REVISED UNIFORM UNCLAIMED PROPERTY ACT – EFFECTIVE …

December 19, 2017

REVISED UNIFORM UNCLAIMED PROPERTY ACT ?

EFFECTIVE JANUARY 1, 2018

Background

In 2016, the Uniform Law Commission ("ULC") completed its most recent update to the uniform unclaimed property act. The ULC's product is the "Revised Uniform Unclaimed Property Act ("RUUPA"), which has been adopted in substantial part by the Illinois General Assembly.

Illinois' current unclaimed property act was passed in 1961 (when it adopted a version of the ULC uniform act from 1954). In the intervening years, Illinois has adopted several discreet and nonuniform amendments to the 1961 Act (some of which were initiated by the League to protect member accounts from escheatment to the State).

Last Spring, Illinois State Treasurer Michael Frerichs initiated HB 2603 to use the ULC RUUPA as a foundation for a comprehensive rewrite of the existing Illinois Unclaimed Property Act. The League, along with other financial institution associations and business groups, opposed HB 2603 as filed.

In response, the Treasurer's office was very willing to negotiate non-uniform provisions to preserve existing Illinois policy. Productive dialogue with the Treasurer's staff occurred over a number of months. Due to the substantial scope and complexity of HB 2603, all parties agreed additional time was needed beyond the Spring Session to determine and analyze with precision

all the areas of concern, in order to develop accurate revisions to the bill. The Treasurer's office planned to engage in a summer long discourse with the League and other interested parties to pursue that goal. Unfortunately, during the end of June and early July session days leading up to the passage of SB 9 pursuant to the General Assembly's override of the Governor's veto (the "2018 Budget Bill"), elements of HB 2603 were incorporated into the budget measure as a means to raise revenue (by reducing the presumptive abandonment period from 5 years to 3 years). Those elements were still a work in progress, as far as the Treasurer's office and ICUL were concerned.

After SB 9 was passed containing the Revised Uniform Unclaimed Property Act, ICUL and other interested parties analyzed the legislation and identified areas of particular concern. ICUL met with the bill sponsor and the Treasurer's office, and a trailer bill was drafted, SB 868. That measure was passed during the November veto session and amended the Act to address some of the underlying concerns with the language in SB 9. On December 15, Governor Rauner signed SB 868.

The Revised Uniform Unclaimed Property Act contained in SB 9 and the subsequent amendments passed in SB 868 will become effective on January 1, 2018.

Non-Uniform Provisions Retained: Section 15-210

At ICUL's urging during the process of passing the bill, the Illinois RUUPA retained several "nonuniform" provisions of the prior law that protected inactive member accounts from turnover to the State. Inactive accounts at the credit union are NOT presumed abandoned, if the member as the apparent owner of the inactive account engages in one or more of the following activities:

(i) the apparent owner undertakes one or more of the actions as described in Section 15210(b) regarding any account that appears on a consolidated statement with the inactive account (e.g. communication to the credit union, presentment of a check or receipt of a dividend or interest payment, making a deposit or a withdrawal or accessing the account or getting information concerning the account);

(ii) the apparent owner increases or decreases the amount of funds in any other account the apparent owner has with the financial institution; or

(iii) the apparent owner engages in any other relationship with the financial institution including payment of any amounts due on a loan.

These conditions apply so long as the mailing address for the apparent owner in the financial organization's books and records is the same for both the inactive account and the active account.

Presumptive Periods of Abandonment: Section 15-201

The most significant change contained in the Revised Uniform Unclaimed Property Act is the time period for the presumptive period of abandonment. Historically in Illinois, most property was considered abandoned after 5 years of inactivity. However, the new Act changes the time frame for abandonment from 5 years to 3 years for many forms of property including deposit accounts. Aside from demand, savings, and time deposits, various other forms of property are subject to specific presumptive periods of abandonment as set forth in Section 15-201 through 15213 of RUPPA.

Notification to Apparent Owners: Sections 15-501/15-502

Section 15-501 of RUUPA outlines process for notifying owners of property that is presumed abandoned. Due diligence letters are required for property valued at $50 or more, which is a change from the current law which requires notification for property valued at $10 or more. Notification is required to be sent to the apparent owner by first-class mail to the apparent owner's last-known mailing address, not more than one year nor less than 60 days before the filing of the required report by the holder. If an apparent owner has consented to receive electronic-mail delivery from the holder, the holder shall send the notice both by first-class United States mail and by electronic mail, unless the holder believes that the apparent owner's electronic mail address is invalid. A signed return receipt constitutes a record communicated by the apparent owner to the holder concerning the property or account in which the property is held.

Section 15-502 contains specifics regarding the contents of the required notification. Minor changes have been made in the due diligence requirement (currently contained in Title 74 Part 760.35 of the applicable rules) on the part of the property holder.

The heading of the notice must contain statutory language as set forth in the Act. The notice must contain: the nature and value of the property that is subject to the notice (except for property that does not have a fixed value); state that the property will be turned over to the State Treasurer; state that after the property is turned over, an apparent owner that seeks return of the property may file a claim with the State Treasurer; state that the property that is not legal tender of the United States may be sold by the State Treasurer; provide instructions that the apparent owner must follow to prevent the property from being reported and turned over to the State Treasurer; and provide the name, address, and e-mail address or telephone number to contact the holder. Additionally, the holder may supplement the required information by listing a website where apparent owners may obtain more information about how to prevent the holder from reporting and paying or delivering the property to the State Treasurer.

Record Retention: Section 15-404

A holder that is required to file a report must maintain records for 10 years after the later of the date the report was filed or the last date a timely report was due to be filed, unless the Treasurer

adopts rules requiring records to be kept for a lesser time period. The holder may contract with an agent for record retention. The records must contain:

the information required to be included in the report; the date, place, and nature of the circumstances that gave rise to the property right; the amount or value of the property; the last address of the apparent owner, if known to the holder; sufficient records of items which were not reported as unclaimed, to allow

examination to determine whether the holder has complied with the Act; and if the holder sells, issues, or provides to others for sale or issue in this State traveler's

checks, money orders, or similar instruments, other than third-party bank checks, on which the holder is directly liable, a record of the instruments while they remain outstanding indicating the state and date of issue.

Compliance Examinations: Section 15-1002.1

RUUPA Section 15-1002.1 addresses compliance examinations for unclaimed property and states that for organizations regulated by the Illinois Department of Financial and Professional Regulation, the State Treasurer's Office shall not examine such organizations unless it has consulted with the Secretary of IDFPR and IDFPR has not examined the credit union for compliance with RUUPA within the past 5 years. However, the Secretary may waive this provision in writing and permit the Treasurer's Office to examine a credit union for compliance with RUUPA.

Penalties for Noncompliance: Section 15-1204

A holder that fails to report, pay, or delivery property within the timeframe established in the Act shall pay to the administrator interest at the rate of 1% per month on the property or the value of the property from the time the property should have been reported, paid, or delivered to the administrator until such time that those required actions are taken. Additionally, the administrator may require a holder that fails to adhere to their statutory duties regarding unclaimed property to pay a civil penalty of $200 per day for each day the duty is not performed.

Transitioning from the Uniform Disposition of Unclaimed Property Act to the Revised Uniform Unclaimed Property Act: Section 15-1503

An initial report filed under RUUPA for property that was not required to be reported before the January 1, 2018 effective date of RUUPA, but that is required to be reported under the new Act, must include all items of property that would have been presumed abandoned during the 5 year period preceding the effective date of the Act.

RUUPA Trailer Bill: SB 868

ICUL worked with the Treasurer's office and other trade associations to identify areas of common concern with SB 9, and drafted an amendment to the legislation. The amendment was contained in SB 868 which was passed during the final week of the fall veto session and was signed by Governor Rauner on December 15, 2018.

Points addressed in SB 868 include:

Pursuant to Section 15-403, the financial institution reporting period remains November 1 (as opposed to a May 1 reporting date under SB 9)

Clarification and consistency in "gift card" and "stored value" card definitions Section 15-602 provides authority to deduct escheatment fees from the property required

to be paid or delivered to the administrator if a contract between the holder and the apparent owner authorizes imposition of the charge for the apparent owner's failure to claim the property within a specified time Clarification of "owner" and "apparent owner" definitions Section 15-606 clarification that deposit box opening fees may be recovered upon application by the holder if there are sufficient cash funds available either from the contents of the box or the sale of the property Restoration of prior law reference to cover cashier's checks Explicit reference in Section 15-607 for owner recovery of interest from administrator Explicit reference in Section 15-501 to the State Treasurer's Office adoption of rules allowing for the reasonable cost of mailing the required notification to be deducted from any unclaimed property amounts

Notice to Credit Union Members

ICUL urges credit unions to notify your members of this change in Illinois law. You may wish to utilize the following sample notification:

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