Topic: Lotteries and Promotions
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Can we award the employee with the most customer referrals (for opening new deposit accounts) with a gift certificate worth over $600? Would we have to issue a tax form for the gift certificate? Can we also hold a drawing for the customers referred by the winning employee with a similar prize?
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We are not aware of any limitations on paying referral fees to employees for selling certain types of deposit accounts, but the drawing for bank customers would likely violate restrictions on bank participation in lotteries. Incentive Programs for Employee Referrals of Deposit Customers As stated above, we are not aware of any limitations on paying…
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We are participating in a national sweepstakes and on the advertising brochure, the company warns that the bank is responsible for complying with all state registration and “bonding requirements.” What does “bonding requirements” mean in the context of Illinois state law?
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The only statutory requirement on bonding with respect to conducting a sweepstakes that we are aware of is in the Illinois Raffles and Poker Runs Act. That Act applies to raffles, which require a player to pay something of value in exchange for an opportunity to win, and based on the facts you have provided…
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We would like to offer a gift certificate to our customers who open a free checking account. Is the value of the gift certificate reportable on a 1099-INT form? Should we disclose that it may be tax reportable in our advertisements? Or, even if not required, would it be prudent to do so?
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We believe that you will have to report the value of the gift certificates on IRS 1099-INT forms. As the IRS explained in a ruling, all payments of interest over $10 in a calendar year must be reported on a 1099-INT form. IRS Rev. Proc. 2000-30 (December 31, 1999). The ruling states that non-cash premiums…
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How should a bank conduct a promotional drawing it is holding for a free grill?
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Although we cannot offer legal advice, we believe that a promotional drawing can be structured by the bank to comply with federal law’s prohibition against banks conducting lotteries and the Illinois Criminal Code’s general prohibitions on gambling. Regarding federal law, the National Bank Act, the Federal Reserve Act, and the Federal Deposit Insurance Act state…
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We would like to conduct a giveaway for celebrating the bankâs anniversary. We would send postcard mailers to non-clients and advertise that if they open an account their name will be entered into a drawing for one of our Anniversary giveaways. Is this a sweepstakes offer?
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If the giveaway requires that participants open an account with the bank in order to enter, we believe it would violate both federal and Illinois lottery prohibitions. However, it is possible to structure a giveaway so that no payment or purchase is required to make an entry, and so that it is open to customers…
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We’d like to give our reward checking account customers a book written by a prominent financial advisor. Would this be seen as promoting the author’s financial advice?
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We believe that providing a book on financial advice as an account bonus would be a business decision and would pose a very low risk for your institution. However, if you are concerned that providing the book might imply an endorsement of its entire content, you may wish to consider including a disclaimer along with…
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Can our institution participate in a black jack game if the playersâ âwinningsâ will be donated to charity? Participants will be asked â but not required â to make a voluntary contribution before they play, but they will not receive any money in return, irrespective of how they fare in the game.
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In general, we are not aware of any prohibitions against a bank holding a blackjack game, provided that no payments are required to participate and no winnings are awarded for playing. We do recommend documenting these circumstances and making it clear to players that a charitable donation is not required to participate in the blackjack…
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Can a bank hold a raffle in our bank lobby? Anyone can enter, customers or non-customers, for a chance to win prize giveaways. Weâre not sure if participants will be required to pay to enter.
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If you allow any participant to enter the giveaway for free, including customers and non-customers alike, we do not believe that the sweepstakes would fall into either the Illinois or federal definition of a “lottery.” The Federal Deposit Insurance Act prohibits banks from dealing in any lottery, defined as an arrangement in which participants “advance…
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Can we hold a promotion with a cash prize giveaway to encourage customers to sign up for e-statements?
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Although we cannot offer any legal advice, we believe that a promotional drawing can be structured to comply with the federal lottery prohibition and the Illinois Criminal Code’s prohibitions on gambling. As to federal law, the Federal Deposit Insurance Act states that a bank may not (among other things) “announce, advertise, or publicize the existence…
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Can we hold a giveaway that is limited to the first two hundred people who download our new mobile banking app?
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Although we cannot offer any legal advice, we would recommend examining the federal lottery prohibition, as well as the Illinois laws discussed below, before going forward with the promotion you described. As to federal law, the National Bank Act states that a bank may not (among other acts) “announce, advertise, or publicize the existence of…