Be Smart – Outsource Escheatment
May 29, 2017
In 1996, Bankers Trust paid $50 million in a lawsuit for its failure to escheat more than $195 million of property. Escheatment, the reclamation of abandoned property by the state, is a complex and often confusing subject.
Abandoned property may include anything from a bill payment to a vendor who went out of business to employee wages that can no longer be issued. It is the company’s responsibility to keep up with escheatment in accordance to its state’s own laws and the laws of each state in which it deals business. This fact can lead to companies getting into trouble that is no direct fault of their own.
Many large companies, such as Aetna, have chosen to outsource escheatment due to its complexity. Even Fortune 500 companies admit that keeping up with escheatment year after year is a big problem.
To outsource escheatment, it is important to choose a well-established company that is familiar with each of the fifty states’ laws. States have different “dormancy periods”- time periods that must pass before the property in question is considered abandoned.- and definitions of what is “due diligence”- the amount of effort exerted by the company to reunite the correct entity with the abandoned property.
A final notice to the individual may be required before the dormancy period ends. In addition, even if an outside company handles your escheatment, it is still your company’s responsibility. It is therefore necessary to make sure the service provided by the company is thorough and reliable.
If your company has not been complying with escheatment law for years, there is some good news: many states have programs that will waive damages, interest, and fines if the company participates in “voluntary compliance”. States would much rather use appropriated funds to pursue companies who fail to comply at all. Seeking a company now to outsource escheatment to may save billions in lawsuits later.