IBA Compliance Connection

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Are there any potential problems with us conducting a promotional giveaway for an iPad if it is open to anyone who wants to register? We are sending a promotional mailing to randomly selected addresses within a mile radius of our newest branch.

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No, we do not believe that this arrangement violates Illinois or federal lottery prohibitions.

The Federal Deposit Insurance Act defines a “lottery” as an arrangement in which participants “advance money or credit to another in exchange for the possibility or expectation that one or more” will win a prize. The Illinois Criminal Code defines a prohibited lottery as a scheme in which “one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win such prizes.” In this case, by opening the drawing to everyone — customers and non-customers — you will not be requiring participants to pay or advance money to your institution. Consequently, we believe the proposed drawing would not be considered a lottery.

Note that the Illinois Prizes and Gifts Act requires nine specific disclosures to be made with any written promotional prize offer, and the Illinois Consumer Fraud and Deceptive Business Practices Act requires you to clearly and conspicuously disclose all material terms and conditions relating to the prize at the outset of the offer. In addition, if your prize is valued at $600 or more, you must issue an IRS Form 1099-MISC to the prizewinner.

For resources related to our guidance, please see:

  • Federal Deposit Insurance Act, 12 USC 1829a(c)(2) (“The term ‘lottery’ includes any arrangement, other than a savings promotion raffle, whereby three or more persons (the ‘participants’) advance money or credit to another in exchange for the possibility or expectation that one or more but not all of the participants (the ‘winners’) will receive by reason of their advances more than the amounts they have advanced, the identity of the winners being determined by any means which includes (A) a random selection; (B) a game, race, or contest; or (C) any record or tabulation of the result of one or more events in which any participant has no interest except for its bearing upon the possibility that he may become a winner.”)
  • Illinois Criminal Code, 720 ILCS 5/28-2(b) (“A ‘lottery’ is any scheme or procedure whereby one or more prizes are distributed by chance among persons who have paid or promised consideration for a chance to win such prizes, whether such scheme or procedure is called a lottery, raffle, gift, sale or some other name, excluding savings promotion raffles . . .”)
  • Illinois Prizes and Gifts Act, 815 ILCS 525/25 (listing nine disclosures that a written promotional prize offer must contain in a clear and conspicuous statement at the outset of the offer)
  • Consumer Fraud and Deceptive Business Practices Act, 815 ILCS 505/2P (requires all material terms and conditions to be clearly and conspicuously disclosed)