ANALYSIS: The League recently revised its ii Release No. 0008 – “Dormant Accounts,” to keep up with changes made this year to Wisconsin’s unclaimed property laws. (We recapped those changes in this Compliance Courier.)
As the release now explains, credit unions in Wisconsin are generally free to charge dormant account fees or inactive account fees (the terms seem interchangeable), so long as members have agreed to pay them and they’ve been disclosed properly. However, once an account becomes “abandoned property” under Wisconsin’s unclaimed property laws and must escheat to the state, then credit unions face a few legal limits if they want to continue charging such fees or to impose an escheatment fee.
What do the statutes say?
Wisconsin’s credit union statutes (§186.113(16)) say “a credit union may … establish a policy, including a fee schedule, for disposing of dormant accounts,” subject to Chap. 177 of the statutes. Chap. 177 contains Wisconsin’s statutes on unclaimed property.
What does Chap. 177 say about dormant (sometimes called “inactive”) account fees? It used to say that financial institutions could not impose a charge during a period of dormancy or inactivity which exceeds the charge regularly imposed by that holder on that class of account. That provision was repealed in 2022.
Now, Chap. 177 says that the holder of unclaimed property may deduct a charge from property required to be paid or delivered to the Department of Revenue (DOR) only if both of the following apply:
- A valid written contract between the holder and the apparent owner authorizes imposition of the charge for the apparent owner’s failure to claim the property within a specified time. (The League’s Your Account Agreement form (WCUL #82004) says this about dormant account fees: “If your Account becomes dormant, we reserve the right to charge your Account with a dormant Account service fee. If the Credit Union charges dormant Account service fees, more specifics about this fee are contained in the Truth in Savings Disclosures given to you.”)
- The holder regularly imposes the charge and regularly does not reverse or otherwise cancel or not collect the charge.
The amount of the charge is limited to an amount that is not unconscionable considering all relevant factors, including the marginal transactional costs incurred in maintaining the property and any services received by the apparent owner. §177.0602.
What does this all mean?
It means that Wisconsin law puts a few limits on credit unions that want to continue charging dormant/inactive account fees on accounts once they are set to escheat to the state – accounts that have reached the so-called “dormancy period” and are considered to be abandoned under Wisconsin’s unclaimed property law. (For details, see ii Release No. 0007.) At that point, credit unions can only charge such fees – or impose new escheatment fees – on dormant or inactive accounts if the two bullet point provisions, above, apply, and only if the fee is not “unconscionable.” (Evaluate whether the amount of the fee is unconscionable by considering all relevant factors, including the marginal transactional costs incurred in maintaining the property and any services received by the apparent owner.) So, credit unions need to take some care in charging fees on accounts once they have to be paid over to the DOR.
On the other hand, Chap. 177 does not appear to restrict dormant or inactive account fees that are charged before an account becomes abandoned property. Credit unions seem to be free to charge dormancy or inactivity fees, so long as they are clearly covered in their Truth in Savings disclosures and agreed to by the member. (The credit union should also have a dormant account policy in place, and ii Release No. 0008 has sample policy language.)
As explained in The League’s ii Release No. 0101, Truth in Savings requires account-opening disclosures to state the amount of any fee that may be imposed in connection with the account (or an explanation of how the fee will be determined) and the conditions under which the fee may be imposed. This includes fees imposed upon dormant or inactive accounts as well as escheatment fees. It is not enough to simply list such fees, without also clearly stating what triggers the fees.
It’s important that members also agree to pay the disclosed account fees. The League’s account agreement forms require accountholders to sign off, acknowledging receipt of and agreement to the terms and conditions of specified agreements/disclosures and to any amendments the credit union may make from time to time.