A Nest Egg Squashed
My mother’s bank took her nest egg--in her view, an unexpected and hostile takeover. She gave it to them to hold and protect; instead, they closed her account and sent her money to the state because she hadn’t touched it for some time. They didn’t even tell her. One month, she had a lordly sum saved up. On the next statement, the balance was zero.
Coincidentally, the same people--owners of Home Savings of America--have made what’s known as a “hostile bid” to take over Great Western Financial Corp. and its $43 billion in assets. Great Western in turn acted as surprised and upset as my mother.
If I link these two actions, it’s not as a judgment just on Home Savings, but on banking, on commerce, on life today. And we’d better accept it, because Home’s parent, H.F. Ahmanson, is the largest thrift in the U.S. with $50 billion in assets, and obviously about to get larger. What its management called a mere “proposal to combine” two banks, and what it sees as “caring service” for customers is perforce the industry standard.
My mother knew she could do better with her money. She’s 90 and neither dumb nor inexperienced. But she wanted it liquid, “there if I need it” and safe. So she chose a savings bank with solid assets and a convenient branch and was content, like many elderly people, to let it sit, untouched, earning 3.6%.
She should have been their favorite customer. She asked nothing. Monthly statements were sent and annual 1099s. None came back to the bank.
Then, a year ago, they sent my mother a form letter noting her inactivity and asking if she wanted to stay a customer. Startled, she called the branch, was told it was only a formality and mailed back her confirmation. She even called and checked that it got there.
They took her money anyway. They didn’t write, though they had her address. They didn’t call, though they had her phone number. They didn’t send a messenger to her house, which, for a good-sized account, wouldn’t have been an excessive gesture.
Her first indication was the absence of a monthly statement in October. She may be old and fiscally inactive, but she noticed.
She called the branch and was told her balance was zero. How could that be, she asked, and in the measured tones with which one addresses a small child or the mentally incompetent, the service representative first insisted that she must have withdrawn the money herself, then confirmed, without apology, that her money was “escheated” to the state.
Such an “escheat”--the transferring of unclaimed assets to the state controller--is meant to protect consumers, ensuring that a financial institution can’t drain “dormant” accounts or service-charge them down to nothing. In California, the required period of dormancy is three years, after which the institution must make a “reasonable effort” to notify customers before shipping their money away.
According to the branch, Home Savings’ “reasonable effort” amounts to that single form letter, the reply to which was then lost. The branch representative thought that accounts above a certain amount might also get a phone call, but if not, it wasn’t the branch’s fault. Escheatments are handled by a central department, she said, and “what they should have done is their business.”
What they did do was reversible. My mother sent in a claim, got her money out of the state’s $2-billion stash of “unclaimed assets” and put it in another bank.
It is also not uncommon. Of the $250 million or 450,000 accounts, escheated annually to California’s controller, 60% comes from banks, savings and loans and credit unions, the rest from stocks, bonds, uncashed checks, safe deposit boxes. In other words, the institutions holding this property are somehow unable to locate almost half a million account holders a year--the equivalent of one in 40 adult Californians.
We don’t know how many are savings banks serving elderly people with savings they purposely keep “inactive” as long as they can. But obviously we should ask that they make more “reasonable”--even strenuous--efforts to serve them. Trusting a nest egg to the world of hostile takeovers is just one step up from putting it in a mattress. Or maybe a step down.
