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In search of lost loonies

This is what happens when a credit union member's account goes dormant

Unclaimed moneyIt seems too good to be true: the idea that a few hundred dollars – maybe even a thousand or two – might be waiting for you in a long-forgotten account.

Perhaps that’s why so many Canadians don’t think of checking to see if they have unclaimed money. Surprisingly, however, it’s a fairly common occurrence. The Bank of Canada alone is holding unclaimed funds for about 1.3 million Canadians that amounted to over $500 million at the end of 2013. That’s no small change.

What constitutes an unclaimed account? Typically, it’s one that has had no activity over a 10-year period and still remains dormant despite repeated notifications from the holder’s financial institution. The reasons accounts sit untouched are many. Divorcing couples sometimes neglect a shared account in the confusion after separation. A relative might set up an account for a child, then both parties forget about it. In other instances, people die leaving no clear details of their financial affairs. Moves are also a common reason, according to Cheryl Rettschlag, manager of banking support services at Servus Credit Union, which has more than 100 branches in Alberta. “Many times we just can’t reach members because they haven’t updated us with their new address,” she says.

Straightforward for banks

As far as the federally-regulated Big Five banks go, the fate of these dead accounts is pretty straightforward. The banks must turn over unclaimed money to the Bank of Canada once a decade has passed. The Bank of Canada then acts as a custodian, holding on to unclaimed balances of less than $1,000 for 30 years. Balances of $1,000 or more are held for 100 years. The Bank of Canada’s website has a database where people can search for accounts they believe belong to them. However, if balances still remain unclaimed after the prescribed dates, the Bank of Canada transfers the funds to the Receiver General of Canada and the money gets added to the country’s coffers.

Trickier for credit unions

Credit unions in different provinces deal with unclaimed money in different ways. A credit union’s obligations regarding notifying members also vary by province

The process regarding these accounts is trickier for credit unions because they’re provincially regulated. For one thing, it’s difficult to calculate how much money in total lies dormant in financial cooperatives Canada-wide.

For another, credit unions in different provinces deal with unclaimed money in different ways.

In Alberta, after 10 years of inactivity, credit unions transfer unclaimed balances to the Credit Union Deposit Guarantee Corporation (CUDGC), which then holds the money for another 20 years, at which point the account becomes government revenue. A CUDGC spokesperson who wished not to be identified said the institution currently holds approximately $1.4 million in 2,400 unclaimed accounts.

By contrast, in British Columbia unclaimed accounts are held indefinitely by the B.C. Unclaimed Property Society. In 2013, provincial credit unions transferred about $3.3 million in unclaimed accounts, but that was due in part to a “clean-up project” by one credit union, making the year an outlier, according to Alena Levitz, executive director of the B.C. Unclaimed Property Society. In 2011, around $179,000 was transferred and in 2012, $362,000. Like the Bank of Canada, the Society has a searchable database for unclaimed funds on its website.

Ontario’s dead accounts under scrutiny

The amount of unclaimed credit union member money in Canada’s most populace province, Ontario, is next to impossible to pin down because credit unions there do not yet have to transfer unclaimed balances to a provincial body. (None of the Ontario credit unions contacted for this story were willing to disclose the amount of inactive accounts they held.) However, the rules for Ontario credit unions around unclaimed accounts are likely to soon change, perhaps after the 2014 review of the Credit Union and Caisses Populaires Act, according to Louise Robichaud, a manager in the Licensing and Market Conduct Branch of the Financial Services Commission of Ontario.

Ontario’s law currently stipulates that credit unions must forward unclaimed balances to the Minister of Finance “in accordance with the Minister’s directions.” But the Minister of Finance has never sent instructions on how money should be transferred, despite the Act becoming law in 1994.

“We’ve been warning credit unions…[that] at some point we’ll have to comply to this law and we’ll receive directives from the Minister of Finance,” says Robichaud, who points out that Ontario credit unions should be especially vigilant about ensuring they keep a record of all details of unclaimed accounts.

A credit union’s obligations regarding notifying members also vary by province. In Ontario, credit unions must send written notification warning members that their accounts have become inactive after two and five years. Alberta credit unions must attempt to make “reasonable efforts to locate a customer” three times over a 10-year period. In B.C., credit unions must send only one written notice to members, just before the money is transferred to the B.C. Unclaimed Property Society.

According to the CUDGC spokesperson in Alberta, however, most credit unions “go beyond what the Act requires.”

Cheryl Rettschlag of Servus Credit Union in Alberta says staff will attempt to find members using Google search or 411, for example. They’ll also call anyone listed as a reference or emergency contact in the member’s initial application.

“We’ll say we’re trying to contact the person but we don’t give any information,” says Rettschlag, explaining the credit union wants to avoid fraudulent claims from impersonators. For the same reason, the credit union can’t simply call every person in the phone book with the same name as a member. “If you have a Patricia Smith, there could be millions of Patricia Smiths. So where do you start?”

Locating members ‘good for business’

Credit unions want to locate members for unclaimed funds because it’s the right thing to do. “It’s their money and we want them to have it,” says Rettschlag. But doing so also makes good business sense. When notifying someone about an unclaimed account, for example, Servus invites members to discuss how they can better manage their finances. “We talk about the money that has gone dormant and try to get them to be an active member,” says Rettschalg. “Maybe they have a chequing account with another institution and we can help them bring the chequing account over.”

Other credit unions may not be as proactive, possibly because of their limited resources. Other than Servus, only the $4-billion Conexus Credit Union in Saskatchewan provided some information, explaining that unclaimed accounts are very rare for that institution, with there only being two in the last few years.

Once money is transferred to provincial regulators, those organizations also make efforts to publicize unclaimed accounts. For instance, every year, Alberta’s CUDGC publishes a list of the unclaimed accounts credit unions have transferred to its institution, including the name, credit union the account was opened at and the amount. The list appears in the Edmonton Journal and Calgary Herald, but doesn’t generate as much buzz as one might think. For instance, in 2013, only eight of the 2,400 accounts currently held by the regulator were claimed. In B.C., meanwhile, 31, 21 and 63 accounts were reclaimed in the last three years respectively. The B.C. Unclaimed Property Society takes out ads in various publications to promote its online database that allows anyone to search for unclaimed money (not just from credit unions, but also from class action law suits, pension funds and other sources).

Individuals who think they are the rightful owner of an account held by the B.C. Unclaimed Property Society must submit an application form and provide supporting documents, such as a bank statement, identification papers, a SIN number or legal confirmation that one is an heir to a deceased person’s account – as is the process with the Bank of Canada.

Search engines too limited?

Stewart Rand, the founder of lostcash.ca, thinks search engines, such as those provided by the Bank of Canada or the B.C. Society, are too limited. That’s why he purchased data from the Bank of Canada and set up his own free database, which allows users to also search by city or address. While Rand, an IT consultant, makes a little money from ads on his website, he says he’s mostly interested in spreading the wealth.

“I showed a friend how to do a search and he looked up his wife’s maiden name,” says Rand. “They found $4,200 that belonged to her aunt and it was at a time when the family was in financial need.” When the aunt moved in 1994, she and her husband had forgotten about the account, which held an inheritance from a grandparent.

“We still can’t get over the miracle of it all,” the owner, Debbie Miles, told local media at the time the money was claimed.

But many are suspicious of Rand’s Good Samaritan motives. “I tried tracking down a couple of the bigger value accounts from this city,” Rand says of his home base in Halifax. “I haven’t received any responses back.” Rand thinks that the people he contacted assumed his email was a scam, even though he says he is not interested in any cash reward.

“There was the opportunity for a great social benefit that the province saw. We are the only [money holding institution] that does that in North America”

—Alena Levitz, executive director, B.C. Unclaimed Property Society

Indeed, numerous consultants profit by taking a cut after helping clients find and retrieve unclaimed accounts. There is no charge for those applying for money through the Bank of Canada or the B.C. Unclaimed Property Society, and the process is relatively straightforward, so, generally speaking, such brokers are unnecessary. That said, a business that may have unclaimed accounts held by different people under different legal jurisdictions may benefit from such a service. Furthermore, as Rand points out, those who wouldn’t have otherwise found out about an unclaimed account do benefit from a cold call alerting them, even if the “consultant” expects a five per cent cut.

Fortunately, easy-to-access free services like Rand’s website reduce the need for brokers. And as Rettschalg points out, the Internet is likely to substantially reduce the number of unclaimed accounts. Most people keep email addresses for longer periods than they maintain the same mailing address. If they do change emails, they usually have mail automatically forwarded to their new address.

Becoming more proactive

Hoping to ensure against unclaimed accounts in the future, Servus now asks for additional contact information, such as email addresses and cell phone numbers. “Over the last few years, we’ve been trying to be more proactive,” Rettschalg says. In British Columbia, one silver lining to money that remains unclaimed is that the B.C. Unclaimed Property Society donates funds each year to the Vancouver Foundation. Try as they might to find rightful owners, “a portion of funds will never be traced,” explains Levitz. This donation is taken from the total of abandoned money and doesn’t affect any lost-account holder personally. The reason? The same principle applies as when financial institutions invest account holders’ money because they know everyone will not withdraw all their funds at once. That means the Society will always have enough on hand to reimburse someone who rightfully owns a lost account.

Since 2003, the organization has donated more than $20 million to the Vancouver Foundation, a registered charity that provides funding for community, arts and environmental projects. “There was the opportunity for a great social benefit that the province saw,” Levitz notes. “We are the only [money holding institution] that does that in North America.” ◊