Promotional Offer: Sign Up and (Maybe) Double Your Interest Rate

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Question:

Is it permissible for a National Bank to offer a time-deposit promotion where customers opening that time-deposit would be entered into a drawing with the winner receiving additional (double) interest on their deposit? I have referenced Title 12, Chapter 2, Sec. 25a of the U.S.C., however, I am having difficulty interpreting the Code's definition of a "lottery."

Answer:

You are correct the term "lottery" is not clearly defined in 12 U.S.C. 25a. The OCC does give some guidance in the Interpretative Letters issued responding to various questions regarding the participation by a National Bank in lottery activities. I am not aware of an Interpretive Letter exactly on point with your situation but the OCC has taken a very conservative stance in this area. It is permissible for a National Bank to cash or accept for deposit checks issued by a State run or authorized lottery. It is permissible for a National Bank to donate an item for a charity lottery and be recognized as the donor. However the National Bank can not advertise the lottery by placing any posters in its lobby or include a reference in any other type of advertising. It would appear from these restrictions that the activity proposed by your institution may not be permissible. To find the OCC Interpretive Letters go to our OCC Web Site Road Map Compliance and Legal Resources section then click on Interpretive Letters and Actions. I suggest you contact the OCC prior to offering the promotion. You also will want to determine if the activity is permissible under state law. Some states have laws and regulations that are even more restrictive than the federal government.
First published on BankersOnline.com 6/4/01