WASHINGTON—The Senate has passed the American Savings Promotion Act, which will allow credit unions to offer prize-linked savings accounts in those states where there is no prohibition.
The same legislation was passed by the House in September; when the current lame duck session began, it was not considered by many analysts and pundits as likely to pass the Senate.
The goal of the legislation is to spur more low- to moderate-income people to save, the belief being that the cash prizes that are offered are an inducement to open savings accounts and keep building them. The bill, sponsored in the Senate by Sen. Jerry Moran of Kansas and Sen. Sherrod Brown of Ohio, will now go to President Obama for his signature.
The legislation had the backing of credit unions, which have already offered prize-linked savings promotions in several states, including Michigan and North Carolina. Michigan’s credit unions have staged a Save-to-Win program that gives savers can a chance of winning up to $10,000 each year, each time they deposit another $25.
Prior to passage of the bills by Congress, federal restrictions passed in the 1960s prevented financial institutions from selling lottery tickets so that customers/members would not withdraw savings in order to purchase the tickets. The new law comes with consumer protections.
The accounts function somewhat like a lottery with the exception that savers never need to purchase anything; they simply need to keep making deposits.
The prize-linked savings accounts will not be available in every state. Some states, such as Ohio (even though Buckeye State Sen. Sherrod Brown was a co-sponsor) prohibit the accounts.
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