Delaware pays $102 million in legal settlement to Pennsylvania, other states over unclaimed property

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Delaware will pay $102 million in unclaimed property funds to a coalition of states, including Pennsylvania, as part of a recent legal settlement.

Pennsylvania and Arkansas led the bloc of states that sued Delaware for its collection of unclaimed property outside of its borders.

Unclaimed property includes uncashed checks, gift cards, utility security deposits, abandoned bank accounts and orphaned refunds. If there’s no activity with these financial products for a year or more, the property is considered “unclaimed” and turned over to the government, under a power called “escheatment.” In June, Delaware’s revenue forecast showed the state collected more than $400 million in unclaimed property for the fiscal year that ended in July.

Delaware is the incorporation destination for millions of businesses, receiving orphaned financial instruments from across the country. Because of that, the First State takes in more than its share of unclaimed property, relative to size and population, and adds it to its general revenue fund.

Pennsylvania sued Delaware in 2016 over its claim to MoneyGram agent and teller’s checks. Although MoneyGram is incorporated in Delaware, the company conducts little operations there. MoneyGram is physically headquartered in Texas. Pennsylvania successfully argued against Delaware’s claim that it was entitled to hold the unclaimed property of companies registered in the state by saying the checks should be viewed as money orders or traveler’s checks and go to the state where they were cut.

“The Pennsylvania Treasury Department first questioned the reporting of this type of property by MoneyGram to Delaware nine years ago, leading the way on this important issue,” said Pennsylvania Treasurer Stacy Garrity in a statement. “Under this settlement, Pennsylvania residents will be able to claim their unclaimed funds directly from the state treasury.”

Dozens of states joined the lawsuit and the U.S. Supreme Court agreed with them last year. The decision required the parties to reach a negotiated settlement spelling out how much Delaware owed everyone.

“Delaware is pleased to bring this matter to a close with the signing of this historic interstate settlement agreement,” said Brenda R. Mayrack, Delaware State Escheator and Director of the Office of Unclaimed Property, in a statement. “Going forward, we look forward to working cooperatively and constructively with our sister states to focus on reuniting owners with their property and improving holder compliance with state unclaimed property laws.”

In addition to the $102 million Delaware is giving back to the coalition,  approximately $89 million, plus interest, that MoneyGram deposited in a litigation escrow account from 2018 to 2022 will be distributed among all 50 states based on place of purchase. The coalition states will receive nearly $55 million, plus earned interest, from that account.

States will assume custody and responsibility to return any of the checks received under the terms of the settlement or from the escrow account.