Understanding Unclaimed Property

Member relationships are the lifeblood of your business. But the unfortunate reality for credit unions is that you face the possibility of “silently” losing member accounts through the escheatment of dormant and lost accounts each year.

The proper management of unclaimed property is an often-overlooked yet effective avenue for member retention. By fundamentally understanding unclaimed property and best practices for reactivating dormant accounts prior to escheatment, you can preserve your member base--and your bottom line.

What is unclaimed property?

Unclaimed property is any financial obligation that is due and owing to another party. While there are more than 100 types of unclaimed property, the most common items relative to credit unions include:

• Savings accounts
• Checking accounts
• Certificates of deposit

Credit unions are legally required to perform due diligence prior to escheatment. If unsuccessful, you're required to report and remit the member’s assets to the state of the member’s last known residence once the “dormancy period” has expired.

Dormancy periods — the length of time an account owner can be inactive before their account is considered reportable — range from three to five years, depending on the type of property and state laws. With unique provisions for each state and other reporting jurisdictions (including the District of Columbia, Puerto Rico, the U.S. Virgin Islands, the Mariana Islands, and Guam), reporting correctly, let alone proactively preventing escheatment, can be challenging.

Best practices for preventing escheatment

The following best practices can help you effectively and efficiently locate and communicate with dormant members, enabling you to reactivate and retain customer accounts.

• Do a thorough search. For best results, use both electronic and manual search methodologies, which, on average, will help you locate and communicate with up to 90% of your members.
• Act fast. Allow sufficient time for multiple communication efforts and member response by beginning outreach soon after an account becomes inactive. If you have a large volume of inactive accounts, prioritize your efforts based on each state’s dormancy period, and tend to accounts that are at higher risk of escheatment first.
• Send multiple communications. Reaching out to members multiple times using various communication vehicles increases the likelihood of member response. One-on-one telephone conversations are usually most effective and can be complemented by direct mail or email programs.
• Evaluate all member activity. In the case of unclaimed property, over-compliance can actually hurt credit unions by escheating more assets than necessary and causing undue member unrest. Consider that credit unions aren't required to report a dormant CD as unclaimed property if the customer also has an active checking account at the same institution, yet many do. By putting IT systems and processes in place to link member accounts, you can analyze all account activity and filter assets that don't need to be escheated.
• Encourage awareness. By regularly educating members about the dangers of unclaimed property, using vehicles like your website or statement messages, you can raise awareness about this important issue and encourage account activity to prevent dormancy and escheatment.
• Look for beneficiaries. It may require extensive research, time, effort, and trust & estate legal expertise to locate and assist the correct legal claimants for accounts whose owners are deceased, but connecting with new members contacts can preserve the account.

Whether you handle the management of unclaimed property in-house or outsource it — a growing trend given the complexities of compliance — safeguarding your members’ assets can help you protect these relationships and positively impact your revenue.

MICHAEL J. RYAN is senior vice president with Keane, which specializes in unclaimed property communications, compliance, and consulting.