14 Hoosier Banker July 2015 COMPLIANCE CONNECTION Question: We have heard that Indiana law has been changed to permit banks to conduct lotteries. Please confirm if this information is correct and, if so, describe the conditions which must be satisfied in order for a bank to conduct a lottery. Answer: The information that you have heard is not correct. Financial institutions are expressly prohibited from participating in lotteries in any manner.1 However, recently enacted federal and state legislation now permits certain financial institutions to offer prize linked savings (PLS) programs. A PLS program is a contest that is associated with certain “qualified accounts” that a financial institution may offer to promote financial literacy and responsible savings habits. For this purpose, qualified accounts include savings accounts, time deposit accounts or other savings programs.2 PLS programs operate in a © 2015 Krieg DeVault LLP THINKING BEYOND TRADITIONAL SOLUTIONS FOR FINANCIAL INSTITUTIONS FOR OVER 130 YEARS • Corporate Representation • Mergers and Acquisitions • Capital Offerings • Regulatory • Compliance • Supervision and Enforcement • New Product Development • Litigation • Commercial / Consumer Loan • Creditors’ Rights • Trust • Tax • Securities • Employment • Intellectual Property One Indiana Square • Suite 2800 • Indianapolis, Indiana 46204 p: 317.636.4341 f: 317.636.1507 INDIANA • ILLINOIS • GEORGIA • FLORIDA • MINNESOTA www.kriegdevault.com manner similar to lotteries. A bank may provide its depositors one or more chances to win a prize in consideration of depositing a minimum specified amount of money in a qualified account, or by participating in one or more qualified financial programs.3 Qualified financial programs include any savings, debt reduction, or financial education program or product that an eligible depository financial institution offers to eligible individuals for the purpose of: • Educating individuals on financial concepts; • Encouraging savings by individuals; or • Providing individuals the opportunity to use and control their own money in order to improve their economic and social condition.4 Beginning July 1, 2015, PLS programs will be permissible5 for the following types of insured financial institutions in Indiana (each an “eligible financial institution”), provided that such programs are offered in the manner described in Ind. Code § 28-1-23.2: • A national bank formed under 12 U.S.C. 21; • A state member bank, as defined in 12 U.S.C. 1813; • A state nonmember bank, as defined in 12 U.S.C.1813; and • A savings association, as defined in 12 U.S.C. 1813. Indiana Code section 28-1-23.2, which was adopted in 2014 for the purpose of authorizing credit unions to offer PLS programs, now also establishes the conditions under which an eligible financial institution may offer a PLS program. Such conditions include: • The terms and conditions of a PLS program must allow an eligible individual to obtain one or more entries to win a specified prize only by depositing a minimum specified amount of money in a qualified account, or
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