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Lending

New legislative proposal would turn the post office into a bank

USPS could offer small loans, other banking services

bank

It’s been rumored and discussed for months, but now it’s one step closer to actually happening. The idea of the United States Postal Service offering banking services may have seem far-fetched when it was originally floated by the USPS earlier this year, but now there’s a legislative proposal that would authorize the USPS to do just that.

Last week, Representative Cedric Richmond (D-La.) followed through on a January white paper from the USPS's Office of the Inspector General, which suggested that by allowing the post office to offer banking services, it could help communities that are currently underserved by banks.

In the white paper the USPS said, “postal financial services could complement the current offerings from banks by helping banks reach customers in geographic areas where they lack a physical presence, by offering products to customers who were not previously a main focus of banks, and by helping some customers transition to traditional bank savings or checking accounts.”

According to the USPS, approximately 68 million adults — one quarter of all U.S. households — make up the entire underserved population, and in 2012 alone, they spent about $89 billion just on interest and fees for alternative financial services.

Now Richmond has introduced a bill, called The Providing Opportunities for Savings, Transactions and Lending Act (or POSTAL Act, because it just had to have the catchy acronym), which would allow the USPS to offer “basic financial services.”

Post office customers would be able to open checking accounts, deposit funds in an interest-bearing savings account, and receive small-dollar loans.

According to a release from Richmond’s office, the bill would also require that the USPS offer customers a “Postal Card” that functions as a debit card and allows them to engage in in-store, mobile, and online transactions.

Post offices in the United Kingdom already offer banking services, including offering mortgages.

According to the UK Post Office, “Our aim is to provide customers with the things that are important to them — from mail to their broadband package, from car insurance to their savings account. Whether customers come into a branch, are on the move or shop online, we work hard to deliver a great experience.”

Unsurprisingly, the bill was met with apprehension from those in the banking industry.

“Though well-intended, the proposal to expand financial services through USPS could have unintentional effects on credit unions and consumers,” said Carrie Hunt, the senior vice president of government affairs and general counsel for the National Association of Federal Credit Unions.

“As not-for-profit, member-focused financial institutions, credit unions have been long-recognized for their low fees, competitive rates and exceptional member service,” Hunt said. “Credit unions are solid financial resources for their local communities and also offer many services for the underbanked.”

The American Bankers Association expressed its concern about the proposal as well.

“Serving the unbanked is a top priority for banks, which are reaching more and more people with innovative products and services,” said Ken Clayton, executive vice president of the ABA.

“At the same time, we’re concerned about possibly creating a new entity engaged in banking services, but not subject to the same level of regulation,” Clayton added. This new entity could be perceived by many as a government-endorsed and preferred provider of financial products. The impact on banks -- particularly community banks -- would be substantial.” 

Richmond, for his part, said that the bill could help many people who are currently unable to procure banking services.

“In the New Orleans area alone, 181,000 households do not have access to a full range of financial services,”Richmond said. “These are primarily low-income households that are forced to pay exorbitant interest rates to predatory lenders in order to borrow. Allowing the Post Office to offer some basic financial services would save these households thousands of dollars every year, and put the USPS on more stable financial footing.”

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