WASHINGTON (12/12/14)--The U.S. Senate late Wednesday passed legislation that would allow credit unions and other financial institutions nationwide to offer prize-linked savings (PLS) accounts.
In recent years, a number of states have enacted laws to allow PLS products. However, in states without such laws, a 1960s federal law that bans financial institutions from operating lotteries unintentionally precluded them from offering PLS products.
The bill was introduced in the House by Reps. Derek Kilmer (D-Wash.) and Tom Cotton (R-Ark.) and was approved in September. Kilmer was instrumental in getting state-level legislation passed when he was a Washington state senator. The Senate bill, the American Savings Promotion Act, was introduced by Sens. Jerry Moran (R-Kan.) and Sherrod Brown (D-Ohio) in 2013.
The legislation becomes law when signed by the president.
Prize-linked savings programs are intended to boost the country's annual savings rate--hovering around a low 4.1%. Through these products, credit union members and others can receive entries into a cash prize sweepstakes for depositing a certain amount of money into their savings accounts. The programs have appealed to unbanked and under-banked consumers who were not previously inclined to save money.
Ten states already allow PLS programs: Connecticut, Indiana, Maine, Maryland, Michigan, Nebraska, New York, North Carolina, Rhode Island and Washington.