Georgia Department of Law, from the office of Michael J. Bowers, Attorney General

Official Opinion 94-18

May 27, 1994

Department of Revenue


Funds held by banks to pay outstanding certified and official checks are not subject to service charges before being reported as unclaimed property.

This responds to your question concerning service charges on dormant official and certified checks. You have asked if funds held by banks to pay outstanding certified and official checks ("checks") are subject to service charges before being reported to the state pursuant to Georgia's Unclaimed Property Act, O.C.G.A. §§ 44-12-190 through 44-12-234.

Official Code of Georgia Annotated § 44-12-196 which applies to "sum[s] payable on a check, draft, or similiar instrument . . . on which a banking or financial organization is directly liable, including but not limited to, cashier's checks and certified checks" provides generally that these funds are presumed abandoned when they have been outstanding for more than five years after becoming payable.

In contrast to other provisions in Georgia's Unclaimed Property Act ("UPA"), O.C.G.A. § 44-12-196 does not provide for imposing service charges on checks. This silence appears to indicate an intent to preclude banks from service-charging funds held to pay checks prior to remitting those funds as unclaimed property. This intent is made clear by O.C.G.A. § 44-12-197 which allows service charges with respect to "any demand, savings, or matured time deposit" with a bank and with respect to funds paid toward purchasing bank shares. The legislative intent to distinguish cashier's checks and certified checks

from demand, savings, or matured time deposits is made even more apparent by the General Assembly's decision to separate checks into O.C.G.A. § 44-12-196 and accounts into O.C.G.A. § 44-12-197 in the 1990 revision of the UPA, when the 1972 UPA addressed checks and accounts in the same Section, former O.C.G.A. § 44-12-193.

Department of Banking and Finance rule 80-1-8-.01 has been cited as authority permitting banks to service-charge dormant checks. Rule 80-1-8-.01(c) provides that certified and official checks are considered dormant "when they have not been presented for payment within two (2) years of their date of issue, or if the issuing financial institution has not had correspondence with the registered owner of the check for a period of two (2) years immediately preceding the determination of dormancy." Official Code of Georgia Annotated § 7-1-358 provides that dormant accounts are subject to a reasonable service charge from time to time.

It appears that rule 80-1-8-.01(c) may be superseded by several Code provisions. A broad interpretation of the rule would conflict with the provisions of O.C.G.A. § 44-12-196. As stated above, O.C.G.A. § 44-12-196 does not provide for imposing service charges on checks, while O.C.G.A § 44-12-197 allows banks to impose service charges on dormant accounts. Conflicts with other Code provisions would also arise by a broad interpretation of rule 80-1-8-.01(c). Under former O.C.G.A. § 44-12-203(g) (which was in effect at the time the regulation was adopted) and current O.C.G.A. § 44-12-197(b), banks cannot service-charge accounts that have not been active for more than twelve months. Thus, rule 80-1-8-.01(c) and O.C.G.A. § 7-1-358 must be read in light of the UPA which prohibits service charges after one year of dormancy.

Application of rule 80-1-8-.01(c) must also take into account the provisions of O.C.G.A. § 7-1-372, which requires commercial banks to pay their own checks at par without any charges for payment, and O.C.G.A. § 11-3-104, which provides that a negotiable instrument must "[c]ontain an unconditional promise or order to pay a sum certain in money and no other promise, order, obligation, or power given by the maker or drawer except as authorized by this article." See Bailey v. Polote, 152 Ga. App. 255, 256 (1979).

As the previous discussion makes clear, there is some doubt as to the continuing viability of rule 80-1-8-.01(c). However, for the purpose of your inquiry, there is no need to determine the validity of the rule.

Even if checks are considered to be dormant accounts, banks are not permitted to impose service charges due to dormancy. Official Code of Georgia Annotated § 44-12-197(c) forbids a holder remitting unclaimed funds to the state from imposing service charges for dormancy or inactivity when the same holder reverses such charges for its customers. The information provided to the Department of Revenue indicates that in practice, banks regularly waive dormancy service charges as a matter of good public relations.

Even if a holder has the right to deduct charges, it waives that right by failing to impose the charges against the true owners. See South Carolina Tax Comm'n v. Metropolitan Life Ins. Co., 221 S.E.2d 522, 524 (S.C. 1975); Violet v. Travelers Express Co., 502 A.2d 347, 350 (R.I. 1985) (citing Cory v. Golden State Bank, 157 Cal. Rptr. 538, 543 (1979); Bank of America Nat'l Trust and Sav. Ass'n v. Cranston, 60 Cal. Rptr. 336, 340 (1967)). As stated previously, these charges are regularly waived in favor of the true owner. The Revenue Commissioner's rights are derivative from those of the true owner. Therefore, once charges are waived against the owners, they may not be imposed against the Revenue Commissioner. Id.

The purpose of unclaimed property legislation is to protect unknown owners of property and deprive the holders of unclaimed property of its benefits. See State v. Pacific Far East Line, Inc., 68 Cal. Rptr. 67, 68-9 (1968). If banks were permitted to impose service charges on dormant checks, the bank would receive the benefits of the checks while the true owner was left only a fraction of the check's value. Under this scenario, the above-mentioned statutory purpose would be completely defeated. In light of the protective policy of the UPA, banks are prohibited from service-charging funds held to pay outstanding checks before such funds are reported as unclaimed property.

Prepared by:

Assistant Attorney General