WASHINGTON, February 4, 2014 —Would the U.S. Post Office make a better bank than a letter delivery service?
In an op-ed piece in the Huffington Post, Senator Elizabeth Warren (D-Mass.) has supported just such a plan.
The Postmater General proposed last week the Post Office step into an arena that banks have never been interested in: financial services directed specifically at America’s poorer citizens.
The Postal Service ended 2013 with a net loss of $5 billion, marking the seventh consecutive year in which the Postal Service incurred a loss, leading it to search for a long term solution to the organization’s financial difficulties.
The U.S. Post Office says poor Americans who are not served by the traditional banking system spent $89 billion in fees for nontraditional financial services in 2012, such as those offered at Wal-Mart stores and check cashing services.
Two major issues facing the Postmaster General’s proposal: these services are often seen as unsavory and untrustworthy institutions who are taking advantage of the most vulnerable members of American society; and, more important, a 2006 law forbids the Postal Service from offering any non-postal services.
Warren wrote in her op-ed the Postal Service taking on a new banking business could be a solution for everyone. “Collectively, these households spent about $89 billion in 2012 on interest and fees for non-bank financial services like payday loans and check cashing, which works out to an average of $2,412 per household. That means the average underserved household spends roughly 10 percent of its annual income on interest and fees — about the same amount they spend on food.”
“Families rely on financial services more than ever, but those who need them most — who struggle to make ends meet — too often must contend with sky-high interest rates and tricks and traps buried in the fine print of their loan products.”
“That is why the OIG report is so interesting. If the Postal Service offered basic banking services — nothing fancy, just basic bill paying, check cashing and small dollar loans — then it could provide affordable financial services for underserved families, and, at the same time, shore up its own financial footing.” Warren concluded
The 2006 Postal Accountability and Enhancement Act, requires the Postal Service to “prefund its future health care benefit payments to retirees for the next 75 years,” a requirement no other agency has, yet receives no tax payer money leaving them perpetually on the verge of bankruptcy.
The Postal Service already participates in some non-postal businesses such as issuing passports and money orders, but will need an act of Congress to go into the banking business.