New Bills Would Boost Savings Via Prize-Linked Accounts (Misc News: November 1, 2013)
Federal legislation that would allow credit unions to offer prize-linked savings accounts was introduced in the U.S. House and Senate.
CUNA News Now reported that a 1960s law bans financial institutions from offering PLS products – such as Save to Win. Some states, including Michigan, have laws that supersede the federal law.
Sens. Jerry Moran, R-Kan., and Sherrod Brown, D-Ohio, introduced the Senate bill, which the legislators said would promote savings by creating a narrow exemption for PLS products while maintaining the ban on federally insured financial institutions from operating lotteries. By removing federal barriers to PLS products, the American Savings Promotion Act "clears the way for states to enable all interested financial institutions in their jurisdiction to offer PLS products," the lawmakers said.
Similar legislation was introduced Tuesday by Reps. Derek Kilmer, D-Wash., and Tom Cotton, R-Ark.
At a time when the annual savings rate in the United States is just 4.1%, PLS accounts would incentivize personal savings by offering participants chances to win prizes based on savings account deposit activity while never putting their savings at risk," Moran said. These accounts, he added, "are proven to increase savings-rates, which empower individuals to better endure financial strain and climb the economic ladder."
Save to Win was introduced in Michigan in 2009 in a partnership between the league, Doorways to Dreams and Filene Research Institute. Since then, three other states, Nebraska, Washington and North Carolina, have started offering Save to Win programs.
For every $25 deposited, account holders earn entries into monthly and annual cash prize drawings. All funds deposited into the accounts, including any interest earnings, belong to the account holders.
The program has appealed to unbanked and under-banked consumers who were not previously inclined to save money. Through these products, many savers have been able to build a nest egg for the first time.