Unclaimed Property on the Brink of Change

This dispute is over unclaimed property funds from MoneyGram Payment Systems and whether their unclaimed checks are actual money orders or not. MoneyGram is one of the largest providers of money orders in the U.S. and is incorporated in Delaware.‍

Currently, unclaimed property is Delaware’s third-largest source of revenue, meaning that if it were to lose this case, the state could potentially take a financial hit. Twenty-nine other states are joining Pennsylvania in this dispute over hundreds of millions of dollars. These states claim that they are entitled to this abandoned property because it was originally purchased in their states.

Pennsylvania is arguing that according to the Federal Disposition Act (FDA) of 1974, uncashed money orders should be escheated to the state in which they were originally purchased.  Delaware’s argument is that these checks are not truly money orders and thus should be escheated to MoneyGram’s state of incorporation (since the last-known address of the owner is unknown) as per the Texas vs. New Jersey Supreme Court ruling of 1965.

Special Master appointed by the Court, Pierre Leval, previously sided with the opposing states, concluding that the official checks were similar enough to money orders to be covered by the FDA.  Delaware has urged the Supreme Court to reject the Special Master’s conclusion.

“This could be a real game changer in the unclaimed property industry,” said Eric Mauldin, Principal at Clearview Group. “Especially as it relates to priority rules and future litigation against the state of Delaware.”

Below are a couple key highlights from the oral arguments regarding this case.

Specific Labels and Functionality

One question posed during the arguments was would altering the “label” of the disputed money orders solve the overall issue? In this case, labels are significant as it needs to be determined whether the money orders in question constitute a similar written instrument as a check.

The argument against Delaware stated that the checks in question function as they are money orders but are marketed differently. Alternatively, Delaware argued that the disputed checks come from a third-party bank, which would exempt them from FDA considerations.

The Court also questioned if similar written instruments such as prepaid cash cars, gift cards, and gift certificates would be covered under the FDA.  The solicitor general of Arkansas, one of the 30 states seeking funds from Delaware, acknowledged these (unlike money orders) would likely not be covered.

Simple Solution?

Throughout the arguments, there was discussion of a simple solution: MoneyGram collecting address information from the property owner. This suggested solution seems like an easy fix as it would negate the disputed issue of unclaimed property for the future, but during the case was suggested to be burdensome regardless of the value of the checks.

Final Analysis

Though there is speculation on how the Court might rule, nothing is official. Whichever decision is made could greatly affect the environment of unclaimed property as it is known, especially in the state of Delaware.

‍If your organization needs assistance with any unclaimed property issues, please contact Eric Mauldin.