Q: We would like to have a giveaway contest but are concerned with the requirements under the Bank Lottery Rule. What should we consider?
A: Under the Bank Lottery Rule, with the exception of a savings raffle, any advance of money or credit by three or more persons for the possibility to win more than the amounts contributed generally results in a prohibited lottery. Below are several practices that are commonly accepted to not run afoul of this requirement.
The contest should be open to everyone, with no account needed to participate, offer multiple ways to enter and mention that IRS reporting may apply. The Official Rules should have a free alternative written entry method to enter for non-customers is sometimes known as the “sweepstakes workaround,” which is common for giveaways. By offering a written entry alternative, a case can be made that there truly is no “money or credit” being advanced to the bank since an entrant potentially can mail in their entry and still be given a fair/equal shot at winning. While admittedly not a best practice, from what C/A has seen, it generally appears to be considered by auditors and regulators as compliant with both UDAAP and the anti-lottery statutes.
In addition to the free alternative method of entry, the bank should include the following information in the official rules for that promotion, as applicable:
- Geographic area and/or who is eligible to participate
- Opening date and scheduled termination date
- Complete name and address of the sponsor and promoter of the contest
- Number of prizes, the accurate description of each prize, the retail value of each prize and the odds of winning
- Whether all prizes offered will be awarded and how the prizes will be awarded
- Manner of selection of winners and when a determination of winners will be made
- Permission to use
- Where and when a list of winners can be obtained
- IRS reporting may apply
12 U.S.C. 1829a(a), https://www.fdic.gov/regulations/laws/rules/1000-2200.html
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