Saturday, June 25, 2022

July 2012 Legal Briefs

  • Family Trust
  • Property Tax Default
  • Escrow Analysis Statement
  • ACH Question
  • Garnishment
  • Free Checking Account
  • Change in Terms
  • Bank-owed Money-payments
  • HPML Question
  • Deceased Customer
  • State Tax Levy from California
  • APR Item
  • Social Media, After Hours
  • SCRA – Interest Rate
  • Gift Card ATM Fee
  • ATM ADA Compliance
  • Customer E-Banking Question
  • Regulation CC Question
  • CTRs and Banks
  • Tribes and Sovereign Nations
  • Branch Designation
  • POS Transactions Closing Accounts
  • Endorsement Verification
  • Business (Lottery) Account
  • ATMs and the ADA
  • Escheatment and Setoff of Cashier’s Checks

In this Issue:

While we await new rulemaking activity, existing laws and rules continue to spark plenty of questions. This month, we’ve chosen to feature an assortment of questions we believe will be of interest to many of you.

Family trust

QUESTION: Based on all of the information I have, all assets were liquidated and distributed after the death of both grantors. Now we have one of the successor trustees wanting to establish a checking account with the trust as owner. If there are checks payable to the trust, that makes sense to me. Otherwise, if everything was liquidated, can the trust be reestablished, or are they entities that go on forever?

ANSWER: In general, I’d say that your take on this situation is correct. You’d not expect to see a request for an account on a family trust that’s been emptied out. But in this case, the only way to truly know what’s going on is to ask. It’s perfectly reasonable to ask the purported successor trustee why, if the trust assets have been distributed, there is a need for an account. I’d also review the trust agreement itself to see whether it calls for the trust to be dissolved after a triggering event.

My thought on the reason is the same as yours — there are some heretofore unknown assets (checks, perhaps) in the trust that need to be distributed. But you won’t know unless you ask.

If there are, in fact, checks payable to the trust that need to be negotiated, the successor trustee probably ought to be working with the source of the checks to ensure that any remaining assets from which the checks came are appropriately liquidated and distributed, too, so that there won’t be future disbursements to the trust. Or perhaps this is what is happening now.

Get the answers and ensure they make sense.

Property tax default

QUESTION: We have been informed that one of our borrowers is delinquent on his property taxes. The bank wants to pay the taxes and demand payment. What forms are needed to do this? Can we just change the note (increase principal) without their signature? Any help would be appreciated.

ANSWER: I am not sure what your bank’s process will be but in general terms this is a condition of default. Your note and security agreement allow that taxes must be paid. If the borrower has not done so, the bank pays them to protect its interest. You can contact the borrower to see what is going on and let them know that if the taxes are not paid by a specific date, the bank will pay them and expect the borrower to make reimburse the bank by a second specified date.

So the bank needs an offset for the tax payment and that is against the loan. The taxes are added as a fee to the loan and you may deem the note in default, you can ask the borrower for a lump sum payment of taxes, or accelerate the loan, or you may choose to collect the taxes at the end of the loan. In any case, this could be a trigger that payments will be slowing down if they haven’t already. It may be that the bank wants to consider an escrow to avoid this in the future if the loan is otherwise performing. The borrower may be waiting on a tax refund or whatever. The servicing officer should deal with that.

Escrow analysis statement

QUESTION: Wondering if you can give me some guidance on this escrow analysis situation:

We have an in-house mortgage loan (5 year) which is an interest only payment set-up but has an escrow account. When doing the annual escrow analysis through Jack Henry software it shows amount of escrow pmt due and then says of your payment, $0.00 goes to principal and $0.00 goes to interest. At the time the escrow statement is being prepared, the amount of the interest payment that will be due is unknown because it is due at a future date. Our Loan Op director thinks that this would be an error to send it this way to the customer but doesn’t know what it should say instead. Frankly, neither do I.

How should the escrow analysis statement read for an interest only payment when you don’t know yet the amount of the next interest payment due?

ANSWER: The main problem here is that escrow accounts are being used on more account products than they were anticipated for. Reviewing CFPB Reg X §1024.17 we read that you may assume payments will be made timely during the final two months of an escrow period. You can assume too that your projection believes payments will be made as agreed. But in my opinion the escrow analysis wasn’t contemplating interest only payments which vary month to month.

I have two recommendations. One is to borrow from Regulation Z and list the range of anticipated timely interest payments, the largest and smallest, denoting they can vary within this range when made timely. Two is to contact Jack Henry. They may have other banks in the same situation. Only they can advise you how to use the software correctly and provide feedback their other clients may have had from examiners.

My first recommendation is made based on informing the borrower what is happening and it meets the spirit and intent of the requirement. But I am aware of no official guidance on this problem. I do not see "$0.00" as an option in any case.

ACH question

QUESTION: At this year’s Compliance Roundup we were told Social Security deposits have to go into an account of that person’s name (must be in that person’s name, and not merely an Authorized Signer on the account). I was visiting with our ACH coordinator and she referred me to the ACH Rules Section 3, Subsection 3.1.2 – "An RDFI may rely solely on the account number contained in an Entry for the purpose of posting the Entry to a Receiver’s account, regardless of whether the name of the Receiver in the Entry matches the name associated with the account number in the Entry." Can you give us some clarification of how we need to handle this?

ANSWER: That takes care of the NACHA rules, but it doesn’t satisfy the requirements of the Social Security Administration, which requires that the account be in the name of the beneficiary, as "owner," NOT as an authorized signer. If direct deposits do not go into the appropriate type and titled account, there may be a claim for reclamation by SSA.

Garnishment

QUESTION: We have received a Post-Judgment continuing wage garnishment. It does not look like a continuing wage garnishment but a non-continuing garnishment. The response page looks like a non-continuing garnishment response as well. I have attached a copy. I am not sure how to respond to this garnishment. It looks like it is trying to cover all bases. I have tried unsuccessfully to contact the attorney’s office. Can you help me with my response?

ANSWER: The affidavit you sent with your question is for a general garnishment, but they have used the continuing wage garnishment summons. This will not reach bank accounts, and you will note that the response time is different. You still have to respond, as well as send the packet to the customer. Unless the defendant is contract labor for the bank, you will respond indicating the corporation is not an employee. The attorney will need to file and serve the correct summons if she wants anything other than wages. Release any hold you have on the customer’s accounts.

Free checking account

QUESTION: Can a checking account be marketed as “free” under the following circumstances?
1. There are no fees for the checking account. The bank’s inactivity fee is applied after a shorter time period for this account type than for other account types (for example, the free account becomes inactive after 6 months of inactivity whereas the regular account becomes inactive after 12 months).
2. There are no fees for the checking account. There is no charge for optional services such as Bill Pay or Mobile Banking if the account balance stays above a minimum monthly level. If the account falls below the minimum monthly level, the customer is charged for the optional service(s).

ANSWER: The inactivity fee should not be a problem.
The related services that require a minimum balance to make the services free will be a problem if you refer to them in an ad advertising the account as "free." You’ll need to note in the ad that there is a fee for the service if the account balance minimum isn’t met. And don’t refer to the service as "free" in an ad, period, if there’s a balance requirement for a fee waiver.

QUESTION: I have an additional question regarding charging a fee for the optional services. Could we advertise an account as “free” if we stated in the ad that the bill pay service charge would be waived if a minimum balance was maintained?

ANSWER: Technically, that would be acceptable as long as you are very clear in the ad that there is a fee for the bill payment service and it can be waived if the minimum balance of $X.XX is maintained.

Change in terms

QUESTION: We are going to change some terms for our Savings accounts: 1) Quarterly service charge fee amount, and 2) Minimum balance to avoid service charge fee.

I know we have to give a 30 day notice. I will give that notice with their monthly and/or quarterly statement all during March. Then, I will change the terms 30 days after the last statement cycle, which is March 31st, so terms will change May 1st.

However, what about the new savings accounts we open during that 60 day period (March 1st thru April 30th)? Do these customers require pre-notification? Or do I change my disclosures now so any new accounts will have the new terms disclosed, but the old terms will actually be in place until May 1st?

ANSWER: You have two options, if the changes are adverse to the customer (higher service charge, higher minimum balance).

1. Update your disclosures now.
2. Use up your current disclosures, but provide each of the new accounts a change-in-terms notice with the effective date at account opening.

If the changes are favorable to the consumers (lower fee or lower minimum balance), use up your current disclosures, since no change in terms notice is really required.

Bank-owed money-payments

QUESTION: I can’t quite remember what the problem is, but it seems that when a customer owes us (the bank) money, there can be a problem if we agree to accept partial payments over a period of time. We have a customer who owes us about $2,000 (account overdrawn due to a check she deposited that was returned as a counterfeit). She admits she owes us and wants to pay us $25 a month until the debt is paid (she also violated her Rep Payee responsibilities). She sent us a money order for $25, but we have not done anything with this money order, nor have we told her we would agree to the $25 a month payments. Can you suggest the best way to handle this? Should we insist on full payment (with a deadline) – which will probably not happen, or try to get larger monthly payments, knowing these will probably not continue, or just proceed to small claims court (we have started this process and have served her and have a court date of April 2)? I guess the question may be whether some money better than none. But clearly, at $25 a month, it would take forever to get paid. If we do decide to establish a payment agreement what can we put in it to make it binding? Thanks for your help!

ANSWER: Since you have service, proceed to judgment on the small claims action, which will also get you filing fees and cost of service plus interest on the judgment. The judgment can then be filed in the county records and constitute a lien against her property, will allow you to garnish her wages and any bank account. Ask the court to order a fixed amount per month by way of a hearing on assets with contempt powers for failure to pay as agreed. In the meantime, you can either hold on to the money until judgment or write her a letter saying the bank does not agree to repayment of the debt at $25 per month, suggest $100 which will be commemorated by an order in the small claims matter so you get costs, fees and interest. If you want, go ahead and cash the money order and tell her the bank is crediting the amount owed by $25.

HPML Question

QUESTION: The loan is to the son but secured by the parent’s primary residence. Would this loan fall under the HPML Reg?

ANSWER: Section 1026.35 of the Bureau’s Reg Z lays out the elements for a loan to be considered a higher-priced mortgage loan. It says it must be (among other things) "a consumer credit transaction secured by the consumer’s principal dwelling."

Note how that wording is different from the wording for right of rescission in 1026.23 — it uses the article "a" rather than "the." It talks about a security interest being taken "in a consumer’s principal dwelling."

So, when it’s not the borrower’s principal dwelling being used as collateral, the loan would not meet the criteria for an HPML, because only "the" consumer’s principal dwelling triggers coverage.

Deceased customer

QUESTION: We have an account belonging to a customer that died on January 12th, 2012. The checking account is a NOW Account with 4 names (one being the deceased) as JWRS. There are 7 POD certificates of deposit and 5 certificates of deposit that are JWRS. There is also one CD in the deceased owner’s name only. We called the deceased customer’s son today (one of the joint owners) in reference to changing the accounts from his father’s name and TIN to one of the other owners’ name and TIN. He became very belligerent and demanded that we could not force him to do that. He said he had owned 6 banks and he had never heard of anything like this before. We tried to explain to him that since his father had died, any interest paid would need to be reported to the other owners. Can you help me out here?

ANSWER: The change occurs by virtue of the contract. It’s not the big bad bank forcing the name to be taken off. It’s the fact that the contract was joint tenancy with right of survivorship, so the contract provides that upon the death of one of the owners, the funds automatically belong to the survivors. All you are doing is changing the styling to reflect the reality. You don’t need his permission.

State tax levy from California

QUESTION: I have a received a tax levy from the state of California for a customer who has accounts at our bank in Oklahoma. I know with a garnishment this would be a non-jurisdiction situation where I would not fill out the answer sheet (because doing so could cause the bank to become liable), but return it with a non-jurisdiction letter. Does this same rule apply for out of state tax levies?

ANSWER: Yes. Unless you have a branch in California, there is no jurisdiction. Return it with the letter without stating whether or not the person named is a customer.

APR Item

QUESTION: Would a charge for closing at a title company be an APR item if it is paid to someone like Home Title?

ANSWER: Whether or not a cost is a finance charge depends on what it is for (I’m not sure of the purpose here), and when it is paid to determine if it is a prepaid FC. Based on the brief question this may or may not be a FC under an exception for mortgage loans. It depends on what it was really for. Under Reg Z §1026.4(a)(2), a fee charged by a third party that conducts the closing are finance charged only if the creditor requires the particular services for which the consumer is charged, requires the imposition of the charge, or retains a portion of the charge, to the extent of the portion retained.

On the other hand, under 1026.4(a)(7), if the fees are bona fide and reasonable in amount and the transaction is secured by real property or in a residential mortgage transaction, they aren’t finance charges if they are
• Fees for title examination, abstract of title, title insurance, property survey, and similar purposes.
• Fees for preparing loan-related documents, such as deeds, mortgages, and reconveyance or settlement documents.
• Notary and credit-report fees.
• Property appraisal fees or fees for inspections to assess the value or condition of the property if the service is performed prior to closing, including fees related to pest-infestation or flood-hazard determinations.
• Amounts required to be paid into escrow or trustee accounts if the amounts would not otherwise be included in the finance charge.

Social media, after hours

QUESTION: When an employee posts something on Facebook after hours using foul language, how should that be addressed? We currently don’t address “social media” in our Code of Conduct Policy, but probably should. Any guidance in this area would be appreciated.

ANSWER: If it was on the employee’s personal account, I don’t know the bank can do anything about it. If it was the bank’s account, the employee should be cautioned as they represent the bank and this isn’t acceptable. Specificity would depend on what is in your Ethics policy and the bank should write a social media policy to specifically address what is said, by whom, when, and how. This may be a teaching moment to place controls over the banks reputation in cyberspace. (And if editable, get that comment removed.)

SCRA – interest rate

QUESTION: We lowered the interest rate to the required 6% during a customer’s military service. However, it was never raised back to what the original rate was when he returned. Are we required to raise it back according to SCRA? I believe he’s been back since sometime in early 2010! What kind of complications have we stepped into if we were supposed to raise it back?

ANSWER: To be clear, you indicate the rate can go up because a servicemember (SM) is back. They are entitled to the rate when called or are on active duty. A SM might be a reservist and receive orders which protects them under the SCRA and entitles them to a rate reduction then. They may serve a tour overseas and return and still be active duty. Until they are released from active duty they are still entitled to the 6% rate.

The SM has no obligation to report back to you and tell you when they were released from active duty. If you currently believe they were released you can ask for orders and because the SM’s protections ended, go back just as you may have when they claimed protections and reamortized the loan. You may also opt to adjust it from this date forward. It may depend on the dollar amount involved and the time necessary to make the adjustments.
Remember that if this is a mortgage the SM is entitled to 6% for a year after discharge. (Refer to Sec. 527(a)(1)). Of course, the interest rate cap provision applies only to pre-service debt.

Gift card ATM fee

QUESTION: We sell Visa debit gift cards at the bank and they are provided to us by TIB. Our name is on the front of the card and on the back it says that the card belongs to TIB. When used at our ATM, the ATM recognizes the card as a foreign card and debits the card our foreign ATM fee of $3.00. Is this in violation of the Credit Card Act?

ANSWER: The ATM fee is most definitely a service fee, and is specifically listed as a form of service fee in Comment 20(a)(6)-1. It falls under the one-per-month limit. I don’t imagine that the bank realized the fee would be charged when they wrote their disclosures, so my suggestion is two-fold:

1. Go back and refund the $3 fees that it can. For cards that have closed out and for which the bank doesn’t have a record with the consumer’s name and address (my guess: most of the paid out cardbase), decide whether an amount needs to be set aside for the unlikely claims. I don’t imagine that the dollar amount is huge. How often do receivers of gift cards tap their value at ATMs rather than spend it for purchases?

2. Contact your ATM processor and direct that the BIN for the gift cards be added to its "on-us" table or otherwise flagged to prevent future transaction charges.

ATM ADA Compliance

QUESTION: Can you tell me what stance OBA has on the requirements on having ATM’s compliant with the ADA law going into effect 3-15-2012. I have one vendor telling me that if they are not compliant, to turn them off March 15 and another advising that they interpret it as meaning there should be a plan of action in place and executed.

ANSWER: While ATMs with height and reach features that comply with the 1991 standards are "grandfathered" with regard to those features, this does NOT affect the requirement that ATMs meet the audio/visual requirements by March 15th. The only exception from having to comply is "undue burden," a subjective standard, defined as "significant difficulty or expense." determined on a case-by-case basis. Factors considered include:

• the nature and cost of the action; the overall financial resources of the site;
• the number of persons employed;
• the effect on expenses and resources;
• the financial resources of any parent entity (holding company).
• The aggregate number and cost of auxiliary aids and services may influence the determination of whether an individual measure imposes an undue burden.

It should be noted that, as stated by the DOJ, “Under general rules governing lawsuits brought by the Federal Government, the Department of Justice may not file a lawsuit unless it has first attempted to settle the dispute through negotiations.”

The bank should seek advice from an attorney who specializes in ADA claims for guidance in preventing litigation/mitigating claims with regard to the bank’s particular circumstances.

Customer e-banking question

QUESTION: We have a commercial customer who purchased their business from another individual several months ago. A third party was doing the billing for the service they provide (debiting their customers accounts and electronically depositing the money to the business owner’s checking account.) When the new owner (our customer) bought the business, the billing company somehow failed to change the account number and routing number from the old owner to the new owner. This whole time the money from the people set up to pay through this billing service has been going into the old owner’s account and he’s probably spent it. He’s not a good person and will probably never give the money back even if they’re able to locate him. They didn’t catch it because that account was at another bank and those statements go directly to the CPA. The billing service says they don’t owe them anything because they should have caught it sooner. If a bank had been in error I would think they could be liable for the first 60 days after the statement, but what about a billing service like that? It really isn’t the bank (in the middle)’s fault, it’s between the company and the business owner. Don’t they need to take it up with the billing service?

ANSWER: That’s certainly not a great way to start off with a newly-owned business! I think I (as the new business owner) would be checking things pretty carefully in the first few months, and given your tale, I question the business acumen of the new owner.

The bank most definitely does not have a dog in this fight. It’s a matter between the billing company and the owner of the business (with the former owner pulled in for good measure). Show concern, but don’t get sucked into the battle.

Regulation CC Question

QUESTION: When using the exception reason “reasonable cause to doubt collectability” for a Reg CC hold, can the reason for that doubt be the paying bank will not give any information (verify funds, stop pays, etc)? If this reason may not be used, is there another exception reason that may be used for these circumstances? Thank you for your help.

ANSWER: A drawee bank’s refusal to respond to your inquiry about a check leaves you with no more information about the check than you had before you wasted your time with the phone call. Use of the "reasonable cause to doubt collectibility" exception hold requires that you have information about the check leading to a reasonable belief that the check won’t be paid on presentation. You don’t have such information. The other exception holds that may be available to you include the large check hold and (if applicable) new account hold, both of which leave the first $5,000 "exposed"; the repeat overdrafter hold (which you can only use with some customers); and the redeposited check hold, which only applies to certain checks.

If none of those holds works for you, you’re left with two choices — take the deposit and accept the risk that the check might be returned after the funds have been withdrawn, or refuse the check for deposit and offer to take it for collection.

CTRs and Banks

QUESTION: We have a bank that wants to get over $10,000 from us and I needed to know if all banks are exempt from CTR reporting. We have a few banks listed on our exempt list but I wasn’t sure if all banks were.

ANSWER: Review the "bank" definition at 31 CFR 1010.100(d). You’ll see that it’s pretty much all inclusive. The short answer is if it’s insured by the FDIC or NCUA, it will be a “bank” and it is exempt under the so-called "Phase I" exemption rule at 310 CFR 1020.315(b)(1).

Tribes and sovereign nations

QUESTION: Is every tribe a sovereign nation? If a tribe will not supply us with proof of EIN number do we need verification that they are a sovereign nation?

ANSWER: If it is a federally recognized tribe, it is a sovereign nation, not subject to CIP but the bank may require a tax identification number nonetheless. Here is where you can check for federal recognition:
http://www.ncsl.org/issues-research/tribal/list-of-federal-and-state-recognized-tribes.aspx

Keep in mind that many casinos are NOT run by tribes themselves, but by private management services that do not fall under the tribal government exception.

Branch Designation

QUESTION: Is the bank prohibited from using the term “branch” for the main location? In reading items from regulators there is often a reference to a “main location” as opposed to “a branch.” As an example, if the bank’s main location is in Norman and the bank has other branches, can the bank refer to the Norman location as the “Norman branch”?

ANSWER: I don’t see a problem with that. Some banks refer to all their offices as "stores." That’s certainly a bigger departure from "tradition" than referring to the main office as a branch.
Some banks often refer to the "mother ship" as the main branch, which was sort of a compromise, even if it challenged English purists.

You will even find a variety of terms used by the FDIC. FDIC 97-6 states it includes: "any branch bank, branch office, branch agency, additional office, or any branch place of business located in any State of the United States . . . at which deposits are received or checks paid or money lent.” Essentially, what happens at the location is more important than what you call it. For simplicity, “main bank” or “main branch” are also common terms.

POS Transactions Closing Accounts

QUESTION: At our bank this is becoming a problem – some of our customers are using their debit cards at merchants and it is taking the exact amount in their account which in turns closes the account. We are running into people that don’t come back in or are getting deposits once a month so the account is closed for a month before next deposit comes in. At what point do we have to re-ID and go thru all of the steps on a new account?

ANSWER: If the account is closed on your books and the customer doesn’t have other accounts open with you (in his/her name), you have to step through the CIP routine even if it’s only been closed for one day. Two strategies to consider:

(1) When an account has gone to $0 and starts the closing-out cycle, send the depositor a notice saying the account will close by [date] unless a deposit is made.

(2) Extend the duration of the closing cycle to 60 days, if it’s feasible on your system.

Endorsement verification

QUESTION: I have a question about the review of endorsements on checks. Our bank examines all checks over $5,000, primarily to verify the signature to the signature card. We also review for endorsements and send the check back if it has an improper endorsement. We have had a customer call and tell us that the depository bank told them that our bank shouldn’t be doing this. I know that the depository bank is the bank responsible for checking endorsements, but should the paying bank be checking this also?

ANSWER: Because of UCC 4-205, it’s really more a matter of not needing to check for endorsements as the paying bank, rather than suggesting it’s something the paying bank should not do.

There’s a good reason for checking larger checks for anomalous endorsements (check payable to ABC Company endorsed by XYZ Company) and for multiple payees not in the alternative endorsed by fewer than all of the payees. Sending those checks back promptly can get problems straightened out.

But sending back checks that simply lack an endorsement is usually not warranted under 4-205. I’d admit to an exception for checks where the issuer (e.g., an insurance company) has indicated on the check that a personal endorsement is required.

Business (Lottery) account

QUESTION: We have a business customer who is making lottery sales deposits to a regular business account. The customer has written in “large” print across the face of each deposit “Lottery Sales” and each “Lottery Sales” deposit is for cash only. Does Oklahoma require businesses who sell lottery tickets to have a separate lottery account?

ANSWER: Yes, a lottery account must be established and maintained as required by the lottery commission. See this link: http://www.lottery.ok.gov/media/documents/2010_08_01_OLC_Retailer_Application_Packet.pdf
Lottery tickets must be purchased using cash (no checks or debit/credit cards (the purchaser could do "cash back" on a purchase for the money, and the purchaser cannot directly charge it to his debit/credit card), so I am wondering how you know the deposits are from lottery sales. Since sales will be made in cash, it will be commingled with change in the drawer, and it would not be a real issue for the lottery licensee to make up any cash shortfall by using a business check deposited to the lottery account.
And there are provisions for the paying the licensee his portion of the sales as well after the lottery account is drafted for the sales.

ATMs and the ADA

QUESTION: Mary Beth mentioned at one of the Compliance Round Ups, that she had information about lawsuits against banks that weren’t ADA-compliant by the deadline. Do you have information available or can you direct me to a good source?

ANSWER: Here are links to some of the news stories:

ADA lawsuits sting Pittsburgh-area banks
http://www.atmmarketplace.com/article/193478/ADA-lawsuits-sting-Pittsburgh-area-banks

Impact of ATM ADA Litigation Grows in Ohio
http://209.235.208.145/cgi-bin/WebSuite/tcsAssnWebSuite.pl?Action=DisplayNewsDetails&RecordID=2433&Sections=A&IncludeDropped=0&AssnID=OBL&DBCode=555442

Blind Man Files 9th Lawsuit – Attorney Says It’s His Right
http://beavercountian.com/content/daily/robert-jahoda-9th-lawsuit

Here is a discussion on the subject from Bankers’ Threads where things got a little heated:
http://www.bankersonline.com/forum/ubbthreads.php?ubb=showflat&Number=1692316

And we have read that according to court records, one set of firms has filed no fewer than ten such lawsuits in federal courts for the Northern and Eastern District of Texas since June 13.

Escheatment and Setoff of Cashier’s Checks

QUESTIONS: We have three questions on cashier’s checks. During the escheatment review, we have (1) found several outstanding cashier’s checks for which the remitter is the bank and the payee is our previous loan customer. These checks have reached the escheatment period. We charged off loans for these customers that are the payees of the outstanding checks. Can we apply the cashier’s checks as a recovery to the charge off loans?
(2) Who is the owner of the check? Our customer is the remitter, the payee is the a third party, can we credit the check back to our customer?
(3) I believe we have the escheatment periods down, but do you have information on the periods so that we can confirm this?

ANSWERS: (1) This would depend on whether the debt is barred from collection by the statute of limitations: 5 years from date of breach of contract, 6 years from date of default on the note. If you have provided a 1099 forgiveness of debt for the charge off, you would need to file an amended 1099 if you were able to take those funds.
(2) The owner of the funds is the payee. You can have your customer file an affidavit of lost, stolen or destroyed cashier’s check and reissue the check, or if the customer still has the check, s/he can have it redeposited as not used.
(3) The state treasurer’s office does have a PDF available, here http://www.ok.gov/treasurer/documents/AbandonmentPeriod.pdf. For simplicity sake the meat of the document is as follows:
(Refer to Title 60 – Section 661 of the Uniform Unclaimed Property Act)
All Companies with the Exception of Life Insurance:
Note: HB1580 Section 4, which became effective July 1, 2003, requires holders to report and remit unclaimed property at the same time.
Period property became abandoned Abandonment period (see form 496-UP) Period property became due to be reported (includes period ending date) Final report and remittance due prior to

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