Kilmer, Cotton Bill to Help Americans Save More Signed into Law by President
WASHINGTON, D.C. – A bipartisan bill introduced by Representative Derek Kilmer (WA-06) and Representative Tom Cotton (AR-4) to help reverse a decline in Americans’ personal savings rates was signed into law by President Obama today.
The American Savings Promotion Act allows more financial institutions to offer prize-linked savings accounts. Senators Jerry Moran (R-Kan.) and Sherrod Brown (D-Ohio) introduced companion legislation in the Senate. For the 113th Congress Representatives Kilmer, Eric Swalwell (CA-15), and Ann Kirkpatrick (AZ-1) are the only freshman Democrats in the House to have two bills signed into law by President Obama.
Prize-linked savings accounts are innovative savings products that offer participants the chance to win cash prizes, sometimes known as “Save to Win” plans. The more participants save, the more chances they have to win prizes. Additionally, people depositing into the accounts are also strengthening their safety net and preparing themselves to meet future financial needs.
In May, the Center for Financial Services Innovation (CFSI) highlighted these savings accounts as a “top impact innovation” and among the best ways to encourage workers and families to save more by offering rewards for savings.
“The President has signed a law to help encourage more families to save money and build assets,” said Kilmer. “By allowing more community financial institutions to offer prize-linked savings accounts, we can help folks be more financially prepared for what life can throw at them – a lost job, a medical emergency, or even a broken water heater. This law provides an innovative way to encourage savings, and people cannot lose. The worst thing that can happen is that folks save more money. Now, more institutions can offer prize-linked savings accounts to their customers so they can better save for rainy days.”
Currently, 10 states including Washington have passed legislation allowing financial institutions to offer these regulated products. However, due to outdated federal regulations, banks and some federally chartered financial institutions are unable to offer prize-linked savings accounts. The American Savings Promotion Act removes this regulatory barrier and ensure more consumers can access these safe financial products, without creating a new government program or spending federal resources.
“American consumers want high-quality financial products that support their day-to-day financial lives and improve their long-term financial health,” said Jennifer Tescher, President & CEO, CFSI. “Prize-linked savings accounts can help them reach these goals, and we are pleased the American Savings Promotion Act now allows more banks and credits unions to meet a real consumer need with this innovative tool.”
“The signing of this bill into law presents a remarkable opportunity to increase financial wellness in the U.S by expanding the kinds of innovative, safe savings products financial institutions can offer. We applaud the tremendous leadership from Congressman Kilmer in introducing the bill and hope for quick adoption from the financial services industry,” Tim Flacke, Executive Director, D2D Fund
Prize-linked savings accounts have received positive reviews from many corners.
“The broad availability of PLS could offer an unconventional, but effective, mechanism to boost the persistently low rate of personal savings in the U.S.” – Bipartisan Policy Center, 5/14/14
“Washington is one of only four states with Save to Win programs in operation. Michigan, Nebraska and North Carolina also have them. The need is huge. A quarter of Americans surveyed say they have zero savings; nearly half the population has less than $1,000 stashed away.” – The Seattle Times, 6/22/14
“These [prize-linked savings] accounts have won support from a rare combination of liberal poverty advocates and conservatives who like the private market-based approach and emphasis on personal responsibility. In Congress, bills to modify federal banking laws and permit more financial institutions to offer prize-linked accounts have Republican and Democratic co-sponsors.” – The New York Times, 8/30/14
“The number of participating credit unions [in the Save to Win Program] has grown from eight to 68, and the amount of money saved per year has increased from $8.6 million (an average of $734 per person) to $45.6 million (an average of $3,000). In all, depositors have saved more than $70 million since the inception of the program that might not have been saved otherwise.” – ABC News, 11/27/13
“Across the country, states are passing legislation allowing credit unions to offer prize-linked savings accounts, where customers are entered into a lottery and given the chance to win an annual grand prize of up to $25,000.” CNN Money, 1/14/14
“A new working paper published by the National Bureau of Economic Research explores the possibility of using lotteries to induce savings behavior…they found that participants were more likely to save when offered the possibility of winning a prize. “To the best of our knowledge, this is the first evidence showing that PLS products are more effective at inducing savings as compared to a standard interest bearing account offering the same expected return,” write the authors.” The Wall Street Journal, 6/21/13
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