Updated 2 years ago
LOUISVILLE (AP) - Kentucky's decision to shorten the waiting period for seizing old traveler's checks from 15 years to 7 years is constitutional, a federal appeals court has ruled in upholding a change to the law that makes the state unique in the country.
The U.S. 6th Circuit Court of Appeals in Cincinnati on Thursday found that the law doesn't violate the Constitution, but sent the case back to federal court in Frankfort because other issues remain in question. The decision reverses a 2009 ruling overturning the law.
Kentucky lawmakers in 2008 shortened the period after which Kentucky can declare the checks abandoned property. Traveler's check issuer American Express challenged the law in 2008, saying it allowed the state to improperly take uncashed checks.
Forty-nine states and the District of Columbia have 15-year waiting periods before traveler's checks can be seized.
Judge Cornelia G. Kennedy wrote in a 14-page opinion that the law shouldn't be invalidated because the court thinks it is unwise to deviate from a practice used by every other state.
"It cannot be doubted that Kentucky has a legitimate interest in enacting legislation that allows the state to take custody of property that is presumed abandoned," Kennedy wrote.
U.S. District Judge Danny C. Reeves ruled in 2009 that the state changed the law in an effort to raise money instead of to reunite citizens with lost goods, giving the statute no rational basis.
American Express tracks when traveler's checks are sold in each state, then turns over to state treasurers the amount paid for any uncashed check 15 years old or older. Should someone try to cash an old traveler's check after that, American Express then negotiates with the state treasurer to pay the check holder.
But, Kennedy noted, American Express's own figures show that between 99.60 percent and 99.68 percent of traveler's checks are cashed before the seven year mark, with the rate declining considerably after that.
"It falls to American Express to demonstrate that the seven-year presumptive abandonment period is irrational, and the evidence American Express presented to the district court fails to satisfy this burden," Kennedy wrote.
American Express contended it would have lost $113,972 with the seven-year period in effect because the company would have gotten a lower interest rate on the money invested that pays for the traveler's checks.
Altering the deadline when checks could be seized may cause the company to charge higher fees
to people buying the checks in Kentucky, the company has said.
The appeals court sent the case back to the trial court to decide several other claims by American Express, including that the seven-year period amounts to an unconstitutional taking of property.
(Copyright 2011 by The Associated Press. All Rights Reserved.)
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