The Postal Service (USPS) Could Save Most Economically Vulnerable Americans From Dealing With Predatory Financial Companies Under Proposal approved this weekend by Senator Elizabeth Warren (D-MA).
“USPS could partner with banks to make a crucial difference to millions of Americans who lack basic banking services as there are hardly any banks or bank branches in their neighborhoods,” he said. Warren wrote in a Huffington Post op-ed on Saturday. The editorial resumed a report of the USPS inspector general who proposed using the agency’s vast physical infrastructure to expand basics like debit cards and low-dollar loans to the same communities that the banking industry has typically ignored. The report found that 68 million Americans do not have a bank account and spent $ 89 billion in 2012 on interest and fees on the types of basic financial services the USPS may begin to offer. The average unbanked household spent over $ 2,400, or about 10% of their income, just to access their own money through activities like check cashing and payday loan shops. USPS would generate savings for these families and income for itself by replacing these non-bank financial services companies.
These companies are among the most predatory players in the money business. Payday loans with annual interest rates far north of 100 percent are zero billions of dollars poor communities each year, with the average customer pay $ 520 to borrow $ 375. After decades of operation in a regulatory blind spot and dodge state-level reforms, the payday loan industry is now facing a crackdown from the Consumer Financial Protection Bureau. The threat of new rules for short-term cash lending in general has pushed traditional banks to stop offering deposit advance loans with similar characteristics.
But while ending triple-digit interest rates and fine print tips is good for consumers, it doesn’t reduce demand for these financial services. The USPS could slip into that space and meet that need without attacking those communities. “Instead of partnering with predatory lenders, writes David Dayen in The New Republic, banks could partnership with the USPS on a public option, not beholden to shareholder demands, which would treat customers more fairly. US post offices are an ideal physical infrastructure for delivering these services to communities currently neglected by banks. About six in ten post offices nationwide are in what the USPS report calls “bank deserts” – zip codes with one or zero bank branches.
Doing business in these communities more ethically would still be profitable enough to inject around $ 9 billion into the books of the ailing federal postal agency. The USPS is facing a fiscal crisis, a crisis largely fabricated by the choices of Congress. The agency does not receive taxpayer money for its operations but is still under the authority of Congress, and lawmakers have used that authority to impose arbitrary financial requirements and service constraints who have the postal service on the verge of bankruptcy. USPS is legally obligated to hold assets in its pension funds that cover the next 75 years of projected retirement costs, a unique and crippling demand that Congress refuses to lift despite proof that he is almost solely responsible for the agency’s financial problems.