Kilmer Prize-Linked Savings Bill Passes the U.S. House of Representatives
WASHINGTON, D.C. – Today, a bill introduced by Representative Derek Kilmer (WA-06) that seeks to reverse a decline in Americans’ personal savings rates passed the U.S. House of Representatives. Last October, Rep. Kilmer and Rep. Tom Cotton (AR-04), introduced the bipartisan American Savings Promotion Act (H.R. 3374), which would allow more financial institutions to offer prize-linked savings accounts.
Prize-linked savings accounts are typical savings products that offer participants the chance to win prizes, sometimes known as “Save to Win” plans. The more participants save, the more chances they have to win prizes. Consequently, those saving are also strengthening their safety net and preparing themselves to meet future financial needs.
Due to outdated federal regulations, banks and federally chartered financial institutions are currently unable to offer prize-linked savings accounts. The American Savings Promotion Act would remove this regulatory barrier and ensure more consumers can access these safe financial products, without creating a new government program or spending federal resources.
“A lot of families in our region are still struggling financially and many have had a tough time building savings,” said Kilmer. “By allowing more community financial institutions to offer prize-linked savings accounts, we can help folks build savings and be more financially prepared for what life can throw at them – a lost job, a medical emergency, or even a broken water heater. This bill provides an innovative way to encourage savings, and folks cannot lose. The worst thing that can happen is that people save more money. I hope the Senate considers this legislation so that we can move forward in allowing more institutions to offer prize-linked savings accounts to their customers and help them save for rainy days.”
Senators Jerry Moran (R-Kan.) and Sherrod Brown (D-Ohio) introduced companion legislation in the Senate, where it is awaiting consideration.
Representative Kilmer previously sponsored and passed legislation in the Washington Senate to bring prize-linked savings accounts to Washington State.
In May, the Center for Financial Services Innovation (CFSI) highlighted these savings accounts as a “top impact innovation” and one the best ways to encourage workers and families to save more by offering rewards for savings.
This is the second bill of Representative Kilmer’s to pass the House recently. Last Wednesday, his bill to properly recognize the Bainbridge Island Japanese American Exclusion Memorial passed the House unanimously.
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
“A banking program related to a measure introduced by U.S. Rep. Derek Kilmer, D-Gig Harbor, has been named a “top impact innovation” by the Center for Financial Services Innovation. “Prize-linked savings” was named as one the best ways to encourage workers and families to save more by offering rewards for savings.” – Tacoma News Tribune, 5/6/14
“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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