there v'as a balance ~3~5 lef: in her accaunt. I sugaested that she pursue this -ac:cr fvr~her. She ir.~uired abouc ~aast interest and service charger. abe b: returned to her *~75.Q7. See attachnent. Brcakda:aa of above account: Account Eo. i'-5026836 last date of activity: June 1960 P Date placed in W0P2'AZT STATUS" August 1968 ç~48.25 -Service charres hecucted a-hile in "4crran; status" 45.00 Balance as of Z"26/79 ~ 3.25 (n~ intc~est has been earned since Abiaust lg66) .4ucust 31, 1979 -Servicer charues reversed 45.00 -Interest earned (since June 1960) . 26.u? Total amount received ~75'.O7 *iTote The arzount originally reported: ~ Anount vitheld by bank: ~7i.6'2 (service charges & interest) Sf this accc~!r.t `are eseheateci, I believe onh' ~ 7/ovid he turacaa? aaar ~a Dhc Jt~0e (~s ,.;`:.~.2 `O"~~ ha ahrarhcc~ i'z~ the ban?:. ,t~n an accaunt is alaced in WOPlaJiT STATUS" by the bank: INTEREST - STOPS ~JB 5'/'PTTfgO USA ROES - 55015 PAGENO="0966" 970 EZ~IIBIT G 183 Power Street Providence, R. 1. 02906 October 26, 1979 State of Rhode Island and Providence Plantations Treasury Department Office of the General Treasurer Providence, R. I. o2903 Re: Account of Charles A. Sylvj~ Jr. Industrial National 11ank 10,,2QGL4703 Attention: Samuel A, Lazieh Chief, Aacheat Division Dear Mr. Lazieh: I am enclosing a Xerox copy of the receipt my brother, ~ Sylvia, Jr. received for his passbook 10~.20014703, when he went to the Industrial National Bank, Riverside to have his account updated and to withdraw the total amount on September 29, 1978. At the time he was told that since th account had been inactive for a number of years, he would be fined $1.00 for each inactive and would receive a letter stating how much he would receive after all the calculations were made, including updating interest amounts and finn. lb this day he has not heard anything from the said Bank~ At the time he received the receipt, he was very angry, to him, it was one more proff of the Bank's dishonesty and underhanded ways. I have pleaded with him numerous times to either go to Anthony Solomon or give me the receipt and I would go to the Treasurer as I believed definitely that fines were illegal. }kwever he thought it was useless. It was only after I spoke to Anthony Solomon at our 5enior Citisdus meeting at the Grace Church on October 5 last that Charles gave me the receipt. As I told Anthony Solomon, the account was orened in 1926. Chacês W~9 6 years old, then, It was a school bank account, In 1953, when married, his now ex-wife convinced him it should be changed to a regular account and her name added. On the jacket, which I have, in pencil, ha has the notation $8.00 plus in the 1950's. I 4o not believe you can call this an unclaimed account nor aban- doned funds. Because of extraordinary circumstances, Charles needs this money. Right now he works overtime, to help out and is exhausted most of th~ time. Any help you may employ to get this money would be gratefruuly appreciated by us. Yours truly inc: 1 M. 4urora 5ylvia PAGENO="0967" 971 SOUTH CAROLINA ~tatr ef ~cu11 ~,sru1tna ~nutIi ~arnIina ~iax QlntnmthMnu COLUMBIA ~ C SSS~. ~ jo+*~ H. LRFIT1C JR ~ `~` CHARLES N. PLOWDEN (` ~ ROBERT C. WASSON October 26, 1979 ITD:TRW:tjc :-~~rable Bar.jamin S. Rosenthal Da~ar~anr of Ccerce, Consumer,and ~metar Affairs Subcomittee 3-377 Rayburn Building washington, D.C. 20515 Dear ~r. Rosenthal, Please find enclosed all information which we have available regarding the Unclaimed Property Questionnaire for the State of South Carolina. 1. Unclaimed mrooertv statute, regulations, and administrative program: a. (i) By definition, "Banking organization" means any bank, trust ccmpany, savings bank or~ land bank engaged in business in this State. Demand, savings or matured time deposits made in this State with a bankit~g organization are subject to the Un- claimed Property Act. "Financial organization" means any savings and loan association, building and loan association, industrial loan company, small loan company, credit union or investment company engaged in business in this State. Any funds paid in this State toward the purchase of shares or other interest in a financial organization or any deposit, along with interest and dividends, made in this State are subject to the Unclaimed Property Act. Also, any sum payable on checks certified in this State or on written instruments issued in this State on which a banking or financial organization of business association is directly liable, includIng by way of illustration but not of limitation, certificates of deposit and travelers' checks. (ii) Only tangible property or sundry personal writings of no value are excluded. (iii) The holding period is twelve (12) years on all above property except as listed in the last sentence of a. (i) above, which would be fifteen (15) years. (iv) The State role is custodial. (v) No interest is paid on Unclaimed Property once the property is delivered to the State. 67-'s'sO 0 - 81 - 62 PAGENO="0968" 972 -2- 1. a. (vi) By Statute: All service charges on accounts in banks must be uniform within classes for all accounts, no service charges in excess on one dollar and fifty cents annually may be made on accounts which have been determined to be inactive for a period of twelve (12) months. b. We have no administrative rules or regulations regarding this. c. Auditors for the S.C. Department of Insurance require all unpaid items to be held in a liability account (with an itemized break- down by name) until reported and paid to the owner or the S.C. Tax Commission. d. (i) Owner's names are advertised (according to the last known add- ress) in a newspaper of general circulation in each county at least once per week for two (2) successive weeks. (ii) The advertisements are placed by the State. (iii) Names and addresses, when available, are given. (iv) Property less than twenty-five (25) dollars is not advertised unless deemed to be in the public interest. (v) Only items currently reported are advertised. (Copy of adver- itsement enclosed). e. A notice is mailed to owners, with a last known address, if the property value is twenty-five (25) dollars or more. f. The maximum compensation for locating abandoned property is five (5) per cent of the value returned to the owner. Violators shall be guilty. of a misdemeanor and fined not less than his fee nor more than ten (10) times such amount or imprisoned for thirty (30) days, or both. g. "Abandoned" would be determined in various code sections by lack of specified activities in the account for specified lengths of time. For financial institutions, there would be no "contact" unless the owner has within the past twelve (12) years: (a) Increased or decreased the amount of the funds or deposit, or presented an appropriate record for the crediting of interest or dividends; or (b) Corresponded in writing with the financial organization concerning the funds or deposit; or (c) Otherwise indicated an interest in the funds or deposit as evidenced by a memorandum on file with the financial organization. Any other assumed "contact" would not be permissable. h. Field audits are conducted at the time of corporate income tax audits, bank tax audits, savings and loan audits and insurance com- pany audits. (i) The above mentioned audit program has just recently been incorp- orated into our system. (ii) There are fourteen (14) auditors with the budget varying annually. PAGENO="0969" 973 ~1atr of ~DU117 ~zr~!tna ~nutt~ QIarLtliua ~ax Q7Ltmmthøinu ROSERT C. WASSO~~ JOHN H. LAFITTE. JR CHARLES N. PLOWDEN ROBERT C. WASSON COMMISSIONERS NOTICE OF NA1~S OF PERSONS APPEARING TO BE OWNERS OF ABANDONED PROPERTY Notice is hereby given that a report has been filed with the S.C. Tax Coiss.ion indicating that the within named person(s) is(are) claimant(s) to intangible property (Checks, Cash, Savings Accounts, etc.). If proof of claim is not presented by the owner to the Ho~lder reporting the property to the Tax Coimiission within sixty-five days from the date of the second published notice, the abandoned property will be placed, not later than eighty-five days after such publication, in the costody of the S. C. Tax Coission as A~in1strator, for the State of South Carolina, until such time as a rightful owner makes claim thereto. Written notice will be furnished claimants shown in this notice, or their hei~s, at the last known address reported. Further information may be obtained by contacting the S. C. Tax Conmiission, P.O. Box 125, Columbia, S.C. 29214. - N~~S AND ADDRESSES: (See Attached List) PAGENO="0970" a. Numbers of institutions reporting: All institutions - total Banks Savings and loans Brokers Insurance companies All others b. Amount of property reported: All institutions - total Banks Savings and loans - Brokers Insurance companies All others c. Amount of property remitted: All instututions - total Banks Savings and loans Brokers Insurance companies All others d. Number of individual accounts in excess of $500. All institutions - total Banks Savings and loans Brokers Insurance companies All others e. Number of names advertised: 3,986 4,942 974 -3- 1. h. (iii) Life insurance companies, banks and savings and loans have been audited. (iv) Corporations have not been audited for unclaimed property in the past. (v) Items checked in field audits are liability accountm and dor- mant accounts. No audit instructions are available for our in- formation. (vi) Information from S.C. Department of Insurance audits are avail- able for our information. i. No specified budget has been set. There are two (2) part-time employees, plus field auditors. 2. Amounts of unclaimed property reported and delivered to owners: (1976 not readily available) 1977 386 41 22 3 114 206 $425,649.22 $85 ,479.71 $37,531.26 $583.56 $93,311.79 $208,742.90 $328,468.31 $48,276.94 $13,305.06 $256.60 $23,312.20 $243,317.51 1978 442 42 32 6 131 231 $457,059.98 $183,049.42 $48,488.67 $633.65 $192,468.53 $32,419.71 .* $309,444.52 $124,871.75 $15,434.19 $633.65 * $7,190.42 $161,772.77 less than 50 less than 50 * Life insurance companies reporting for 12-31-78 have not yet remitted funds to South Carolina. PAGENO="0971" 975 -4~- 2. f. Dellar armunts returned to ~wners: $97,180.91 not complete g. Delivery percentage: 26% h. Amounts remitted minus claims paid during year: $14,862.36 $8,760.76 i. Total returned to owners for the year: $112,043.27 - 3. Brokerage firm renorts: a. Under South Carolina law, this information is confidential. b. In 1978 there were six (6) brokerage firms reporting a total of 34 accounts (23 had names, 11 were unidentifiable). The accounts totaled $633.65. This is about the average reported each year by brokerage firms. c. Of 34 accounts reported for 1978, 23 had names and 11 did not. 4. Ccrmliance: a. (i) National banks - fair (ii) State banks - complete (iii) Federal savings and loan associations - fair (iv) State savings and loan associations - complete (v) Federal credit unions - fair (vi) State credit unions - fair (vii) Securities brokerage firms - poor (viii) Nutual funds - fair (ix) Insurance companies - fair (x) Non-financial corporations - poor b. We have just begun to incorporate abandoned property into our Field Audit Section. The only significant audit thus far included uncashed checks held by a large South Carolina life insurance company. We obtained our initial information from the South Carolina Department of Insurance and the audit resulted in securing $44,000.00 in unclaim- ed property. c. Due to our inexperience in~abandoned property audits, this is dif f- icult to estimate. We have~found that many institutions have re- worked their computer programs to obtain abandoned property inform- ation. We therefore assome that they intend to comply completely with the law. 5. Service charges: a. We have little information regarding service charges. B. Service charges by banks occur only occasionally. c. By South Carolina law, only banks can impose service charges. PAGENO="0972" 976 -5- d. Customers should be notified in advance. e. Service charges are limited to $1.50 per annum. f. None over $1.50 per annum. g. Very seldom have I seen this occur. Maximum service charge by a bank would normally be $18.00. h. Total service charges for 1978 were $259.41. i. It appears~, in most cases, that service charges are reasonable and would wipe out only accounts under $18.00. j. By statute, only banks may impose service charges and these are limited to $1.50 per annum. k. No. 6. Other Practices: a. None that we are aware of. b. No. We have contacted some owners by mailing notices to a correct last known address but these persons claimed their property before it was remitted to the State. c. No. d. No. e. None, that we are aware of. f. No. 7. Unclaimed Property held by federal government. a. We made a claim in 1975 for approximately $4,600.00 for savings bonds with the U.S. Treasury. This claim was denied. b. They responded that they had apportioned unclaimed property among the States in 1971 and 1972 and would hold the balance for claimants "without regard to any laws of the States or other jurisdictions con- cerning disposition of unclaimed or abandoned property.". c. South Ca~rolina S~atutes. Submitted by: Jj~-- ~ * T. R. Wilson Assistant Supervisor PAGENO="0973" 977 TENNESSEE QUESTIONNAIRE RFI~PONSE U-" TENNESSEE HAF.L&N SIATEEWS TREASURY DEPARTMENT REBECCA S. ROCBFORD UNCLAIMED PROPERTY DIVISION DIRECTOR ARNOLD TACNE1-r STATE CAPITOL NASHVILLE. TENNESSEE 37219 SIR-741-047E Noven.Ser 2, ~ The Ronorable Benja.nin S. Rosenthal ~ 5 1979 Chairnan Cmnn~erce, Consuner and ~onetary PAPA Affairs Subconittee ~ 5-377 Rayburn Euildir.g - ?7aa~iir.gtcn, D.C. 20515 The: Thairnan R:aenthal: Ra:lcaed is Tennessee's response to your subconittee's unclaimed e:cmerty guesticnnaire. Tennessee's unclaimed property law was passed in 1978, with the first reports due !~ay 1, 1979. Since we are relatively new in the unclaimed property field, our responses cay not be as useful as those of other states wMch have had nore adninistrative experience in this area. In addition to enclosing cur response, we are including a copy of our law and our rules and regulations. If you have any questions or if further information is desired, please Very truly ~ours, Rebecca S. Rochford RSR:ep Enclosure PAGENO="0974" 978 RESPONSE BY STATE OF TENNESSEE TO UNCLAIMED PROPERTY QUESTIONNAIRE 1. a( i) Tennessee's un~laimed property law follows the uniform law with respect to types of property and institutions covered. (ii) Our law has no specific exclusions. (iii) Our holding preiod is seven (7) years for all types of property with exception of traveler's checks (15 years), safe deposit boxes (2 years), and property resulting from corporate dissolution (immediately). (iv) Our law is purely custodial. (v) All funds which are interest-bearing when they are turned over to us are credited with interest when a claim is paid. Interest is based on the stated rate, compounded annually. b. We have attached a copy of our rules and regulations which became effective January 1979. Regulations l700-2-l-.09 through l700-2-l-.l5 specifically deal with banks and financial organizations. c. The unclaimed property law provides that the holder must attempt to contact any owner whose whereabouts are known. Regulation 10 specifies the lawful deductions which may be withheld by banking or financial organizations and regulation 22 prohibits holders from acting to circumvent the law. The intent of Regulation 22 was to prevent holders from placing unreasonable charges on accounts. d. The state advertises the names and last known addresses of all owners of property valued at $25 or more in a newspaper of general circulation in the Tennessee county of the last known residence. If no address is reported or if the last known address is outside Tennessee, the owner's name is published in the Tennessee county where the holder is located. Names are published only in the year in which they are reported. We have not enclosed a copy of our most recent advertising notice because ninety-five (95) different notices were printed. e. Notices are mailed to the last known addresses of all owners of property valued at $25 or over by the state. f. No g. Property is deemed abandoned if there has been no contact with the owner for the statutory period. Contact with respect to safe deposit boxes means the payment of rent, and with respect to traveller's checks it means the sale. Our regulations (.19) provide that a first-class mailing to an owner sent in the normal course of business which is not returned to the holder is considered to be contact and will prevent abandonment from being presumed. h. This is the first year for filing reports under our law and no audit procram has been officially established. Presently state bank examiners arc including a review of unclaimed property reports in th~i~ audit. of banks. We anticipate using other state agencies which routinely audit various holders in our er~forcement efforts. PAGENO="0975" 979 Page Two i. Our administrative budget for the 1979-80 fiscal year is approximately $50,000. The department has four (4) employees. 2. As stated previously, Tennessee's first unclaimed property reports were filed in 1979. Approximately 750 holders reported property, the total value of cash items reported was approximately $5.1 million dollars. All funds are due in our office by November 22, 1979 and we will not know until that time how much of the property has been claimed. This year we advertised approximately 30,000 name~ statewide. 3. ~errill Lynch, Pierce, Fenner and Smith, Inc. is the only brokerage firm which filed a report with us. They reported a total of $15,334.41 and 35 shares ci stock. 76 owners were reported by name of cash items, 12 cash items were due to unknown owners and 5 owners were reported by name with security positions in brokerage accounts. 4. The following is a listing showing t~e precentage of holders filing reports (either positive or negative) compared with the total number of holders, by classification: Business Type Compliance Banks (both state and federal) 45% Credit agencies other than banks (included savings 25% and loans and credit unions) Security and Cc=cdity Brokers 18% Insurance Companies 50% Average of All Nolders 57% ~ce estimate that the various business entities are still holding unclaimed property as follows: Business Type Un-Reported Property* Banks $ 4.5 million Credit Agencies other than banks $ 1.1 million Security and Co.odity Brokers $ .07 million Insurance Companies $ .2 million All other business types $ 1.33 million * These estimates are based on projections of the total amounts reported and the total of entities reporting by business type. 5. We do not have sufficient experience to answer this question. Our regulations do attempt to control both service charges and dormant account charges (see Regulations .10 and .22). 6. We do not have sufficient experience~ to answer this question. Regulation .11 deals with abandonment of certificates of deposit in an attempt to resolve any cuestions concerning the dormancy period. PAGENO="0976" 980 Page Three 8. Again, our experience in the unclaimed property area in Tennessee is limited since this is the first year for reporting under our law. We feel that federal regulation, legislation and/or assistance would be helpful in the following areas: a. audit by federal employees for compliance with unclaimed property laws by their regulated industries; b. specific regulation of dormant account charges made by banks; c. definition of the owner of a cashier's check; d. recognition of the federal government's responsibility to comply with state administered unclaimed property laws (including Social Security and Internal Revenue Service funds); and e. recognition by the federal government of the states' rights to exercise ownership of negotiable items in their custody. PAGENO="0977" 981 ADVERTISBMENT PAGENO="0978" 982 PAGENO="0979" 983 PAGENO="0980" 984 UTAH THE STATE OF UTAH BETTY M.JOHNSON OFFICE OF THE STATE TREASURER SALT LAKE CITY, UTAH 84114 October 17, 1979 Congressman Benjamin S. Rosenthal Chairman, Commerce, Consumer and Monetary Affairs Subcommittee of the Committee on Government Operations Rayburn House Office Building, Room B-377 Washington, D.C. 20515 Dear Representative Rosenthal: You will find enclosed our answer to your questionnaire regarding unclaimed property. Since you wanted the report expeditiously we have supplied as much information as we can within the time available. We hope it and the accompanying documentation will be helpful to you and that Congress can pass a bill to return unclaimed property to the states. Thank you for your interest and assistance. Sincerly, ~( Harvard R. Hinton Deputy for Unclaimed Property RECEIV~ ends. 2 cC1. LUctc~~'~.-. ~Ff1P SI PAGENO="0981" 985 STATE OF UTAH U~~CLA~iED PROPERTY QUESTIONNAIRE 1. a. Utah passed the Uniform Disposition of Unclaimed Property Act in 1957. It has been amended a couple of times since then. A copy of the law and amendments is enclosed. The law applies to banks and other financial institutions and would include trust companies, savings and loan associations, securities, brokerage firms, mutual funds, credit unions and imsurance companies. (i) Set forth in attached form ST No.106 (ii) Tangible personal property covered seems to be limited by Section 78-44-2(4) (iii) Set forth in form ST No.106 (iv) State Treasurer becomes custodian of unclaimed property, not owner. (v) 1o interest is paid. (iv) ~ational as well as state banks report under the Utah Act. b. Old regulations in back of enclosed pamphlet containing ~Jmcaimed Property Act. New regulations presently being prepared. c. Ir.sofar as we know other Utah~ laws do not regulate service charges, dormant deposit accounts, or other unclaimed pro- d. The names and addresses, if available, of owners of unclaimed property turned over to the Treasurer are listed in a legal advertisement if the amount is $25.00 or more. (i) Ve have advertised in the Salt Lake Tribune, the news- paper with the largest circulation in the state. It is published once a week~ for two consecutive weeks. (ii) The advertisements are placed by the Unclaimed Property Division of the State Treasurer's office. (iii) Addresses are used if available. (iv) There is no coverage in advertisements of amounts under $25.00. (v) Advertisements include only the owners of unclaimed property that is being reported for the first time. To attempt to include reportings from prior years would be far too costly. PAGENO="0982" 986 -2- e. We encourage banks and other holders to make diligent efforts to locate the owners-by letter orthrough tele- phone calls prior to reporting to us and send in only the ones they can't locate. The State also sends out a notice to owners in the form of a letter to the last known ad- dress before publication. f. `Bounty hunters" have not been a problem in our state. We have had numerous inquiries but we have no lists to give them and we refuse to allow them to personally search our records. g. For explanation of what is "abandoned" or "unclaimed" see Sections 78-44-2, 3, 4, 5, 6, 7, 8 and 9. A bank or other business cannot presume that there is a contact if mail is sent to the owner and not returned. To prevent abandonment there must be some affirmative action on the part of the owner. h. Utah at this time does not conduct field audits or on-site compliance investigations. Our policy has been to work with companies on a voluntary compliance basis. We expect an occasional lawsuit to be necessary when cooperation is refused. The State Auditor will cooperate and help us with an assigned auditor in case it becomes necessary. Also the auditor's office by statute must respond to our requests to aid in enforcing collections. Utah joined with a group of other states in having a national CPA firm (Alexander Grant & Company) perform a joint unclaimed property audit on some twenty large national corporations. The results were somewhat disappointing but such audits alerted the business community to the determinations of states to move forward in securing correct unclaimed property reports. i. Unclaimed Property budget for fiscal year 1979-80 is $84,800.00. Three employees in department. 2. a. See attached b. " c. d. " e. " f. " g. " h. " PAGENO="0983" :nsurance cccanies others c. ~.-cur.t of srocertv renitted: ~n excess of t5~J institutions can~s Brokers Insurance companies All others luber of flares advertised: r ;/.5~ 1978 4 /,_~ ov;',1o7~ In / 987 3a 2. Amounts of unclaimed property reported and delivered to owners: a. Numbers of institutions reporting: All institutions inucrance ccnrenieo b. A~ncunt of sropertv resorted: All institutions 1976 / ~_:3 1977 o ~ -~-~ ~. ,.x~ ( cf~ ~ / AU institutions nSflK5 tr:~e-s of individual acccunts C. _____________________ :sUsr e-ccnts returned to owners: eliv er:oercentace: A~~jnts renitted ninus clams C' ~ -7.--,-- 2 ~-` C- *-~ 67~14~O 0 - 81 - 63 PAGENO="0984" *988 -3- 3. National brokerage firms reporting funds: (only one reports on an annual basis) Merrill Lynch, Pierce, Fenner & Smith 1978 - Reported $1,259.46 - Remitted $766.52 1977 - Reported $ 128.11 - Remitted $ 32.25 All reported with names and addresses. No small aggregate sums. 4. a. Compliance (i) National Banks - Good Compliance (ii) State Banks - Good Compliance (iii) Federal Savings & Loan Association - Fair Compliance (iv) State Savings & Loan Association - Fair Compliance (v) Federal Credit Unions - Poor Compliance (vi) State Credit Unions - Poor Compliance (vii) Securities Brokerage Firms - Poor Compliance (viii) Mutual Funds - Poor Compliance (ix) Insurance Companies - Good Compliance (x) Nonfinancial Corporations - Some Good - Some Poor b. In years past this office did not have the continuity of staff to contact corporations and let them know what was expected of them. Lately forms and instructions have been sent out and compliance is beginning to improve. The above ratings may be unfair since some of the businesses may be doing business in other states and the law is still somewhat uncertain as to which state or states they should be reporting to. c. We have no way at present to estimate a probable amount of unclaimed property that is not being reported. We think it would be considerable. 5. a. Some information concerning service charges imposed by banks and other institutions come to our attention. It has come from several sources, customer complaints, reports filed and from interviews with company officials. b. Among banks the imposition of service charges on dormant accounts is a general practice but the amount charged differs from bank to bank. c. Some companies supplying money orders make a service charge on uncashed orders. d. Advance notice concerning service charges generally is inadequately given. PAGENO="0985" 989 -4- e. Service charges imposed by banks vary in amounts from $1.00 per month to $1.00 per year. Money orders sold by Travelers Express Company charge $.25 per month on dormant uncashed orders, Same as above. g. Yany small accounts are "service charged" out of existence and not reported. h. Amount unknown - no figures are available i. Since accounts wiped out are not reported we have no way of estimating how much would have been reportable. j. Yo specific limitation. k. Yes. Against Travelers Express Company, Inc. on dormant money order, service charges. They reluctantly paid it in but th-eatened suit to get it back. 6. a. Yo audits have been made to determine if payment of interest is stopped on dormant accounts. A lump sum is sent to us along with the name of the owner. Supposedly it includes some interest. b. Yes. Some banks were not careful to check, or to search for owners. We have pointed out this problem to offending banks and they are now doing better. to our knowledge. This presents an interesting question which we will endeavor tojook into. d. Ye fownd some banks were reporting on a limited number of items rather than including everything that should have been reported. As to some items they may~ have felt the items were exempt from the law. Also in years past when their filings were not challenged they made no effort to change. e. In the past inadequate controls were placed on unclaimed safe deposit boxes when boxes were opened and removed and stored for future delivery as unclaimed propert. f. No. PAGENO="0986" 990 7. Utah has made numerous requests to agencies of the federal government to claim unclaimed property being held or ad- ministered by those agencies. These agencies include the Internal Revenue Service as to unclaimed tax refunds, the Treasury Department as to cashing in of unclaimed government bonds, U.S. Department of Labor as to unpaid wages, and the Department of Health, Education and Welfare as to uncashed medicare and medicaid payments. All such agencies have declined to turn over unclaimed funds to the Utah State Treasurer. A complaint has been drawn up by the Utah Attorney General's office to sue the IRS for uncashed tax refund checks. It has not yet been filed and as of now we don't know when the filing date will be. We understand the Attorney Generals office wants more time to do some more legal research before the filing. Copies of our correspondence with federal agencies is attached for your study. Our legal position and demands are set forth in some of the correspondence. 8. a. We feel the federal agencies should turn over unclaimed funds and property to the respective states where the owners had a last place of residence and in keeping with the state unclaimed property laws. b. All of the federal agencies fiercely cling on to unclaimed funds and refuse to part with it for varying reasons. Federal corrective legislation should be passed by Congress which requires all federal agencies to turn over to the respective states all unclaimed and escheated funds which have been held more than a given number of years. And that each year thereafter an accounting must be made so that no unclaimed funds go into the federal treasury. It would also be a good thing if federal banking laws would require banks to pay interest on dormant accounts and that service charges on dormant accounts be clearly defined and severely limited. PAGENO="0987" 991 VERMONT QUESTIONNAIRE RESPONSE STATE OF VERMONT ~919 0 FlOE OF THE STATE TREASURER MONTP~LIER 05602 October 31, 1979 Honorable Benjamin S. Rose~ithal chairman, Coerce, Consumer, and i~etar~: Affairs Subcooit~ee Rayhurn house Office Building, Room B-377 washington, D.C. 20515 Dear hr. Rosenthal: Enclosed are the answers to the questionnaire, which I hope you will find helpful in bringing legislation to pass that will give the residents of the states the ability to receive property that they have lost or misplaced which originated with the Federal Government. If I may be of further assistance, I will be glad to do so. When you have accumulated the results of this questionnaire, would you please see that Vermont's two Senators and Representative receive a copy. * Sincerely, /l Emory A.! Hebard State T~easurer EAH/lm Enclosures PAGENO="0988" 992 VERMONT 10/31/79 Unclaimed Property Questionnaire (Please send response to Comerce, Consumer, and Monetary Affairs Subcomniittee; B-377 Rayburn Building; Washington, D.C. 20515.) 1. Unclaimed property statute, regulations, and administrative program: a. How does the state unclaimed property or abandoned property statute apply to banks and other financial institutions (including trust com- panies, savings and loan associations, securities brokerage firms, mutual funds, credit unions, and insurance companies)? PLEASE SEE ATTACHED STATUTES In particular, please specify: (27 V.S.A. ~ 1208 - 1236). (i) the types of property and institutions covered (ii) any types of property or institutions specifically excluded (iii) the holding period which must elapse before the property is reported to the state (iv) whether the role of the state is purely custodial, or whether the state assumes ownership of the property (v) whether the state pays interest on funds under its custody (vi) any other important characteristics of the law as it applies to financial institutions. b. What administrative rules or regulations of your office or agency apply to the handling and reporting of unclaimed property to the state by banks and other financial institutions? Please attach a copy of any such admin- istrative rules. PLEASE SEE ATTACHED REPORTING FORMS. c. Are there any provisions of your state's other banking, insurance, or general comerce laws or regulations that impose certain requirements on how banks and other financial institutions must handle dormant de- posit accounts or other unclaimed property, especially requirements for the protection of the rights of the owners of the property? WE HAVE NO SPECIAL REGULATIONS AS TO HOW BANKS SHALL HANDLE DORMANT ACCOUNTS. (This and the previous question would cover limitations on service charges, requirements of prior notice to owners, requirements con- cerning efforts to locate owners, for example.) d. What is the practice in your state as regards advertising the names of owners of unclaimed property being turned over to the state? In parti- cular: /IN ALL NEWSPAPERS IN THE STATE. /Certified mail notices for ove~0 (i) In which newspapers and in which other media are the names advertised? (ii) Who places the advertisements, the state or the individual institutions holdin the ro ert THE STATE. WHEN KNOWN, ADDRESSES (iii) Are addresses given in the advertisements, or only names?A5 WELL AS NAMES. (iv) Do the advertisements cover all amounts of unclaimed property, or only property whose value elceeds a certain minimum? If there is a minimum, what is the minimum?$25.00 or over (Please see 27 V.S.A. ~1221(c). (v) Do the advertisements include only the owners of unclaimed property that is being reported for the first time, or do they include also owners of property still unclaimed from reports of one or more earlier years? FOR THE FIRST TIME. IF AVAILABLE, PLEASE SUPPLY A COPY OF YOUR STATE'S MOST RECENT ADVERTISING NOTICE. (PLEASE SEE ATTACHED COPY OF RECENT AD.) e. In addition to advertising the names in newspapers and other media, are any other efforts regularly made (either by the state or by the holders acting in compliance with state requirements) to locate the owners of unclaimed bank accounts and other financial property? NO. f. Are there any state limitations on the actions of `bounty hunters who seek out the advertised owners of unclaimed property in the hope of qettinq a share of the property? THE STATE PAYS TO ONLY THE OWNERS OP UNCLAIMED ~ROPERTY. IF A THIRD PARTY BECOMES INVOLVED, HIS PAY IS A HATTER BETWEEN THE ~OUN~Y HIVNTER" AND THE UWIQIR. g. mat is tne oefinition or asandoned or unclaimed in your state? In financial institutions, is property presumed abandoned when there has been no contact' for a certain number of years? How is `contact" de- fined? If mail addressed to the owner is not being returned by the Post Office as undeliverable, can the bank or other institution presume that there is still "contact" and that the property is not abandoned? PLEASE SEE STATUTE. PAGENO="0989" 993 h. Does your office (or so~o other state office acting in cooperation with your office) conduct field audits or on-site compliance investigations devoted exclusively to checkin~ compliance with the unclaimed property 1 w ? If ~ WITHIN THE LAST FEW YEARS VEEW~~I ~ COUPOEATED a 5 50 WITH OTHER STARES FOR. JOINT. INV5STIGATIONS. (i) How many sucn tie 5 ausits or investigations are conducted each year? (ii) How large is the staff assigned to this function, and what is the budget available for this work? (iii) What types of institutionshave been given field audits within the past three years? (iv) What types of institutions, if any, have not been checked for com- pliance in this way because of lack of authority to conduct field exa.~inotions or bacause of some other legal inpediment? Please elaborate. (v) What ite~s are checked In such a field audit? (A copy of your audit promra~ or instructions would be satisfactory.) (vi) If the field audits are perforned by another state office or agency, which office or agency is that? i. What is your state's budget for adninistration of the unclaimed property program? How many full-time (or full-time-equivalent) persons are assigned to the unclained property program? $03,500 is the budget. A1o~ost one full-tine person is assigned to the unc1ai~ed property progran. PAGENO="0990" 994 3 VEPNONT 10/31/79 2. Amounts of unclaimed property reported and delivered to owners: PLEASE SEE PAGE 3a OF THIS QUESTIONNAIRE. [WHERE EXACT FIGURES ARE NOT AVAILABLE, PLEASE PROVIDE AN ESTIMATE IF AT ALL POSSIBLE. ESTIMATED FIGURES MAY BE MARKED WITH "e". FOR YOUR CONVENIENCE, A BLANK FORM IS ATTACHED ON WHICH THE REQUESTED INFORMATION CAN BE ENTERED.] For each of the most recent three years for which information is available, please report, by type of institution: a. The numbers of institutions filing unclaimed property reports in which some unclaimed property was reported. b. The dollar amounts of unclaimed property reported. c. The dollar amounts of unclaimed property remitted to the state. d. The numbers of individual unclaimed property accounts reported with values in excess of $500. (Even rough indications of numbers, such as "none', "less than five", "more than 20", etc., would be helpful if exact figures cannot be given.) The types of institutions to be reported separately above are (i) banks (including savings banks and trust companies), (ii) securities brokerage firms, (iii) insurance companies, and (iv) all other firms. (If infor- mation is available separately for savings and loan associations, credit unions, mutual funds, and nonfinancial corporations, that would be of interest.) In addition, for each of the most recent three years, please report the totals of the following (a breakdown by types of institution is not re- quested here): e. The number of names or unclaimed accounts advertised by the state or (if relevant) by the holders. f. The dollar amounts of unclaimed property reported to your office that has subsequently been returned to the owners, either by the holders or by the state. g. The delivery percentage, showing what percentage of reported funds was later returned to the owners. h. The net dollar amounts of unclaimed property remitted to the state in that year, minus claims paid by the state in that year. PAGENO="0991" 995 VERMONT 3a 10/31/79 2. Amounts of unclaimed property reported and delivered to owners: 1976 1977 1978 a. ~u15ers 01 ~nst~tut1ons reporting: All institutions 141 173 162 Banks 5 1 2 Brokers 1 2 Insurance companies 51 63 65 All others 85 108 93 b. A~mnt of crocerty recorted: IS ~OT AVAILABLE. All institutions S198,299.39 $81,614.27 $67,219.34 Banks Brokers Insurance companies All others c. kcunt of oro~erty remitted: IS IS)I AVAILABLE. All irs:i:~iticns S184,127.O2 $68,053.00 $59,827.72 Brokers Insurance companies All others d. Uumber of individual accounts in excess of $500 All institutions 35 17 13 Banks 1 Brokers 1 Insurance companies 1 2 All others 33 17 10 e. Number of names advertised: 516 799 699 f. Dollar amounts returned to owners: $34,704.24 $26,596.21 $15,813.36 Delivery oercentage: 18.8% 39.1% 26.4% n. A-.ounts remitted minus claims $149,422.78 $41,456.79 $44,014.36 PAGENO="0992" 996 VERMONT 10/31/79 4 -- 3. Brokerage firm reports; PLEASE SEE QUESTIONNAIRE, 2a. For each of the most recent three years, a. Please identify the names of the individual securities brokerage firms that filed unclaimed property reports showing positive amounts of un- claimed property. b. For the aggregate of all reporting bokerage firms and for each reporting brokerage firm, please give the dollar amounts of cash, dollar values or listings of securities reported, and numbers of individual accounts reported. c. If these figures are available, or if an estimate can be constructed, please give the breakdown of the aggregate cash reported by all broker- age firms as between cash belonging to individual named owners and cash without names. [Copies of the actual brokerage firm reports, with the names and addresses of the individual account holders deleted or blacked out for privacy, would be a satisfactory response to this question.] 4. Compliance a. How would you describe the degree of compliance with your state's unclaimed property laws and related regulations by (i) national banks, (ii) state banks, (iii) federal savings and loan associations, (iv) state savings and loan associations Cv) federal credit unions, (vi) state credit unions, (vii) securities brokerage firms, (viii) mutual funds, (ix) insurance companies, and (x) nonfinancial corporations? For each type of institution, please indicate whether you find that these institutions are in substantially complete compliance, show fair compliance, or show poor or no compliance, and please indicate what factors contribute to this evaluation. b. How have field audits, investigations, or litigation altered the amounts reported to your office? Please cite individual cases of audits or in- vestigations performed or litigation conducted and the additional amounts of unclaimed property reported as a result of audit, investigation, or litigation. WHERE POSSIBLE, IDENTIFY BY NAME THE INSTITUTION INVOLVED IN EACH CASE CITED; IF FOR ANY REASON THE IDENTITY OF THE INSTITUTION CANNOT BE GIVEN, THEN PLEASE SPECIFY THE TYPE OF INSTITUTION. c. If possible, please give a rough estimate of (or indicate in some other way the probable amount of) the additional unclaimed property in (i) banks and other depository institutions, (ii) brokerage firms, (iii) insurance companies, and (iv) nonfinancial corporations that is not being reported but tha.t would be reported if there were substantially complete compliance with the letter and intent of the law. a. Vermont is a small state, and the degree of cooperation between the various businesses and the State of Vermont is good. By and lar~ge we think that the compliance has been good. b. Except for field audits in cooperation with other states, we do none, and there has been no litigation. c. Please see 4b. PAGENO="0993" 997 VERMONT 5 10/31/79 5. Service Charces a. Have you info~ation about service dharges imposed by banks and other financial institutions on dormant accounts and other unclaimed property? ~;hat scurces does this information core from: customer complaints, re- ports filed with the state, audits or investigations, or other sources? b. knong banks, does the imposition of service charges on dormant accounts and other unclaimed property appear to occur only occasionally or to be a general practice? c. Arcong which other types of institutions do you find that service charges have been imposed on dormant accounts or unclaimed property? d. In most cases are the customers properly notified in advance that service charces will be imposed if their accounts remain dormant? larce are the typical service charges imposed by banks? by other institutions? Hc;~ larce have the service charges been in unusual or extreme cases? PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCW~EUTS THAT SHOW THE SERVICE CHARGES IMPOSED IN UNUSUAL OR EXTREME CASES. g. Have there been any cases in which unclaimed property that would normally have been reportable to the state after a certain number of years was entirely taken into income by the financial institution holding it, either through service charges or in sore other way? P:EASE DESCRIBE IIDIVIDUAL CASES I~i DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES CF EA~;K RECORDS, REPORTS, COHPLAINT LETTERS, OR OTHER DOCUMENTS THAT iLLJSTF~PTE THIS SITUATIOW. h. If possible, please estimate in rough magnitude the total dollar amount of service charges that you believe was imposed by all banks in your state on the unclaimed property they reported to you in 1978 (~i~the most recent year for which figures are available). i. If possible, please estimate also (or give some statement of probable magnitude) of bank service charges taken on unclaimed property that would have been reportable but was wiped out by the service charges prior to reporting. j. Does state law limit in any way the service charges that banks or other institutions may impose on dormant accounts or other unclaimed property? k. Has your state asserted a claim for refund of any service charges imposed on dormant accounts or other unclaimed property? If so, please explain, including an explanation of the legal basis for the claim. ALTHOUGH THE BANKS IN VERMONT WOULD LIKE TO DO THIS, THE COMMISSIONER OF BANKING REFUSES TO ALLOW THEM TO DO SO. PAGENO="0994" 998. VERMONT 6 10/31/79 6. Other Practices a. Have there been any cases in which a bank or other savings institution has stopped paying interest on dormant savings accounts, or has reversed or taken away interest that had previously been credited to dormant savings accounts, before reporting these accounts to the state? NONE :INS0FAR.AS~ WE KNOW. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF. POSSIBLE, PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THIS SITUATION. b. Have there been any cases in which a dormant account of substantial size (several hundred dollars or mo.re)was turned over to the state even though the owner of the account was living and receiving mail at the same address as shown in th~ records of the institution? NONE INSOFAR AS WE KNOW. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. c. Have there been any cases in which banks or other savings institutions have treated their certificates of deposit as exempt from the unclaimed property laws by automatically rolling them over into new certificates whenever they mature? NONE INSOFAR AS WE KNOW. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. d. Have there been any other significant cases in which banks or other depository institutions have failed to classify certain property as unclaimed or dormant because Ci) automatic crediting of interest or dividends was treated as customer activity; (ii) the property was believed to be exempt from the law; or (iii) of any other reason? NONE INSOFAR AS WE KNOW. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. e. What other practices have been observed by which banks or other financial institutions seek to evade the intent of the unclaimed property laws or evade their responsibilities to the owners of the property? NONE INSOFAR AS WE KNOW. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL AND, IF POSSIBLE, PLEASE SUPPLY COPIES OF REPORTS, BANK RECORDS, COMPLAINT LETTERS, OR OTHER DOCUMENTS THAT ILLUSTRATE THESE SITUATIONS. f. Can you identify any other particular banking services or programs that appear to be particularly vulnerable to service charge abuse or other abuse of public trust by the banks? NONE INSOFAR AS WE KNOW. PLEASE DESCRIBE INDIVIDUAL CASES IN DETAIL. 7. Unclaimed property held by federal government: Has your state made any claims, or contemplated making any claims, for unclaimed property held by any agencies of the federal government? Please explain, cover- ing the following points: a. How much money or other property was claimed, and with which agency or agencies was the property claim filed? b. What was the federal agency response to this claim? c. What did your state rely upon as the legal basis for this claim? Last week the State of Vermont joined with the State of Indiana in a suit filed against the Secretary of the Treasury in regard to abandoned property consisting of United States bearer bonds. PAGENO="0995" 999 VERMONT 10/31/79 8. Suggestions for federal action: a. what regulatory steps by the federal regulatory agencies would you suggest, if any, to Ci) enhance compliance with state unclaimed property laws and! Cr (ii) crotect the rights of the o~iners of dormant bank accounts and other unclaimed property? (The federal regulatory agencies that could be relevant here include the Comptroller of the Currency, Federal Reserve, FDIC, Federal Home Loan Bank Board, Wational Credit Union Administration, Securities and Exchange Comoission, and Federal Trade CooTnission.) b. What corrective federal legislation, if any, would you suggest that Congress should consider in order to (i) enhance compliance with state unclaimed pro- perty laws and/or (ii) protect the rights of the owners of dormant bank accounts and other unclaimed property? (If you wish to devote extra time to this question, you may wish to send in your other responses first and then reply to this question separately by letter.) Congress of the Cnited States should pass legislation requiring the Federal Covernoent and all its agencies to comply with the states' unclaimed property jaws. The states, particularly Vermont, do their best to find the missing owners of abandoned property. Perhaps there could be a compromise between the states and the Federal Government whereby the Feds would conform with the states' unclaimed property laws and we would return whatever we could to the owners and then divide the renainderbetween ourselves (i.e., the state) and the Federal Government. PAGENO="0996" 1000 ADVERTISEM1~NT ~ ~ /~e~ ~ ~`~3 7/ LEGAL NOTIC~i11LEGAL NOTICE~T~LEGA' NOTICES LEGAL NOTICES ~T PAGENO="0997" 1001 VIRGINIA QUESTIONNAIRE RESPONSE ~ OCT26 ~ c3:~t:U.E, CO.. ~~AtY ~FF~1RS ~ COMMONWEALTH of VIRQINIA Department of the Treasz4ry ~ Re/rrodTrgi 2~5 October 24, 1979 ~----. - Honorable Eenja~in S. Rosenthal 3' Ccnçress of the United States House of Representativ CMv~NTs...~ Cc~srce, Ccns~er, and ~onetary Affairs Subcomitte ~rr~se a ~ Operations Washinctcr D.C. 20515 Re: Unclaimed Property Questionnaire Dear Hr. Rosenthal: Enclosed is the completed Unclaimed Property Questionnaire with attactvrents for the State of Virginia. We trust this will be of some assistance to your subcorrrnittee's investigation of the need for regulatory and adr~inistrative programs concerning unclaimed property. If we can be of any further assistance to you, please feel free to call upon us at (804) 786 4191. Yours sincerely, (Mrs.) Vivian E. Herbert Administrator Unclaimed Property VEH:has PAGENO="0998" 1002 DEPARTMENT OF THE TREASURY CONMONWEALTH OF VIRGINIA RESPONSE - UNCLAItIED PROPERTY OUESTIONOAI RE (Questions will be answered and nusbered ~in sequential order as outline in Questionnaire) i.(a) - (i) and (ii) - See Sections 55-210.3 through 55-210.10 regarding types of property, institutions covered and reporting requirements. (/\ct enclosed). (iii) - Seventeen years for banks and financial institions, seven years for all other except dissolution of business (2 years - Section 55-210.7) and reissue of lost stock certificates (17 years - Section 55-210.6:1). (iv) - Purely custodial. (v) - No interest paid. (vi) - None. (b & c) - Article 4, Section 56-210.12 (5-e) - If the holder of property presumed abandoned under this Act knows the whereabouts of the owner, and if the owner's claim has not been barred by the statute of limitations, the holder shall before filing the annual report, communicate with the owner and take necessary steps to prevent abandonment from being presumed. The holder shall exercise due diligence to ascertain the whereabouts of the owner. Cd) (i) - Advertisements are placed four times a year in 27 newspapers with general circulation in designated areas throughout the state. (ii) - The state. (iii) - Names and addresses (iv) - Amounts not included in advertisements - $25.00 minimum Cv) - Only property being reported for the first time, not cumulative from prior years. Ce) Notices are sent to the last known address as reported by holder for all owners of property in the amount of $25.00 or more - where time and manpower allow additional efforts are made through telephone calls, letters, etc. (f) See attached copy. of opinion of Assistant Attorney General regarding inspection of files (example 1) (g) Abandoned' - `unclaimed' - means there has been no contact from owner for specified dormancy period. `Contact' is defined as no correspondence from the owner of property, nor interest evidenced by a memorandum in file from the owner of the property for the period of dormancy as set forth in the Act for each type of holder. PAGENO="0999" 1003 RESPONSE - UNCLAIMED PROPERTY qUESTIONNAIRE - Page 2 (Continued) (h) - Yes (i) - Audit forms from the office of Unélaimad Property were placed in use with another state agency approximately one year ago and at the present time we have received only a few responses f~-on state auditors. Our office, at the present tire, is holding meetings with the State Director of Financial Institutions, State Insurance Comrissioner, along with the recional offices of the representatives from the FDIC, Federal Reserve, and Reaional Cirector of National Banks concerning the Federal Consumer Compliance Exa~inaticn Procram, with a request toinclude a proposed audit form for unclaimed property in the examinationsof the institutions regulated by their respective agencies. (ii) - Ye do not have an audit staff, hence no budget - the cooperation from other acercies is strictly voluntary. (iii) - State hospital, mental institution audited for patient accounts, etc. (iv) - Banks, credit unions, savings and loan associations and other financial institutions along with insurance companies. (see reference in h(i~ abc"e). Cv) - Sea attached proposed audit forms mentioned in (i) above. (example 2) (vi) - Amfitor of Public Accounts. (i) - ~CJ,CCCayear Two full-time persons -+ one full-time equivalent. 67-4'~O 0 - 81 - PAGENO="1000" 1004 3a 2. Amounts of unclaimed property reported and delivered to owners: 1976 1977 1978 a. `uffiLers of institutions rep*3rtir.q: All institutions: Savings & Loan Association 21 21 22 Banks (Including Federal Land Banks) 96 93 93 Credit Unions 19 14 35 Brokers 2 2 2 Insurance companies - Life 110 124 142 Casualty 37 44 65 *All others 306 323 451 b. Amount of property reported: All institutions Savings & Loan Association 21,887.68 14,108.97 98,690.68 Banks (Including Federal Land Banks) 131,782.08 104,261.98 98,512.84 Credit Unions 5,142.55 1,226.30 14,963.43 Brokers 1,966.27 4,560.21 5,691.72 Insurance companies - Life 243,830.26 243,471,81 308,942.59 Casualty 40,739.70 52,137.28 77,941.09 *All others 234,555.16 277,942.12 452,512.36 c. Amount of property remitted: All institutions Savings & Loan Association 8,826.27 4,430.13 23,271.24 Banks (Including Federal Land Banks) 113,663.31 91,844.18 87,006.64 Credit Unions 5,113.94 1,223.30 8.208,62 Brokers 1,316.28 3,646.58 4,011.48 Insurance companies - Life 217,084.67 222,168.06 283,659.42 Casualty 32,522.02 43,018.66 65,402.60 *All others 170,928.16 243,900.94 362,025.94 d. Number of individual accounts in excess of $500 All institutions Savings & Loan Association 4 4 5 Banks (Including Federal Land Banks) 18 16 23 Credit Unions - - - Brokers - 3 - Insurance companies - Life ** 10 10 10 Casualty ** 5 5 5 *All others ** 25 25 25 e. Number of names advertised: 4,604 6,398 5,988 f. Dollar amounts returned to owners: 146,593.02 142,410.52 318,872.26 g. Delivery percentage: 21.56 20.41 30.16 h. Amounts remitted minus claims 515,992.81 587,015.88 782,286.73 * Includes nonfinancial corporations, utilities, railroads, courts and fiduciaries ** Approximate PAGENO="1001" 1005 RESPONSE - UNCLAIMED PROPERTY QUESTIONNAIRE Page 4 (Continued) 211 shares of stock with a value of $8,400.87 Total a~uunt of additional property, - $17,760.69, The cost to the state ~ss $503 for each completed audit. There were eight audits completed for Virginia at a total cost of $4,000 - the remaining seven corporations tcuP the stand that states did not have jurisdiction to audit at the ccr:orate headquarters of the companies doing business in the respective states. Listed below is a complete list of companies audited and amounts reported, followed by a list of the companies taking the jurisdictional stand: Companies Reporting Cash Stock (Value) Equitable Life of Iowa (Des Moines) $59.49 Safeway Stores (Sam. Francisco) - Union Carbide Corp. (New York) $34.50 Seers, Roebuck B Co. (Chicago) - Bankers Life of Iowa (Des Noines) 6.00 Transa-erica Corp. (San Francisco) $708.38 Ntiantic Richfield (Los Angeles) $2,048.47 Equitable Life Assurance Society $6 502 98 of the U.S. (New York) Companies Taking Jurisdictional Stand J.C. Penney (New York) Marcor - Montgomery Ward(Chi6ago) Standard Oil - Indiana (Chicago) Investment Company of America (Los Angeles) Litton Industries (Los Angeles) Occidental Petroleum (Los Angeles) Standard Oil of California (San Francisco) 3. (a, b and c) - See attached copies of actual brokerage firms reports for the past three years. (example 3) 4.(a) - in cur opinion the degree of ccmmliance with the unclaimed property laws range from fair for banks, financial institutions and nonfinancial corporations, to good for insurance companies, with a poor rating for securities brokerage firms. Na believe that the lack of knowledge and the interpretation of the unclaimed ~roperty law is certainly a ccntributing factor. (b) - Virginia was part of a state consortium audit performed by Alexander Grant and Company in 1978 involving 15 major corporations (no banks or financial institutions). As a result of this audit, the following additional unclaimed property was reported to Virginia: $9,359,82 cash 132 common 18 5/8 $2,458.50 43 common 69 1/8 $2,972.37 36 pref. 82 1/2 $2.97O.00 PAGENO="1002" 1006 RESPONSE - UNCLAINED PROPERTY QUESTIONNAIRE - Page 5 (Continued) 5.(a) See attached - from investigation by Unclaimed Property office. (example 4) (b) - General practice, particularly by larger banks. Cc) - None. (d) - No. (e) - Varied (See 5(a) for detail) (f) - Unknown (g) - Unknown (h) - Unknown (i) - Unknown Ci) - No (k) - No PAGENO="1003" 1007 RESPONSE - UNCLAIMED PROPERTY_QUESTIONNAIRE -~ Page 6 (Continued) C(s) - Yes - banks stop paying interest at period of dormancy established by individual institution - see attached. (Exaniple 4) (b) - Yes - A Federal Savings & Loan Association reported ts:o accounts in the sa~e joint names in their 1978 report totalins over $6100000. I called the information operator in the area of the last known address and found that there was a ron-published telephone number for the owner reported. Unable to telephone, I sent a registered letter, return receipt requested to the address reported and received in reply a telephone call from the neighbor of the individual reported., The owner (joint oarner) of the account was an 81 year old lady, whose husband had died in 1972 (the other joint c~ner). The owner was living on a fixed income and had done so for the past seven years, without any knowl~dge that she was the owner of the rs;orted savinas account. She and her husband had lived at the address reported by the Savings S Loan Association for over thirty years. Ne were able to have her claim the accountsby having tha neighbor take her to the savings and loan association. The two accounts were removed from the report as having been claimed when the remittance was submitted by the institution, Cc) - Unknown. Cd) - Yea -- see attached correspondence and reply from Attorney General `s Office concerning Federal Credit Unions. (example 5) Ce) - Unknown. (f) - In our opinion banks are not supplying depositors with copies of the Rules and Regulations governing the institutions accounts when accounts are opened. We have found that Rules and Regulations are often distributed only upon request. - Yes, to the U.S. Department of the Treasury for the redemption of savings bonds. (s) - ~cns - U. S. Department of the Treasury. (b) - Refused to redeem - reason, payable only to owner/co-owner. (c) - Section 55-210.10, Page 6, Unclaimed Property Act, PAGENO="1004" 1008 B. Sucoestions for Federal action: a Wtat regulatory st2pe by the federal regulatory agencies would you sugoest, if any, to (i) enhance ccmpiiance with state unclaimed property laus ard! or (ii) protect the rights of the owners of dormant bank accounts and other unclaimed property? (The federal regulatory agencies that could be relevant hero include the Comptroller of the Currency, Federal Reserve, ERIC, Federal Home Loan Bank Board, Ilational Credit Union Administration, Securities and Exchange Commission, and Federal Trade Commission.) h. What corrective federal legislation, if any, would you suggest that Congress should consider in order to (i) enhance compliance with state unclaimed pro- perty laws and/or (ii) protect the rights of the owners of dormant bank accounts and other unclaimed property? (If you wish to devote extra tine to this question, you may wish to send in your other rasponses first and then reply to this question separately by letter.) a.(l) Incorporation of forms, similar to example 2 attached, in federal Consumer Compliance Examination Program audits - These cursory audit forms to be forwarded to state unclaimed property office for review and indepth audit, where indicated, for compliance under state law. (11) Have -federal regulatory agencies initiate legislation to place controls on service charging accounts and the non-payment of interest at dormancy date established by individual national banks and financial institutions. b. Legislation to identify unclaimed property to individual states and return same. This will enable states to follow their administrative procedures in attempting to locate owners and return their property to them. (Example: property consisting of funds held in the Veterans Administration, Comptroller of the Currency, U.S. Treasury, Internal Revenue, federal courts, etc.) PAGENO="1005" ADVERTISEMENT 1009 PAGENO="1006" Et ma 21$~~S~ ~=r S v~: 7fl~C 1010 ma PAGENO="1007" 1011 PROPOSED AUDIT FORM FOR BANKS Vivian Herbert, Administrator Division of Unclaimed Property Department of the Treasury P. 0. lox 6-H Richmond, Virginia 23215 STATE OF VIRGINIA UNCLAD~D PROPERTY EXAMINATION - STATE BANKS/ NATI0::AL BARES SCIRE CF EXAMINATION: (1) This form is to be completed ~ for banks that have been in enistence 17 or more years. This is an examination which should take approximately ccc bce:. A cmry of this schedule will be transmitted to the Unclaimed Property Divisicn of the Department of the Treasury. (2) Records should be reviewed for the rurpese of evaluating compliance with requirements for reporting all outstanding ha- ~i1ities in accordance with Chapter 11.1, Virginia Statutes. QUESTIOCIIRERE NAME OF BANK: ADDRESS OF BUlK: 2. DATE OF ELNATION: EXAMINER-IN-CHARGE:_______________ 3. Has this ban:-: filed a current report with the Unclaimed Property Division of the Depareaant of the Treasury? (Report is due November 1st each year for the period ended Juno 30th. The report for the periàd ending June 30, 1978, should include all cutttamding iteas prior to July 1, 1961.) __________________________________ 4. Does it appear that all outstanding liabilities have been reported such as: (a) Dormant/Inactive Savings Accounts; Date of Oldest Item:_________ (b) Dormant/Inactive Checking Accounts; Date of Oldest Item:_________ (c) Outstanding Cashiers Chewks, Certifi~d Cheeks, Travelers Checks, Money Orders, Dividend Checks: Date of Oldest Item:________ (d) Ur~Gentified Deposits__________ Date of Oldest Item;_________ (e) Safe Deposit Boxes ; Date of Oldest Item;_________ (f) Trust Department: Outstanding Drafts: ;. Date of Oldest Item:________ Is unclaimed propartv held in trust accounts?: Are attempts being made to contact beneficiaries?: Oldest contact date_____________ 5. Does it appear that "Miscellaneous or Other Income" contains items that should have been reported?__________________ 6. If dormant accounts are on computer, does the printout reflect the date of last contact with the owner on all accounts or does it show the computer conversion date or some other incorrect date?_______________________ _________________________ 7. Service Charge Policy: Are service charges consistent with contractural agreement and colicy of the Board?________ Brief swmsary of Service Charge Policy relatinG to inactive accounts and interest payment policy on inactive savings accounts. PAGENO="1008" 1012 UNCLAIMED PROPERTY EXANINATION - STATE BANKS - Page 2 8. Does it appear that a more in-depth examination is warranted?______________________ 9. Examiner's comments, suggestions or remarks: Examined Close of Business PAGENO="1009" StJllVI~Y OF ItANKS IN ItI(1IIMOND, VA. Dormancy Period Established by Institution(yrs.) Ckg. Says. AnAlYSIS oi' IIANKS IN Till RIC1IMONe, VIlilII1IA APEA Service `hg. Interest Meld on (Dormant J\ccic.) Dormant Accounts I Says. Ckq. Says. $1.00 per me. $2.00 per no P 199.99 or Ii 9199.99,6% less plus other per annum P Sc and mainte- $200.00 nance clips. adopted by flank Bk's current inactive Acct. Chgs. Mo. mainte- nance as established by bank $1200 per me. subject to change yb notice to customer, May be charged me, quarterly, semi-ann. or annually Dotice to cestcmers ra: Change in Interest Rates/Service Charges flanking lobbies, Main office and branches Not ~,gjqlred to make other ptiisllcation or mali notices, but may do so. Statements mailed 4 tine a year. Lobby of main offi~e K branches - $p~ mail or advertise, at bank's discretion - not required Posted In hank (every affected of lice) for 10 days In advance of the change. Copies of R, K fl availabe to customers upon request. Published In Richmond newspaper on any 2 business days In each of 2 successive wks - 10 days elapsing between publications No $1.00 per mo. 1 5 1- 5 1 3 1 3 3 3 "Reasonable service & maintenance chgs. as In effect' - may change from time to time and be deducted from acct, - no notice to customer $12.00 yr. As adopted by bank from time to time $2.00 per no. samo as chkg. No Lobby of the bank for 2 wks. No Cor.t... PAGENO="1010" ANALYSIS OF BANKS IN THE PICH7IOND, VIRGINIA AREA Interest Paid on Notice to customers re: Dormant Accounts Change in Interest Rates/Servoco Charges Conspicuous place in each banking office for 30 days or mailing copy to depssitor Posting notice in bank - 10 days - and publication in any local newspaper during that 10 day period - or giving depositor not less than 10 days notT~e in writina. No `Notice mailed to depositors Paid on re-: (info, by phone - R 6 R not available in Bank) * activated * accounts Dormancy Period Established by institution (yrs.) Service Chgs. (Dormant Accts.) .1 ~L 5 3 with hal. less than $60. $2.00 me. $3.00 mo. Service & maintenance as adopted and changed at Banks discre- tion $6.00 S/A Chg. No No No $1.50 mo. - $3.00 mm. - $1.00 mo. - $6.00 S/A - Charge PAGENO="1011" 1015 WASHINGTON (STATE) October 12, 1979 L Dear Mr. Rosenthal: This office has received your letter of request dated October 3, 1979, and our responses to your questionnaire are contained herewith. Cur ves~onses to the questionnaire are limited by virtue the iact that this Department has only recently established a ccnrrehensive prooram to recover unclaimed property through iieli auiits and investigations. In addition the Department is ex~loring nore effective methods ofnotifying owners of unclained property so as to reunite as many accounts as possible with Washington State residents. Section 28 of the Washington Unclaimed Property Act provides that Any information or records required to be iurnished to the De~artment of Revenue as provided in this act shall be confidential and shall not be disclosed to any ~erson excepting the person who furnished the same to the 2erartr~ent ci Revenue, and excepting as provided in sections 12 and 13 od this act, or as may be necessary in the proper adicinistration of this act." (Copy of Act enclosed). Due to the restriction of the above cited section, we are precluded from providing any names of holders as requested in your questionnaire. Our responses to your questionnaire follow in the same order as they are presented therein. Sincerely, Joel F. Graham, Supervisor Unclaimed Property Section Denjarin S. Rosenthal, N.y., Chairman CONGRESS of the UNITED STATES HOUSE of REPRESENTATIVES Rayburn House Office Building, Room Vashington D.C. 20515 JFG: db rnclosure PAGENO="1012" 1016 1. Unclaimed Property Statute, Regulations, and Administrative Program: a. The Washington Uniform Disposition of Unclaimed Property Act, became effective June 9, 1955. The Act is modeled after Uniformed Disposition of Unclaimed Property AOt as promulgated by the National Conference of Commissioners on Uniform State Laws. However, section 16 of the Unclaimed Property Act was not enacted until May 30, 1979 and became effective August 30, 1979. (i) Generally, the Act covers all types of holders of un- claimed property such as commercial banks, both state and national; trust companies; savings and loan associations, both state and federal; credit union, both state and federal; securities brokerage firms; mutual funds and investment companies; insurance companies, both life and casualty; as well as public utilities, issuers of securities, fiduciaries, state courts and public officers and agencies and all other holders of intangible personal property without limitation. (ii) There are not exemptions or exclusions in the Washing- ton Act relating to either types of holders or types of property covered, except that the Act doesn't apply to safe deposit companies. (iii) The holding period for property under the Washington Act is twelve years as to bank accounts and written instruments on which a bank is directly liable, fifteen years as to travellers checks, and seven years as to all other property. (iv) The Washington Act is custodial in nature, except where it appears the owner of such property has died, and that no other person is entitled to it. (See section 22 of the Act). (v) No Cvi) The Washington Act provides a special requirement on records retention that is not found in the Uniform Act or most other state laws, (see section 15 of the Act). In citation section 28 provides, that Any information or records required to be furnished to the Department of Revenue as provided in this act shall be confidential and shall not be disclosed to any person excepting the person who furnished the same to the Department of Revenue, and excepting as provided in sections 12 and 18 of this act, or as may be necessary in the proper administration of this act." PAGENO="1013" 1017 (b) Yone (c) yone, (Department has not researched all statutes related to banks and financial institutions). (d) (1) Nawspaeer of general circulation in county of last known address. (ii) State places advertisement. (iii) Both names and addresses if known. (iv) S25.OO minimum. Cv) Only owners reported for the first time. Ce) ~o, :-owaver the Department is considering additional prcceiures to locate owners. (f) Yes; see section 27 relating to 5% limitation on finders fee and confidentially; Department restricts access only to names, address, and file number. (g) Unclaimed means that for the statutory holding period there has been no owner-generated activity or corres- Doncence, and the owner has not otherwise acknowledged an interest in the oroperty, `Contact" is defined in the act as being am affirmative action taken by the owner. non-return of mail does not constitute activity under the Uashington Act. (:~.) Recently the Department of Revenue has instituted a compliance program involving the field audit of holders; it is specifically designed to uncover unclaimed property. Although the Department of Revenue regularly audits businesses for business and ~ccupation taxes and state retail sales taxes, it did not cover the area of un- claimed property. (i) It is anticipated that in the following twelve months period thirty to fifty audits will be performed. (ii) Currently the Department has three auditors and one consulting auditor assigned to unclaimed property audits. In addition the Department utilizes the services of the Attorney General's office on an as needed basis as well as a special consulting attorney highly experienced in unclaimed property law. PAGENO="1014" 1018 (iii) As indicated, the audit program in Washington State is fairly new, however, the Department is in the process of auditing a major national bank in Washington State and a major health care provider. Findings at one of these institutions will exceed $800,000.00 and at the other, findings are anticipated to run into several million dollars. (iv) None, except safe deposit companies. (v) The Department is in the process of developing special- ized audit programs for various types of holders of unclaimed property. By way of illustration we are attaching a copy of our bank audit program. In unclaimed property audits all areas that may give rise to unclaimed property are reviewed. (vi) No field audits are performed by other state offices or agencies. (1) $62,000.00 per year. Five full time, two consultants. PAGENO="1015" 1019 2. Paiounts of unclaimed property reported and delivered to owners:. 1975 1976 1977 a. Numbers of institutions reporting: All institutions 805 e 894 e 725 e Banks 249 e 227 e 224 e Brokers 4e 4e 4e Insurance co~panies 104 e 116 e 94 e All others 450 e 549 e 405 e b. Amount of p~perty reported: All institutions $812,355 e 526,946 e 340,948 e Banks 251 ,275 e 133,799 e 105,341 e Brokers 13,022 13,304 48,851 insurance co-Tanies 104,950 e 68,373 e 44,206 e All others 443,108 e 311 ,470 e 142,550 e c. ~ount of orocerty remitted: All institutions 738,505 479,042 309,953 Banks 228,432 e 121,636 e 95,765 e Brokers 12,951 7,789 37,424 Insurance comDanies 95,409 e 53,585 e 40,187 e All others 401,713 e 296,032 e 136,577 e d. ;-bar of individual accounts ~n excess of ~5O3 A~i institutions 148 e 74 e 74 e Banks 46 e 19 e 23 e Brokers 0 4 19 Insurance companies 19 e 10 e 10 e All others 83 e 41 e 22 e e. Number of names advertised: 1,661 1,851 1,564 f. Dollar amounts returned to owners: 17,183 54,943 27,644 c. eiiery oercentage: 23% 11.5% 9% h. Aounts remitted minus claims $721 ,322 424,099 282,309 67-~O 0 - 81 - 65 PAGENO="1016" 1020 3. Brokerage Firm Reports: Very few brokerage firms have reported to the State under the provisions of the State Act. Attached as a exhibit are copies of reports that have been filed. 4. Compliance (a) For all of the institutions mentioned herein, compliance has been determined to be very poor or non existent. The reasons for this low level of compliance are many fold; non familiarity with the Act's requirements; no fiscal disincentives for not complying; prior history of a low level of enforcement; poor record keeping by holders; various legal defenses contributed to evade the spirit and intent of the Act; directions from holders Independent Certified Public Accountants to write of f old unclaimed items. (b) The Washington State audit program is too new to have had results effecting a positive response to this question; however, it is anticipated that future field audits and related litigation will increase amounts reported by at least five times. (c) Ci) 20 to 30 Million (ii) 2 to 5 Million (iii) 5 to 10 Million (iv) 10 to 30 Million 5. Service Charges Ca) Yes. Reports filed with the state and audits. (b) Appears to be a general practice amongst banks. Cc) Have not investigated into other areas as of this date. Cd) Based on current experience it appears customers are not properly notified. (e) This Department has krowledge of charges varying from six to eight dollars per month. (f) Unknown (g) Yes; however, exact amounts are not currently known. (ii) One to two million. PAGENO="1017" 1021 (i) Potentially a few million. (j) Yes, it does limit it in that it must be contracted for and notice must be given. (k) No, however the precedent setting case is in the process of audit and investigation. 6. Other Practices (a) In cases vhere banks have serviced charged off interest bearing items, they cease to accrue interest. (b) No record on file. (c) Information not available. (d) Information not available. (e) Although no specific information is available at this time, the Department has reason to believe that several practices are employed that result in failure to pro- ~r1y report unclaimed property. This is based on the fact that several banking institutions have never filed a report or have reported minimal amounts. (f) Those services, ~there the institution is empowered to hold the publics money. 7. Unclaimed Property held by the Federal Government: No, hovever the state anticipates action in this area in the not-to-distant future. 6. Suggestions for Federal Action: Ur~er separate cover this Department will forward suggestions relating to federal assistance in the Unclaimed Property Area. PAGENO="1018" 1022 WISCONSIN QUESTIONNAIRE RESPONSE ~tt~e .~afr ~ OFFICE OF THE STATE TREASURER UI.,! ,,,JMER AND `~T,,.Y AflAIRS SUBcOMSi,11EE October 16, 1979 Commerce, Consumer, and Monetary Affairs Subcommittee of the Committee on Government Operations Rayburn House Office Bldg, Rm B-377 Washington, DC 20515 Re: Unclaimed Property Questionaire Attn: Benjamin S Rosenthal, Chairman Following your instructions of October 3, we are enclosing materials relative to Wisconsin's unclaimed property statute. We hope the information as supplied will fully answer your inquiry. In explanation, it may be helpful to remember that because of the absence of an auditor on our staff, this office has never conducted any field audits or on-site compliance investigations and consequently in many cases we were prevented from responding due to lack of documentary evidence. We are anxious to see some of the problems encountered in the administration of this law resolved. If there is any additional information we can provide, please let us know and we will be happy to assist you in any way possible. Sincerely, Charles P. Smith State Treasurer Colleen Cox Unclaimed Property Division End. PAGENO="1019" 1023 UNCLAIMED PROPERTY QUESTIONNAIRE - WISCONSIN 1. Unclaimed property statute, regulations, and adthinistrative program: a. Wisconsin unclaimed property statute and financial institutions (i) Generally, the report must include only intangible personal property held by any business that belongs to another person which has been unclaimed for ten years or more. Holders of property include, but are not limited to: any bank, trust company, safe deposit compa~y or banker engaged in business in this state; credit unions, savings or building and loan associations, life insurance companies, public utilities, government or governmantal agencies (federal and state), ~artnerships, or any association for business purposes of two or more individuals, whether or not for profit. The property covered includes, but is not limited to: money; bills of exchange; stocks, bonds and interest thereon; dividends, both cash and stock; credits, including unclaimed wages and commissions; certified checks; certificates of deposit; drafts; cashier's checks; money orders; traveler's checks; unredeemed gift certificates; demand savings and matured time deposits, including interest and dividends thereon; amounts due on matured life insurance policies, endowments or annuities; security deposits; funds deposited by a holder with a fiscal agent for payment to an owner of dividends, interest or liquidation value, or to redeem stocks and other securities, or to make a distribution thereof; refunds of utility rates or deposits made with utilities; money owing under profit sharing plans; also, subject to the Act is tangible personal property found in safe deposit boxes or other safekeeping repositories. Please refer to Form ST/lll-78 (Unclaimed Property Holder Checklist) for a more specific detailed listing of property covered. (ii) The Act excludes any retirement system for public employees in the state and property held by a political subdivision or court of record. (iii) All property is deemed unclaimed and/or abandoned if there has. been no contact with the owner for a period of ten years from the date on which itbecomes returnable, payable or demandable, except in thecase of traveler's checks, which is considered abandoned if it remains outstanding for more than 15 years. (iv) The property transferred to the state is held custodially and is available forever to the original owner or to his heirs upon proof of ownership. (v) In accordance with s.177.15, Wis. Stats., the state treasurer is not permitted to pay interest on property paid or delivered under the Unclaimed Property Act. - I - PAGENO="1020" 1024 1. Unclaimed property statute, regulations, and administrative program: b. Administrative rules and regulations Attached is a copy of our "proposed" rules and regulations. Note that these rules have not been formally adopted and are not currently in effect to the degree that they are legally enforceable. From the comn~nts we have solicited, it is anticipated that some revisions will have to be made before the rules are formally introduced for passage. Particularly, objections have been raised to ST 1.03 - charges lawfully withheld. This problem will be fully discussed under item 5. PAGENO="1021" 1025 1. Unclaimed property statute, regulations, and administrative program: c. Regulations of banking, insurance and general commerce laws Other than the Unclai~ed Property Act, there are few references in the wisconsin Statutes to regulatory practices governing dorant accounts in financial institutions. ~nile there is no specific statutory authority, state banks are perritted to assess Treasonable service or maintenance charges vhen there is a provision for such charges in their by-laws or rules. A provision in the by-laws essentially constitutes an "agreement" with the customer and as long as the charges are "reasonable", they are permissible. The definition of "reasonable" is a policymaking decision delegated to individual banks and dictated by internal bank management. The Commissioner of Banking maintains that the charges being assessed in state-chartered banks are usually reflective of~the actual cost of maintaining the account. State Banking Co=issioner further insures that ~-hatever service charge is established by the bank must be applied unilaterally to all accounts - regardless of amount. If the bank changes their service charge rate, they must attempt to notify all customers and also post a notice regarding the change in their lobby. Savings and loan associations are not permitted to assess service charges; however credit unions ware recently granted statutory authority as follows: "Levy an Annual Maintenance Charge, not to exceed 50 cents per onth against member or eligible member dormant accounts of less than $25; in order to recover fixed operating costs of dormant accounts. An account is dormant if no deposit has been made to the account or no withdrawal has been rade fran the account by the member in a period of 36 months or more and if mailings to the member at the member's last known address are not accepted or are returned to the credit union marked `address unknown'." Generally speaking, for most businesses, the cost of maintaining an account is assumed to be a: "normal cost of doing business" and as such is not deductible as a service charge. Additionally, most regulatory~ agencies have made some provisions for the mandatory retention of records. -3- PAGENO="1022" 1026 1. Unclaimed property statute, regulations, and administrative program: d. Advertising (i) Owners of abandoned property are advertised in the newspaper with the largest circulation in the county of the owner's last known address. Additionally, in 1978, in an attempt to reach more owners, the entire listing was published in the Sunday edition of The Milwaukee Journal, the largest circulated newspaper in the state. (ii) Advertisements are placed directly by the state treasurer's office. (iii) Advertisements include the owner's name and last known address (if available), together with a microfilm index number that allows immediate retrieval of information when an inquiry is received. (iv) Only those owners whose property exceeds $50 in value are advertised. (v) Only owners of unclaimed property being reported to the state for the first time are advertised. Owners reported in previous years are not re-advertised. PAGENO="1023" 1027 1. Unclaimed property statute, regulations, and administrative program: Crevey HIll QIt TakeS a Thiel 3TDOt~E23Ne~ 11:03 OMerie-Fvo'5~e e-d Jo5vv:e~ Elu's Pvrney. Dorsa Dc.';ias ~Odd Ceepin OCelasto ~Meke Me Laugh 11:15 OTlrls is the World Series ~JAugustana Highlights OCollece Footbeli 79 QViewpoint ~Mercos Weiby, M.D. 11:30 CBS] McMttten and Wife-The t McMiOans enteras ports car rally csith a eoiuatie prize at stake. @J7°° Club QSnrek P,nniews ]lDCamera Ttsree-Marcin HamiIrch. OSlo Million Doll,, Men 511 ironsld, ONewetelk OWented: Deed or Ailee 11:45 ~0orna Ferpo OForum 13 12:00 NBC] Tomorrow-Tom Snyder host. ]5JA Gilt to Lest OStiller end Meero ODinrenstons 12:10 ~Barecek 12:15 OMoete-The irtormer-Victor McLag ion. QLose, Amertcan Style 12:30 Deightbeet S OCollege Footbstt `79 12:50 11!JABC C,ptioned News 1:50 (5jMemus Welby, M.D. ~Comedy Shop ~trorslde 1:03 OThe FBt 1:33 OHealth Field 1:50 ]~JMoeis-The tdni-J,nnlter loves. Mlohevl Parks. 2:00 (IJMeda in Chicago 2:03 ~Sospy Seine 2:25 0MBYte-They Pen for Their Liven-John Payne, Luaeto Patten. e. Additional advertising Other than the legal advertisement required by statute, little effort is made by either the state or the original holder to locate the rightful owners. Legal idvertisements placed by the state are preceded by press releases to stimulate public awareness prior to the actual publication of the notices. `ddi:icnally, nones of owners of property still unclaiced free -e.'c-s rercr:s ate selected at randon and republished in a cagazine called TV TIi~S. This advertising, provided charea, has brought excelleht results in the past year. lv law, holders of rnclainsd property are required to cake soc effort to locate the owners before reporting it to the state. t-tnile we are aware of sore organizations whicn cake extensive "searches" for missing owners, for the cost part, there appears to be little effort on the part of holders to re-establish Contact with the owners of the property. Some organizations which regularly publish newsletters will advertise for missing shareholders in this manner. A few financial organizations post public notices in their lobbies of "lost depositors" whom they are attecpting to locate. the custcnsr relation aspect is i~ortant to cost holders, are :c.d that cftentices the co~t of a search is far in excess anaun: ci nancy to be returned and furthercore, that it responsibility to aietain contact with lIe have tried to stress in cur adrinistration of this law, that when prcper:y is unnecessarily inventoried and advertised, it not only p1 aces an increased financial burden upon the state, but cost icportantly it undercines,' cus toner relations and confidence. 4:00 ~Moeie-Loan Sharks-George Pelt, Domthy Hart. HIDDEN TREASURE teeS e'~' cr51 ae:r.t ot pmperty *5109 Ureiae.d Pmperry Screen, P.O. Doe 2f14, Medicos. Wi Ylttt. No phone a~IIe Peaa.. ,,eOeve. PIeeen b~ iScoShttul Inca to aend rkWev Ehon Orco. 2102 Kerdali ace.. Oroaeed Wages PAGENO="1024" 1028 1. Unclaimed property statute~ regulations, and administrative program: f. Bounty hunters There are currently no limitations on the actions of "bounty hunters" in Wisconsin. There is legislation pending which, if passed, will require that any agreement to find or claim unclaimed property must disclose as an amount certain the fee which is to be paid, rather than as is normal - a percentage figure. This was introduced as a compromise between those who wish to limit heir finders fees and those who believe they have a proper role to play in locating the true owners, but believe the true owners should be aware of the cost to them. We believe that if someone is made an offer to find property for which he will pay $1000 to $2000 or more in fees, he may make an effort to discover what the property is on his own and as a result, pay no fee. Wisconsin's public information law requires that all records relating to unclaimed property be made available for public inspection during regularly scheduled office hours. PAGENO="1025" 1029 1. Unclaimed property statute, regulations, and administrative program: g. Definition of abandonment All property is deemed unclaimed and/or abandoned if there has been no contact with the owner for a period of ten years (traveler's checks 15 years) from the date on which it becomes returnable, payable or demandable and the holder cannot locate the owner. `Contact" as defined by the statute means that the owner has within ten years: a. Increased or decreased the amount of the funds on deposit, or presented an appropriate~ record for the crediting of interest or dividends; or Co:respcnded in writing with the financial organization ccncerning the funds or deposit; or c. Otherwise indicated an interest in the funds or deposit as evidenced by a ~amorandun on file with the financial organization. The law further provides that if the holder of the property knows the whereabouts of the owner, the holder shall coamunicate with the owner and take necessary steps to prevent abandonment from being presuned. The holder is required to exercise due diligence to ascertain the whereabouts of the owner. The adrinistrative practice of this office in relation to this atter is detailed in our proposed rules and regulations under ST 1.07 - ~otice to Last Known Address of Owner. Briefly, it provides that the holder should attempt to counicate facts concerning abandonent to the owner and that the owner, after being notified, must take affirmative steps in order to prevent the continued presumption of abandonment. PAGENO="1026" 1030 1. Unclain~d property statute, regulations, and administrative program: h. Field audits Our office has never conducted any field audits or on-site compliance investigations. The state regulatory agencies for the various financial organizations covered by the law (i.e. insur- ance companies, banks, credit unions, savings and loan associations, etc~) routinely check for dormant accounts as a part of their regular audits. -9- PAGENO="1027" 1031 1. Unclaimed property statute, regulations, and administrative prog~ i. Budget wisconsin's yearly budget for administration of its unclaimed proparty program is $39,900. This includes the salary of one fuil-timeindividual as veil as~covering costs incurred in administration such as advertising, postage, forms, data processing, travel, etc. PAGENO="1028" 1032 3a 2. Amounts of unclaimed property reported and delivered to owners: a. Numbers of institutions reporting: All institutions Banks Brokers Insurance companies All others b. Amount of property reported: All institutions Banks 1976 ~$ 876 288 nil 113 475 857,414 340,191 (e) 1,500 83,858 431,865 642,868 250,634 (e) 1,476 78,060 314 ,174 134 82 none 4 48 2,109 Brokers Insurance companies All others Amount of property remitted: All institutions Banks Brokers Insurance companies All others Number of individual accounts 1977 z 0 c~. t,i 0 0 0 01 "1 0 01 01 z I 1978 $ 1,000 333 nil 131 536 1,351,802 559,313 :e) 7,542 145 ,242 639,705 865 ,l0l 311 ,l21 (e) 6,881 118,831 435 ,149 218 113 none 17 88 3,570 C. d. e. f. g. h. in excess or ~uu All institutions Banks Brokers Insurance companies All others Number of namoc adv~rtis~d Dollar amounts returned to owners: Delivery percentage: Amounts remitted minus claims 265 .151 30.92 534,163 39.51 592,263 p~j~: by the state 817 ,639 PAGENO="1029" UNCLAIMED PROPERTY SUMMARY - WI5CON~IN $ 250,634 35,463 25,145 78,060 49,666 43,366 160, 534 $ 642,868 74.98% $ 311,121 23,998 46,067 118,831 66,300 70,799 227,985 $ 865,101 $1,351,802 1972 1974 1976 1978 1970 ____________ Funds Remitted* Banks $ 342,615 $ 174,428 $ 201,237 Cooperatives 28,130 18,013 20,671 Credit Unions 67,100 16,124 16,662 Insurance Companies .... 32,960 22,515 42,766 Savings & Loan Assns ... 78,795 28,093 15,872 Utilities 10,770 4,335 7,785 Miscellaneous 84,250 37,847 52,681 Total Funds Remitted~ $ 644,620 $ 301,355 $ 357,674 Total Funds Reported 932,685 $ 422,203 $~ - 584,184 % of Reported Funds Actually Remitted 69.11% 71.38% 61.23% *Source - "Amended" Computer Audit Report (Pgm l4P) Positive Holders Owners Items Negative Holders Unfound Holders Dissolved Holders 63. 99% 921 3,359 2,758 2,425 - 3,148 - 4,636 3,436 3,198 2,472 3,257 4,575 20,585 2,670 2,998 2,822 3,110 237 123 123 87 81 PAGENO="1030" 1034 3. Brokerage firm reports No major brokerage forms other than the two noted are currently complying withWisconsints law. Please refer to attached copies for detailed information. PAGENO="1031" 1035 4. ~~pliance a. Degree of compliance with Wisconsin's unclaimed property laws (i) national banks - fair compliance (ii) state banks - fair compliance (iii) federal savings and loan associations - substantially complete cotnpliance (iv) state savings and loan associations - substantially complete compliance (v) federal credit unions - substantially complete compliance (vi) state credit union - substantially complete compliance (vii) securities brokerage fi~s - no compliance (viii) utual funds - no corpliance (ix) insurance copanies - poor compliance (x) non-financial corporations - fair compliance 67-~4O 0 - 81- 66 PAGENO="1032" 1036 4. Compliance b. Field audits, investigations, and litigation There have been no field audits, investigations or litigation cases in Wisconsin. Since passage of Wisconsin's Unclaimed Property Law in 1970, the program has been administered on a largely voluntary basis. We follow-up on reports to the extent that ~ bank, savings and loan association, credit union, utility and life insurance company MUST file a report; however, we do not often analyze the individual reports and follow-up with an investigation to determine if all property is being reported in compliance with the law. We find that while most banks regularly report savings and checking accounts; assets from trust departments, proceeds of official bank checks, etc., are rarely reported. In the same line, corporations may report unclaimed wages or dividends ,but never uncashed vendor checks. PAGENO="1033" 1037 4. Compliance - c. Additional unclaimed property not reported that would be reported if there were substantially complete compliance with the law. The experience of states with active audit and compliance programs seems to indicate that the potential revenue from unclaimed property is great. Nost often "projected" revenues are made on the basis of population. Without taking into account factors such as industry base, related laws governing financial corporations, and in particular the specifics of their unclaimed property statute, we feel such predictions are misleading. Because we have no statistics from a comparable state (with an active compliance program), any prediction on our part would be pure gues swork. PAGENO="1034" 1038 5. Service charges a. Service charge information Because compliance with our law is largely voluntary, the knowledge we have of service charges comes almost totally from customer inquiries, and in a few cases from information given on the report form. b. Service charge occurrence The imposition of service charges on dormant accounts occurs to some degree, as a general practice, in most Wis~onsin banks. c. Service charges among other institutions Occasionally, we will find that a business corporation deducts the cost they incurred in searching for a missing owner from that individual's account. The state treasurer has taken the position that this is a normal "cost of doing business" and therefore not permissible. As previously noted, credit unions were recently granted statutory authority to assess maintenance charges on inactive accounts. d. Service charge notification It has been our experience that customers are NOT aware that their accounts are being depleted by service charges. The authority for such charges is usually referenced in the financial organization's by-laws or rules. The customer signs a statement agreeing to comply with the bank's rules and regula- tions, but doesn't ask for and isn't voluntarily given a copy of the rules. For the most part, the customer assumes that should they decide to `let their money sit' for 5 years, the bank will be crediting interest - not deducting service charges. Typically, interest is paid for 3-10 years from the date of last activity and then a monthly service charge of $.25 - 2.00 a month is assessed. e. Typical service charges Typical service charges average 5O~ per month. - 16 - PAGENO="1035" 1039 5. Service Charges f. Large service charges The highest service charge of which we are aware is that being assessed by a national bank of $2.00 per month. Please refer to the attached copies of "claims for reimbursement" documenting this fact. g. Lnclaimed property taken into financial institution's income As noted above, the First Wisconsin National Bank of Milwaukee assesses a monthly service charge of $2.00 against all dormant accounts. Assuming the bank waits 24 months from the date of last activity to declare the account "dormant"* - in the eight additional years it is held awaiting transmittal to the state as "abandoned property", the account may be depleted by as much as $192.00. The bank is effectively liquidating any account with a beginning balance of less that $200.00. Other than this bank, the instances where we have knowledge of accounts being eaten up by service charges are for nominal azounts - usually less than $25.00. It has been our experience that all banks quite willingly reverse the service charges and pay out the full amount in the account - often yith interest added to th~ date of withdrawal - when the customer appears to claim it. h. Total dollar amount of service charges Wisccnsin law allows banks to "aggregate" all accounts under 550 for reporting purposes. When an aggregate total is reported, we have no way of knowing the number of accounts included in that total. We do 1~ow from our statistics that there were approximately 4,600 accounts reported to our office for amounts greater than $50. If we were to estimate that each of these accounts had been reduced by $6.00 per year in service charges - f or approximately eight years - this would amount to $220,800.00. Remember that this is a conservative figure for only those accounts reported with a value greater than $50.00. i. Bank service charges that would have been reportable Because we have no audit figures to rely on, it is impossible to estimate revenue lost through service charges. j. State law limitations As previously noted, credit unions are statutorily limited to assessing service charges of 5O~ per month on inactive accounts. Service charges in state-chartered banks are not statutorily limited; however, the State Banking Commission in its regular examinations insures that "reasonable" charges do not exceed $1.00 per month. - 17 - PAGENO="1036" 1040 5. Service charg~p k. State claims for service charge refunds The only instance where the state has made claim for a refund of any service charges has been when the bank has continued to assess service charges after the account has been inactive for a period of ten years and is `abandoned" and subject to the Unclaimed Property Act. The bank involved has voluntarily discontinued this practice. In cases where an individual account has been questioned by the customer, all banks - as a matter of customer relations have voluntarily reinstated the accounts, usually disregarding the assessed service charges and crediting full interest to the date of withdrawal. PAGENO="1037" 1041 6. Other practices a. Interest on dormant savings accounts While we suspect that some financial institutions may begin assessing service charges when the account approaches the point of "abandonment' under the law, without conducting a field examination, we have no documentary evidence to prove this. The State Banking Coissioner's office routinely examines to insure that charges are not being established merely as a means of depleting the account before escheatment. b. Dormant account turned over to the state There have been numerous instances where accounts have been reported for individuals who are living at the same address. Most notable was a case last year where an account for $35,000 was reported as "abandoned" and the owner was living at the exact address reported by the bank. This partichiar case involved a local bank in a small town. In ost cases where individuals ~re residing at the same address as that reported for the unolained fund, they are readily boated as a result of the state treasurer's regional advertise- ments and the funds are never actually remitted to the state. Our experience indiddtes that the reported owners of the large accounts remitted to this office, are generally deceased. c. Certificates of deposit without a field examination, it is impossible to determine whether certificates of deposit are automatically being rolled over into mew certificates when th~y nature. ~nen a certificate of deposit matures, usually an interest check is sent to the owner. If the owner cashes this check, under wisconsin's law, the financial institution can interpret this as "activity" and automatically roll the certificate over into a new one. Pew certificates of deposit ever reach our office as abandoned property. d,e,f. As stated above, because we have èonducted no on-site field audits and to date our law has been administered on a voluntary basis, it is impossible to answer: these questions. - 19 - PAGENO="1038" 1042 7. Unclaimed property held by federal government The only claim Wisconsin has made against federally held monies was for Postal Savings funds which were voluntarily distributed by the Department of Treasury in the early 1970's. In 1975, we questioned the Department of Treasury concerning the disposition of Postal Savings certificates recovered from abandoned safe deposit boxes under the unclaimed property law. They replied that the certificates shouL be forwarded to Washington for safekeeping - we did not comply with their request. In a few cases we have been successful in redeeming savings bonds if we are able to produce evidence that the original payee is deceased and are willing to execute a Bond of Indemnity. PAGENO="1039" 1043 PROPOSED RULES PROPOSED RULES OP THE UNIFORN DISPOSITION OF UNCLAIMED PROPERTY ACT ADMINISTERED BY TWI WISCONSIN STATETREASURER ST 1.01 PURPOSE AND STATUTORY AUTHORITY. (1) The Uniform Disposition of Unclaimed Property Act providea that the custody of abandoned property, as defined, shall be acquired by the state when the owner cannot be located and does not appear to be aware of its existence and shall be deposited by the state treasurer in the school fund of the state. The acquisition of custody of abandoned property by the state does not deprive the owner of title. (2) The rules contained in this chapter implement provisions of the Unclaimed ?rone:ty Act as authorized by s. 177.26, Stats. ST 1.02 DEFINITIONS. As used in this chapter, unless the context requires otherwise: (1) "Act" means the Uniform Disposition of Unclaimed Property Act, subchapter I of ch. 177, Stats. - (2) "Charges" means any type of charge deducted by a holder, as defined in s. 177.01 (4), Stats., from property subject to theAct, including, but not limited to service charges, handling charges; and administrative costs. (3) `Property" means any property that is reportable to the state treasurer under the Act, or ~u1d be reportable if charges had not been deducted therefrom. (4) "Inactivity" means non-occurence of any of the events or acts described in s. 177.02, Stats. (5) "Deducted" is synonymous with the terms "excluded" and "withheld". (6) All other words used in chapter ST 1 have the same meaning as used and defined in the Act. ST 1.03 CHARGES L&3~TULLY WITHI~ED. (1) Authority for charges. Charges shall not be deducted from property unless: (a) Expressly permitted by provisions of the Act; or (b) Authorized by a statute other than the Act or by a valid, enforceable contract which expressly provides for such charges and the terms of which are not inconsistent with the provisions of the Act. (2) Contracted Charges. For purposes of ST 1.03 (1) (b) and s. 177.02 (1) (2) (3), Stats., an agreement in order to constitute a "contracted service charge", "charges that mey lawfully be withheld", or "valid enforceable contract" must satisfy the following conditions: (a) The agreement must be in writing and executed by the customer. (b) The agreement shall expressly provide on the face thereof the specific amount or method by which such charges shall be calculated and in no event shall the terms thereof be unreasonable or unconscionable. PAGENO="1040" 1044 (c) Any modifications or supplement, or amendment to an agreement otherwise satisfying these rules must be assented to in writing by the customer. (d) Such agreement shall otherwise comply with all Wisconsin statutes and federal statutes and regulations to which holders are subject. (3) Substantiation of Deductions. If charges are deducted from property a holder shall include or attach as part of the report filed pursuant to s. 177.11, Stats: (a) The citation of the statute or a copy of the form or contract authorizing such charges. (b) The value or amount of each item or property, before any charges are deducted therefrom. (c) The amount of charges deducted from each item and the date or dates on which such charges were deducted. (d) Such other information or documentation as the state treasurer may require after review of the report to substantiate the deduction of charges. (4) Waiver or Non-Enforcement of Right. Charges may not be deducted from property pursuant to a contract or statute if the holder anuld not have deducted such charges in the event the property had been claimed by the owner prior to being reported or remitted to the state treasurer. ST 1.04 INTEREST OR DIVIDENDS. (1) Authority for Discontinuance. If payment of interest or dividends on property subject to s. 177.02 (1) or (2), Stats., is discontinued at any time during the period of inactivity, the holder shall include or attach as part of the report filed pursuant to s. 177.11, Stats: (a) A copy of the form of a valid, enforceable contract which authorized such discontinuance of payment of interest or dividends; or (b) The citation of the statute which authorized such discontinuance of payment of interest or dividends. (2) Non-Enforcement of Right. A contract or statute shall not be considered as authorizing discontinuance of payment of interest or dividends if such payment would not have been discontinued or anuld otherwise have accrued to the benefit of the owner, in the event the property had been claimed by the owner prior to being reported or remitted to the state treasurer. ST 1.05 RECORDS. (1) In order to allow the state treasurer adequate time in which to inventory and microfilm necessary documents, records pertaining to unclaimed property shall become "public records" within 6 months of the actual delivery of the property to the state treasurer. (2) Records shall be available for public inspection between the hours of 7:45 a.m. and 4:30 p.m., except Saturday, Sunday and legal holidays, at the Office of State Treasurer, Madison, Wisconsin. (3) No records may be removed from the place of examination without written authorization of the unclaimed property division of the office. PAGENO="1041" 1045 Page 3 (4) No bulk records relating to unclaimed property will be provided through the mail. ST 1.06 ACCEPTANCE OF UNCLAIMED PROPERTY AFEER 2 YEARS. Since the Wisconsin law is purely custodial, any holder of unclaimed property may voluntarily report funds before the statutory due dates and be relieved of all accountability and responsibility u;rn delivery of the unclaimed property to the state treasurer. (1) This rules only applies to non-income producing property; property which weuld not accrue interest, dividends or income for the owner, were the holder to continue and hold it for the prescribed period of abandonment. (2) Before reporting, the holder must first exercise due diligence to ascertain the whereabouts of the owner. ST 1.07 NOTICE TO LAST KNOWN ADDRESS OF OWNER (s. 177.11 (5), Stats). (1) Once property is presumed abandoned under the Act, the balder must exercise due diligence to ascertain the whereabouts of the owner. (a) The bolder should attenpt to comnunicate facts concerning abandonment to the owner. (b) Tne owner, after being notified, must take affirmative steps in order to prevent the continued presumption of abandonment. (2) The holders notice to the owner should be sent by United States mail, first class postage prepaid, and should inform the owner that unless the owner notifies the holder within a reasonable stated period that the owner has not abandoned the property it will be reported to the state treasurer. The notice should further state that if the property is still not claimed after it has been reported it will be placed in the protective custody of the state treasurer, to whom all future for the return of the property should be made. (3) The cwner's affirnative steps to prevent abandonment from being presumed should ~:eferably be in the form of a written memerandun, post card or letter si~ed by the owner containing a statement to the effect that he or she has not abandoned the property. (4) Interest earnings statements or other notièes mailed by the balder to the last known address of the owner do not in themselves meet the requirements of a. 177.11 (5), Stats; however, if such notices,, sent ~y United States mail, first class postage prepaid, are returned by the post office because the addressee can- not be located then the notice of presumed abandonment need not be sent unless the holder otherwise has knowledge of the owners whereabouts. ST 1.08 SAFE DEPOSIT BOXES. No banking or other financial institution shall permit any safe deposit box, safe, vault or other safekeeping repository in its possession or under its control on which the lease or rental agreement has expired due to non-payrunt of rental charges to be opened by anyone other than the owner unless all funds and personal property found in such safe deposit box, safe, vault or other safekeeping repository be inventoried, in form prescribed below, in the presence of at least 2 enployes of said banking or other financial institution who shall certify as to the accuracy of the contents of the safe deposit box, safe, vault or other safekeeping repository which contents shall thereupon be sealed in an envelope and remain under unbroken seal until the contents are either delivered to the owner or to the office of state treasurer upon statutory presumption of abandonment. PAGENO="1042" 1046 Page4 - (1) All property removed from a safe deposit box, safe, vault or other safekeeping repository must be reported; but only items of probable tangible value, such as money, jewelry, stock certificates, bonds, etc., need be itemized in the inventory. (2) Documents such as receipts, cancelled checks, personal letters, etc. may be listed as "miscellaneous papers of no apparent value." (3) In accordance with the rules and regulations adopted by the banking or other financial institution, items of value removed from a safe deposit box, safe, vault or other safekeeping repository may be sold for reimbursement of back rent and drilling charges. The disposition of any property so removed and sold must be clearly stated on the inventoy and witnessed by 2 employes of said banking or other financial institution. (4) Under no circumstances is property removed from a safe deposit box to be replaced by a similiar item of supposed like value. (5) Safe deposit boxes, safes, vaults or other safekeeping repositories which are empty need not be reported. (6) Reimbursment for back rent and drilling charges is not collectable from the state treasurer. ST 1.09 DISPOSITION OF NON-CASH PROPERTY. (1) The state treasurer has the authority to dispose of non-cash property within one year of its receipt by selling, destroying or transmitting to a selected agency. (2) If the state treasurer determines that any property delivered to the office pursuant to this chapter has no apparent commercial value, he or she may at any time thereafter destroy or otherwise dispose of the property, and in that event no action or proceeding shall be brought or maintained against the state or any officer thereof or against the holder for or on account of any action taken by the state treasurer pursuant to this chapter with respect to the property. ST 1.10 EX~HINATION. (1) The actual cost of any examination or investigation incurred by the state treasurer in administering any provision of this act, shall be borne by the holder examined or investigated, provided: (a) A written demand for a report shall have been made and not forthcoming in the time specified in s. 177.11, Stats; or (b) A report has not been received and property reportable thereunder is discovered by such examination or investigation; or (c) A report has been received and additional property reportable under this Act is discovered by such examination or investigation. (2) Prior to any examination or investigation conducted pursuant to s. 177.23, Stats., there shall be delivered to the holder a notice in writing advising the holder of the state treasurer's intention to examine or investigate the holder, such notice shall be delivered to the holder 10 days prior to any examination or investigation. * PAGENO="1043" 1047 SERVICE CHARGES, EXAMPLES CLAIM TO STATE OF WiSCONSIN FOR * `:`y'~'~ "-3,\ STATE OF WISCONSIN FROFERTY FRESUMED ABANDONED e~'o ~ OFFICE OF STATE TREASURER ST 103-76 -c ~` `~ F 0 Box 2114 Complete ,ll four copies of this form. You do not boon to use cof~c papei~5~s ~ Madison, Wisconsin 53701 Detach the pink copy foe your records. Submit the other three ebyins to theOffioebl Sa~Tss~~rer at abotte address. 1. hare-in end Fresent Address of Claimant - include maiden ca~~-if~ny t~ -_ - Claimant is - check one First Wisconsin National Bank of Ni~Iw~skee ~ `~ I Dceportr~oneenerof property 777 Eut Wisconsin Avenue tel ~S' {~ ~Pnertcocshc!drrof property Milwaukee, WI 53202 ~ke-). DGuardianecrcutor,administratoroeother ~e reprennntat:ce J~1 0 Heir echere them has been no probate F-c-ye-ny Dmta'c-' 4. F~trenty ~fa~ j.~j 0 Eeneficiany of an account by owner who is cow dead -4 ~`~Yi 0 Other - eoplain Savings Account #1100773 $23.61 (7 - b. fl-c Ptcyenn-r eeoc Re'rirterO no the Start Tenon-.erer LInden heron end dd~d of 5~. Social Security Number Sb. Date of Birth Otto Flaig 11727 N. Vega Avenue 79W Meqttona WI 53092 6. linen and Addreot of Holder who Remitted Property * ak 6a. Date Froper-ty ems Remitted to the State First Wisconsin National Bank of iwaukee 777 East Wisconsin Avenue Noveeber 22, 1978 ?iilvstckee, WI 53202 e-taOercn th.a co-n-in-ott the eia~eart to the reperted 0cc-ten and the property, such as the original sau4ngs passbook, is `ct a-ut- be, a ercno:ord statement frye the holder- that lIt claimant is the r:;Itcful ce-once to tIre bestof his ~ ~`~~4.taroccltoa.on-raen-tcn'eoms:(S 201.61 (1) J byc~eckuo 3111692 Dated 4130/79 IC. A~cir'utc cc cormtp'c~ce-ny rt'~tyc oI~t t'io cIa~tn ard6~c-e itproperiyarreotedbya Notary Pcblib c'n cla:-.a-t iso pt-er-u-a ltc~r' ep- nythis 0-cit. ccc be eceo-.cred by a pec-tnet- eta partnership, the chief fiscal officer of a public corporation, en ct-ia p--nra eo'-pyt-arp- c- tot-ott-pc. ac-ct. Th* catered Car-act hereby eer-titics that this etaim foe pcpnrco peuutoecadabuaducc.diundicf and joel, that all statements herein am true and correct, c-cd 0-at cpcn payment of thJsetai rtS0- Claitnatt s'4ll itdemnifyotd hold harmless 1h es officers and employees, front sty cc..eLestos...penpe-t.__~ Subnoribed end serene-n to baler-n me this Signatut-es of all Claimants _________ _____________ First Wisconsin Nati 1 Bank of Milu. NOTE: Any claim for property pmsumeo~~ndoned must be epproned by the Justice Department. You will be notified of theiedecisionA~~s action is taken within 90 days of the date the claim is filed,the Claimant may commence sefiun in Dana County Circuit Court to establish his claim, but such notion most be started within 180 days from the data the claim isfiled. If she Claimatt is out satisfied with the decision of she Justice Deportment on his claim, he may request aiudieiaf reciew by seecieg a petition sherefore,peesonealfy or by relater-ad mail, upon the State Treasurer of Wisconsin. 9ueh pee-rip- most be see-ned and filed it Dane County Circuit Coors within 30 days after sercice of decision upon the Claimant. STATE TREAS1JRER'S RECOMMENDATION & RECORD DEPARTMENT OF JUSTICE ACTION I CO I 0(12 XApprunrd 0 Denied 0 Hearing Ordered ~ by AnQumty norm! 1st day cf MaY , 19 N~W7 `~`7 County, State My commission eepinec ~.ie.oet1a~3 /.~77 PAGENO="1044" CLAIM TO STATE OF W~SCONSIN FOR PROPERTY PRESUMED ABANDONED ST 103-76 Complete all four copies of this form. You do cot hace to use carbon paper us this paper is salt-copying. Detach the pick copy foe your records. Submit she other three copies so she Office of State Teeceurerat abooe address. 1. NamoandPresentAddrensofClaimant-includemaiden cameifany First Wisconsin National Bank of Milwaukee 777 1. Wisconsin Avenue hilwaiikee WI 53202 2. Cloimantis-checkone .-~ ~ Reported owner of property - ~] Precious holder of property *. -~ DGrd ve°' dm stra or her Heir where there has been ~mo-probate -. / ~ Beneficiary of an account by2 r wltbid cow DOtber-euplain . -. 3. Property Description 4. Properly Cash Value Savings A0ct. Passbook No. 3116 ~ ~4~_ 5. This Property was Remitted to the State Treasurer Under the Name and Address of 5a. Social Security Number 5b. Date of Birth Jerome Letkiewicz or Mrs. Lillian Torcivia 5627 N. 25th St. Milwaukee, WI 53209 6. Name and Address of Holder wino Remitted Property - Ba. Date Property was Remitted to the State First Wisconsin National Bank of Milwaukee 777 ~. Wisconsin Avenue November 22, 1978 Milwaukee, MI 53202 7. Describe and asnach tame documentary euidecm that connects the olaimant to the reported owner .nf the erooertn. such as she orioinal saniem eaosbooh. share certificate. etc. or, if such enidence is cot anailable, a notoniaed statement from the holder that the claimant is the rightful owner so she best of his ~joowiedge and belief. 9, If the claimant is the prenloos holder of property, complete the following and attach a copy of she refund check, the withdrawal slip or euidence of Amoontpaidto abone-camedowners: S 679.62 (i) byCtreckNo 2211538 Dated ________ 10. All clairesanto to theeamedprcperrymunruig!m rhio claim and hare Jr pmperlyarreored bya NoraryPublia tithe cloinnantis a precious holder of property, this claim most be ececuted bya partner of a partnership, the chief fiscal officer of a public corporation, sn officer of a peiraate corporation or unitorpor-oted association. The ~ hembycertifiesthatthisclaimfOpeopertyp sumedaba onedistwidandiuut,that statementshere:cam srueand correct,and that upon payment of this claim said Claimant will indemnif n I she State i officers and employees, from any otherual:d claims so said propert~'. ~ NOTE: Any claim for property presumed~andoned must be approned bythejostioe Department. You will be notified of their decision. If no action is taken withief 90 days of thedate the claim is filed,the Claimant may commence action is Dane County Circuit Court so establish his claim, but such action must be started within 180 days from the date the claim is filed. If she Claimant is not satisfied with the decision of she Justice Department on h:s claim, he may request a judicial reniewby sewing a petition therefore, personnelly or by roistered mail, upon the StateTeassurer of Wisconsin. Such petition must be earned and filed in Dane County Circuit Court within 30 days after seanice of decision upon the Claimant. STATE TREASURER'S RECOMMENDATION & RECORD DEPARTMENT OF JUSTICE ACTION 1048 STATE OF WISCONSIN OFFICE OF STATE TREASURER P0 Box Modiso~~in~7O~7'), 8~ If she claimant is an heir where there has been no probate, list the tames, address and relationship of other heirs who surciced the original owner. Attach documentary enidence such as birth, baptismal, marriage or drath certificate that will show relationship of heir no original owner, Subscribed end sworn so before me this Sionaturet of all Claimants 2nd~ day of April 19 ...,~..,... ~ ~n `IL, ~°~W 7~ County, State Mycommiscioneoplaes Oa'~cf,t .1-J~7f - Firs~, Wisconsin Nati~al Bank of Milw. DaPa~YR,ei~ ~ Yearff~nrted8 Iu~:~fiI~n;,ruo. ~Appro 0 Denied / 0 Heaeisg0rdemd ReporsCbomAggr (~ee,~l.ic:z~7c-' Wf by_____________________ ~ ~ I~'°~ AssistantAtsorneyGeneral Date PAGENO="1045" Ott - ... *. ~-. First WiSconsin National Bank of Mi1vaukee~1 --h 777 East Wisconsin Avenue ~--~ Kilvaukee, Wisconsin 53202 ~ ~ 2. Cte;mant as - check one ~R~do~nofpro~ ~Preos holder of property DGooandiat,eeerotor.admini~tormothec representation 0 Heir stattere there has been no probate 0 Betteficiary of att account by owtter who is now dead DOtlter -eoplain 3. Property Description 4. Propetty Cotta Valom Savings Acct. #128592 $5,972.71 S. This Prtpn'ty snot Rertitted to the Scone Treasunen Undon the fiance and Addnesn of Anna A. Schvarz 142.5 West F Street Ontario, Cal. So. Social Seccnity Nutnber 5b. Date of Birth . tn act ,t±l'eno o' Hc~- s','.y Re-7red Prypemny First Wisconsin National Bank of Milvaukee 777 East Wisconsin Avenue )`ilvaukee, Wisconsin 53202 Ga. Dane Pt-opnrny sat Remitted to the State 11-30-76 See enclosed. 5. If are ttaiwart is the peatious holder of property, compete the fc!lcwicg and ataaoh a copy of the retond check, the withdraual slip or eoidetoe of ~taot'coeo'.e'ccectcm-nrns: S 6,116.71 (1) by~treuictia #2118727 Dated 101878 0.! "cr-m to renu-ect'n'cy nnc,' t0:uctart,nttOoce,apypyrfy,tecn.byaNuocyPoobboo oancnsaooro,c..otctte'o'ppy'y aca-rtoocbeeoecconedbyapor-trerotap.t-tnershp,thechieffisoaloftioerofapubliocorporat:ot,an The rca'edCn-a'n byrenfn'canthiscnfcrptypresumedabandunrdisutlidandjunt,thatacstatementshrreitaretrueatd Subscribed and swotn to before me this Signato~es of all Claimants * ~ ~~~Coon~Sepoe Firs o~a1BaoMwaukee Mycommissioneopiret `o?.57/9~f NOTE: Any claim for property pmsumed abandoned most be approned by the .lottioe Department You will be notified of their deoisiot. It no action is taken within 90 days of the date the claim is 5 ilrd,the Claimant may commence action in Date County Circcit Court to establish his claim, but scch action most be started within 180 days from the date the claim is filed. If she Claimant is not satisfied with the decision of the Justice Department on his claim, he may reqoest a judicial recieteo by setning a petition therefore, parsonnally or by teistered snail, opon the State Treasurer of Wisconsit. Such pa m otbe road dOled D C yC Co row h 3Oday f ervoe fd p Ic Cl ma 1049 `CtJ,Te,~TO.STATEOFWISCONS1NFOR ~` ~ `~ ~ STATEOFWISCONSIN OFFICE OF STATE TREASURER P0 Box 2114 -/3 Cuneneefco.-cnpistofnsfc'n-.Ypycanrccta,'ncuctnoo.boooo~.eectehityopenissylt.copyir~.: Mad:son,W,scons:n53701 Ceroto nrc fl-k cony fn~ yny- nero-dc. $.tc'cm the cnhnn n-re cotton no the Otl:oe ad.Scone rtnatuner.,~ aboce add'ens. 7. C~b~ end errach sct'rt dyn/'ccncnany eondenne than contents the claimant to the reported owner and the property, such at the ctiginal sacirgt patsbouk, c', if a~.ch e°dence is rut ao'milate, a ncnaroed snanemenn 5mm the hclder that tIe ola:mant :s the r:gfctf ul owner to the bent of his S. tf n'e cleiy'.a'cn is ac heir e,te.e the'e hot bnnn tao probate, lien the comet, address and te!ationthip of other heirs who surniord the original owner. Attach doy,n'ecnacy ecideom soda en birch, bapricrnel, marnia~e or death certificate that will show relationship of heir to original owner. 7 / n. ~. ~SfdtIf I I (fl,e4onetsm' Scn~t'e flffit'er STATE TREASURER'S RECOMMENDATION & RECORD DEPARTMENT OF JUSTICE ACTION Dane Claim Receioed Holder No. Year Reported Owner No. Item No. 019083 1976 ItL 1 * Apptooed, 0 Denied /~D Hearing Ordered Microfilm Indeo Vs ed by Report Claim Aggr Q~JTi0~ 7ó~~7~ yb t~5~/ I by Assistant Astarney Gene~f Date PAGENO="1046" CLAIM TO STATE OF WISCONSIN FOR &fl ~ PROPERTY PRESUMED ABANDONED L~ s574y. ~ l9,~5e ~1 ST 103.76 ETRI~. `zJ Complete all foot onpies of this foret. You do not bane so usa carho pa~er as'ttQu~ll~er is'elt.c~04q, Detach tho pitA enpy for your tnuords. Submit the ottter three ccpies\~3~nOffice of State TW~tu~t~Ar at abone addreso. 1. NameandPtasetttAddressofClairnant-inc!udeenaidennameifanu'.~~f7ma'ç.\\. First Wisconsin National Bank of Milwaukee ~" 777 East Wisconsin Avenue Milwaukee, Wisconsin 53201 . 2. Claimant is-checkone ~Reportedownerof property ZPteoious holder of property DGuordian, eceoctor, edminisnrator or other t,ttVNeir where there has been no probate D Beneficiary of an amount by owner who is now dead 0 Other - ecplain 3. Property Descniptios 4. Ptoperty Cash Value Savings_Account_#506501 $543.37 5. This Propnrsy was Remitted to the State Treasurer Under the Name and Addrens of Pa. Social Security Number 5b. Dote of Birth Elizabeth Black 3459 North 2nd Street Milwaukeea Wisconsin 53212 6. Namn and Address of Holdnr wfto Remitted Property Ba. Date Property was Remitted so she State First Wisconsin National Bank of Milwaukee 777 East Wisconsin Avenue Novonaber 30, 1976 Milwaukee, Wisconsin 53201 7. Describe and attach some dncomentary ecidence that connects the claimant to the reported owner and the property, such as the original eaoings passbook, sham certificate, etc. or, it suoh eoidenoe is not acsilab!e, a notarioed statement from the holder that she claimant is the rightful owner no she best of his kaowledge and belief. 8. If the oloimant is an heir where them hot been no probate, list the names, address and mlationship of other heirs who surcioed she original owner. Attach documentary euidence such as birth, baptismal, marriage or death certificate that will show relationship of heir to originolowner, See Enclosed 9. If the claimant is the precious holder of property, complete the following and attach a copy of the refund check, the withdrawal slip or eoidence of Aeeouetpaidtoahoce.namedownnrs: $687.37 (1) by~hnckNo 2605580 Dated 9/8/78 10. A1101aimantoaatheoamedpropertymooroignrhiocfoimandhcreitprnper!yartroradbyathacaryPnbliy ft the claimant isa precioos holder of property, this claim must be eoeooted by a partner of a partnership, she chinf fiscal officer of a public corporation, an officer of a peicate corporation or unicorporated association. First isconsin National Bank of Milw. ~ (:1:" CuStomer Service Officer NOTEt Any claim for property pmsomed'~bandoned most be approued by the Justice Department. You will be notified of theirdecision. It no action is taken within 90 days of the date the claim is filed,the Claimant may commence action in Dane County Circuit Court to establish his claim, but such action must be started within 100 days from the date the claim is tiled. ft she Claimant is not satisfied with the decision of she Justice Department on his claim, he may request e judicial teciew by seroirg a petition therefore, personnally or by reistered mail, upon the State Treasurer of Wisconsin. Such petition must be serned and filed in Dane County Circuit Court within 30 days after srruice of decision upon the Claimant. DEPARTMENT OF JfJSTICE ACTION 1050 54 036~TATE OF WISCONSIN OFFICE OF STATE TREASURER P0 Box 2114 Madison, Wisconsin 53701 coereot and that upon payment of this tam ancoc an or emnify and hold harmless the State, its ficers and employers, from any other ualid claims so said property. ~ argesof $144. Subscribed and sworn to before me this // day o dt15710h1) , 19 `~ry~ qCounty,State My commissi~'n eutfees ~getE.o' 3 Signatures of all Claimants O Claire R i Holder No. Year Reported Owner No. ttem N ~~/~9- ~ 019083 1976 ~ ci G~ C' ~Appe d 0 Denied/ 0 Heaving Ordered R po~0r0e~e0AO0r Ver1~c~Y~~) C~"~~/' by /f L.~ 4~L~f~ q ``~~á' Vou7~/do. ~O~O~O347 ~ Assistant Attorney 0 eneral Date PAGENO="1047" 1051 QIljt ~`tafr UI fl~izcntwin OFFICE OF THE STATE TREASURER STATE CAFITOL Mad son Ws~ 53702 () 9 February 1978 P Mr Jack `n Adat.s -~ - - 3240 Fiebrantz Drive - - Brookfield WI 53005 - - - - Re: Dorthant Savings AOcount .. -: Marine . National Exchange Bank : . ..* -. * . Dear Mr. Adams: *. - . .Y Upo-a an unsuccessful search of our files for a record of your account;: we contacted the Marine National: Exchange Dank of Milwaukee. They have informed us thstyour savings account, nunher 523-135 was terminated as of Noveeber 1976. The balance of.your account was negated by service charges. . No money was ~-~-----evor--renitthd-to the State~of -Wisconsin for-this'eccount:--"-~-~ IfT3~6u have sny furthor questions regarding your account, Pleas&cdntáct the Marine National Exchange Bank. * `~nan} you Sincerely Charles P. Snith * - : * * * State Treasurer * * By: * * - .-~: Lori D Guineá~--: --- - * - *~ ~*.:*:.~*: .:-: * *: * Unclain~d Property Division CPS/ldg: ** 7 *..-. .1 : *. .: *: : : ** Enclosure: / *. * . *.::~ - * . Savings Passbook t523-l35 Marine Nat 1 Exchange Bank 67-440 0 - 81 - 67 PAGENO="1048" 1052 C~Q zL~ c~L~ __ _ L~ 4~ ~-tk~ ~Q4t ~ )C( (~ 37 ~ tZ-i~ ~ W4'~A~- 53z~O( PAGENO="1049" 1053 * ~Iie ~tate of ~wcauatn OFFICE OF THE STATE TREA~JRER STATE CAPITOL.. Madi~~, Wi~~n3in 53702 (1.) February 8 1978 Mr Ralph Hurley .1. 1210 A W Greenfield - Milwaukee WI 53204 `~ Re: Dormant Savings Account l4arine National Exchange Bank Dear Mr. Hurley: Upon an unsuccessful search of our files for a record of your account, we contacted the Marine National Exchange Bank of Milwaukee. They have informed us that your savings account, #452-637 was terminated as of November 1976. The balance of your account was negated by service charges. No money was ever ~ -- *. mitted to the State of Wisconsin for thu account. If you have any further questions regarding your account, please contact the Marine National Exchange Bank. Thank you. Sincerely, Charles P. Smith State Treasurer * - * *By: * * Lori B. Guinea Unclaimed Property Division CPS/ldg Enclosure: Savings Passbook #452-637 Marine Nat'l.Exchange Bank PAGENO="1050" APPENDIX 5.-SURVEYS OF DISTRICT OF COLUMBIA FINANCIAL INSTITUTIONS COMFrROLLER OF THE CTJRRENCY SURVEY OF D.C. BANKS (cover letter sent with questionnaire to each bank) Comptroller of the Currency Administrator of National Banks Washington, D.C. 20219 November 19, 1979 TO THE CHIEF EXECUTIVE OFFICER "The Commerce, Consumer and Monetary Affairs Subcommittee is currently investigating the extent and handling of dormant accounts and other unclaimed financial assets belonging to the public but held by banks and other financial institutions. The purpose of the investigation has been to determine (a) to what extent the dormant accounts and other unclaimed property held by these insti- tutions are being handled in ways that do not adequately protect the rights of the owners and (b) whether the subcommittee should hold an oversight hearing to learn the extent of any problems and to consider possible federal regulatory or legislative steps.?* The ~Congressional subcommittee has asked us to survey District of Columbia banks on this matter. Accordingly, as authorized by 12 U.S.C. 161(a) we are hereby issuing a Special Call Report to answer these questions. The current year data required should be reported as of September 30, 1979. If data as of September 30, 1979 is not available please provide data as of the most recent date possible. Prior year information should be reflected as of December 31. Amounts should be reported in thousands. Information derived from this Special Call Report will be treated on a confidential basis by the 0CC. The Subcommittee has agreed to accept summary and aggregate data which will not identify individual institutions. Please respond by December 14, 1979. Should you have any questions, please contact Fred Finke, National Bank Examiner/Project Coordinator at 447-1164. Thank you. Sincerely, John G. Hezmann Comptroller of the Currency *Excerpt from letter of Representative Benjamin S. Rosenthal to John 0. Heimann. (1054) PAGENO="1051" 1055 Comptroller of the Currency Administrator of National Banks ~shingks~. D.C. 20219 May 2, 1980 Dear Mr. Chairman: Pursuant to your October 11, 1979 and December 3, 1979 requests, as well as several telephone conversations with Don Tucker of your staff, attached are the final results of a dormant account survey of national banks in the District of Columbia. Should you have any further questions, please do not hesitate to contact either Ed Zito or myself. Sinc ly, Special Assistant for Congressional Affairs Attachment Honorable Benjamin S. Rosenthal Chairman Commerce, Consumar and Monetary Af fairs Subcommittee United States Congress Rayburn House Office Building Room B-377 Washington, D. C. 20515 PAGENO="1052" 1056 RESULTS OF TH DORMANT ACCOUNT SURVEY OF DISTRICT OF COLtTh~IA BANKS Question 1 If within the past five years the bank has imposed service charges on savings accounts or demand accounts by reason of their inactivity, please provide the amount of such service charges for each year and the number of accounts on which these charges were imposed. 1974 1975 1976 1977 1978 1979 Amount of charges Number of accounts How have the owners of the dormant accounts been informed that service charges are being imposed on their accounts by reason of their inactivity? Summary of Responses to Question 1 Amount of Service Cha~~ Number of Accounts 1974 (1) 93,000 23,479 1975 (2) 111,000 23,719 1976 (3) 150,000 33,159 - 1977 (4) 148,000 35,615 1978 (5) 215,000 34,990 1979 (6) 177,000 27,931 (1) 5 banks reported both number of accounts and dollar amount 1 bank reported number but no amount 2 banks reported amount but no number 3 banks reported zero 3 banks reported the figures were not available 3 banks were not open in 1974, i.e., not applicable 17 (2) 6 banks reported both number of accounts and dollar amount 2 banks reported dollar amount only 3 banks reported zero 3 banks reported the figures were not available 3 banks were not open in 1975, i.e., not applicable 17 (3) 8 banks reported both number of accounts and dollar amount 2 banks reported dollar amount only 3 banks reported zero 3 banks reported the figures were not available 1 bank was not open.jn 1976 (4) 8 banks reported both number of accounts and dollar amount 4 banks reported zero 3 banks reported the figures were not available 1 bank was not open in 1977 1 bank reported dollar amount only 17 (5) 11 banks reported both number of accounts and dollar amount 2 banks reported dollar amount only 3 banks reported zero 1 bank reported the figures were not available 17 PAGENO="1053" 1057 (6) l~ banks reported both number of accounts and dollar amount 2 banks reported ~dollar amount only 2 banks reported zero 17 The most widely used method of informing cumtotnerS that charges are being imposed is through their monthly statement, although brochureS and letters forwarded through the nail are also used. 9 banks reported informed through statements 3 banks used brochure or letter 2 banks imposed no charges 1 bank reported rules in passbook 1 bank said "Yes"? 1 bank failed to respond Question 2 After such accounts have been classified as dormant or inactive, has the bank credited to income and/or written of f to thebank's capital accounts any such account? If so, please provide the dollar amount credited to income and/or written off to the bank's capital accounts (do not include any amounts described in Question 1 above). 1974 1975 1976 1977 1978 1979 A~ount credited to incoi~e and/or capital accounts Surnary of Responses to Question 2 Amount Credited to Income not available not available 48,000 25,000 42,000 18,000 12 banks reported none 2 banks reported the figures were not available 3 banks were not open in 1974 or 1975 17 (3) & (4) 2 banks reported an amount 13 banks reported none 1 bank reported the figures were not available 1 bank was not open in 1976 17 (5) & (6) 3 banks reported the amount 13 banks reported none 1 bank reported the figures were not available 17 1974 (1) 1975 (2) 1976 (3) 1977 (4) 1978 (5) 1979 (6) (1) & (2) PAGENO="1054" 1058 Question 3 Does the bank cease accruing interest on savings accounts classified as inactive or dormant? If so, after what period of inactivity does interest cease to accrue? What is the current amount of dormant account balances on which interest accruals have ceased? What were the amounts of such account balances at the end of each of the past five fiscal years? 1974 1975 1976 1977 1978 1979 Account Balances Summary of Responses to Question 3 The vast majority of banks do not cease accruing interest in dormant savings accounts, for those that did cease interest accruals it was stopped after two years. Current Account Balance on Which Interest Accruals Habe Been Ceased 1974 not available 1975 not available 1976 3,480,000 1977 3939,000 1978 6,111,000 1979 5,881,000 15 banks reported interest accruals were not stopped 1 bank reported ceasing interest accruals 1 bank reported ceasing accruals when amount was below $100 17 Q~estion 4 If service charges have been imposed on dormant accounts, does the bank refund or restore these accumulated charges to the account if the depositor reactivates or otherwise claims the account? If interest accruals have been suspended on a dormant savings account, does the bank reinstate the interest accruals retroactively to the account if the depositor reactivates or otherwise claims the account? PAGENO="1055" 1059 Su~iary of Responses to Question 4 -- Moat banks indicated service charges, if imposed, are refunded if the depositor reactivates or claims the amount. (1) For those banks ceasing interest accruals1 the accruals are reinstated retroactively if the depositor reactivates or claims the amount. (2) (1) 11 banks indicated they would refund service charges 4 banks indicated they would not refund service charges 1 bank properly indicated question was not applicable 1 bank did not answer question I'- (2) 1 bank ceasing interest accruals would reinstate interest 1 bank would not Questici ~ After what period is an account classified dormant or inactive? Demand Accounts __________________________ Savings Accounts __________________________ Stmarv of Responses to Question 5 Only one bank did not make it a practice to classify accounts dormant or inactive. The tine period for classifying demand accounts dormant ranged from six months to one year, with one year being cited most often. 12 banks cited 1 year 3 banks cited 6 months 1 bank cited 250 days 1 bank doesn't classify accounts dormant rr The time period for classifying savings accounts dormant ranged from 6 months to 5 years with 3 years being cited most often. 1 bank said 6 monhts 4 banks said 1 year 1 bank said 600 days 1 bank said 2 years 7 banks said 3 years 1 bank said 4 years 1 bank said 5 years 1 bank does not classify accounts dormant I,- PAGENO="1056" 1060 Question 6 Does the bank segregate in any way dormant savings and demand deposits, or make them subject to dormancy control? If so, please provide the total dollar amount and number of such accounts appearing on the bank's dormant account trial balance or similar file which have had no customer generated activity for seven or more years. In order to provide this information, the date of last customer generated activity must be stored in computer files or otherwise available. If stored, a search of the account files should provide the needed information. In case the date of last customer generated activity is unavailable, please contact the person referenced in the cover letter for assistance. Dollar Amount _______________________ Number of Accounts ________________________ Summary of Responses to Question 6 Over 90% of the banks which have re~ponded segregate dormant accounts. 15 banks do segregate dormant accounts 1 bank does not classify accounts as dormant 1 bank does not segregate accounts 17 The amount of accounts in which no activity has occurred for seven or more years was $25,092,000 which represented 14,992 accounts. 12 banks reported both amous~s and numbers 1 bank could not determine because accounts not classified as dormant or segregated 4 banks have not been open for seven years 17 Question 7 What is the policy of the bank concerning the disposition of funds released at the maturity of a certIficate of deposit when no commun- ication is received from the depositor concerning, the disposition of the funds: Are the funds automatically rolled over into another certificate of deposit? Are the funds transferred to a non-interest-bearing account? Other? . If the policy has been changed within the .past five years, what was the earlier policy? PAGENO="1057" 1061 of Responses to Ouestion 7 The majority of banks do not transfer funds into non-interest bearing accounts. The funds are rolled over as long as the CD contract gives the bank authority to roll the CD over, i.e. ,states the CD is automatically renewable. 7 banks rolled CDs over 3 banks do not roll CD5 over but do not transfer funds 6 banks transfer into non-interest bearing account 1 bank has yet to lose contact with customer I,- Only one bank reported changing its policy in the last five years. It had ceased accruing interest on matured CD5, now it rolls them over. Q~estior~S If such funds from matured certificates of deposit have ever been automatically rolled over into new certificates when no customer communication is received, have such certificates been segregated as dormant or made subject to dormancy control? Please provide the current dollar amount of all certificates of deposit resulting from automatic rollover of previously issued certificates of deposit where no customer communcation has been received for seven or more years (Do not include any amounts previously reported in Question 6). Dollar A~ount _______________________ Number of Accounts ________________________ of Responses to Question ~ For those banks which roll the CDs over none report segregating the certificates as dormant. Ameunt of CD5 resulting from automatic roliover where no customer coxmnunication has been received for seven or mere years - $258,000 representing 37 accounts. 2 banks reported both dollar ameunt and number of accounts 4 banks have not been open for seven years 11 banks reported none I,- PAGENO="1058" 1062 Question 9 Does the bank credit to income and/or capital, cashier's checks, money orders, certified checks, bank drafts, or any other written instrument on which the bank is directly liable which have remained outstanding for a period of time designated by the bank? If so, please provide the length of time ___________________________ Does the bank impose service charges on such items? Please provide the amount of such service charges or credits to income and/or capital for each year. 1974 1975 1976 1977 1978 1979 Amount of service charges Amount credited to income and/or capital Sumnary of Responses to Question 9 The majority of banks credit income for old. official items. The time period ranged from one to seven years with five years being cited most often. 4 banks reported five years 1 bank reported one year 1 bank reported two years 1 bank reported three years 2 banks reported seven years 8 banks said it was not applicable 17 1 bank service charges the items after one year Amounts of Official Items Credited to Income 1974 (1) 18,000 1975 (2) 323,000 1976 (3) 255,000 1977 (4) 251,000 1978 (5) 300,000 1979 (6) 342,000 (1) & (2) 4 banks reported an amount 3 banks reported the figures were not available 3 banks were not open in 1974 or 1975 7 banks do not service charge or credit income 17 (3) & (4) 6 banks reported an amount 1 bank reported the figures were not available 9 banks do not service charge or credit income 1 bank was not open in 19Th or 1977 17 (5) 6 banks reported an amount 10 banks do not service charge or credit income 1 bank reported the figures were not available 17 (6) 7 banks reported an amount 10 banks do not service charge or credit income 17 PAGENO="1059" 1O63~ Qu2stion 10 What is the dollar amount as of 9/30/79 of the checks referred to in question 9 that have remained outstanding seven or more years and that have not been creditedto income and/or capital? Su~arv of T~esponses to Ouestionl0 There was $64,000 in official items outstanding seven or more years that had not been credited to income. 4 banks reported an amount 4 banks have not been open for seven years 9 banks reported none 17 Q~estior~ 11 What are the bank~s policies and procedures involving unclaimed diyidends arising from activities of the corporate trust or agency department. For example, uncashed checks sent by the bank as trustee or agent of a corporate customer. If possible, please provide the dollar amount of any such unclaimed dividends, outstanding seven or more years as of September 30, 1979. S~.r~rv of Responses to QuestIon 11 This question did not apply to most D.C. banks as they do not offer such services. For those that did offer these services there were only $34,000 in such checks outstanding seven or more years. - 5 banks offer such services - 3 gave an amount 12 banks do not offer these services 17 PAGENO="1060" 1064 Questions 12 and 13 (12) After a checking or savings account has been classified as dormant by thern bank, are periodic account statements still mailed to the depositor? Is the owner of a dormant deposit balance reminded in any other way of the continued existence and current status of his account? (13) If statements or notices mailed to a depositor are returned by the Post Office as undeliverable, what steps are then taken by the bank, assuming the depositor does not contact the bank to provide a new address within a reasonable period of time? What is the bank's policy regarding the use of locator services or other unusual steps to attempt to obtain a valid mail address in such cases? Summary of Responses to Questions 12 and 13 Questions 12 and 13 were asked of the four largest banks only Question 12 4 of the banks continue to nail periodic statements on cheàking accounts 3 of the banks continue to nail periodic statements on savings accounts The statement was the only way the customer is informed of the status of the account. Question l3~ All the banks indicated efforts are made to locate new addresses, etc., through the phone book, city directories, etc. None use locator services or other unusual methods. PAGENO="1061" Q.trEsTloxs To AND LETTERS FROM FoUR D.C. SAVINGS INSTITUTIONS INFORMATION REQUESTED CONCERNING DORMANT ACCOUNTS AND OTHER UNCLAIMED PROPERTY It~1b~STRICT OF COLUMBIA SAVINGS AND LOAN ASSOCIATIONS Please provide the following information for each of the preceding 5 fiscal years (or such time period as may be available): (I) If the association imposes service charges on savings accounts by reason of their inactivity, please provide the amount of such service charges for each year. On how many accounts in each year were these charges imposed? How have the owners of the dormant accounts been informed that service charges are being imposed on their accounts by reason of their inactivity? (2) After such accounts have been classified as dormant or inactive, does the association redeem any accounts so classified, or otherwise write off or credit to income any such accounts? If so, please provide the dollar amounts redeemed, written off, or credited to income for each year (do not include any amounts described in paragraph (1) above). (3) Does the association cease the accruing of interest on savings accounts classified as inactive or dormant? If so, after what period of inactivity does interest cease to accrue? What is the current amount of dormant account balances on which interest accruals have ceased? What were the amounts of such account balances at the end of each of the past five fiscal years? (4) If service charges have been imposed on a dormant account, does the association refund or restore these accumulated charges to the account if the depositor reactivates or otherwise claims the accàunt? If interest accruals have been suspended on a dormant account, does the association reinstate the interest accruals retroactively to the account if the depositor reactivates or otherwise claims the account? (5) Does the association segregate in any way dormant savings and time deposits, or make them subject to dormancy control? If so, please provide the total dollar amount and number of such accounts appearing currently (or for the most recent available date) on the association's dormant account trial balance or other similar file which have had no customer generated activity for seven or more years. What portion of this amount and how many of these accounts belong to depositors whose last known address is in the District of Columbia? (6) What is the policy of the association concerning the disposition of funds released at the maturity of a certificate of deposit when no communication is received from the depositor concerning the disposition of the funds? Are the funds automatically rolled over into another certificate of deposit? (1065) PAGENO="1062" 1066 2 (7) If such funds from matured certificates of deposit are automatically rolled over into new certificates when no customer communication is received, are such certificate accounts in which there has been no customer contact for a certain period of time segregated in any way as dormant or made subject to dormancy control? Please provide the current dollar amount of all certificate of deposit accounts which have had no customer generated activity for seven or more years or on which no customer communication has been received for seven or more years. (Do not include in this figure any amounts previously reported in answer to question 5.) What portion of this amount belongs to depositors whose last known address is in the District of Columbia? (8) After a savings account has been classified as dormant, are periodic account statements still mailed to the depositor? Is the owner of a dormant deposit balance reminded in any other way of the continued existence and current status of his account?. (9) If statements or notices mailed to a depositor are returned by the Post Office as undeliverable, what steps are then taken by the association, at.suming the depositor does not contact the association to provide a new address Within a reasonable time? What Is the association's policy regarding the use of locator services or (~ther unusual steps to attempt to obtain a valid mail address In such cases? PAGENO="1063" 1067 Perpetual Federa! Savings S~rnv~ Vv~ ~ November 2, 1979 Mr. Francis N. Passarellj Acting Deputy Director Office of Federal Savings and Loan Insurance Corporation(Examjnatjons) 17th and G Streets, N.W. Washington, D.C. 20532 Dear Frank: Enclosed as requested in your letter to Mr. Thomas J. Owen, dated October 19, 1979, is the Association's responses to the list of questions that the Subcommittee had prepared. As dis- cussed over the phone, we have no record of receiving your original request and regret any delay that~this has caused. If you or the Subcorirnittee need any further information with regard to the Association's dormant and inactive accounts; or if you have any questions concerning:the information we have furnished, certainly feel free to contact me directly at our Main Office ad- dress. Very truly yours, Wade Hotsenpiller Wit :mc Ma,n Office Eleventh and E Streets. Northwest * Washington 0 C 20004 * Telephone 783-7700 PAGENO="1064" 1068 INFORMATION REQUESTED CONCERNING DORMANT ACCOUNTS AND OTHER UNCLAIMED PROPERTY IN DISTRICT OF COLUMBIA SAVINGS AND LOAN ASSOCIATIONS The following information is provided in response to and in the same order as the specific questions listed in your letter of October 19, 1979 to Mr. Thomas J. Owen: (1) No service charges have been placed by the Association on a savings account by reason of inaOtivit~ for the last five years. (2) Effective December 31, 1978, the Association has adopted a policy of redeeming savings accounts that have been inactive for five years. The accounts so redeemed are reclassified from `Savings Accounts" to "Other Accounts Payable" without a write-off or credit to income. The following are the approxi- mate whole dollar amounts of the accounts that have been re- deemed to date by the Association: December 31, 1978 - $2,488,000 June 30, 1979 - 80,000 (3) The Association discontinues the accruing of interest on in- active savings accounts as of the date the accounts are re- deemed (i.e., after five years of inactivity). The total dollar amount of dormant accounts that had been redeemed and on which interest accruals have ceased, is the total of the above two redemptions less accounts subsequently reactivated. This total is $2,400,000. (.4) As explained above, the Association does not impose service charges on inactive or dormant accounts at this time. The Association does reinstate the interest accruals retroactively if the depositor reactivates or otherwise claims the account that had previously been redeemed. (5) The Association does segregate dormant and inactive accounts from regular active savings accounts. As a result of the Association's policy on redemption of dormant accounts after five years of no activity (2 above), the Association does not have any accounts that have been dormant for seven years or more. (6) The Association's policy is to automatically roll over certif i- cates of deposit when they mature under circumstances where no communication has been received from the depositor concerning the disposition of the funds. Approximately 15 days before maturity, the Association does mail requests to each certif i- cate holder in order to confirm their instructions for the disposition of funds upon certificate maturity. PAGENO="1065" 1O~9. -2- (7) Since the Association did not commence issuing certificates of deposit until December 1977, the Association has had no substantive experience to date concerning the situations where no customer communication is received in regard to certificates maturing and where there has been no customer contact for a certain period of time. PAGENO="1066" 1070 Perpetual Federal Savings Sinior V~:~eratiOnO December 13, 1979 Mr. Francis M. Passarelli Associate Director Office of Examinations and Supervision Federal Home Loan Bank Board 1700 G Street, N.W. Washington, D.C. 20552 Dear Frank: Enclosed as requested in your letter of December 7, 1979, is the Association's response to the two additional ques- tions that the "Subcommittee" in question has prepared concerning dormant accounts in the District of Columbia for savings and loan associations. Again, if you or the Subcommittee need any further infor- mation with regard to the Association's dormant and in- active accounts, or if you have any questions concerning the information we have furnished, certainly feel free to contact me directly at our Main Office address. Very truly yours, Wade Hotsenpiller Main Office Eleventh and E Streets. Northwest * Washington. D C 20004 * Telephone 783-7700 PAGENO="1067" 1071 December 13, 1979 ADDITIONAL INFORMATION REQUESTED CONCER~~ING DORMANT ACCOUNTS AND OTHER UNCLAIMED PROPERTY IN DISTRICT OF COLUMBIA SAVINGS AND LOAN ASSOCIATIONS The following information is provided in response to the specific questions listed in your letter of December 7, 1979: (8) After a savings account has been classified as dorciant, are periodic account statements still mailed to the depositor? Yes, it has been the procedure of the Association for dormant and inactive accounts to mail a year-end statement on all such accounts that have earned $10 or more interest during the calendar year. Is the owner of a dormant deposit balance reminded in any other way of the continued existence and current status of his account? Yes, a "hold condition" is placed on the Savings account requiring action to be taken by the Association with the account holder whenever a deposit or withdrawal transaction is processed on an inactive or dormant account. Also, there are at least two certified mailings by the Association to the owners of inactive or dormant accounts, in an attempt to verify the existence of the account with the proper account holder prior to commencing the redeemed account procedures. (9) If statements or notices mailed to a depositor are returned by the Post Office as undeliverable, what steps are then taken by the association, assuming the depositor does not contact the association, to provide a new address within a reasonable time? A specified hold condition is placed upon all accounts for which statements or other notices have been returned by the Post Office as undeliverable. This hold condition requires action to be taken by the Association in obtaining a new address prior to handling and processing any deposit or withdrawal transaction on the account in question. Also, there are other steps or action taken from tine to time depending on the specific circumstances concerning statements and other notices that have been returned by the Post Office as undeliverable, e.g., when the account has just been opened in the last 30 days, renailing the items a second time because there are problems by the Post Office in the initial mailing, etc. PAGENO="1068" 1072 -2- What is the association's policy regarding the use of locator services or other unusual steps to attempt to obtain a valid mail address in such cases? Again, the specific steps taken to obtain a cur- rent mailing address varies upon the specific circumstances. The Association in the past has researched telephone directories (including Haines' cross-reference and index directory), reviewed other savings accounts or loan accounts that the account holder in question may also have with the Association, placed phone calls to the account holder's employer or the present occupants of the last mailing address, etc. PAGENO="1069" 1073 NATIONAL PERMANENT FEDERAL SAVINGS AND LOAN ASSOCIATION ORGANIZED 1890 1775 PennsyfraniaAvemie, N.W., Washington, D.C. 20006 (202) 857.6700 JO~ W. STADTLER ~ of the Board Oe.tobe/L 24, 1979 M'~. FizancL~ M. Pai~sa~'r~L& ActLn~ Vepu.ty Vix~c.'~o~~ Pc! t/P~tcg~air.3 Fc~de'~c~L ffci~a Lcc~ &v'Jz &a.'td 1700 G ~ N. W. 4hLr~2;~c1~, V. C. 20552 Vea~~ E'uznh; A~s i~e.que~ed by youi~ LetW~ o~ Oe~obe~t 19, 1979, an4weli.4 Iuwe been ptep~tted ~o ~he qae4~on4 ~z~eh yea dubmi2ted /Lep~a/uU.ng J.n~oiwIation on oP~mar~t c1eCOW~6. Eeca.u.~e o~ the. £kon~t thne pe~.Lod, compF.~ete a.n4we't~ ~o aU qae4tLon4 cca&1 ,to~t be obf~aLned. ~ hoped tha/~ ~he in~oiur,ttA.on Lthich at £uXn14ke4 ~s 4a~J~cJ.~ent, cr.d .tha.~ i~ a~y o~iiv~ ~ £~ needed, ~IUtt yea W~U te~ me (mow. Co~td.ZcJ2y, EnaA.04WLe6 PAGENO="1070" 1074 NATIONAL PERMANENT FEDERAL SAVINGS AND LQ~N ASSOCIATION 1. Na~tLona~ PeJu7~aneitt J~~O4 ~4 4 e/LV~LCA aha/~ge4 on 4avLng4 aaaoan~t6 tiuvt We. have. dee.r~ad to be. ac~owvt~ o~ doium~n~ 4ta~tws. VoA.iran~t 4tatu4 mean4 aa~our~ts n~-th baLance4 o~ £e.44 tiian $10. 00, and tthene no aatcivJ~tj harns oc~w~e.d ~ot the. £zz4~ ~Mee. cLi2endair. ye~an4. The. nurnbe.x o~ aeaoaett.o aha'z~ed the. $1.00 4e/LvLIae ahaitge. ~O~L the~ pa4t ~~ve. ye.an4 ai~e. a4 £oLeo~: 1975 - 532 1976 - 1171 1977 - 1304 1978 - 955 1979 - 843 Be.~oke. any o~ the. ancowtt~ w~/~e. dut~e.d, a £e~ttex io~u maUed ~o the. £a~ l?JW~l adcL~e~s4 o~ e.ve/uj aaaotuv1~ hotdeit. Jn~onithig the.m .tha~ ~he.y ~wed have. 30 days .to ~e.deen o'~ add ~o ~he aae.oatv~ ~o p'~eveett the. $1.00 4e/vLce change.. 2. Th.L4 A44 oa.&tLon, eon. the. pa4 ~.Lve. ye.0A4, ha4 ~take.n he. 4 exvece ciut&ge.s .i.r~to .~ncoiie., and the. ~oUo~vLng ~i2 a do!Jan. arnowvt o~ 4e/w.~ce. eJuv~ge4 LOlL the pa~ ~Lve. yeaJz~s: 1975 - $ 404.80 1976 - $1,055.30 1977 - $ 973.28 1978 - $ 881.97 1979 - $ 724.44 3. As e.xp~a.Lned above., th.Ls A44oc.Lation cease.4 o pay J~n2~eAe.4l~ on accowvto when he. bcla.nce oL ~h ~ .~ .ee.~ ~than $io.oo, and whene no ac.tLvLty ha4 ocnw~n.ed Lan. the. past thn.ee. ca.Fendan. ye.axs. BaLances oL these. desZgnate4 don.man.t aanoun.ts LolL the pas.t ~Lve. yeans aXe: 1975 - $ 413.95 1976 - $7,041.89 1977 - $5,47s.~s 1978 - $3,576.58 1979 - $2,631.54 The. pn.e.se.n.t ba~o.nce. .i.n the. dó'umxnt accowtt6 .~.s $1,907.10. 4. It has aLways been the poL.Lcy oL Na.tLona2 Pe'unanent to n.tht4sta.te the donirant acaou.nt chan.ge.s when the. sasiex 40 Xeqaeots on. Xeaa.tLva.tes the. acaowtt. On th.Ls type. oL account, the. `Lest aec/wo2 ~s not ~te2'wactLue. PAGENO="1071" 1075 NATIONAL PERMANENT FEDGSAL SAVINGS AND LOAN ASSOCIATION 5. Th~cLS A~ociatLon ha~s a aomp~v~ n-tou~ on t'~Za-t baCa~nees o~ aU a~cow-t~, and et~L~ Ee~ a&e p&zaed be4Zde tho4 e. aenoun~to Tha~t luwe had no tLvL~y ~ ~haee oi~ r~o'~e yen,u~. Tha dciJr~ arw~ and The nuabe~t o~ The~se acaowtts That befLong ~o d~rL~ct.~ tho~e £a~~t hno:~n add&es~s L6 ~n The VLstndat o~ CotwobLa L~ w ~UaLnahZe at The pte2eJ~t n~e. 6. it Ls The potiay o~ NationaL P wianent that when ee ates o~ depo.~Lt raLwte and no aor i~LcatLon Ls &eaeLve4 £Jwm the depo4Lto~, that The cei ~h~ate autorraL catty be toLLed oveiL wtth The 4ame te/ums p~evaLUitg. L'hen The aaaount6 woe wLtO7mv~~crLUy w!J.ed ove,t, The same aaaoant nw-bet Ls r~ntaLned, and The 4ame aeit,~4Lcate 4exvLn9 04 ev~denae o~ c:~nctshLp. 7. ~ci: c~w~e4 ate aaLonificaUy `LLed ove~t, a~te/L no cu4tomc/L ac~-r'~icn ha~ bean ~teaetved, The ae Lcate4 woe not denoted as do~r-en~, wZc~s ~such cettt~Lcate4 have been L~ued by The M4ocLatLon Lot a pextod o~ Th~tea at nwe yccvus. Tho doLLat w-~ount o~ aU cc L~Lcate depotit acaoanf~ Ithcich have hod cr~et adivLty £o~ ~ even o~ mete yeats Le wuzttaLnabte at The pteseaL t~oa, as Lo The amount That betong4 to depo4Ltani~ who4e £n~t fanc~n ddcc~s Ls -Zn The VLsL'zLat o~ CoLumbia. The ~ envLae duvtg e~ on dotmant aacow~t6 That ate changed by ThLo A&socLafion woe awthonLzed Thtoagh Fedciiat Home Loan Bante 8oaxd ~egutation4 a~ aLated in `taLe 545.1 pa~tagnaph C. 67-'4~4O 0 - 81 - 68 PAGENO="1072" 1076 NATIONAL PERMANENT FEDERAL SAVINGS AND LOAN ASSOCIATION ORGANIZED 1890 1775 Pennsylvania Avenue, NW., Washington, D.C. 20006 (202) 857.6700 Veaembe..& 12, 1979 M'~. FizaneJ~s M. PassaxeL& Ac~Ung Veputy VJ.~tecton. PoV~~y/Piwg'tam6 Fe4exa.~ Home Loan Bank Boaiui 1100 G St'Leet, N. N. WaslvLngton, V. C. 20552 Dean. Mn.. Passaxef_&: Mn.. John Stadttex has asked me to xepty to yow~ ttex oL Deceinbex 1, 1919, wh.ich was .Lit xef~exence to owt poV.ay on don.mant and .Lnctc,tLve 5cw.~n94 accowit6. The an4we~ to you.x questLons, nwnbei~s eIght and n.Lne, axe as £0/lows: 8) SLnce sav.~ngs acc.ounts axe not e2~ sWed as do.'unc.nt unLess the bal.ance .i.s Less than $10.00 and have Iui.d no taansae..ti.ons Lox a.t Least thxee c.atendax yeaxs, add.W.onat peiz.LocLLc. statements axe not ma.Ued. A~ten. the ae.coant has been decl.axed don.man.t and at Least th.i.n.ty dags pn~ox to the acc.owit beIng assessed a $1.00 sexv.~ce change, a Lette'r. .~4 wn.Ltten to the donjnan.t eccount hoLdexs, .LnvLtLng them to aalLvate the accou.nt. The notLce states that .LL no tnansactlon ~i.s xee.onded .i.n the next th ty days, a $1.00 se.n.vLce aha.xge ulU be assessed. 9) An oveswhel.seIng majox~y oL dwtmant accowit notices axe xetwtned by the post o~&~e ccL.th the notcWon, "moved - .eeLt no ~onwaxdJ~ng in.ess", "u.nfznown", ela. it is the pa/Icy 06 the AssociafJ~on to check the city dixectoxy ox ciziss-cn.oss telephone book to a.t.temnpt to Locate an addeess Lox maAL sent and it xetuxned Lox va.eIous xea.sons. Nal.Lonal Penmanent ha~ nevex used a £ocolox seavice to ~.Lnd don.mant acc.ou.nt ho~.den.s. it is noted in yous. Let.te.'r. that you also wish a xepty to questions Listed as A, B, and C on the second page. oL youx Le.ttex. ~-` We thought that the Jji6on.mation to pan..ts A and B had been an.swe.n.ed .i.n Mn.. .Stad.tlen.'s Lettex 06 Oc.toben. 24, 1919, and a photostat 06 pa/tI 06 that Le,ttex has been pxepan.ed, and is enclosed, and it is hoped that this utilL give you the necessaxy .LnLo/una.tLon. Fox the calendax yean.s 061913 and 1914, this PAGENO="1073" 1077 F. M. PawteLt~ Page 2 NATIONAL PERMANENT tEAL SAVINES AND LQkN ~ ~ssocicJLon dJ~d no~ a~s~t c~s~ any ~ e/wZce ahajLge4 on do'zmvvt oft. any oiteit. ype o~ accoart, and natzctaUy, no Jnaorie caz6 f~aiaen beeau4e oL th~L6. ~t p~t, hL~ A~oc~atLor. ha4 no ~gwLe.4 on he oa1... doLtoit. antotLn and nw~beit. oL ftavôtg4 accoant~ ~tha-t have had no ca~tomejt. genvutted aatLvLty a pc~zJod oL 4even o~t r~o'e yea'zS. FiuJt.e4 Loft. aaeoant.6 that have been ~ct~vc 2'~' ~-~ve~catendcvt. yea~'L4 can be obaLtied LL you co~h. Tn 1973 when ccnt'e,ttcd to an on EAne 6y~tcn oL 4atLLng4 accoun~to, the £a~t tt.an4act~on wcte r& gfuv-~nd; he~teLo~e, ~the onLy gwt.e.4 -that can ~`t.eadJiy be cbcincd ate Lot he caJ~enda,t yea~ 1974 -th'tough 1978. Lt Ls hoped -that thLs addLtZonrxj. inLot~r~ation A~ 4u~cient, bwt -L~ no.t, p~ease Lec.~ L't.ee -to ca~& ce pVt.4onaui_y at 857-6720. Ve't.j `ut.Zy yowt~, Ko:~wt.d N. MLUnc,jt. SenLo,t. V~hae P-c~dent P. S. A3 an cLe,tthougftt, Lt ocawz4 hctt ~nce the 4 even yeat. nwttbeit. <16 baiiig hca,td r~te and co-te as a c&z44<1L<1cai~on Loft. -àuzcLLve acaot.uut.6 - aU o~ ha ~ nhkls have been Ls~sued L't.om ~tILL6 AF.R Staff Reportrr of TilE WALLSTREErT JOcRNAI. A federal agency will soon be looking over the shoulder of bankers to make sure they don't lay claim to money in forgotten bank acocunts. New examining procedures are being drafted by the Comptroller of the Currency in Washington to crack down on national * banks that report unclaimed property as in. come instead of as liabilities. Under the * plan, bank examiners, for the first time, will * monitor whethertiational banks comply with stife escheat laws. Those codes require abandoned property to be turned over to the states. A pilot project is to get under way, this fall involving about 400 banks in Minnesota. Wisconsin, North Dakota and South Dakota. "We'll be checktng bank records to see whether banks are filing reports, and turn- Ing over funds as required under state law." said Thomas W. Taylor, an associate deputy comptroller. Mr. Taylor outlined the program in Min- neapolis yesterday at a meeting of the Na- (lanai Association of Administrators of Un- claimed Property, a professional group of state finance officers. The amount of money Involved can't be estimated at this time, Mr. Taylor said. About 42 states have escheat laws on their books, which fix the time after which Inactive account.s are considered abandoned, and become state property. Jim Lord, Minnesota state treasurer, said such laws are often ignored by banks and corporations, and that abuses arc wide: spread. Federal Inquiry - Mr. Taylor said federal examiners will * be looking to see if banks stop paying Inter- est and impose unauthorized service charges on accounts that are classified as dormant. They'll also examine records for Improper use of unclaimed funds as earn- ings. "Since we have exclusive power over na- tional banks, we feel it's our duty to enforce the (state) laws," Mr. Taylor said. National banks are administered by the Comptroller of the Currency. State officials say often they're powerles~ to find out the amount of unclaimed fund5 banks hold in savings and checking ac- counts, trusts, uncashed dividend checks and elsewhere. ~`National banks claim they operate un- der federal law, and aren't subject to state laws," said Robert Q. Crane. Massachusetts state treasurer. He recently went to court to' gain access to records of First National* Bank of Bo~ton, claiming it holds Si million in abandoned funds. The bank has denied the charge. Mr. crane's staff is examining the bank's books. In another example, Bank of America, the nation's largest bank, sued California for relief from a claim by the state to collect $9.5 million of unclaimed property. A trial is expected soon. Citibank Settlement Separately, New . York recently negoti-, ated a settlement with Citibank for more than $3.8 million in abandoned dividend. checks, money orders and other funds. Mr. Crane. said the Comptroller's actior will help Massachusetts residents recover funds from out-of-state banks, which don't currently report abandoned holdings to other states. "It's certainly a moral victory for our side," Mr. Crane said. The pilot project was begun In the four-* state region at the urging of Mr. Lord, the Minnesota state treasurer~Ai p.rësident of the unclaimed property administrators' group, he began meeting with federal bank- Jng regulators more than a year ago, Mr. Taylor said. If the model program works, It: could be expanded nationally by next spring, he said. I Currently, about 2,100 federal elcaminers: annually review the books of 4,700 national banks in 14 regions. Separately. Mr. Lord said state finance officers expect to draft legislation this week requiring the federal government to report unclaimed funds to the states. He estimates! Washington imprpperiy holds $5 billion in unclaimed tax refunds, savings bonds, and other property. * 1O91~ `~L.S. TO ENSURE THAT BANKs DON'T CLAIM MONEY IN FORGOTTEN ACCOUNTS AS THEIRS," BY BYRON KLAPPER, WALL STREET JOURNAL, AUGUST 11, 1978 TIlE WAI.l. STItF.FT JOURNAL 8 - Friiiiy. .`~ug.1I. 197$ US. to Ensure That Banks Don't Claim Money in Forgo tt~n A~counts as Theirs 67-~lO 0 - 81 - 69 PAGENO="1088" 1092 "C0FC PLANS NB ESCHEAT PROBE," BY LYNN CONov~n, AMERICAN BANKER, AUGUST 15, 1978 CofC Plans NB Escheat Probe By LYNN CONOVER WASHINGTON - Examiners from the Office of the Comptroller of the Currency will verify whether national banks are complying with state unclaimed property laws. In a speech before the National Associa- tion of Unclaimed Property Ad- ministrators, in Minneapolis, Thomas W. Taylor, Associate Deputy Comptroller, said the national bank regulator is in the process of developing examination procedures to apply to certain state es- cheat laws. A copy of the speech was made available here. The Comptroller's Office is developing a model project for Minnesota, Wisconsin, North Dakota and South Dakota which would become part of the Federal agency's examination procedure after it has established a viable program in those four states, probably this fall, according to Mr. Taylor. He said the national bank regulator was proceeding under the assumption that the substantive provisions of the various state laws were applicable to national banks, but that inspection of bank records should be left to national bank examiners, not state officials. Mr. Taylor also noted that some state es- cheat laws limit the amount of service charges on dormant accounts, in contrast to the Federal statute, which does not limit the charges. lie said, however, that the Com- ptroller's Office presumed that the state service charge limitations are applicable to national banks. "I ~is very hopeful that our Federal ~ncy will be able to cooperate with state officials in enforcing unclaimed property law laws", he added. American Banker, Aug. 15, 1978 PAGENO="1089" It' JOE SCALES 50, and her mother Anna, 84, said they felt Of The Gaaette Stilt like they were winnIng the lottery whIte tatey read oft a social security number to see If It It was at-rest take u'.raeg lottery. rn.atcteed the one the booker bad. A Ertiie~s banker culled Iwo Nebraska "I lttlr.k it is wonderful," Dorothy said. waortt reccr.ttv and inked them fcc a social `1 really don't know how the yearn went by s.eriar:rv eo,'ttt'er. When they supplied it, be WIthout anyone knowing. It's nice to hue a aenrtii000actieckfor$ll,ccao., rich aunt somewhere.' The two women tire The sc~ot nee.o'tmy number reeoeied that on a farm near Nebraska City, Neb. They said they were the rightful owners at the money, they have planned nothing special wtth the which was on depend at Security Bank as snnneyyel. therrumesbutwithoutlhctrknow'lc-d They had isa idea that the mone wa.s It ~ onctaimeuLfog. 11 rs - thelrC"fl~iiiiiT~iedth1woiial we as since the death In lOtia of Emma Ulinssch. s~iawiThizltheesiitrWl~alleet[l~"' ecider, the Billings woman who deposited II. koitlcallti.._Mn tl5wm~EOii'isdeiTt00hkosiat.,,,, She was the sister of note of thi Nebraska Security Bask far about 30 years before retir- womeo aod the aunt of the other. log, oro ma sa The owney was deposited In their names officials apparently dial not know no:nctime befnre her death, where It almost the nuoESy"Wii"Oloro"et'tltsr'umnttr'ttmny'-wnrr-" doubtcd white collecting interest. - Tt.c Nebraska wcrtrco. lkrctby R.arrtutd, (More on Hears, Page t4A) Heirs (~A~) ~ at- s to started coming bock with no forward- lice. ieth,_k.ll,ZLt.J.Le.a.t.toeee generiT'i"PTflvw ing address. 5i~'~ been tricking down sliiliiTh0"00tTh'tl~cd After the money was located he soot out ~ ~ law, unpaid obligations owed to citizens by who had the same maiden name a.s the Itst' banks, msorasce companies. utilities and molds. Their names were on Ike certificate of other businesses most be turned over to the deposit in the bask slate after seven years and eflarts must be in- lie contacted the attorney for the ltiatedtnlocaletkelawfutowners. Watson's estate and was told where the `: The attorney general's otlice is is the women lised. midst of a vicorous campaign to make sure that slate businesses locate any unclaimed 1 finally got her on the phone," be said. mnneytheyhaveandtrymofindtheou~er~, ~ was ecstatic. II certainty made my It was the job of Ray Randolph. assisl- day. ant cont.notter at Security Bank. to track Dennis Dunthy of the attorney general's down Ike owners of the $tl,(0O. : attire s.iid smn~~ginoino~_~eprogram Randotph's search won aL'ttunl stcniie-d to huiit down ui'itrtiTiiied money thlliTOTl'Fios when the first phone call be made to Pie.- ~ brastsa reached a woman with the same name `"Tl'~7st holding was $40,000 that as the one be was laoh.lug for, who also lived Blue Cnoss had In ameashed checks for so. to the some city, onerous individuals. When Ia tried to explain that she might tIe said the $11,000 given to the Ne- he the owner of a large soon of money the braska women was probably the biggest woman, apparently thinking he was kidding, single sum. got angry and hung up. On the second call "The typical case is a macto smaller she gave him a number where he could track amount than that," he said. down Ike other ftamold.s ho town. "It onty took us three months Into the Randolph sold the money was appar. ~ ;,onify Inst in the system when bank stale- ~ 1093 "DECADE AFrER DEATH, $11,000 FINDS HEn~s," BY JOE SCALES, BIr~r4INGs GAZETTE, JtLY 28, 1979 ~t.r ~ Lb .~DTJ~ Saturday July 28, 1979 Billings, Montar.k 59103 96th Year, No. 87 Single Copy 25 ? ij~~ D~ciM aft~r death, $fl,000 finds heirs V. PAGENO="1090" 1094 "NEW YORK STATE LAW ANNUALLY TARNISHES BANKS' As~rum IMAGE," BY RICHARD JANSSEN, WALL SRTEET JOURNAL, SEPTEMBER 5, 1979 lIe 5 £ nil I tOt lt~',AI_ .IIJ 5 .i.,. ,,,.. 5. IsIs' -. -~---- ~--- - Irtiago of Parochialtasn New York State Law Tb ala of inc a bit parochial. Among the listings in A ~waa1ly Tarnlisnes full-tinge ~ ~ IdIfl den on ~ Banhem Trust Co., a m.'ip ought have at trust given Baflks Asti4e In7age ~ t~ a s a where west at the Hudson River), In the Firms Are Forcedto Publicize ~ ofCbleagn"irehabtyrepoited Their Inability to Locate l~ioticisco Chronicle (nndnrstnnd to be on tic' very rim of the continent). Certain Property Owners ~ The htar,hattan telephone book might atso helps, at least in theory. Among compa nies listed by Bankers Trust as due mine By RicluAtto F. Jossuca money are Morgan Guaranty Trust Co.. Ouaf/eresrfrrnfxlsrOtsua,OThcu'eJOvRNaL New York Tutephone Cot, Ike ntutr's Dapaui- tewW YORK - Marine Midland Bark meat of Taxation aad Finance. Satumutu can't find Hubert lit. .&nlezava, Eva Yagni Brothers and `racks. Gsldr,ean, unknown." tdtzer. or Wing It Productions. . *~~f those peopte hose alt disappeared, we re Nor can tt do better than "address on- in bigger tenable thas I thought." qaips a boon's" for the Securities and Exchange Bankers Trust spokesman. Commission, Xeron Corp., Merritt Lynch, But, altheagk it wouldn't require a Sher Pierce Fenner & Smith tic. and Chose nub Holmes to find sank institutions, even it litanhattan Bank. And, for tt',at matter, it taste of the names are shghtty scrambled, can't track doss's the consolidated dis'idends hanhei-n contain that much of the blame ties I f I no cv'pcrate P dq rt rs I ~ h Irs I Il' Ba~eNs~n;utg seem to be libelous asser- representatives of the other big banks and lions, except that Marine Midland ttsrtt took sort things out in person. Sal, the state substantial advertising space in The New won't allow lots to pay !ven another bark, York Times oat week to prnnhnitr its mobil' t~' says, unIons tat banns can cleat) iOUi' ily to mole these aed about 733 other lify the trar.sochon, thus proving that its "persvnn ap'uearie" as owners xl certain un still due the money. . claimed trapeys'." Shale's Benefit From Procedure Burt records, the ott says, show that This strict ir.oistence.on proof Isn't en each a! the individuals, huoitreoses and guy tircly unrelated, the banher mggesls. In the erorsenl ageudes appears to be c-dined to revenues the yale derives from those ac "cash amsuunlscf 050 or mom." counts. Accurdinc to the state's ttr. Roaero, Macire Mic0rnd im'l alone ix this probe books alone poOl about ~O million insoch tern; the ads are rrqoieed annoaly by a foods lathe stale lust year. The slate gels Ic Nose York stale law dating back to the speed that money as it it osere lax revenue, 19th Century. As it currently stands, every he says. Ho-,oevve, he notes hot it is never Aog. 1 n book roust ss'rile In each deproilor Ian tale for the intended recipient In gel a whose accaudI dsosn't slmw aas' deposit on refund, providing there's adequate proof. wiliudraa'al during the toss fise years. Thu Jbaul Sat million was refunded in 1918. he tellers most hi' faitawed op milk an ad adds. within :10 days. Ths hun a "very loeneficiat People musing, dying or just forgetting consumer peolevuiau ,`uspvct" ie that it bl.se~t small suviurgs accounts uodertie ouch doesn't lOt looks `avg on to such fonts o' of the problem, bankers say. Although, a d.'iii.iuvby, okoervmn, letars'imo fhsvis, dieretut Sib 000 iteni iso's anheard of, souse cases In ilie' si-ste's thor-as ot Abnndaaed I'rapeuly valve anly a few defines, and tue average us in Ahi~uoy. about St.500, ass' specialist says. A diligent lout the tegoit requirements also leave u hunker could snuck doo'n mvii any big insti- ihu' banks faulting less aslole too titi'ii' ia tuusiun, ever if the post office bounced back a age makers wuuld like. Alter etn'lsuining shot letter to it, tie' specialist adds. Rut It can be the' csuvvi oepeeoenl cashier's clucks that a of harder to hod Ike right person at liii' snluciasv rover cane vU circle, a Marine ccmpuno' and itaisre him In parsime the mat Mudloud rr'pronextatuve n-us asked annul tsr. listing its hradquu:uetera as a nsiesing depcs- The persi'vehivn Is dillerent from the tees. Thu r6'sN.flov': .(th for heaveno sake, - "Ut-iso- et Isn't," hso"cs'er. lid ho' Pa,uek- lusts enmtaucueunc - . . will hose to tell civ Trust nest `c/u' Cayrel fur k's~el." uvuSh lt;esa." the rurrecl PAIi Anu'ttue admiress."Ttuey hadn't phoned or written isetnee." repeat Abrahunu Keller, vice rrssudeut. tusance. tar the lund-raising org,ioiautiouu, who ~hemmed the bunk alher nuhicing the ad. tIe was told the nunouusl-tlil.20-and told to call another number In find rout huhose check it was. tIe did, but "they never catted back." he says. hteanwtuil', hi's deduced from the sam thaI the check ouust have bern one of many seat out as diu'idenda by the tand.raishag group "back itu 1974." Sounehow "the hank - credited ltke check) lv us instead of to I whnever" xhoutd have gal It, he sa>k. As lIe organi.tolion "never sad an account at Bauukeio Trust." lute. Ketier conuments, `Ibis is a loony tlmiog." And pruubably 00.26 more tar Ike stale. PAGENO="1091" 0 In ~ ~ Ulm ~...Zrn ~< ~.<. ni C ~C11 ~ti CID~J ~ ,_~ (0 01 t~ Cft 0z 0 PAGENO="1092" C.) ~ ~ z 0 ~CI) ~ L4 rt 0 c-I 0 `1 (I 03 a I ~II~ ~ ~ 0 ~$ ~ .~ (D c~L~ ~-t ~, 0 PAGENO="1093" I PAGENO="1094" 1098 Michigan Is the only state that has judicially outlawed any sort of service charge on escheathd accounts. That came as a reult of n laweult by thc state treasurer against the National Bank of Detroit in 1970. In other states, the fight against service, charges has been pro~'eealng slowly, according to L.oc Angeles lawyer David Epstein, a consultant to 15 states on unclaimed property mat- ters. Mr. Epstein says the case against the Bank of America In Important because It is seeking to apply the argu- ment against service charges to a huge financial Institution. PAGENO="1095" 1099 -~-l~ Escheats: A Nationwide Issue RECENT court cases around the countryhave been shaping the way states deal with eseheated property. Although few involve the high stakes of the Coi~i case, all are helping to define what has been a largely Ignored area of property'lsw. Important ca~ ~shi~: Zcree,i Ac~rs øwUd v. Copy, PiCA ~d lii (1P79). `i'~seCal1forn1a Court of -Appeahetd-that th.~es!a "private asc~t law" was unconstitutional. The union rule allowed the guild to keep any performer's check for residual pay- ments 11 the check hun't been cashed after six years. The appellate court declared that the funds must eacheat to the state. * Illlno~s ox rel Callahan v. Marehall Field Co., Cook ~o. Circuit Ct. 764w- 7899. The giant department store is appealing a trial court ruling that it must etcheat proceeds from gift certificates that were purchased but never redeemed. `In a case that could break an impasse over eacheats developing between several etates and the federal government, the Utah state treasurer is draw- ing up a oult to force the Internal Revenue Service to honor a $588 tax refund check eicheated in 1977. * Scndh Carolfna Tax Cümm. v. MefropolUan L4fe I~si~ronce Co., 221 SE 2nd (1975). The South Carolina Supreme Court held that even if a company routinely waived a six.year statute of limitations for claims on insurance policies by beneficiaries, it may not avoid the eacheating of unclaimed benefits after the statutory period had passed. That ruling was considered something of a breakthrough in Insurance es-. cheat law, a field that experts on abandoned propei-Iy predict will become a major source of new revenue for governments. In the tart several months, 10 states have joined to tonduct an audit of the John Hancock Mutual Life Insurance Co. to determine if the company has been keeping proceeds from matured policies that were unclaithed by beneficiaries. Mr. Lord, the Minnesota state treasurer, says he believes insurance com- panies make iubetantlal turns of money on unclaimed policies. "The Insurance companies say that all beneficiaries who make a claim get paid," he noted, "and that's probably true. But the catch Is `make a claim.' "The insurance companies make it a policy not to notify the beneficiary of the policyholder's death," he said. - Ciem Work PAGENO="1096" 1100 "BANK o~' AMERICA TOLD TO HAND OVER $20 MILLION TO STATE," WALL STREET JOURNAL, JULY 21, 1980 Bank of Amerka Told to Han4 Over $20 Milliomto State * * * Interest and Fees on Unused Accounts Are Involved in California Court Ruling Bye WALLSTRrsTJOL'RNAI, Rtaff RE-port,'r SACRAMENTO, Calif-In a ruling that could affect unclaimed property practices in most states, a state judge ruled that Bank of America must hand over to the state about ~0 million in service charges and interest collected on dormant accounts. A spokesman for BankAmerica Corp., the bank's parent, said a decision on whether to appeal won't be made immediately. Lawyer David J. Epstein of Century City, Calif., a consultant on unclaimed property laws for a hail dozen states, called the rul- ing "the death knell for bank service-charge practices on dormant accounts," He says the ruling Is a breakthrough on practices covering such abandoned property as uncashed dividend checks and unclaimed insurance.policy proceeds. Escheats System The six-year-old lawsuit questioned a sys- tem in many states called escheats. Under California's 1959 eseheat law, funds that lay dormant for seven years in bank accounts are to be turned over to the state if the bank can't find the owner. The state then acts as £ustodian for the depositors. In 1974, San Francisco lawyer Gary J. Near filed a lawsuit on behalf of two account hc~ders against California's controller. Since then, the state controller joined the action by filing similar suits against Bank of Amer- ins and others. Essentially, the lawsuits contend that banks shouldn't be permitted to keep the service charges levied against the dormant accounts, That money, they argue, atso should be turned over to the state. Where Is Bob Hope? Mr. Near's suit claimed that the state controller had breached his duty by failing to object to the banks' making the service charges. In addition, he disputed the banks' claim that they tried to find the holders of inactive accounts, noting that Bank of America had failed to find such account holders as entertainers Bob Hope and Lu' cifie Ball, former Gov. Edmund G. Brown Sr., San Frsthcisco Giants baseball player Willie McCovey and even the state control' ler, Kenneth Cory. In the Bank of America case that con- cluded this past January, president A. W, Clausen testified that "I cannot explain" why the bank had failed to find Mr, Mc' Covey. He added that people make mis- takes. Even Willie McCovey didn't bat a thousand," Mr. Clausen said. Several banks settled out of court. And earlier this year, a suit against Crocker Na- tional Bank was thrown out of court on a technicality; the state is appealing that deci- sion. Recently. Bank of California settled its suit with the state for about $300,000, and Wells Fargo Bank settled the matter for an amount `in the vicinity of $1 million," says one attorney. A bank spokeswoman says she can't confirm or deny that figure. Suits In Minnesota James F. Lard, Minnesota's treasurer, says the state filed similar lawsuits against two banks there, First National Bank of St. Paul and Farmers & Mechanics Savings Bank in Minneapolis, Both banks are con- testing the suits. A House subcommittee has scheduled hearings this week on alleged bank abuses of inactive savings and checking accounts. In his 31-page opinion, Judge A. Richard Backus said Bank of America must account for and pay to the controller all service charges collected against the dormant ac- counts and all interest withheld from them before they were turned over to the state from Sept, 18, 1959. pIus interest from the date the accounts were first payable, Taking a swipe at California, the judge said "it is clear from the evidence that, but for the action by the taxpayers, the control- ler wouldn't have adequately pursued the re- covery of the amounts due" from the banks, Mr. Near says he stands to collect $2 mil- lion to $4 million in legal fees from the $20 million, TIlE WAIL. S'I'REE'I' JOt'KNAI., 19 Mmdiv, July 21, 1981) PAGENO="1097" 1101 "CAL~'. Now Ai~rs AT CROCKER NATIONAL," AMERICAN BANKER, JuLY 23, 1980 10 Calif. Now Aims At Crocker Nati. spedzI to the Amerkon linker Mr. Cory it was improper to t~ndertake discovery when litigation was in process. Mr. Cory agreed and withdrew the auditors, the bank spokesman asserted. "Nowthat no one but two judges have ruled against the Bank of America's similar shoddy practice of removing money from the account of the unwary depositor," said Mr..Cory,"l would think that it and Crocker Bank would have some second thoughts about continuing this practice." ~~lIed `Stealing At his press conference, Mr. Cory called the deduction of service charges from dormant accounts "stealing," and charged that anybody else in business who did something similar would be put "in the hoosegow." Later in the day, Crocker executive vice president David A. Brooks issued a statement questioning Mr. Cory's motives in bringing a new lawsuit, and denying any improper practices. "We are surprised Mr. Cory would hold a press conference to announce a new lawsuit against us," said Mr. Brooks. "Some four years ago he filed a suit against us on the same-topic. The court dismissed that suit in May this year and Mr.- Cory has appealed that decision. - "We don't understand why he wants two lawsuits on the same matter unless it is to call attefltion to the situation or get publicity. - "Crocker has always been proud of the benefits we provide our depositors. We believe we have always obeyed the law. ,We do not have the right to break the law, nor do we want to~" "Crocker~s practice has been to pay interest to depositors on all savings ac. counts. We have a formal procedure to locate depositors who m~ke no deposits or withdrawals for several years.- We make no additional charges to those accounts because they are dormant. We don't understand why Mr. Cory believes -that is unfair because active or dormant accounts are treated alike." Recent state law now requires banks to continue paying interest on savings accounts that have become dormant. Crocker says it does not now deduct service charges from accounts before escheatment, but refused to reveal what - its past practices were, or when the present policy was adopted. - A Sacramento Superior Court judge upheld the state's position last week in a -notice of intended decision on the BofA dormant account legal battle. it was not yet known this week whether BofA would demand further hearings before a final decision is handed down, or whether it would appeal the decision when it is made final. Accusing banks here of "arbitrarily - siphoning off money from accounts," Mr. Cory said he was accusing Crocker of "ripping loose at least S1.7 million over a period of time" from dormant -~ accounts escheated to the state. `However, since the bank saw fit to: throw our auditors off its premises we: are not certain of the precise amount they have taken," he said. "It could rise considerably higher." A Crocker spokesman said the bank had not thrown any state auditors off the premises, as charged. Rather, he said, the - state filed against Crocker and later sent auditors to examine its records, at which point the state attorney general advised SACRAMENTO - Flush with apparent victory in a legal-battle with Bank of America NT&SA over it.s handling of dormant accounts, California state con- troller Kenneth Cory called a press con- ference here \%`ednesday to announce he is now going after Crocker National Bank on the same matter. In the press conference, Mr. Cory accused Crocker of "stealing" and charged it with "fraudulent and unfair business practices." - In San Francisco, a Crocker spokesman noted that Mr. Cory is already appealing a 1976 dormant account suit against Cracker, dismissed this May, and sug- gested thai the new lawsuit might have been called "to call attention to the situation or get publicity." The suit revolves around the California escheatrrsent law, under which deposit accounts which have been dormant a given period of time must be turned over to the stat~ as unclaimed property. The law allowed the banks to deduct "rea- sonable" service charges from the ac- counts. However, Mr. Cory has contended that the bank service charges were not "rea- sonable," and further that the banks had no contractural basis with their de- positors for making the deductions, or in many cases, stopping the payment of interest on the dormant accounts. Court Upholds State American Banker, July 23, 1980 PAGENO="1098"