Legislature(1995 - 1996)
03/22/1996 03:25 PM L&C
* first hearing in first committee of referral
= bill was previously heard/scheduled
= bill was previously heard/scheduled
HB 434 - UNCLAIMED PROPERTY Number 011 CHAIRMAN PETE KOTT announced the first order of business would be HB 434, "An Act relating to unclaimed property; and providing for an effective date," introduced by Rules by request of the Governor. RACHEL MARSHALL, Administrator, Unclaimed Property Section, Income and Excise Audit Division, Department of Revenue, explained HB 434 has to do with some cleanup areas. Many of recommendations in the bill were from an audit done by the Office of Management and Budget (OMB). The bill is also in line with the uniform law commissioner's 1995 revision to the Uniform Unclaimed Property Act. MS. MARSHALL said Section 1 cleans up language for property that is dividend reinvestment plan oriented. It specifically addresses mutual funds because they are not actively monitored by an owner. Mutual funds become unclaimed property usually because a mailing has not been received by the owner. By the time a second mailing hasn't been received by the owner, it is flagged as unclaimed property. Ms. Marshall noted this is in line with the Uniform Law Commission's changes for 1995. Number 284 MS. MARSHALL explained Section 2 was a recommendation by OMB which streamlines reporting amounts. Currently, there are amounts that are $25 for certain types of property and $50 for other types of property. This would lump sum all types of property into a $100 aggregate. She said it is up to the holder, which is a company, an association, a bank or financial institution, etc., reporting the property to either itemize those amounts or they could list them, for example, as 16 unclaimed checks in the amount $14, instead of listing them as 2 cents, 4 cents, etc. MS. MARSHALL said Section 3 provides for the filing dates to be the same, November 1. Currently, life insurance companies report by May 1, and remit the property November 1. All other companies report the property November 1, and remit the property May 1. She said this is very confusing for holders. Why not clean up all your records all at once - once a year and call it good. MS. MARSHALL referred to Section 4 and said it has to do with increasing property values which holders are required a due diligence requirement to contact the owner one last time prior to recording it as unclaimed property and to make this dollar amount consistent with the reporting amount, the aggregate amount and the publication amount - all to be $100. Number 417 CHAIRMAN KOTT referred to Section 4 and asked Ms. Marshall to explain how it would work. MS. MARSHALL explained that section is for the holders to send their due diligence requirement. Depending on the property, the dormancy period which is five years on the average, for five years a bank statement has been going to you once a month - mail has been sent to your address and it is being returned. This section asks that property that is at a level of $100 or more, one more time you must send them a notice before it is reported as unclaimed property. For most of the other items under $100, you already have significant flagging in your system that the owners have moved, but because the value is $100, they would be asked to try to contact the person one more time before the property is reported. Currently, if it is under $50, you don't have to send out the due diligence notice. By increasing the amount to $100 would be consistent with the increase to the reporting amount and publication amount. She noted 120 days before the unclaimed property is reported by a holder, they would send the owner one more written notice. CHAIRMAN KOTT asked how many previous notices Ms. Marshall would have sent. MS. MARSHALL said she wouldn't have sent any. This is the responsibility of the company holding the money. She noted it varies depending on what type of property it is. If it is wages, the company may have only sent that last paycheck one time. If it is a bank, they automatically send a statement every month and have for the last seven years. Number 599 MS. MARSHALL referred to Section 5 and said the way the current law reads, not later than March 1 of each year, the department is required to publish the names of owners who have property in excess of $50 or more. She stated the Uniform Law Commission has made a change to the uniform law and the department is trying to follow suit with that. More and more property is being reported every year and her section is not given any more time to key the information into the computer system and to work with the holders in returning the property prior to publication. By having an extra four months, the department would have enough time to administer it and publish it when the resources are there to handle the incoming phone calls. Although it says not later than March 1, with a staff of three they have to start at the beginning of February in order to hit Anchorage first and Fairbanks, because you can't publish names around the whole state at the same time or the phone lines would be clogged. Ms. Marshall said by moving the time to June 30, it would leave the administrator or the department manageable time to publish names when the office and resources can handle it. She noted the Uniform Law Commission's change was no later than November 1, so the department would still have a shorter deadline than the commission's deadline. Number 790 MS. MARSHALL referred to Section 6 and said it has to do with requirements to publish a owner's last known addresses. She said currently, the statute requires the owner's address be put in the publication. She explained in order to clean up areas, the owners are listed under the last known city. The reason this is important is because the owners look for their name in each town they lived in instead of using addresses. She said she lists the names by city because it is much easier for people to be found. CHAIRMAN KOTT asked if the publication is a handbook. MS. MARSHALL explained the names are inserted in newspapers statewide. They are inserted in the Bush Mailer which goes to 214 communities, the Anchorage Daily News, the Fairbanks News Miner and the Juneau Empire. Ms. Marshall said each year they call the newspapers and ask what their highest circulation date is and the publication is inserted in that date. CHAIRMAN KOTT asked if the names are published as a community service item or if there is a cost. MS. MARSHALL said she would be reviewing that area because the names are supposed to be published for two consecutive weeks and the department wants to make it one time. CHAIRMAN KOTT asked what is done for the rural areas that are not serviced by a newspaper. MS. MARSHALL said she takes things to library. She also noted the publications are given to the legislators and there has been a good response. Number 995 REPRESENTATIVE NORMAN ROKEBERG said he identified a constituent of his in the publication he received. He stated it does work. MS. MARSHALL noted the information is all public information. When a legislator does call a constituent to inform them they have unclaimed property, they are going to want to know what kind of a dollar amount it is. REPRESENTATIVE ROKEBERG asked if he could find out by calling the Unclaimed Property Office. MS. MARSHALL indicated he could as it is public information. Number 1035 MS. MARSHALL said Section 7 is in line with making all the dollar amounts consistent. Currently, the department publishes a name for property of $50. That amount would be increased to $100. Not only the cost for publishing has become expensive, but there are some easier and less costly methods for putting peoples' names out in order for them to be located. One is the Internet which doesn't cost anything. She said they could provide the items of $99 by the Internet and $100 or above would still be published. CHAIRMAN KOTT questioned how many people have unclaimed property below $99. MS. MARSHALL said she isn't sure. She said the number would be a lot less than then amounts above $100. Ms. Marshall said it may reduce the publication by one page or maybe two. She noted it is an eight page circular. It would probably be kept at eight pages because she would also list the Internet address for the items under $100 and give other ways to look for property of less than $100. Number 1173 MS. MARSHALL referred to Section 8 and said the people who are reporting unclaimed property, the holders, sends the department their report on November 1. She said she advertises it and then by May 1, if those people haven't come forward then the holder sends the department another report with the changes of the people who have come forward. Ms. Marshall noted some of those people have come forward and have not completed their paperwork so they are still included on the list. Some are deleted off the list. They have to add interest and deduct service charges on a second report. The Uniform Law Commission and OMB have recommended that they do a report/remit. The holder would send both the names and money November 1. When people call after seeing their name in the paper, the department would have their money and owners wouldn't have to go to the holders. The way things currently are is by the time the owners call the holders, the money has been sent to the department. MS. MARSHALL referred to Section 9 and said this section has to do with people who help locate owners. They are called heir finders, fee finders and other names. Ms. Marshall said the department gets an awful lot of complaints. Some finders charge people 35 to 50 percent of their unclaimed property. This section asks for two items. She said property that is on its way to the department cannot have a charge put on it until it has been in the department's possession for 24 months, which is a nice window period for the department to be able to return the property to the owner. This time period would give the property time to work through the system. It would have worked through due diligence through the holder and through the publication period. After that 24 month period if the department still hasn't been able to locate the owner, someone else could assist. Ms. Marshall explained many states are going to a percentage the fee finders can collect. She said 15 states have a 10 percent limit, 5 states have a 15 percent limit, 5 states have a 20 percent limit and 2 have a 5 percent limit. Ms. Marshall said the department wanted to be in line with 33 other states to have some kind of a cap on this fee. The fee finders aren't doing all the work, the holders and the state are and for the cost of a stamp and a phone call, they're charging a lot of money. Number 1359 REPRESENTATIVE JERRY SANDERS asked Ms. Marshall if she has an idea as to what percentage of the returns are instigated by a finder. MS. MARSHALL said she doesn't have that information. She noted that sometimes the owner will send her copies of the agreement with the fee finder, but that doesn't necessarily mean that the owner actually pays them or all the property that they located was included in that fee finder agreement. Ms. Marshall said if she had to guess, she would say it may be between 5 and 10 percent. She noted the larger the value of the property, the more someone is hounded. REPRESENTATIVE SANDERS said, "The reason I asked, and I may be completely backwards if -- and you know, I'm not going to argue this point. I just want to bring it up (indisc.). These people are performing a service because they're looking these people up - people who obviously haven't seen it in the paper and you obviously haven't gone to find out where they moved to. So if these guys are doing that and they do it for a high amount, I could understand that. On the low amount, you know for $200 at 10 percent I wouldn't write their name down for $20, you know and they wouldn't either, and people might want their $200 back. So I'm wondering if you might want to put in a variation there. Maybe 50 percent on anything under $500 or something and 10 percent over that. It is just something I wanted to bring out. I'm not going to push it, I don't care, but everybody knows about it. Thank you." CHAIRMAN KOTT noted he also had a concern in that area. Number 1483 REPRESENTATIVE KIM ELTON said anymore, this isn't a tough business. You can buy CD Roms that gives every name listed in every phone book in the United States. All you have to do is a name search. Number 1515 BOB BARTHOLOMEW, Deputy Director, Income and Excise Audit Division Department of Revenue, explained that for the department, there are three components to that change which is having to require that the fee finder has to tell the owner the value of the property that they found. The fee finder can't contact the owner for 24 months so that the state can have a chance to try and refund the property for free. The third part is the percentage cap which is the least important of the three to the department. Mr. Bartholomew noted the idea of the bill is to reduce some of the paperwork and get back to the function of finding owners. CHAIRMAN KOTT said there is a lot of technology that would make it fairly simple to locate people, but even with that it obviously isn't working otherwise there wouldn't be eight pages of unclaimed property. There may be something more to it than just looking at CD Roms. Number 1593 MS. MARSHALL said the owners are being hit up for money before the property comes to Unclaimed Property. Sometimes she hasn't even had a chance to try and find them. Ms. Marshall said on a $5,000 claim, $1,400 is a lot. REPRESENTATIVE SANDERS said he didn't have a problem with the 24 month time period. He asked Ms. Marshall if she what she thought about changing the percentage rate to 25 or 50. MS. MARSHALL indicated she would love to hear any recommendations the committee has. Number 1644 REPRESENTATIVE PORTER referred to money being held by the state for two years and asked what the disposition of the interest is on the money. MS. MARSHALL said property is only paid interest if it is interest bearing when it comes to the state. Number 1671 MR. BARTHOLOMEW explained the department is required to deposit the money into the general fund, but if it was an uncashed warrant that was sitting in someone's desk drawer where interest wouldn't be earned, the department would then not pay interest on the money when it is returned to the owner. If a savings account was received that was an interest bearing account, then interest would be paid on that account as if it were left in the bank. Interest is paid on property if it was earning interest when it was submitted to the state. He noted the general fund would benefit from the interest earned during that interim. Number 1696 MS. MARSHALL explained Section 10 defines business associations to include mutual funds. MS. MARSHALL informed the committee Section 11 includes warrants under intangible property. MS. MARSHALL referred to Section 12 and said, "The state is required to - once - a 120 days before November 1, the holder sends out a written notice and once we get it we're supposed to send out a written notice. It is a duplicate mailing notice. In the next few months after we receive the property, we're gonna advertise it anyway or have it out on the Internet. We're asking that that written notice be deleted from the department's responsibilities. OMB also had that in their recommendations for their audit this year too." MS. MARSHALL said Section 13 asks that this take effect in July. Number 1750 CHAIRMAN KOTT questioned what section asks that the names be published one time. MS. MARSHALL informed him it is Section 5. Number 1791 MR. BARTHOLOMEW informed the committee the department spends $22,000 to $25,000 to do one statewide publication. Of the total cost of the program, which is about $188,000, that is a lot of money and to do it twice.... There would have to be an increase in their budget to do it twice. He said they haven't actually been doing it twice. CHAIRMAN KOTT asked how successful the program is and how many claims are actually returned to the rightful owner. MS. MARSHALL said there is about a 30 percent return to the owner and that is high. MS. MARSHALL informed the committee there is a gentleman in Anchorage where the department has had about $250,000 for him. The department has a good address for him. Ms. Marshall said she asked him to sign a form that says he wants his unclaimed property and she'd be happy to send it to him. He has so much money he doesn't know what to do with it and hasn't requested his money from Unclaimed Property. She noted he is an attorney. Number 1911 REPRESENTATIVE GENE KUBINA asked what happens to the $250,000. MS. MARSHALL said it is in the general fund. She said when he dies and his children want to come forward for it, they can have it. REPRESENTATIVE KUBINA asked how long it has to be kept in the general fund. MR. BARTHOLOMEW said forever. REPRESENTATIVE SANDERS said he thought it was for seven years. MS. MARSHALL said that was the escheat law that went out in 1986. This law came in September, 1986. MR. BARTHOLOMEW explained there is a unclaimed property trust account and a balance is kept in there almost equal to what the department returns annually. The rest of it actually gets deposited into the unrestricted general fund. If there was ever a claim in excess of what is collected in a year, which is $2.5 million to $3 million, the department would have to get authorization for all past deposits. Even if the example of the $250,000 came in a year, the department would have plenty of authority to return it out of those annual receipts. There may be a smaller deposit into the general fund, but it wouldn't require an appropriation. Close to $2 million a year would flow into the general fund and a large run on the fund would shrink that deposit. He noted he doubts there would ever be a year that would exceed the deposits. Number 2001 CHAIRMAN KOTT closed public testimony as there were no further witnesses to testify on the measure. Number 2021 REPRESENTATIVE SANDERS made a motion that on page 5, line 3, after the word "property" add "provided the property is over $500;". It would then read: "(1) the fee or compensation if not more than 10 percent of the value of the property provided the property is over $500;". REPRESENTATIVE ROKEBERG made a motion to amend the amendment to say, "20 percent of the value..." REPRESENTATIVE ELTON said he would like to make a friendly suggestion that it read, "the fee or compensation is not more than 20 percent provided that any property with a value over $500 the fee is not more than 10 percent." REPRESENTATIVE ROKEBERG said he would rather have the 10 percent first because people will read the statute that way. He said, "Not more than 10 percent of the value of the property in the amount of $500 or under 20 percent of the value of the property under $500." CHAIRMAN KOTT said conceptually, we want to establish a fee of no more than 10 percent of property valued at $500 or more, and less than $500, the percentage will be no more than 20 percent. CHAIRMAN KOTT asked if there was an objection to the friendly amendment to the amendment to the amendment. REPRESENTATIVE SANDERS said he would like to point out that at $490, they get 20 percent which is almost $100. At $500, they get 10 percent which is $50. Number 2185 CHAIRMAN KOTT said without objection, conceptual Amendment 1 is adopted. Number 2189 REPRESENTATIVE ROKEBERG made a motion to move CSHB 434, as amended, out of committee with individual recommendations and the attached zero fiscal note. CHAIRMAN KOTT asked if there was an objection. Hearing none, CSHB 434(L&C), was moved out of the House Labor and Commerce Committee.