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Automated escheatment – prevent and resolve unclaimed property

Hi, everyone. Thanks for joining today. You know, every business, especially those issuing checks to consumers, must deal with escheatment. It's estimated that there's about $80 billion of unclaimed property, and only 50%, so only half of that is returned to the rightful owner.

That means there's a lot of additional work placed on those businesses, yet 65% of them are out of compliance with unclaimed property laws. I'm Madison Donnini, a working capital consultant at U.S. Bank. Stay with us as we break down what's contributing to this challenge, ways to prevent it, and if you do have to escheat, how to do it in an efficient and compliant way.

I brought together a group of experts in this space, and to give you their perspective and talk through some of the solutions U.S. Bank offers in order to help with escheatment. I'd like to introduce to you Larry Andretich, a vice president in our product group. And he actually worked on the team that developed the automated escheatment service. Larry, what are some of the variables that led us to develop this solution?

Hey, thanks, Madison. So we talked to our clients to better understand where they need to help with escheatment. And more often than not, they told us they needed help in every part of the process, because it's an excruciatingly complex one.

It's incredibly manual, as they typically are tracking items in spreadsheets, and relying on external reporting to research unpaid items. They have to be legal experts on escheatment regulations in numerous jurisdictions, and there is little to no automation, which ultimately means that it requires a lot of effort from the accounting or operations teams to manage the escheatment process.

As we know, checks continue to be a major payment row. In 2018, over 14.5 billion of them were issued, with a total of almost $25 trillion. These are the types of transactions that are fueling the growth we see today in unclaimed property, as many of those checks are going uncashed.

How many of you have received a check from your insurance carrier or utility company and it's for a small dollar amount. Do you really want to go through the effort of depositing those checks? These are the types of checks that will typically go uncashed. Precisely what we're talking about. It's in addition to checks that never make it to their intended recipient because of bad and/or incomplete addresses.

You know, Becky, I'm really interested to get your thoughts on this, and some of the pain points around escheatment. Becky Stephens is an assistant vice president, and an Agile product owner. She actually supports many of the business lines that manages U.S. Bank escheatment. So she's in your shoes, and she really understands it. Becky, what are your thoughts on this?

Thanks, Madison. While I may not use the term excruciating, like Larry did, there are pain points when maintaining escheat steady compliance. Those pain points, they'll vary by product or business line, but most often it's the manual efforts that are required to manage the incoming data from your source systems.

Very few of them, if any, of those source systems have the capability to do escheat aging. So too often, you get a system file dump that requires manual evaluation and review by your escheat reporting team. That usually results in a spreadsheet that gets uploaded to your reporting software.

Then having a tool like automated escheatment service to assist with the aging process would be a great time saver. You know, anyone who has escheated checks knows the issuing business lines generally aren't aware that no address details or limited information about the checks has downstream impacts if that check remains uncashed.

No address details. That usually means you have no way of contacting the property owner to attempt to avoid escheatment. You've got 55 jurisdictions to monitor for the ever-changing unclaimed property rules and regulations. And along with the adoption of new laws, there's usually no immediate state guidance supporting those changes.

There's changing dormancy periods with the new laws. There's different dormancy periods based on the underlying reason the check was issued. Ongoing litigation regarding the reporting of checks. And if you do have to report them, the states are making it more difficult to claim the funds once they're escheated.

Yeah, as Becky stated, and the challenge of having to deal with over 55 jurisdictions, our clients are really struggling with maintaining that expertise. As well as working within spreadsheets, because of a very manual approach.

COVID-19 has also motivated municipalities and governments to enforce out of compliance fines to balance their books that are in dire need of revenue. Unclaimed property is a top revenue stream for many a state's general fund.

Manual processes are also squeezing efficiency, mostly due to internal systems that don't talk to each other, or require manual intervention, making information sharing very difficult. And in most companies, the people doing the escheatment work have other responsibilities, many of which are prioritized above the rigor required just to manage their unclaimed property.

You're right, Larry. Escheatment is time consuming, but it's necessary, based on the laws of those 55 jurisdictions that we previously mentioned. You've got different reporting cycles, not only by state but by industry. You have year-round activities to support, monitor, and track the unclaimed property.

So having an automated escheatment solution or service to monitor and track the records, it may even allow an organization to redirect a full-time employee hours to a more value-driven operation.

So that's awesome. I mean, I think it's really obvious why there's been a need for an escheatment solution. But I'd like to take a step back and really talk about, how do we reduce the amount of items that go unclaimed? How do we reduce the number of checks that you are issuing?

We have James Kannas with us. And he's a vice president and solutions engineer for payables. You think of some good solutions for this, James. Do you mind talking through some of them?

I'd love to. Thanks, Madison. So prevention, prevention, prevention. It's a great tactic. But how do we do that? You can prevent escheatment by eliminating as many checks as possible from your payables process. So we're talking about digitizing payments, providing payees with a choice and payment method, and actually engaging them.

Another thing you can do, that Larry is going to cover more later, is dramatically enhance your visibility into your payable earned paychecks along with the activity around it. If we focus on payment digitization, our payee choice solution offers multiple digital payment options, including ACH, a whole group of faster payments with Zelle, real-time payments, and push-to-card. Also, prepaid for [INAUDIBLE], so Reliacard and Focus Blue reloadable. Checks are still part of it. So checks are included along with those payment choices.

Our payee choice solution securely registers the payee, and securely retains all of their confidential banking information on a secure website, with your logo and customized messaging.

As far as integration, it can be done via API, the transmission and file uploads, and single sign ups. So literally, your customers can move from your website to ours seamlessly. It's used by universities, insurance companies, utilities, and health-care providers, all working to reduce their effort around paying claims or providing refunds.

Yeah, as you just mentioned, we've got a lot of customers using this payee choice solution, and they found it really valuable. But is there an example you could share with our audience?

Yeah, a great example. We have a very large health care provider located in the Eastern US. They were really-- they thought of a way to digitize their patient refund volume, which was in excess of 20,000 checks a month. They wanted to enhance that patient financial experience. So we're looking at speed, payment choice, and reduced paper.

Finally, another benefit they brought in was reducing their cost per transaction. The payee choice accomplishes all of that. So they can select from, as I said earlier, ACH Zelle, real-time payments, prepaid card, push-to-card, and check.

But they selected ACH, Zelle, and check. So they narrowed it down a little bit. And just with the introduction of payee choice, almost 30% of the refunds were completed digitally. They'll go higher. What they'll do is they'll engage in further messaging to make certain that those patients know they're going to have choice and faster payment.

Thanks, James. That's a really good example. While we giving our customers, or giving your customers a choice on how they get paid is going to help reduce that amount of unclaimed property, it's probably not going to eliminate it. So Larry, you started to talk about our solution, automated escheatment service. But what else can our clients expect from this solution?

Well, Madison, automated escheatment is a natural bolt on to our payables ecosystem. And like James said, we start everything with prevention. Prevention tools allow customers to have visibility into their outstanding and auto cancel payments. It also will help them to understand if a check payment can be replaced with an electronic equivalent.

Then for the items that we can't prevent from going into escheatment, which we know there's going to be some, it's about resolution. How can we help the client resolve unclaimed property in the most efficient way possible? We're going to do that by delivering an application that's integrated, automated, and exceptions based.

It's integrated with our check data warehouse, saving clients time and labor by replacing manual record keeping and providing updates to payment statuses. It's automated, walking customers down the escheatment path, using an automated flow for each step in the process. And it's exceptions based, because it proactively alerts clients of priorities within the workflow that will require their attention.

You know, as a financial institution, we're in a unique position to offer this capability. Having access to our clients' payables data allows us to integrate and automate the application to provide an experience like no other for this type of service.

And we're the only company in the marketplace to offer this type of capability around escheatment. As we said, we've talked to our clients about the process, and they told us things like, Larry, running a report in our ERP to be a sort of, excuse me, to be able to sort and sift through all the items is a huge pain point.

Data imports and exports into the system should be automated. It takes a lot of IT resources to move data. Research on all the different states would take up to 50% of my job. I never want to look at another due diligence letter again. And finally, there's nothing I wouldn't want to be automated.

Yeah. So, Becky, again, curious to get your perspective. You deal with the escheatment process on the daily. So how do you see the solution changing the business?

Well, I think having seen this tool, and been part of Larry's process with this, having a tool like the automated escheatment service provides an organization with a bird's eye view of their outstanding checks.

I think the tool will assist the organization in determining how to best resolve the outstanding items to avoid escheatment. But if escheatment is necessary, the automated escheatment service tool makes that process easier for you to complete.

Right. So we've talked about the amount of unclaimed property, the manual processes associated with escheatment, how you might provide your customers with an option to get paid in the way they want to. So hopefully, they choose electronic payments and reducing the amount of checks, you know, our automated escheatment service.

But you know, Larry, I know we're helping our customers get ready for the spring escheatment cycle. If someone wanted to take advantage of the service, what are some of the things they could do to get ready?

So, Madison, they would really want to make sure they're using products like full account reconcilement and Positive Pay. Getting these services in place now will ensure that we can integrate their check information into our automated escheatment application.

They would also want to make sure that their transmission method is updated to the most current format. Our treasury management experts will work with you to make sure you have everything in place to take advantage of this service.

Perfect. That sounds great. You know, I think these are all great examples of how U.S. Bank is really trying to meet our customers where they are in their digital journey, and helping them move towards the future of faster payments. Thanks for joining us today, and we'll see you next month as we take a deeper look into AP Optimizer. So be on the lookout for that invite. Have a good one.

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September, 2021

Automated escheatment: Prevent and resolve unclaimed property

Hear how you can prevent escheatment in your business and resolve unclaimed property.

Check disbursement remains a major payment rail for businesses. But what happens when checks are left uncashed? Your business still has an obligation to pay the recipient. Replace manual processes to manage, track and escheat. 

Learn about:

  • Common challenges organizations experience with unclaimed checks.
  • Solutions U.S. Bank has developed to help businesses prevent escheatment.
  • An automated and integrated approach that helps resolve unclaimed property when it can’t be avoided.


Learn more »




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