Savings promotion raffle authority sought for credit unions

The General Affairs Committee heard testimony Feb. 7 on a bill that would allow credit unions to conduct a savings promotion raffle.

Under LB524, introduced by Lincoln Sen. Amanda McGill, savings promotion raffles would be added to the definition of a gift enterprise. Currently, credit unions are authorized to conduct a gift enterprise – a business promotion contest or game of chance – under Nebraska law.

According to McGill, a savings promotion raffle is a contest where depositing a specific amount of money into a savings account or program earns an individual a chance at winning a designated prize. Each entry must have an equal chance of winning.

McGill said a pilot program in Michigan helped individuals save over $8.5 million dollars. Individuals earned a chance at winning a prize each time they made a deposit to a savings account, she explained, with the prize money supplied by credit unions either through a small reduction in the interest paid on accounts or from the credit union’s respective marketing funds.

“People in America just aren’t saving anymore,” McGill said. “This is a way to incentivize savings by making it fun.”

Joanna Smith-Ramani of Doorway to Dreams, a Boston based national nonprofit group, testified in support of the bill, saying that prize-based savings accounts are a safe and powerful way to encourage low-income Americans to save.

She said 56 percent of those who participated in the Michigan pilot program had never previously had a savings account, and 44 percent were low- or moderate-income individuals.

“[This bill] could help more families across the state start saving for their futures,” Smith-Ramani said.

Julie Kalkowski of the Financial Hope Collaborative also testified in support. Fifty percent of families live paycheck-to-paycheck, she said, and a lack of emergency savings causes low-income individuals to pay more in interest and fees for basic financial transactions.

“When people have even a little bit of savings it goes a long way,” Kalkowski said. “I can’t see a downside to this.”

Robert Hallstrom of the Nebraska Bankers Association testified in a neutral capacity, saying steps could be taken to make the bill less “bare bones” in regard to the operation of a savings raffle.

For example, some states restrict participation in such raffles only to new customers, he said. Such restrictions would help create a level playing field, Hallstrom said, because federal law prohibits banks from participating in raffle promotions.

The committee took no immediate action on the bill.