Delaware reaches $102M settlement in MoneyGrams lawsuit

Delaware has settled a lawsuit with 30 states on unclaimed MoneyGrams orders, but state officials report it will have a minimal impact on the budget.| DBT FILE PHOTO

WILMINGTON —  Ending a long-running legal matter that has made its way to the U.S. Supreme Court, Delaware reached a settlement worth as much as $120 million to a coalition of 30 states, putting to rest the issue of whether the First State had unfairly claimed millions in uncashed MoneyGram checks via its escheatment practices.

The settlement was announced Thursday afternoon by Delaware, detailing an agreement that will see the state transfer millions of dollars that it collected between 2011 and 2017 to a collective of states that joined a consolidated lawsuit involving the Pennsylvania & Wisconsin v. Delaware and Arkansas v. Delaware cases. Officials from Arkansas, Pennsylvania, California, Texas and Wisconsin worked to reach the deal on the behalf of 30 states.

“Delaware is pleased to bring this matter to a close with the signing of this historic interstate settlement agreement,” Delaware State Escheator and Director of the Office of Unclaimed Property Brenda Mayrack said in a prepared statement. “Going forward, we look forward to working cooperatively and constructively with our sister states to focus on reuniting owners with their property and improving holder compliance with state unclaimed property laws.”

MoneyGram, the second largest money-transfer company in the world, has long determined that uncashed orders, cashier’s or traveler’s checks do not meet the federal determination of money. That meant for years, unclaimed funds were sent to Delaware, where the company is incorporated. That fraction of unclaimed property, which also includes forgotten 401(K) balances and leftover funds from closed bank accounts and other sources, has benefited Delaware’s budget.

In years past, Delaware officials have contended that MoneyGram checks are not considered money orders, as those are often handled by banks rather than convenience stores or retailers. In Fiscal Year 2024, that amount of unclaimed property was estimated at $394 million. For FY 2025, it was forecast at $365 million. For the current fiscal year, that’s close to 6% of the budget.

It should be noted that the state statue has capped the unclaimed property proceeds to $554 million. The Unclaimed Property Office also told the Delaware Business Times that the state also pays back between $150 million and $200 million, when the property owners step forward with ownership claims. Whatever money in unclaimed property that comes over that cap is allocated to a fund for “extraordinary claims on its unclaimed property operations.”

The payment to the 30 states involved in the settlement will derive from that “extraordinary claims” fund which is also where state officials plan to pay for Gov. John Carney’s ambitious plans to transform the Port of Wilmington, including a new port at Edgemoor.

Looking to the future, Mayrack told the DBT that she anticipates that the state’s finances should see little impact. As the litigation was pending, Delaware stopped collecting the unclaimed MoneyGrams from the states named in the lawsuit back in 2018. Meanwhile, MoneyGram placed those claims in a court ordered escrow account.

“I believe that amount is $90 million over the years and Delaware’s unclaimed property proceeds have not received any of the proceeds from this matter in the past five years,” Mayrack said.

MoneyGram has deposited $89 million in a litigation escrow account between 2018 and 2022, plus interest earned. That fund will be distributed among all 50 states based on where each MoneyGram was ordered. The 30 states that joined in the lawsuit will receive, collectively, $55 million from that account, plus interest.

The states will now assume custody and responsibility to return any property received under the settlement or from the escrow account, including any payment for claims on that property. Mayrack said that at the peak, Delaware collected $20 million per year from MoneyGrams, which has long since been tapered off since 2018.

“This settlement will have no impact on the state budget, because money has been set aside,” Mayrack said. “So while it means that MoneyGrams will have to revert back to the state where they were ordered, the priority rules have not been altered in terms of property law. This litigation has been ongoing for almost 10 years, so we are looking forward to working with other states on improving unclaimed property compliance by companies and looking to find ways to return money.”

In the meantime, Delaware has already committed $215 million in bond funding as well as proceeds from the American Rescue Plan Act to move ahead with transforming the Port of Wilmington. Port operator Estructure will commit another $150 million, according to the state.

An earlier version of this article incorrectly stated that the rest of the Port of Wilmington is dependent on the fund of escheatment “extraordinary funds” that comes from unclaimed property. The General Assembly has approved the allocation for the Port’s future earlier this year. We regret the error.