By: Gary Joseph and Paola Narez
In order to maintain compliance with states’ unclaimed property statutes, holders must understand the types of unclaimed properties they are susceptible to generating and the conditions that would begin the running of the dormancy period for each property type (the “dormancy trigger”). Property becomes abandoned or unclaimed when an act of ownership has not been exercised within the specified dormancy period. For this reason, in order to demonstrate the property is active and not abandoned, it is imperative to understand what actions taken by the owner constitute an act of ownership and therefore restart the running of dormancy. While the unclaimed property laws expressly state that owner-initiated activity and/or contact are essential in determining abandonment, such factors may not be weighted equally among different companies despite them being crucial to unclaimed property compliance.
Determining the dormancy trigger can prove to be quite challenging as it depends on a number of variables including underlying terms of the property, unique industry practice and criteria, and differing definitions among state laws. For instance, holders operating in the banking industry hold various property types for which there are differing dormancy triggers, such as the maturity date for time deposits, and required minimum distribution dates in the case of tax-deferred retirement accounts. Keeping track of such nuances, as well as relevant legislative updates which may impact or change the trigger date, can be a moving target for unclaimed property process owners. Moreover, many state statutes were written before the advent of modern communication systems, so often times do not address electronic communication or similar means. The Revised Uniform Unclaimed Property Act (“RUUPA”) addresses current practices and defines electronic mail as a form of contact with the apparent owner. Although determining the dormancy trigger from a transaction date, last activity date, or the date upon which the property was due and payable can prove complex, evidence of contact should be a simpler trigger.
The advancement of technology and the means by which we communicate and transact business has impacted what we understand to be an act of contact. In the past, commercial transactions and communication were conducted face-to-face, via fax, via telephone, or via traditional mail. Transactions and communications today are primarily conducted electronically, which from an unclaimed property perspective can make it more difficult to demonstrate positive contact with an account owner. While many companies’ operating and accounting systems allow for the documenting of detailed notes and dates, there are still many who have not kept pace with technological changes and are unable to do so.
There are four primary methods of communication on which holders and other parties rely to maintain contact with account owners for unclaimed property purposes:
- Written correspondence / due diligence mailing
- Email / electronic mail
- Accessing an online account
It is important to note that if phone contact is made it must be documented in writing, including the date and time of the conversation with the account owner. Even then, certain states, such as New York, may not accept phone contact for all property types. We have found that the preferred method in evidencing contact with an owner for most, if not all, states is written correspondence between the holder and property owner.
Date of Last Contact (DOLC)
The date of last contact (DOLC) is considered to be the last time an owner showed interest in the property and conducted some form of owner generated activity. When reviewing customer accounts or other payables for abandoned property, holders should look for the most recent documented communication or the last debit or credit generated by the owner on any property. For properties held in a legitimate suspended position, such as a legal dispute, contact in the form of a communication with the owner may be the only viable option available as owner financial activity may be prohibited.
Property cannot become abandoned if an owner is aware of it as demonstrated by an act of ownership. As such, it is important that holders understand all the actions that would constitute positive contact, especially in an ever-changing technological environment, in order to demonstrate that property has remained active and has not been abandoned. It is imperative that holders identify, monitor and track the date of all contact with a property owner.
The following are suggested best practices for maintaining and tracking contact:
- Create a centralized data system for tracking contact and documenting owner generated activities
- Preserve copies of written contact such as responses to due diligence letters, completed request to update contact information form, etc.
- Generate written documentation of any telephone contact made by an owner
- Follow data protection procedures and ensure compliance with privacy and security requirements when including personal information
- Ensure accurate and up to date mailing addresses and email addresses
- Update owner information promptly when mail is returned
To learn more about managing unclaimed property compliance here.