CODEY-RICE BILL WOULD ENCOURAGE SAVINGS

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‘Prize-Linked Savings Accounts’ Would Be Authorized For NJ Banks

 TRENTON —  Acting to provide incentives to open and maintain savings accounts, Senator Richard J. Codey and Senator Ronald Rice have introduced legislation (S-2495) that would authorize New Jersey banks to offer savings promotions, also known as  “prize-linked savings accounts,” which treat every deposit as a ticket in a prize-winning raffle.

“Low income people see lotteries as their best chance to pay their bills or to get out of poverty,” said Senator Codey. “They don’t believe they make enough money to maintain a savings account. This would offer the attraction of gambling without the any risk because they don’t lose any of their savings. They win even if they lose.”

The legislation would authorize state-chartered banks, savings banks and credit unions to conduct savings promotions in which a minimum deposit qualifies for a chance at winning a designated prize. This 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.

“This is a way for those with modest paychecks and little or no money in the bank to ‘play to win’,” said Senator Rice. “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.

New York, Connecticut, Michigan and Indiana have modified their state banking laws to allow for these programs and legislation has been introduced in Congress to make similar revisions to federal banking laws.