Unclaimed property reporting is a necessary and often complex process for business owners. One of the critical steps in the unclaimed property process is conducting due diligence, which involves performing outreach to property owners before reporting their assets to the state.
At its core, due diligence is an effort to reunite the rightful owner with their property. While it may seem like a straightforward task, the challenges lie in ensuring you have accurate contact information, getting responses, and maintaining compliance with state regulations.
Here are 6 ways for business owners to improve their due diligence efforts, increase the likelihood of customer responses, and minimize the risk of penalties for non-compliance:
1. Understand State-Specific Due Diligence Requirements
Before diving into the technical aspects of contacting property owners, it’s essential to fully understand the specific due diligence requirements in each state where your business reports unclaimed property.
These regulations can vary in several ways, including:
- Threshold amounts: Some states require due diligence only for property above a certain value. For instance, California requires due diligence letters to be sent for property valued at $50 or more, while other states may have higher or lower thresholds.
- Timeframes: The timeline for when business owners must send due diligence letters can differ between states. For example, a state might require that letters be sent 60 days before the reporting deadline, while another may require them to be sent 90 days before.
- Letter contents: Some states mandate specific language be used in due diligence letters. Failure to include required phrases or disclosures can result in non-compliance, even if the letter is sent at the appropriate time.
By familiarizing themselves with state-specific regulations, business owners can avoid making unnecessary mistakes and ensure that their due diligence process meets all legal obligations. They may even consider developing a state-by-state checklist that outlines these requirements to help their team stay organized.
2. Verify Customer Contact Information Regularly
One of the most significant challenges in conducting due diligence is ensuring you have accurate and up-to-date contact information for property owners. If your records are outdated, your efforts to contact individuals will likely fail, and you may have to report the property to the state.
Here are some proactive steps business owners can take to maintain accurate contact information:
- Regular Data Updates: Make it a routine practice to ask for updated contact information from customers, vendors, and employees. This can be done during interactions like transactions, account reviews, or customer service touchpoints.
- Use Third-Party Verification Services: Business owners should consider using third-party service to verify and update addresses before sending out due diligence letters. Services like the National Change of Address (NCOA) database can help ensure that these addresses are correct.
- Leverage Email and Phone Contact: While unclaimed property due diligence often relies on physical letters, consider using email or phone calls as supplementary methods of contact. Though not always required by law, reaching out through multiple channels increases the likelihood that business owners will get responses from the property owners.
By taking these steps, business owners increase the chances of successfully reaching the property owners, reducing the number of items that need to be reported as unclaimed property.
3. Craft Clear and Compelling Due Diligence Letters
The content of your due diligence letters can greatly impact whether or not the recipient responds. Simply meeting the legal requirements isn’t enough. Your letter should be clear and concise, as well as give the recipient a reason to act.
Here are some tips business owners should follow to write effective due diligence letters:
- Personalize the Letter: Whenever possible, business owners should personalize the letter with the individual’s name, specific account details, and property value. Generic letters can easily be mistaken for junk mail, reducing the chances of a response.
- Be Transparent About the Process: Clearly explain what unclaimed property is and why they are being contacted. Some recipients may be unfamiliar with the concept of unclaimed property and may assume it’s a scam if the process isn’t explained in straightforward terms.
- Create a Sense of Urgency: Business owners should include deadlines by which the recipient must respond before the property is reported to the state. This sense of urgency can encourage the recipient to act more quickly.
- Provide Clear Instructions for Next Steps: Make it as easy as possible for the recipient to claim their property. Provide clear instructions on how to respond, whether it’s by returning the letter, calling a customer service number, or logging into an account online. Include multiple contact options, such as a phone number, email, or web portal, to make it convenient for the recipient to take action.
By writing letters that are clear, direct, and encourage action, business owners will likely see higher response rates and more successful reunions of property with its rightful owner.
4. Optimize Your Communication Channels
While state laws often require physical letters to be sent as part of the due diligence process, business owners don’t have to limit their communication to traditional mail. Expanding your efforts to include multiple communication channels can significantly improve your success rate.
Here are some ways to optimize your outreach:
- Use Multiple Communication Channels: In addition to sending physical letters, consider contacting property owners via email, phone, or even text message. Many people may overlook a letter in their mailbox but will respond to a phone call or email. While not always legally required, this extra effort can help reduce the volume of unclaimed property that needs to be reported.
- Track Your Communications: Business owners should keep a log of all communication attempts, including phone calls, emails, and returned letters. This record can be helpful if they are audited or need to demonstrate that they made a good-faith effort to contact the property owner.
- Send Follow-Up Communications: If the initial communication attempt doesn’t yield a response, consider sending a follow-up letter or email. Sometimes a second attempt with a more urgent tone can lead to a successful outcome.
By employing a multi-channel approach, business owners increase the chances of contacting the property owners, reducing the need to report the property to the state.
5. Be Proactive with Recordkeeping
Detailed recordkeeping is crucial for proving compliance with due diligence requirements, especially if audited. Maintaining thorough and accurate records can save your business from fines or penalties down the line.
Here are some tips for staying organized:
- Track Due Diligence Efforts: Keep detailed records of when letters were sent, what property was involved, and the outcomes of those efforts. Make sure your records reflect that all state-specific requirements were met.
- Document Returned Letters: If letters are returned as undeliverable, make sure to log that information. States typically require businesses to report if due diligence letters were returned, as this may affect how the property is reported.
- Maintain Contact Logs: If property owners are contacted by phone or email, document the dates and outcomes of those conversations. This can help demonstrate the efforts made to reunite the owner with their property.
6. Outsource to Unclaimed Property Experts
One of the best ways to ensure compliance with the due diligence process is to consider outsourcing to unclaimed property experts. These professionals specialize in managing the intricacies of due diligence and reporting for multiple states.
Here are a few reasons to consider outsourcing:
- Complied Technology: Outsourcing firms often use sophisticated tracking tools to manage communications, increasing the likelihood of successful contact with property owners and reducing the burden on your internal team.
Managing the due diligence process for unclaimed property reporting doesn’t have to be a daunting task.
By taking proactive steps to verify contact information, crafting clear and compelling letters, and optimizing communication channels, business owners can significantly improve their chances of reuniting property with its rightful owner. Additionally, outsourcing to experts can relieve much of the administrative burden while ensuring compliance with complex state laws.
Whether you handle due diligence internally or partner with a third-party expert, the key to success is maintaining organized records, following state-specific guidelines, and taking a customer-centric approach to reuniting property with its rightful owner. This not only keeps you in compliance but also fosters goodwill and trust with your customers.
Dunbar is a reputable provider of unclaimed property compliance services, offering a comprehensive suite of solutions to help organizations remain compliant with all applicable laws. With a professional team with decades of experience, Dunbar is the ideal choice for businesses seeking a reliable and knowledgeable provider for their unclaimed property compliance needs.