Are there any issues with charging an inactivity fee on checking and savings accounts under the new Illinois unclaimed property law? Can we charge inactivity fees on money orders and cashier’s checks by month?

We are not aware of any prohibition against charging inactivity fees for checking and savings accounts, provided that the fees comply with the requirements in the new Illinois Revised Uniform Unclaimed Property Act (Illinois RUUPA).

Under the Illinois RUUPA, inactivity fees must be authorized by a valid contract that specifies the time in which your bank will assess the fees. Additionally, the amount of the fees must be “not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner’s property and any services received by the apparent owner.”

However, we do not recommend charging monthly inactivity fees for unclaimed money orders or cashier’s checks. Your bank’s cashier’s checks and money orders are direct obligations of your bank, and when presented for payment, they cannot be wrongfully dishonored or reduced to cover the inactivity fees. While the Illinois RUUPA permits inactivity fees for any property type, without excluding cashier’s checks or money orders, as noted above such fees must be authorized by a valid contract “between the holder and the apparent owner.” It may be possible for your bank to obtain the purchaser’s signature on a valid contract authorizing inactivity fees for cashier’s checks and money orders, but it would be difficult for your bank to collect inactivity fees after the instrument has been paid to another party who presents the cashier’s check or money order; in other words, it is unlikely that your bank would be able to obtain the payee’s signature on a valid contract authorizing the inactivity fees.

For resources related to our guidance, please see:

Illinois RUUPA, 765 ILCS 1026/15-602(a) (“A holder may deduct a dormancy charge or an escheat fee from property required to be paid or delivered to the administrator if: (1) a valid 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; and (2) the holder regularly imposes the charge and regularly does not reverse or otherwise cancel the charge.”)

Illinois RUUPA, 765 ILCS 1026/15-602(b) (“The amount of the deduction under subsection (a) is limited to an amount that is not unconscionable considering all relevant factors, including the marginal transactional costs incurred by the holder in maintaining the apparent owner’s property and any services received by the apparent owner.”)

Illinois Uniform Commercial Code, 810 ILCS 5/3-412 (“The issuer of a note or cashier’s check . . . is obliged to pay the instrument (i) according to its terms at the time it was issued or, if not issued, at the time it first came into possession of a holder . . . The obligation is owed to a person entitled to enforce the instrument or to an indorser who paid the instrument under Section 3-415.”)

Illinois Uniform Commercial Code, 810 ILCS 5/3-411(b) (“If the obligated bank wrongfully (i) refuses to pay a cashier’s check or certified check . . . the person asserting the right to enforce the check is entitled to compensation for expenses and loss of interest resulting from the nonpayment and may recover consequential damages if the obligated bank refuses to pay after receiving notice of particular circumstances giving rise to the damages.”)

Gillespie v. Riley Management Corp., 59 Ill.2d 211, 217 (1974) (“[T]he purchaser of a cashier’s check remains the ‘owner’ thereof until such time as he delivers or negotiates it to the payee.”)