Senate targets unused traveler's checks - East Valley Tribune: Arizona

Senate targets unused traveler's checks

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Posted: Wednesday, November 18, 2009 6:49 pm | Updated: 2:00 am, Sat Oct 8, 2011.

Ignoring a potential lawsuit, state senators voted Wednesday to grab hold of the money from traveler's checks that haven't been used or cashed within three years - 12 years less than now allowed.

The move is part of a package in which lawmakers are trying to find cash to plug a $2 billion hole in the budget. Anthony Forschino, deputy director of the Arizona Department of Revenue, estimated the change could generate an immediate $2.5 million.

What it also could generate is legal problems: Senate staff attorney Joni Hoffman told legislators that a similar effort last year by Kentucky lawmakers was struck down just this past June by a federal court there.

That ruling sets no legal precedent in Arizona. But it shows that American Express is willing to go to court to protect the company's ability to hold onto the cash - and benefit from the use of the dollars - as long as possible.

Despite that, Senate President Bob Burns, R-Peoria, said lawmakers intend to push ahead with the change, at least for the time being. A final Senate vote on the measure is set for Thursday, with the House also taking up the legislation Thursday.

But Burns said he has committed to lobbyists for American Express that he would consider changes during the next special session, tentatively set for December.

All states have laws dealing with unclaimed property. These include not only traveler's checks but also bank accounts, contents of safe deposit boxes and unclaimed tax refunds.

The idea behind the law is that, at some point, the cash and other items should go to the state.

In Arizona, like other states, the time limit for traveler's checks is 15 years. SB1003 changes that to just three years.

The net result would force American Express - and any other company that issues traveler's checks - to give Arizona the cash from checks issued in this state to the government after three years.

Technically, the state remains on the financial hook: If the rightful owner shows up - even years later - the state has to refund the cash. But it allows the state to use the money in the interim to deal with its own cash-flow problems.

That was precisely why Kentucky lawmakers tried to shorten the time period, in that case to seven years rather than the three being pushed here. But U.S. District Court Judge Danny Reeves said the state was not entitled to the free use of the cash.

In his June ruling, he said American Express issues the money orders without charge in reliance of being able to hang on to the cash, interest free, for up to 15 years if the customers just put the checks in a drawer.

"With a significantly shortened abandonment period, American Express' decision to offer traveler's checks free of charge would not stand," the judge wrote.

More to the point, Reeves wrote it's not like Kentucky lawmakers enacted the measure in an effort to help their residents.

"(The law) was passed to raise revenue for the state, rather than reunite citizens with lost property," the judge wrote. As proof of that, Reeves noted, the provision was included in legislation labeled as relating to taxation and revenue; SB1003 is labeled as an act "relating to revenue budget reconciliation."

Repeated calls to American Express seeking comment on the Arizona legislation were not immediately returned.

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