State-to-state disparities in laws on handling unclaimed financial assets have led to decades of efforts at greater uniformity, but limited success.
There is a piece of model legislation — the Uniform Unclaimed Property Act of 1995 — but only 15 states have enacted it. Many other states enacted earlier versions, drafted in 1954 and 1981. But some of the biggest states — including California, New York and Texas — have never adopted any version. Neither has Delaware, the legal home to more major U.S. corporations than any other state.
The Uniform Law Commission, which seeks to standardize state laws, has formed a committee to draft a new uniform unclaimed property act. Its deliberations have been strained.
Michael Houghton, a Delaware lawyer who co-chairs the revision committee, expressed hope that the end result would be a better uniform law, but he acknowledged there were “very strong differences of opinion” between state officials who administer unclaimed property and powerful organizations representing the “holders” — the banks, insurance companies and other businesses that have possession of assets, such as abandoned accounts, that do not belong to them.
The business groups are wary of states trying to maximize revenue from unclaimed property, and have proposed several changes. For example, they want unused gift cards and business-to-business transactions exempted from the definition of unclaimed property, and they want to ban the states’ use of contingency fees to compensate private auditors who — in the view of some business groups — become overzealous.
“Contingent-fee audit arrangements encourage auditors to be overly aggressive, to interpret state laws to their own advantage, to ‘cherry pick’ audit targets,” said the Council on State Taxation, which represents major interstate corporations.
The states, on the other hand, depict themselves as more diligent than the holders in trying to locate owners and return unclaimed property to them. The National Association of Unclaimed Property Administrators, an affiliate of the state treasurers’ association, said in a recent position paper that most of the changes proposed by the holders are “anti-consumer.”
“To be successful, this product has to be balanced and address both constituencies,” Houghton said.