Riley Walz

Unclaimed property

December 19, 2023

One area that Mehran and I explored in depth last July and decided against pursuing:

Let's say you open a bank account and forget about it. Or lose a gift card. Or forget to cash a paycheck. After some period of inactivity, companies are required by law to hand that money over to the state government for you to claim. The many “unclaimed property funds” managed by state governments sum to well over $100 billion. 1 in 7 Americans are owed money, and plenty of businesses are, too. However, governments have little incentive to inform those owed money about this because they make a lot of interest on this cash.

This is an information problem. It’s pretty easy to fill out an online form to claim your money, but that’s only helpful if you know that you are owed money. Because if people knew they were owed money, they’d probably collect it, and there are still billions sitting there.

Certain states, particularly California, Florida, and Arizona, allow for “bounty hunters” to look through the list of lost funds, contact those on the list, and help them file the paperwork to retrieve their money, assuming they agree. Then the hunters can collect a percentage of the money. There are a good number of individuals who do this for a living, but not many companies, and certainly none that utilize technology to the degree that a startup would. We cold-called over 100 people who were on the lists and owed at least $1,000. Eventually, we got through to about a third of them, but the premise of hearing “you are owed money and I can help you get it” from a stranger over the phone is not very comforting or believable. No one took us up on the offer. Even then, it’s a cat-and-mouse game. I don’t want to tell them where exactly the money is sitting because if I tell them, they can Google it and get it without me pretty easily. So why would you trust me if I don’t even tell you where the money is?

The “file the paperwork for you” is the only straightforward way to be compensated. I just want to solve the information problem! But there’s no straightforward way to be compensated for that.

In one experiment, I mailed 30 handwritten notes to random people who were owed money across New York and California. I told them they were owed money by the state, how they could easily claim it themselves, and that if they appreciated the notice, they could send me a “tip.” No responses.

So then we turned to businesses. Surely, getting in touch with businesses would be easier, and there might be people in the finance or accounting department interested. We called about 50 businesses of varying sizes in California, that were owed at least $1,000. Getting through phone trees and finding the right department was hard, but then getting past the secretary or screener was even harder. In a few cases, we got through to the right person and they seemed interested! But when we’d send them an email with an agreement ready to sign: crickets. They likely discovered they could file for it themselves.

We then talked with several people familiar with the industry. On the individuals side, we were told it was a numbers game, where maybe 1 in 50, or 1 in 100 cold outreaches convert. But it only makes sense to work cases where the person is owed multiple thousands of dollars for the commission to be worth it, and there are a limited number of cases like that. So it doesn’t really scale. And on the business side, the entire industry is built on connections and years of relationships. Which might be possible to scale once you have those relationships? But we were told that each case is wildly different and requires an almost lawyer-like attention to detail to win. In one extreme case, we heard about how a recovery firm found that a defunct LLC was owed a lot of money in unclaimed property. The firm found the owner, who agreed to work with them to get the money back. The firm, out of their own budget, paid a significant amount of unpaid taxes to make the LLC active again. Only then were they able to successfully claim the lost money owed, and both parties took a nice payday home.

For those reasons, we gave up on the idea. But I found the problem really interesting. I really hope someone tackles this problem someday. Unfortunately, it seems like something must change at the government level. There’s SO much money sitting there!