Legislature(1995 - 1996)

03/22/1996 03:25 PM L&C

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= 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           
 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              
 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           
 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            
 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           
 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            
 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               
 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.            

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