Pub. 10 2015-2016 Issue 4

November/December 2015 15 Extraordinary Service for Extraordinary Members. participation 10 and (2) each entry has an equal chance of be- ing drawn. 11 Nebraska is one of the only states to impose a duty upon banks to pay out all of the prizes they offer during a PLS program. 12 Nebraska also establishes that banksmay not “print, publish, or circulate literature or advertisingmaterial . . . which is false, deceptive, or misleading” in connection with offering PLS accounts. 13 The elements of each state law vary, but generally banks offering PLS products require the chance to win a prize to be dependent upon an individual’s deposit of a minimum sum of money as specified under the terms and conditions of the promotion. Further, state laws also require banks engaging in PLS to disclose to participants all terms and conditions of the PLS program. 14 Is It That Simple? Although legal, many issues remain for the bank contem- plating a PLS program: • Federal Preemption – National banks and, to a lesser extent, state banks have certain preemption authority. Can a bank rely on preemption principles to launch a national PLS programwithout a state-by-state analysis? • Web-Based Promotions – If compliance with state law is necessary and a bank advertises PLS products on its website, must banks ensure that customers are not enrolled from non-enabling states? If so, how will that be ensured? Banks marketing PLS over the internet can  Counselor’s Corner — continued on page 16 simplify their lives by restricting programs to residents of eligible states (or limit the promotion only to Nebraska residents). 15 • Marketing – Nebraska requires that all marketing in connection with a PLS program be devoid of deception. • Consumer Protection Laws – In addition to marketing requirements, other state and federal consumer protec- tion laws may apply to PLS (think UDAP and UDAAP). • Changes in Bank Accounting Processes – Paying inter- est as a prize from a pool of unpaid interest may involve internal system changes. Prize giveaways may be subject to IRS information reporting requirements depending on the amount involved. • Disclosures – Ensuring the bank is providing statutorily required disclosures requires diligence at many levels of the bank. • Rule Monitoring – Ongoing monitoring of the state en- abling statutes, the American Savings Promotion Act, and other federal and state sweepstakes law will be required. • Brokered Deposits – In some circumstances, engaging a third party in connection with a PLS program that “facilitates the placement of deposits” could render the PLS deposits received from such program as “brokered deposits.” See FDIC “Guidance on Identifying, Accept- ing, and Reporting Brokered Deposits,” question nos. B4 and B5.