HIGHTSTOWN, N.J. (10/24/14)--New Jersey Credit Union League-supported legislation to enable state-chartered credit unions and banks to offer prize-linked savings accounts has been introduced in the state Senate.
The legislation would authorize the offering of savings promotions, also known as "prize-linked savings accounts," which treat every deposit as a ticket in a prize-winning raffle (Daily Exchange Oct. 23)
"Low-income people see lotteries as their best chance to pay their bills or to get out of poverty," said Senator Richard Codey (D-Livingston), who along with Sen. Ronald Rice (D-Newark sponsored the bill. "They don't believe they make enough money to maintain a savings account. This would offer the attraction of gambling without any risk because they don't lose any of their savings. They win even if they lose."
The legislation would authorize state-charted credit unions, banks and savings banks to conduct savings promotions in which a minimum deposit qualifies for a chance at winning a designated prize. The idea has been put into practice in a number of states by non-profits and credit unions.
With each deposit in an amount predetermined by the institution, a participant qualifies for a raffle that can win financial prizes while at the same time they build up their savings. The payments go to certificates of deposit managed by credit unions.
"The success other states have demonstrated with regards to prize-linked savings accounts in encouraging consistent saving by individuals who have not done so regularly in the past, is compelling," Greg Michlig, NJCUL president/CEO, told News Now. "By introducing an exciting element to the sound financial practice of saving, this program can stimulate a healthier financial environment for the people of New Jersey. We are encouraged by the introduction of this bill by Senators Codey and Rice and are hopeful that we will join the other states currently offering this tool to encourage savings habits amongst consumers."
"This is a way for those with modest paychecks and little or no money in the bank to 'play to win'," Rice said. "It's an incentive to save, which can help provide a way out of poverty for those who haven't had the opportunity to put money away."
The bill would require all participants to be at least 18 years of age, that everyone has an equal chance to win, that all the rules and conditions are spelled out, and that interest rates and fees are approximately the same as other accounts.
Ten states--Connecticut, Indiana, Maine, Maryland, Michigan, Nebraska, New York, North Carolina, Rhode Island and Washington--currently permit credit unions to offer prize-linked savings accounts.