Magazine article American Banker

Federal Appeals Court to Hear Mass. Case against FDIC over Unclaimed Deposits

Magazine article American Banker

Federal Appeals Court to Hear Mass. Case against FDIC over Unclaimed Deposits

Article excerpt

WASHINGTON - Attorneys for Massachusetts will argue before a federal appeals court in Boston today that the Federal Deposit Insurance Corp. must turn over millions of dollars in unclaimed deposits to the state treasury.

The FDIC, at today's argument, will draw a decidingly different picture, telling the U.S. Court of Appeals for the First Circuit that a federal law clearly gives the agency title to those funds.

Massachusetts is challenging the FDIC's decision to retain the unclaimed deposits from 36 failed institutions, arguing that the local Abandoned Property Statute requires the agency to release the $3 to $5 million.

If Massachusetts succeeds, it could pave the way for other states to claim more than $200 million in abandoned deposits held now by the FDIC.

"It is a significant issue because it affects almost all states"' Massachusetts Assistant Attorney General Thomas O. Bean said.

The amount at stake isn't "petty cash," said Ira H. Parker, a former FDIC attorney who handled this issue.

"Certainly there are other states interested in this," Mr. Parker said, "and, there is at least one law firm trying to get other states interested in it."

But, the states first need to defeat the FDIC, which argues in its brief that the federal Unclaimed Deposits Amendment Act overrules state law, and requires the agency to retain the deposits.

That's not the only hurdle, according to the FDIC. People who fail to collect their insured deposits from the agency after 18 months receive a stake in any recovered assets. …

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