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by
Rick Moran

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February 3, 2014 - 4:07 pm

This is an idea that actually has intriguing possibilities. The Inspector General of the USPS issued a White Paper suggesting that the Post Office offer some simple banking services for the 68 million people who don’t have access to a bank or don’t have a banking account.

Those 68 million people pay $89 billion in interest and sucker fees to the payday loan industry, as well as more reputable businesses who cash checks, and allow customers to pay utility bills and the like. That works out to an astonishing $2400 per household per year — about 10% of a poor household’s income.

Usurious rates charged by payday loan companies might come down if they had a little competition — from the Post Office. Two stubborn problems would be addressed with one solution; Americans who are underserved by the banking industry would have access to inexpensive and reliable services while the crumbling finances of the Post Office would be shored up to the tune of about $9 billion a year.

The Post Office would not be competing with banks. They would act as an adjunct to financial institutions.

David Dayen writing at The New Republic:

As America becomes more of a cashless society, more reliant on some level of financial services (try renting a car without a credit card), the 68 million under-banked are essentially forced into working with predatory businesses, without the kind of low-cost alternative the post office could provide. Banks don’t want these customers; if they did, they would actually make a play for their business. Large banks have closed branches in the very low-income communities with the largest percentages of unbanked Americans. In fact, banks find it more profitable to fund payday lenders that charge junk fees and outrageous interest—currently the subject of a Justice Department investigation—than actually take market share away from them.

Instead of partnering with predatory lenders, banks could partner with the USPS on a public option, not beholden to shareholder demands, which would treat customers more fairly. As the report says, “the Postal Service could greatly complement banks’ offerings,” and in turn help drive out of business some of the most crooked companies in America, while promoting savings and expanding credit for the poor.

The report suggests three types of potential products. First, it proposes a “Postal Card” that could make in-store purchases, access cash at ATMs, pay bills online, or transfer money internationally. Customers with paper checks could cash them at the post office or deposit them through their cell phones, loading them onto their Postal Card. Second, the USPS could offer an interest-bearing savings account, again through the Postal Card, encouraging savings from communities with little in the way of a personal safety net. Finally, the Postal Service could offer small-dollar loans, effectively an alternative to costly payday lending. The fees on all these services would be drastically lower than anything in the marketplace today.

The postal service, with public trust earned over generations and 35,000 outlets in the best real estate in practically every city in America (in fact, the report notes, 59 percent of all post offices are in “bank deserts” with only one bank branch or less), is well-positioned to deliver simple financial services.

So what’s not to like? While the USPS is an independent agency, it is still part of the federal government. The notion of a government agency competing with private businesses — even if those businesses are run by a bunch of schmucks — should give us pause. But really,  how sorry are you going to feel if a payday loan company charging customers 126% interest on a $200 loan goes belly up?  If the USPS can offer these same people a low cost alternative, why not? A little competition might force the predators to lower their fees — a win, win situation.

Millions of older Americans still depend on the Post Office for delivery of their Social Security checks, medicine, and letters from their grand kids. This means the USPS isn’t going anywhere anytime soon. Rather than the Post Office being forced into the untenable position of asking for a  taxpayer bailout, Congress should approve some pilot financial services programs around the country to see how these services would go over, as well as how they’d work in practice.

 

Rick Moran is PJ Media's Chicago editor and Blog editor at The American Thinker. He is also host of the"RINO Hour of Power" on Blog Talk Radio. His own blog is Right Wing Nut House.

Comments are closed.

Top Rated Comments   
What makes you think the USPS can make a profit when its apparent that businesses have looked the niche over and decided its not worth the effort to participate? Like any government entity the USPS isn't a stranger to losing money - I'm sure they'd find a way to eff this enterprise up as well. Their ineptitude is what encouraged UPS - FedEx and others to move into the package moving services line. I say privatize the services that USPS now has and let the government participation in ineptitude be finished. All I get in the mail is cheap advertisements for the most part. Do you think the USPS can survive much less thrive on delivering a snail-spam letter for $.10? I don't.

37 weeks ago
37 weeks ago Link To Comment
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All Comments   (19)
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The USPS providing banking services for poor people sounds to me like nothing more than another sympathy hostage they will exploit when it's time for a bailout.
36 weeks ago
36 weeks ago Link To Comment
oh sure. There must be hundreds of businesses where big gov can beat the private sector. Obamacare is just one shining example. And oh yes, the USPS is another. Look how it humiliates UPS and Fedex on a daily basis.

Sheez.
36 weeks ago
36 weeks ago Link To Comment
It's time to finish the job of privatizing the postal service that was started in 1971. Figure out the government's equity and either sell it as shares or just hand it to the employees, end the mandates and give management free reign to adjust the business as they see fit (set rates, drop unprofitable services, close surplus facilities), and end the monopoly on first class delivery.

My suspicion is that Amazon or Ebay would probably buy the parcel service and make it profitable, local players would take over local delivery.

The main reason this hasn't happened yet is because the postal union and the junk mail industry would take a huge hit, but sooner or later they're going to have to take that hit...better sooner than later.

I wouldn't be surprised to see a privatized postal service offer banking kinds of services (assuming the CFPB didn't regulate them to death), but there's no reason to keep it in a quasi-government entity.
36 weeks ago
36 weeks ago Link To Comment
I couldn't read this whole article. After a sentence or two I got sick. The USPS trying to operate a bank is the stupidest idea since Obamacare.
36 weeks ago
36 weeks ago Link To Comment
Payday loan places charge the interest they do, as that niche industry has figured that is the cost of the risk for the type of people that use those services. Ever walk into one of those places? They typically have a huge "wall of shame" with photos of people in handcuffs that tried to pass bad checks, this is supposed to be a deterrent to other scammers. Unfortunately the bad check scammers still persist, using those places. There would be outrage of the USPS charged those same rates, so it is safe to assume that it would be the taxpayer (again) that would need to absorb the cost of the bad checks. This is likely not a way to keep the USPS in the black, but deeper in the red.
37 weeks ago
37 weeks ago Link To Comment
Thank you! Thank you! Thank you! Unless you can prove there's some sort of onerous regulatory barrier or conspiracy, I think we have to assume the Payday loan's are charging a "fair" price - otherwise someone would come in and undercut them. And the LAST entity that should try is one that is already accustomed to bailouts.
36 weeks ago
36 weeks ago Link To Comment
"If the USPS can offer these same people a low cost alternative, why not? A little competition might force the predators to lower their fees — a win, win situation."

Where to begin with the flaws in this . . .

First, we must recognize that there is a reason the payday lenders charge the rates they do. Certainly they want to make a profit, but give the extensive competition that already exists in the field, there must be something keeping the interest rates so high. Is it the rate of rollovers? The rate of defaults? Other factors?
So to start, this proposal will have the post office putting up $5-10B in "seed" money, then hoping to get it back at 10% rate throughout the year, despite all the defaults.

Second, that "little" competition will be nothing of the sort. 1% is a "little". 5% would even qualify as a "little" in this context. But clearly this proposal anticipates something more along the lines of 50-100% difference in interest rate. That, or you expect people to gleefully pay a "mere" 100% interest rate just because it is the post office, while hating frantically on the independents charging 126%. So take "little" right out of the discussion and go to "massive" and understand that at such a difference, the private lenders will either completely disappear or wind up tripling their rates or more for the few people so alienated from the system they cannot qualify at the post office.

Third, this means massively increasing the traffic at each post office. It also means increasing the security at each post office. That is both a major infrastructure start up cost and a hefty ongoing staffing cost.

Overall, the economics are just completely against the post office getting into banking, which, despite claims otherwise, I precisely what this proposal is.

When we consider the political elements, namely the federal government having ALL of the banking records of those involved without needing a search warrant, and thus being able to track otherwise "untrackable" purchases made with money cards, overseas transfers, and more, as well as noting that the White Paper specifies that defaults will be handled through the simple expedient of IRS refund seizures, and we have a recipe for entrapping the poor and even random parts of the middle class in a web of absolute government control of their financial activity.

If this were only half as bad it would still be a bad idea.
37 weeks ago
37 weeks ago Link To Comment
Another solution in search of a problem.
37 weeks ago
37 weeks ago Link To Comment
Bad idea. The idea might be to compete with payday loan sharks, but that's not where the money is. The money is in middle class customers and soon the USPS would be competing with banks.

And using the full faith and credit of the United States to make loans - loans subsidized for political purposes.

It would make FANNIE MAE look like a sound investment.

Bad idea.
37 weeks ago
37 weeks ago Link To Comment
I've been after this for at least 20 years.
As long as the PO is required by law to provide service to all corners of the country. And today's banks no longer desire the small depositor (see recent articles on proposed service charges on deposits). Simple banking should be one of the services offered. Automatic deposit (especially of SS checks) and ATM cards. It's not like it's a NEW idea. Simple savings was a service offered by the PO in the 19th and early 20th Century. They still had passbook savings when I was a kid in the 50's.
37 weeks ago
37 weeks ago Link To Comment
The post office is already a wreck, have you been in one recently? Long lines and surly union employees and now you propose they add rudimentary banking services.

Madness, just madness.
37 weeks ago
37 weeks ago Link To Comment
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