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Will Promo Open a Treasure Chest or Can of Worms?
by Mary Beth Guard, BOL Guru
Guru Bios
Question: We are considering a giveaway in which customers will have a key to open a treasure chest and be able to scoop a child size shoe of quarters. What kind of compliance issues will we have?
Answer: It depends upon how you structure it. Are you planning to allow each customer to scoop a shoe of quarters? Only deposit account customers? Loan customers? Safe deposit renters?
Or, are you saying that each customer will receive a key and the customer whose key fits will be able to scoop a shoe of quarters?
In terms of compliance, the first issue is whether this is a sweepstakes. If it is, you can't do it. To be a sweepstakes or lottery, it must be structured so that a person provides consideration in exchange for a chance to win a prize. Most legal experts hold the view that when a person gives you his business by becoming a customer, he gives "consideration." If you limit eligibility to those individuals who are (or who become) customers, you are requiring consideration to be given for a chance to win a prize and you therefore have a lottery/sweepstakes, which is illegal. By opening it up and clearly and conspicuously disclosing that no purchase (including no customer relationship) is necessary to win and providing an alternate means for a noncustomer to enter, you cross that hurdle.
Another obvious compliance consideration is the requirement to report the winnings to the IRS.
Without more information about how you're going to structure this, I don't believe you have any Reg Q issues.
First published on BankersOnline.com 5/02/05
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