Should Credit Unions Hire Asset-Recovery Lawyers to Protect Their Capital?

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In these difficult times as financial institutions, including credit unions, face a potential liquidity crunch, it is imperative that these institutions conserve their capital. That conservation effort, in addition to managing investment and loan portfolios, should address their missing and unclaimed assets. By “missing and unclaimed assets,” I mean funds and securities that are held by federal and state unclaimed property agencies for the benefit of credit unions. The states collectively hold some $70 billion in unclaimed assets belonging to “missing owners.” Much of that $70 billion is owed to American businesses.

Where do these unclaimed assets come from? For financial institutions, mostly from dividend payments, bond interest payments and in some instances bond redemptions, which are not received by the institutions. Another source of unclaimed assets is old and probably written off bankruptcy claims. It is not unusual for a commercial bankruptcy case to take five to 10 years to resolve before dividends are paid to creditors. In that five- to 10-year period, files and claims are abandoned, offices close or move, companies change their name or merge, and employee turnover leaves gaps in the collection process. So, when the bankruptcy trustee mails checks to creditors under a former name, to a former address or to the attention of a former employee, those checks are often lost, misplaced or never received by the financial institution. Under federal bankruptcy law, the trustee is then compelled to turn over the unclaimed funds to the clerk of the Bankruptcy Court, who eventually sends them to the U.S. Treasury. Those funds remain available to be claimed by their owners. However, without a robust asset recovery plan, those assets will be lost to their owners forever.