Dormant and Inactive Accounts (New Jersey)
Last Reviewed: December 2021
A dormant account or inactive account is a policy initiative created by the credit union to eliminate (close) the unutilized accounts by members who are not participating in the financial health and growth of the credit union.
The terms dormant account or inactive account are synonyms used by credit unions to identify and describe accounts that are not being used by their members that contain a nominal amount of funds.
Dormant and Inactive Accounts (New Jersey): Summary
The reason that credit unions implement and utilize dormant/inactive account policies is because the annual maintenance cost of every account at the credit union ranges anywhere from $80 to $120 a year (e.g., for staff time, statement preparation and mailing, database maintenance, etc). Given this expense, it is a disservice to all members of the credit union to allow certain members whose accounts hold nominal funds to keep those accounts open if those members are not participating in the use of products or services at the credit union.
To fulfill their responsibilities to manage the credit unions assets and resources prudently, credit union management, at the direction of board, creates a dormant/inactive account policy to fee and ultimately eliminate (close) accounts that are not being utilized by members who are not actively participating at the credit union.
A holder is a person, wherever organized or domiciled, who is the original obligor indebted to another on an obligation.
An owner is a person having a legal or equitable interest in property subject to this chapter or the person’s legal representative and includes, but is not limited to, a depositor in the case of a deposit, a beneficiary in the case of a trust other than a deposit in trust, and a creditor, claimant, or payee in the case of other property
Property means tangible property described in R.S. 46:30B-45 or a fixed and certain interest in intangible property that is held, issued, or owed in the course of a holder’s business, or by a government, government subdivision, agency, or instrumentality, and all income or increments therefrom, and includes property that is referred to as or evidenced by:
- Money, a check, draft, deposit, interest, or dividend;
- Credit balance, customer’s overpayment, security deposit, refund, credit memorandum, unpaid wage, unused ticket, mineral proceeds or unidentified remittance;
- Stock or other evidence of ownership of an interest in a business association or financial organization;
- A bond, debenture, note, or other evidence of indebtedness;
- Money deposited to redeem stock, bonds, coupons, or other securities or distributions;
- An amount due and payable under the terms of an annuity or insurance policy, including policies providing life insurance, property and casualty insurance, workers compensation insurance, or health and disability insurance; and
- An amount distributable from a trust or custodial fund established under a plan to provide health, welfare, pension, vacation, severance, retirement, death stock purchase, profit sharing, employee savings, supplemental unemployment, insurance, or similar benefits
What exactly are dormant/inactive accounts?
A dormant/inactive account is generally defined by policy as being an account:
- That has not been utilized (i.e., no deposits or withdrawals) by a member for an extended period of time (e.g., six months to a year);
- That contains less than a minimum prescribed amount of funds in the account (e.g., $50 to $100); and
- Whose owner, the member, has not engaged in any other transactions with the credit union (e.g., made deposits to other accounts, engaged in credit transactions, or utilized other credit union services) for this same extended period of time.
If an account becomes subject to a credit union's dormant/inactive account policy, the member is notified of the account's status, the account becomes subject to monthly fees or charges, and if the member does not use the account or participate in other ways that would remove the account from the policy, the account is ultimately closed.
Credit unions can impose charges/fees on accounts and can close accounts, and obviously can formulate policies with respect to accounts that are in the best interests of all their members.
Dormant/Inactive Accounts in New Jersey
N.J.S.A. 46:30B-1 provides that if property has remained unclaimed for a specific, statutory period, it shall be presumed to be abandoned. Shares, including accrued interest thereon, and funds payable on a share draft, check or similar instrument to a person, company, corporation, or other entity, are personal property and are presumed abandoned unless the owner of the funds has, within 3 years:
- Increased or decreased the amount on deposit or presented a passbook or similar evidence of the deposit for crediting of interest;
- Communicated in writing with the credit union concerning the account;
- Otherwise indicated an interest in the account as evidenced by a written memorandum or other record on file prepared by a credit union employee;
- Owned other accounts (or property to which any of the above apply) and if the credit union communicates in writing with the owner with regard to the property that would otherwise be presumed abandoned under this section at the address to which communications regarding the other property regularly are sent; or
- Had another relationship with the credit union concerning which the owner has communicated in writing or for which there is a file memo indicating the owner’s indication of an interest in such other property.
Abandoned Property in State-Chartered Credit Unions
When no transaction has occurred in a member's share or deposit account for 12 months and his whereabouts are unknown, as verified by the return of a certified letter addressed to him at his last known address, all sums due to the member shall be credited to a special reserve account. If the sums are not reclaimed within a five year period, they shall escheat to the State and be forwarded to the Treasurer of the State of New Jersey (N.J.S.A 17:13-108).
Different items are considered to be abandoned property after a specified amount of time has elapsed. A Property Holder’s Report must be filed by the holder in order for property to be considered abandoned.
Three conditions must be satisfied before any unclaimed property is reported and turned over the State Treasurer.
- Presumption of Abandonment: Property that has remained unclaimed by the owner for a certain period of time, as specified in the Unclaimed Property Statute.
- Address Requirement: The last known address of the owner of the abandoned property is in the State of New Jersey. The State, in which the intermediary is incorporated, has the right to escheat funds belonging to beneficial owners who cannot be identified or located.
- Notice to Apparent Owners: If the amount of the unclaimed property is $50.00 or greater, the holder shall send a certified mail return receipt requested R.S.46B-50 to the apparent owner at the last known address. This notice should inform the owner that the holder is in possession of unclaimed property that will be turned over the State Treasurer unless the owner claims it from the holder before the report is filed. The notice to apparent owners should be mailed not more than 120 days and not less than 60 days before filing the report.
Payment and Delivery of Unclaimed Property
At the time of filing a Property Holder’s Report, the holder must turn over all unclaimed property to the State Treasurer. The payment and report should include all applicable interest, dividend, income, corporate actions from the date of the report, not the date of the end of the abandonment cycle. Payment must be included with the filing of the report.
The Unclaimed Personal Property Report must be filed, with payment, prior to November 1 of each year, as of the preceding June 30. The Unclaimed Life Insurance Report must be filed prior to May 1 of each year, as of the preceding December 31.
Safe Deposit Boxes/ Money Orders/ Traveler’s Checks
The contents of a safe deposit box are considered to be abandoned 5 years after the lease or rental has expired. Reports for an abandoned safe deposit box must be submitted separately from other personal property reports (N.J.S.A. 46:30B-45).
Money orders are considered abandoned after 3 years unless, within 3 years, the owner has communicated with the issuer on the matter (N.J.S.A. 46:30B-12). This is, however, pursuant to R.S. 46:30 B-14.
Traveler’s checks are considered abandoned after 3 years unless, within 3 years, the owner has communicated with the issuer on the matter (N.J.S.A. 46:30B-11). This is also pursuant to R.S. 46:30B-14.
According to N.J.S.A. 46:30B-13, the holder of a traveler’s check or money order may not deduct any charge imposed by reason of failure to present the instrument for payment unless a valid, written contract exists that states that the issuer may impose a charge, as long as he does not reverse or cancel the charges.
Other Personal Property Considered Abandoned
As per N.J.S.A. 46:30B-1, all personal property is considered to be abandoned after 3 years, unless specifically stated otherwise. These are some things that have been given a different time frame:
- Governmental entities (bonds and other intangible items) are considered abandoned after 1 year;
- Proceeds to dissolution are considered abandoned 1 year after the date of final distribution;
- Utility deposits are considered abandoned 1 year after the service ends;
- Class action proceeds are considered abandoned 1 year after the initial distribution date.
Unclaimed Property: Life Insurance
Funds being held or owed to a person under any life or endowment insurance policy or annuity contract are presumed abandoned 3 years after the policy has matured or terminated and is due, or 3 years after the insured has died, or the insured has attained the limiting age under morality tables and there are no assignments, readjustments, premium payments, loans or written communication in the last 2 years.
Dormant and Inactive Accounts (New Jersey): Additional State Considerations
Dormancy and Liability
In 2002, New Jersey implemented major dormancy period changes. One of the most dramatic changes under the revised law involves the dormancy period for demand, savings, or time deposits, including deposits that are automatically renewable. The prior dormancy period was 10 years, but it was shortened to three years after the earlier of maturity or the date the owner last indicated an interest in the property. N.J.S.A. 46:30B-7.
A holder may not deduct from the amount due a person who has a legal or equitable interest in any property subject to chapter 30B of Title 46 of the Revised Statutes any charges due to dormancy or inactivity, unless:
there is an enforceable written contract between the holder and the owner of the property pursuant to which the holder may impose a charge; and
the holder regularly imposes charges and does not regularly reverse or otherwise cancel those charges with respect to the property, the amount of any charges is not unconscionable, and no additional charges are imposed as a result of escheatment of the property.
N.J. Stat. § 46:30B-7.2 (LexisNexis, Lexis Advance through New Jersey 219th Second Annual Session, L. 2021, c. 272, and J.R. 8)
Dormant and Inactive Accounts (New Jersey): Additional Resources
Dormant and Inactive Accounts (New Jersey): Laws & Regulations
- New Jersey Statutes
- New Jersey Property Chapter