Loyalty Register glossary
Unclaimed property
Money or property held by a business for someone who has not claimed it within a set period, which state law may require the business to report and hand over.
Unclaimed property is money or property a business holds for someone who has not claimed or used it within a set period. Common examples are uncashed checks, dormant bank accounts and customer credit balances. In the US, each state’s unclaimed property law decides what counts, how long the dormancy period is, and when the business must report the value and hand it to the state, a process called escheatment.
Updated · By Loyalty Register Editorial TeamRelated terms
Do loyalty points count as unclaimed property?
In many cases, rewards given for free are treated differently from value the customer paid for, but the rules vary by state. Illinois offers a clear example. Its unclaimed property act defines a loyalty card as a record given without direct monetary consideration under a reward or promotional program, redeemable only for goods, services or discounts, and excludes loyalty cards from the property the act covers. The state treasurer’s rules confirm loyalty cards are exempt from reporting and remitting, but not rebate cards, which are given in return for a purchase. Rewards that can be redeemed for cash or otherwise turned into money fall outside the Illinois loyalty card definition.
Which program features raise the risk?
- Points or credits that can be cashed out.
- Points or balances that members bought with money.
- Rebates or refunds paid as program credit.
- Store credit issued in place of a cash refund.
A program with any of these should review each feature against the laws of the states where its members live.
How is it different from breakage?
Breakage is an accounting estimate of points that will never be redeemed, which the business may recognize as revenue over time. Unclaimed property is a legal obligation. If a balance must be reported to a state, the business still owes it, just to a different party, so it cannot be counted as breakage. A hypothetical program that assumes $400,000 of dormant credits will break, when they are in fact reportable, overstates its revenue by that amount.
What should you do?
- List every type of value the program issues, and how members obtain it.
- Get state-by-state advice where any value is paid for or cash-redeemable.
- Keep records of member activity, since dormancy is usually measured from the last activity.
- Make sure finance excludes reportable balances from breakage.