Credit unions can offer prizes for savings programs 

By Emily Metheny
click to enlarge 30_laws.jpg

Some credit unions will be allowed to offer programs that help Hoosiers learn how to be financially responsibility - and possibly win cash prizes - under a new law approved this year.

House Bill 1235, authored by Rep. Gail Riecken, D-Evansville, allows state-authorized credit unions to offer prize-linked savings programs to patrons - without falling under the definition of gambling.

Under the program, people would deposit money in a savings account and have a possibility of winning more cash, Riecken said. The lawmaker hopes that will lead participants to have money for future emergencies.

"A lot of people need money fast," Riecken said. She said that too many people now use high interest loans and pay overdraft fees for items like air conditioners, utilities and car payments. If they had money in the bank, they could avoid those problems.

Still, Riecken said she understands that not everyone has the money to start a savings account. But she said those individuals can still participate in the program - and receive entries for a raffle - by taking financial literacy and debt reduction classes.

The law is a way to protect credit unions from being considered gambling, Riecken said.

"Typically in order to do (prize-linked savings), you have to pass legislation that specifically carves out room for financial institutions to offer these types of accounts," said Melanie Kwon Duch, an innovation strategist for Doorway to Dream. She said the national nonprofit worked "very closely" with Riecken for the past year to help with the legislation.

The law went into effect upon signing, and Duch said she thinks one credit union has started using the program.

Because of federal regulations, banks and some other financial institutions are not able to offer the programs as of now, Duch said.

However, the U.S. Senate and House are considering legislation that would change federal law to let other financial institutions offer similar programs, Duch said.

In other states that have these programs, Duch said, as many as 11 percent of people joined a credit union because of the prize-linked saving accounts. In a survey of states that have been using the accounts, people have been able to move to other products of the banks once they have built up a couple hundred dollars in their accounts, Duch said.

In the future, Riecken said, there may be an opportunity to work employers into the program because financial security is an employment issue.

Emily Metheny is a reporter for TheStatehouseFile.com, a news service powered by Franklin College journalism students and faculty.

Latest in News

Comments

Subscribe to this thread:

Add a comment

Feedback

Recent Comments


More by The Statehouse File

  • Pence won't cancel New England campaign trip

    Democrats are calling on Gov. Mike Pence to cancel a trip to New Hampshire, home of the first presidential primary, and to release documents about his decision not to apply for a federal pre-kindergarten grant.
    • Oct 22, 2014
  • Legislators need stricter disclosure rules

    Legislators need to be more transparent about conflicts of interest and should never be lobbying privately or publicly for issues that could impact their finances, an open-government advocate said Monday.
    • Oct 21, 2014
  • More »

© 2014 NUVO | Website powered by Foundation