As the United States Post Office continues to be plagued by shipping delays and rising prices, agency officials are looking for ways to increase revenue and ensure financial stability . And that is why, for the third time since 2008, there is serious talk on the provision of banking services at the post office.
Only this time it actually happens – at least as part of a small pilot program to offer payroll cashing. As an alternative to payday lenders who often charge a high percentage, customers can pay a reasonable flat fee to redeem their paychecks for Visa gift cards up to $500.
Currently, the service is only available in four of the USPS Over 31,000 locations— in Baltimore, Maryland; the Bronx, New York; Falls Church, Virginia; and Washington DC. Eventually, the trial will expand to include bill payment services and ATM access. But even the mere existence of the pilot program is exciting for promoters postal banking services, commonplace in the first half of the last century.
“This is the first real step towards reviving postal banking services since the program ended in the 1960s,” notes Christopher Shaw, historian and author of Money, Power, and the People: America’s Struggle to Democratize Banking.
A report 2014 of the USPS Inspector General’s Office found that Postal Banking could generate up to $9 billion in annual revenue. U.S. Senator Kirsten Gillibrand of New York, argued earlier this year that offering banking services at USPS outlets could be the answer to the agency’s financial woes while easing financial burdens on beholden households. predatory payday lenders. She and Senator Bernie Sanders of Vermont introduced the Postal Banks Act (pdf) in 2020 with the aim of helping the approximately 7.1 million unbanked US households obtain services such as low-cost checking accounts and ATMs.
There is research and precedent that shows postal banking can provide financial services to low-income Americans, help fund the USPS, and ease financial burdens on unbanked households. So why isn’t the USPS already a bank?
Who opposes the postal bank?
❖ Banks and bankers
The strong opposition to postal banking comes from banks and bankers themselves. Since the U.S. Congress created the Postal Savings System in 1910, banks have been highly critical of postal banking, resisting moves to expand the program. By the 1960s, use of the services had declined, and lobbies for various banking groups and savings and loan associations were able to get rid of them, says Shaw.
“There was no longer an organized movement to defend him, as there had been for all those decades. And so at that time, the policy was in favor of the banking lobby,” he says.
Organizations such as the Independent Community Bankers Association have strongly opposed efforts to revive postal banking services. A spokesperson for the trade group told Quartz that complex financial service offerings are best delivered “in a competitive, private and free marketplace that openly and effectively benefits customers.”
A spokesperson for the American Bankers Association, meanwhile, said the solution to high check cashing fees is a “banking relationship,” not “a government-subsidized service through the job”.
❖ The ccollection industry
The industry most at risk from postal banking is the $18.2 billion industry cashing checks and personal loans industry. There are thousands of such storefronts in the United States that cash checks without the customer needing a bank account. Some of these companies also offer payday loans, a practice often seen as predatory practice based on the high loan interest rates and generally low incomes of the customers targeted by these companies.
Under the Trump administration, the United States canceled regulations on predatory payday lenders, an issue the Postal Bank would address as part of its service line. At the four USPS pilot program locations, customers must pay a fee of $5.95 by check up to $500, a number Shaw says is lower than most check cashing services.
❖ Congressional Republicans
Historically, postal banking has been a popular issue among progressive Democrats. Contemporary proponents of postal banking include the aforementioned Sanders as well as congressional representatives Alexandria Ocasio-Cortez of New York, Marcy Captur of Ohio and Bill Pascrell of New Jersey.
Republicans were not as supportive. In 2014, Republican Congressman Darrell Issa of California expressed himself against the Postal Bank, arguing that USPS employees are not equipped to handle financial services beyond warrants, a service the agency has long provided. In 2020, a provision to test a pilot program for USPS financial services was fall by the Republican-controlled Senate.
In response to the USPS’ current pilot program, Republican Senator Pat Toomey of Pennsylvania said, “[Y]You have to work very hard to come up with a worse idea than to make the government a national bank run by mail.
Shaw, however, does not intend this question to be strictly partisan..“There’s actually decent support for the Postal Service among Republicans, especially those who represent a rural district because the Postal Service is so important in rural America,” he says.
Rural customers are also expected to be the primary beneficiaries of USPS’s expanded banking services, but the pilot program so far only involves post offices in densely populated areas. The American Postal Workers Union, which worked with the USPS to set up the pilot, recommended expanding it to a rural area, the government executive said. reports.