Lewis Roca Blog

Prize-linked savings (PLS) accounts are a new and exciting way for banking customers to experience the thrill of a lottery while personally funding their savings account. PLS accounts add a lottery-style feature to certain savings accounts where financial institutions offer incentives to its customers to win prizes. These prizes are funded by the interest that accrues from the pool of prize-linked accounts.

In 2014, Congress passed the American Savings Promotions Act which allowed certain financial institutions to offer incentivized savings accounts to customers with the chance to win monthly, quarterly and annual prizes by depositing into their PLS account. Prior to this, banks were prohibited from advertising any promotions related to a game of chance linked to bank accounts. To date, over 30 states have enacted legislation to authorize promotional raffles linked to savings accounts. Notably, California allows banks to offer promotional raffles for savings accounts, as long as bank depositors are not required to pay a fee or provide any consideration to enter the savings promotion and all participants have an equal chance of winning. Meanwhile, Arizona Revised Statue §6-559, allows credit unions to offer a savings promotion account including an incentive, provided that the only requirement to obtain the incentive is a deposit of a specified amount of money in the savings account.

Although the logistics behind a prize-linked savings account vary from account to account, the core principle remains true; it involves giving an account holder a chance to win a prize made up of a pool of the interest rates from other PLS accounts. Essentially, an account holder opens a PLS account either at a bank or credit union and the more money they place in their savings account, the higher chance they have at winning a prize.

The prize pool is comprised of the interest collected on all of the prize-linked savings accounts. Instead of incurring interest on their money deposited, a customer has a chance at winning the pool at the end of the prize period in a lottery style random drawing. At its most basic level, certain dollar amounts contributed to a savings account are essentially converted into free lottery- style tickets. Importantly, the account holder never loses their principle amount placed in their savings account. Instead, this “no-loss lottery” incentivizes customers to contribute more money to their savings accounts, thereby increasing their chances of winning the lottery all while funding their savings account.

During an era of such uncertainty, and where there tends to be a lack of a propensity to save, this dynamic banking style provides a new and entertaining way for banks and other financial institutions to engage customers while appealing to people’s desires to win. Ultimately, PLS accounts allow banks and financial institutions to improve consumers’ financial behaviors through gamification.

If you have any questions regarding PLS accounts or whether your bank or financial institutions is eligible to offer such accounts, please contact our authors Karl Rutledge at krutledge@lewisroca.com or Glenn Light at glight@lewisroca.com.