It is not uncommon for a credit professional to be managing hundreds of accounts at once. It is also not uncommon for some of these accounts to have a surplus credit balance on them that goes unclaimed. This could simply be due to an oversight from your customer or any number of circumstances. All this means is free money for your business, right? Unfortunately, if you decide to keep this extra money you could be violating your states escheatment laws. These laws, commonly referred to as unclaimed property laws, govern what happens if any form of property becomes abandoned by its rightful owner. If you do find yourself in this situation, here are some things to keep in mind.
As a matter of good business practice as well as meeting due diligence requirements required by your state, your company should have policies to notify individuals or business of property belonging to them.
What qualifies as “unclaimed property”?
Escheatment laws include all forms of property, both tangible and intangible, that becomes abandoned by its rightful owner. This will typically take the form of uncashed checks, customer credit balances or refunds, security deposits, dividend checks, corporate securities, insurance refunds or claims, and sometimes wages. You may be asking how someone could just abandon assets like that, but business and residents abandoned over a billion dollars worth of tangible and intangible assets each year.
What does the law require you to do with this property?
The law requires that the state become the legal owner of all abandoned property. This means that if your customer has a surplus balance of $100, then technically all of that money would become the states should your customer never claim it. The same can be said for checks, and any of the other forms of property discussed above.
How long until something is considered “abandoned”
This will vary by state, so for specific questions, we recommend you do further research or contact a lawyer, but the typical length of time is often 5 years.
How serious should you take escheatment laws?
Will state budgets getting tighter and tighter by the year, states are trying to find ways to increase revenue. One of the most popular has been to become stricter and stricter on escheatment laws. As of 2016, states held over 43 billion dollars in unclaimed property: nearly double the amount just 10 years ago. At this point, if you decide to keep the unclaimed property, it is only a matter of time before your state finds out through audits which can lead to various penalties and fines.
Escheatment laws are not often thought of and can be overlooked quite easily, but given the amount of money to be made they are taken quite seriously by states. If you have questions about specific laws in your states or believe you may be holding unclaimed property we recommend you contact a lawyer for more advice.