Unclaimed money -- banks absorb it; states want it
"We did have a savings account for you," the bank wrote a St. Cloud, Minn., customer in 1978. "This account was closed in November of 1966, at which time the balance was $16.34."Skip to next paragraph
Subscribe Today to the Monitor
The bank explained it was permitted to charge a "maintenance fee" if it lost contact with a customer and its statements were returned.
"It would appear the service charge absorbed all of the remaining balance, which closed the account." The letter blithely concluded, "Sincerely yours."
Instead of accumulating interest for the long-missing depositor, the account had simply melted into the bank's own funds.
For 1979, Massachusetts alone estimated at $2 million to $3 million the unclaimed property in that state wiped out by bank service charges.
an amazing number of Americans seem to have either forgotten some of their assets or neglected to record them for distribution at time of death. About half of the funds are estimated to be in banks, but huge amounts are also held by other financial institutions, insurance companies, brokerage houses, and utilities -- even department stores and race tracks.
When California sued the giant Bank of America, state Controller Ken Cory reviewed the bank's reports and found his own name on the list of "missing" depositors, along with names of actress Lucille Ball, comedian Bob Hope, and former Gov. Edmund G. Brown Sr.
The suit resulted in a court order for the bank to return to its customers an estimated $20 million in service charges, unpaid interest, and penalties.
States are moving toward improved monitoring of abandoned property laws, under which unclaimed property reverts (escheats) to the state after a dormancy period.Required advertising of names in local newspapers before state takeovers has brought pleasant financial surprises to thousands of individuals who had forgotten their own assets.
Minnesota, which is engaged in a vigorous "missing owners" program, prides itself on the number tracked down.
"In fiscal year 1979 we identified owners of $5 million," said unclaimed property administrator Jim Lord. "We have just identified another $2 million this year. We have already returned 94.6 percent of this money."
The escheat principle dates back to fuedal times when land reverted to the manor in the absence of legal heirs. Nearly all the states have statutes requiring disclosure before takeover of abandoned property, but they are widely ignored. A conflicting US Supreme Court decision added complicating technicalities.
Enter two consumer-oriented groups dedicated to fairness and good order.
The Uniform Law Commissioners (ULC), unpaid appointees of state governors trying to solve common legal problems, had much earlier devised an unclaimed property act now on the books in 31 states. New amendments drafted by a committee headed by attorney Howard T. Rosen of Newark, N.J., will be considered by the ULC annual meeting in Hawaii July 26 to Aug. 1. After receiving guidance from the gathering of 250 lawyers, judges, and professors, the committee will have another go at perfecting its product for resubmission next year.
On adoption of the final text, the commissioners will work for its enactment in their own states.