Founding the Unclaimed Property Clearinghouse

By David Lemoine, Managing Director, Finance and Revenue Services, Xerox

Thirty years ago, back in 1984:

  • The U.S. median household income (in current dollars) was $22,415
  • The average new home in the U.S., cost $97,600
  • You could mail a first-class letter for 20 cents
  • A gallon of regular gas went for $1.21

That year, the Unclaimed Property Clearinghouse was founded.

David Epstein, a California-based attorney who had worked with numerous state unclaimed property programs, developed the “Clearinghouse concept” for identifying and collecting abandoned property after seeing first-hand the challenges that individual states faced in obtaining holder compliance. Widely known as “the godfather of unclaimed property”, he launched the Clearinghouse along with 18 member states.

“The basic idea of the Clearinghouse is that the states, working in concert, can accomplish things that they can’t on their own.” Then (and now), many states didn’t have their own audit program. States that did found it difficult to perform examinations in other states, much less the other side of the country. Then there was the problem of records. Three decades ago, it was less about leveraging technology than it was about managing all those paper records. Hand-written ledgers, checks returned by the post office and stuffed in garbage bags for “storage,” and liabilities records on microfiche were just some of the issues that complicated the audit process for states.

State Street Corporation (then State Street Bank) was enlisted to perform data entry and data processing services, as well as act as custodian for holder remittances. Along with Epstein’s staff acting as a central reference and coordination point for the audits and the states, the two entities developed a new service offering that many states found appealing: bringing holders into compliance with unclaimed property laws by performing first time reporting, a service the Clearinghouse referred to as initial compliance.

There were 18 “member states” at the time of UPCH’s formation. Within several years, the number doubled. Holder interest (and cooperation) did not develop as quickly. After a few years with more and more states joining, however, an increasing number of non-complying companies found the Clearinghouse to be a source for resolving complex legal and reporting issues. The state “executive committee” proved to be a very successful approach for vetting and resolving these issues, many of which arose as a matter of first impression. And Epstein’s hypothesis that significant economies of scale would develop in undertaking multi-state audits (and settlements) also proved to be true.

States embraced the Clearinghouse approach because it fulfilled an important compliance need and, ultimately, was successful. Thirty years later, we continue with David Epstein’s innovative approach, further expanding it by adding other unclaimed property solutions. Our focus remains the same today and we enjoy the important role we play in identifying and collecting property that might otherwise go unreported, and never be returned to the rightful owner.

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