Outlook: Should the US Postal Service Grow in the Banking Industry?
YES: affordable financial services would be accessible in each community at local post offices
By Nicole Ndumele
The U.S. Postal Service recently launched a postal banking pilot program that allows customers to cash paychecks and business checks up to $ 500 in four cities: Washington, Baltimore, the Bronx and Falls Church, Va. . This modest pilot project is the foundation for envisioned more extensive postal banking services that could include bill payment services, access to ATMs, and money order and wire transfer capabilities, all of which would provide essential financial services to millions of people. people excluded from banking services. that promote the economic security and well-being of many Americans.
Local bank branches are closing in all communities across our country, and traditional banks are failing to provide financial services that meet the needs of many communities, especially low-income, rural, black, and Latino communities. As a result, too many people are forced to turn to exploitative payday loan services that charge outrageous fees and interest rates for the most basic financial services, including cashing a paycheck.
Robust postal banking services, which should eventually include checking and savings accounts as well as lending options, could step in and provide fair, accessible and affordable financial services to people who do not have access to traditional banking services and otherwise would have to turn to high banking services. low-cost, low-value fringe financial institutions.
An alarming number of Americans – over 60 million people – are either “unbanked” (that is, without a current account or savings) or “under-banked” (that is, say using products and services outside of traditional banks like check cashing stores and payday lenders). One in five Americans who are underbanked are the least able to afford financial service fees, but pay the highest costs to access their money.
People of color are disproportionately underbanked. The reasons are complex, ranging from inaccessible bank branches and onerous bank account requirements, to credit problems, discrimination and mistrust of traditional banks.
A recent trend has made banking services even less accessible: For at least a decade, banks have systematically closed bank branches, including a record 3,324 branches nationwide in 2020 alone. These bank closures are creating problems. “Banking deserts” in many low-income, black and rural communities. More than 90 percent of bank branches closed since 2008 were located in communities with household incomes below the national median. Rural communities are particularly vulnerable to banking deserts, and majority Black communities have lost more bank branches than any other community, including low-income non-majority Black communities.
Postal banking provides an economic lifeline for countless Americans living in banking deserts. The 34,000 postal service facilities serve all postal codes across the country. Over two-thirds of census tracts that have a post office do not have a bank branch.
Postal banking also provides transparent and fair services and costs. Traditional banking fees and requirements, such as minimum balance requirements, activity fees, and overdraft fees, exclude low-income and low-balance customers. These high fees and requirements are compounded by the racialized current account costs and fees which are $ 190.09 higher for blacks, $ 262.09 higher for Latinos, and $ 25.53 higher for Americans. Asian origin than for whites for entry-level current accounts. Even worse is the exploitation by payday lenders who charge high fees for check cashing services and interest rates of up to 589% for payday loans. In contrast, the Postal Banking Pilot Project allows customers to cash checks up to $ 500 at a fixed price of $ 5.95.
The Postal Service is ideally located to provide accessible and affordable financial services to every family and community in America. Postal banking offers a viable and fair path forward for American families who have been left behind or left behind by our banking institutions and forced to rely on often unscrupulous payday lenders who often trap those who can. the least afford it in a cycle of debt. Postal banking is a key route from poverty to economic mobility for millions of Americans and also generates significant revenue and opportunities for the Postal Service to thrive and expand its business model.
Nicole Ndumele is the senior vice president for rights and justice at the Center for American Progress. She wrote this for InsideSources.com.
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NO: USPS should continue to focus on its core mission – timely mail delivery
By Paul Steidler
On October 4, three days after the Postal Service implemented degraded standards for first-class mail, ensuring delivery will be slower than in the 1970s, it announced it was embarking on a new business. : check cashing. The experimental service takes place in four cities: Washington, Baltimore, Bronx and Falls Church, Virginia.
The Postal Service has $ 188 billion in unpaid debts and long-term liabilities, chronic annual losses of $ 9 billion, and has missed more than $ 45 billion in pension and health care contributions since 2011. Still, he flirts with diving – yes, wait – banking.
The main US progressives – Senators Bernie Sanders and Kirsten Gillibrand, as well as Representative Alexandria Ocasio-Cortez – are pushing hard enough for postal banking. Across the country’s more than 34,000 post offices, they want to deliver sprawling new government programs.
The central argument for postal banking is that millions of Americans are unbanked and exploited by payday loan companies and related businesses that charge high fees for check cashing and other services. . Unbanked means not having a checking or savings account at a bank or credit union.
While all exploitation of the poor is despicable, the numbers just don’t show that being unbanked is a widespread crisis, or that the USPS getting into this business is the best way to address the issue under -jacent.
A 2020 report from the Federal Deposit Insurance Corporation found that 5.4% of U.S. households (roughly 7.1 million households) were unbanked. This is the lowest level since the start of these studies, with a significant drop from 8.2% in 2011.
The FDIC study found that 56.2% of unbanked people were not at all interested in having a bank account, while only 24.8% were very or somewhat interested in a bank account.
And the unbanked have profitable options. For example, Walmart charges a maximum fee of $ 4 for checks up to $ 1,000, with funds put on a card, and up to three checks per day cashed. As part of the USPS pilot program, it charges $ 5.95 to cash checks up to just $ 500 and puts the funds on a card.
The mission and purpose of the USPS for the past 245 years has been to deliver the mail. It is the only entity that can perform this essential public service. Even in the Internet age, mail remains important, with 50 billion first-class mails sent each year. Still, the delivery standard for 39% of first-class mail has been extended by at least one day, effective October 1.
A critical lesson from the USPS over the past 15 years is that when it strays from its unique public and historical duty, mail delivery suffers. This is confirmed by USPS ‘focus on increasing parcel delivery over the past 15 years, a competitive product for which customers have many alternatives.
Today, parcels represent only 6% of the total volume, but the focus on growing this business has resulted in a double reduction in mail standards since 2014 and has contributed to the financial difficulties of the USPS.
Postal banking is much further removed from the USPS ‘core business of managing logistics and delivering mail.
There will soon be aggressive pressure for the USPS to open savings accounts. Not far behind will be applications for low interest credit cards, mortgages and auto loans. The goal of the progressives is to make the USPS a gigantic government lender and change the bank as we know it.
This raises many questions. Will USPS offer Venmo-like payment options? Accept Bitcoin for payment? How much depositor and customer data could be stolen by hackers?
Banking technology is evolving rapidly and is essential to today’s banking services. USPS does not have the funds to become a full scale banking business. And taxpayers shouldn’t foot the bill for this experience or be the safety net for the losses of USPS financial services.
A 2018 Treasury Department task force report on the USPS was correct when it said: “Given the USPS ‘narrow expertise and capital limitations, expansion into areas where the USPS does not have a comparative advantage or where a balance sheet risk could arise, such as postal banking, should not be sued. “
The USPS is faltering in its critical mission: rapid mail delivery. Postal banking is diverting attention from this mission and will create even more staggering financial losses for the USPS, while doing little or no good.
Paul Steidler is a senior research fellow at the Lexington Institute, a public policy think tank in Arlington, Virginia. He wrote this for InsideSources.com.
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