Due Diligence: It’s More than a Project, It’s an Ongoing Process

by Maureen Ferrari 29. December 2016 14:33

Maureen Ferrari-Grollman, Managing Partner, Unclaimed Property Advocates

Due diligence, the official notification sent to the owner of a dormant account advising that their account will be reported to the state if no action is taken, is a mandatory step in the unclaimed property reporting process in all states. And because state laws vary, so too do the requirements for the due diligence mailing. In other words, one size does not fit all when it comes to meeting state’s requirements.

Some variances in the due diligence process include:

Timing of the mailing – Some states require due diligence letters to be sent 60-120 days prior to the reporting deadline. In other states it can be as much as nine months to one year or as little as 30 days.

Content of the letter – Specific language may be required within the body of the due diligence letter. It can include certain disclosures about the account type and what happens to the account if the owner takes no action. Many states will post a sample due diligence letter on their web site.

Mailing requirements – A few states require certified postage either for all letters or if the value of the property exceeds a certain amount. New York requires both first class and certified mailing for owners whose property is valued over $1,000 if they do not respond to the first class mailing.

Meeting all of the special requirements warrants careful attention to the compliance details of each state, keeping in mind that they can change from year to year. Staying current with due diligence procedures and a year-long timeline is an effective way to manage this complex process.

Can you get ahead of the game? Absolutely!

Early outreach, before the state unclaimed property law requires it, is an excellent way to establish customer contact before the account becomes too “stale”. Reaching out to a customer six to twelve months after an account has become dormant, or a check remains uncashed, will significantly increase your chances of location and reunification. If you add some owner location efforts for those account holders who are non-responsive or lost, you can increase the likelihood of returning the property to the owner, or reinstating/reactivating an account before it reaches the mandatory dormancy period. In addition, you can reach an owner via first class mail before a state requires the more expensive certified mailing. Early and often, with owner location efforts for high dollar value accounts, is the key to a customer-effective and cost-effective due diligence program.

Inevitably, though, when a person receives a letter stating that they are owed money, there can be some element of skepticism; and rightfully so. Society has taught us that if it’s too good to be true, it probably is. Back in the mid-1990s when I worked for Pennsylvania’s Unclaimed Property Department, the PA Attorney General used the lure of an unclaimed property letter as the basis for a sting operation for wanted criminals. It took the Unclaimed Property Department a long time to regain credibility and reassure the public of the legitimacy of our letters, ads and outreach.

Companies should have an awareness of consumer skepticism when crafting due diligence letters. While there is not much room for customized messages after incorporating the required language, you should ensure that the letter contains the same branding as other company correspondence and provides the contact information of an informed individual or call center that can be prepared to answer questions about the letter and unclaimed property in general. Enclosing a separate Frequently Asked Questions brochure can be helpful in explaining the purpose of the letter.

While some who receive the letter may allege fraud, there are those that are willing to commit fraud in order to claim money that is not rightfully theirs. Management must be especially mindful of this possibility and have policies and procedures in place not only to ensure accurate payments to entitled parties, but identify the potential fraudsters and stop them in their tracks.

Due diligence is undoubtedly a process. It involves crafting a letter that will uphold statutory language, sending it according to statutory timeframes, and processing returns to your customers, all with an awareness that the consumer may think the letter is a fraud and the responder may be trying to commit fraud.

How UP Advocates Can Help

UP Advocates can serve as your partner for a fully outsourced unclaimed property solution, or we can work with you to advise you on policies and procedures for best practices in the due diligence process. For more information, please contact Maureen Ferrari-Grollman at meferrari@upadvocates.com.

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