KAREN CASALESE, KENTUCKY
A. No good deed goes unpunished. Because you did the right thing, Allstate finds you unfit to insure. Yours is a classic case of how easily credit data can be misapplied.
Allstate’s list of proven high risks includes “customers who have certain types of entries on their credit reports. . .” You have no bad entries; your credit is clean. But Allstate can check everyone who lives there, as if bankruptcy were an infectious disease. Allstate didn’t answer NEWSWEEK’S questions about the case. Says Robert Hunter of the Consumer Federation of America, “Is the mother going to burn down the house because the daughter went broke?”
If you were applying for a loan, no bank could turn you down because of your resident daughter’s bad credit record. Federal law won’t allow it. But the states regulate insurance companies, and states let some astounding practices stand.
The Kentucky Department of Insurance did think that Allstate went too far. It wrote a letter in your behalf, and the company offered to take you back. By then, however, you’d found other coverage and were too mad to switch.
Kentucky, alas, isn’t pressing to change Allstate’s general approach. It’s addressing only individual complaints. Talk about the assault on family values. Can we no longer help desperate relatives without first checking their credit reports?
Q: My daughter and I had a five-year certificate of deposit at the California Federal Bank, maturing in September 1995. In October 1994, our balance suddenly dropped to zero! Our entire CD, worth almost $7,000, had been escheated to the state. The bank said it happened because there was no activity in the account. But what “activity” are you expected to have in a CD? The bank got my money back, but I had to fight for all the interest due me. Do you think people should be warned of this es-cheat-ing practice?
JEAN KITTRELL, EDWARDSVILLE, ILL.
Money is escheated–turned over to the state-when it has apparently been forgotten about. Sometimes owners move without giving the institution their new address. Sometimes they die, neglecting to leave a list of assets for their heirs. Kittrell’s bank goofed; her escheatment shouldn’t have happened. But every month, millions of dollars legitimately pass to the states from forgotten CDs, stocks, insurance policies, deposits left at utilities, even items in safe-deposit boxes.
I have no problem with escheatment itself (except its slimy-sounding name). The state might as well take the unclaimed money as anyone else. If you or your heirs ever rediscover the funds, the state returns them-sometimes with interest.
The key question is: when does money officially become “unclaimed”? States have different answers. In California, a CD can be escheated if there’s no activity in the account for three years after it matures. Automatic rollovers don’t count as activity (the CD could roll even if you’re dead). Neither does a telephone call.
To declare a CD active, the bank has to see your signature on a letter-renewing the CD, making a deposit or withdrawal, changing your address or just saying you know that the money is there. If you have two CDs and write about only one of them, the other could be escheated away.
Kittrell renewed. her CD in 1990. But it was mistakenly treated as an automatic rollover, says CalFed vice president Frank Moore. So her bank records said that she hadn’t been heard from. She got a warning letter about the escheat and wrote right back. Still, her CD went to the state. Moore says the bank has adopted controls to keep this from happening again.
To stay clear of escheat, make a written list of all money due you. If you move, give all your financial institutions your new address. Ask them how to avoid escheat on long-term savings like CDs and Individual Retirement Accounts (the info is probably in your new-account disclosure, but I defy you to understand it). And read all the mail you get from the bank, even if most of it is junk.
Q: In June 1994 Southern California Edison hammered stockholders with a 30 percent dividend cut. To make it look as if body took a hit, chief executive officer John Bryson wrote, in the annual report, “Your SCEcorp and Edison officers decided to accept no bonuses this year.” Not true! Hundreds of thousands of stock options were transferred to Bryson and other officers. Don’t you think this report misled the stockholders?
MARK WAYSON, FAIRBANKS, ALASKA
And no wonder, since it did appear that the officers would get no reward. They do share your pain. Bryson’s lost bonus was worth some $400,000. He blames the bad stock performance on the California Public Utilities Commission, which proposed an industry restructuring. But in top managements everywhere, the stock-option bandwagon always rolls. Bryson’s will be worth $438,850 if the stock performs as expected in the years ahead. Still, SCEcorp can be commended; many execs would have gotten bonuses anyway.
