Checking Account, Post Office Style


Thursday Review staff

(Originally posted February 13, 2014) That the United States Postal Service has been facing hard times lately is no great secret. The Post Office has faced ever-more complex problems of competition with online payments, mobile account and payment apps, and rapidly evolving consumer preferences in the digital age.

For a century and a half the Post Office it was awash in black ink thanks to a constant sea of mail—letters, bills, payments, magazines, and more. Every few years the rate for first class postage might go up, but there was a balance. The internet has changed all of that. Now, the Post Office knows only red ink, and its future has become increasingly uncertain.

Many of the solutions proposed over the last few years have been radical, and painful: post office closures; layoffs; early retirements and buyouts; outsourcing; fewer drop off boxes; termination of Saturday deliveries; reduced hours; perhaps even a four-day delivery week. And even when these scenarios are thrown into the mix, newer, quickly evolving projections show such a future shortfall that may persist well into the future. That means more red ink, and even more price increases for all forms of delivery.

But if U.S. Senator Elizabeth Warren (D. Mass) has her way, the United States Postal Service may soon be adding neighborhood banking to its resume.

Warren has endorsed a plan which would allow the Post Office to enter into partnership with credit unions, banks and other financial institutions to operate bill pay services, check cashing and check depositing, and even process loans for customers who do not have a checking or savings account at a traditional bank or credit union.

Warren and others who have signed onto the plan see this as a win-win. The Post Office would gain a valuable source of modestly profitable foot traffic—enough, presumably, to re-energize its purpose and get the black ink flowing again. Further, Americans who lack access to banks would be able to engage in routine bank activity, like check cashing and small loans, giving them a far better option than the nearby payday loan operations which typically charge extremely high fees and interest rates.

Warren is one of several Washington legislators concerned about the high interest and heavy fees imposed on customers who use retail street corner check cashing services or neighborhood retail loan stores. Some so-called payday lenders offer cash advances on paychecks, charging fees for the transaction but also charging a hefty interest rate.

Warren says that as many as 68 million Americans lack access to a traditional checking account and many of those have become dependent on the payday lenders. Warren’s plan would facilitate using the U.S. Postal Service as a lower-cost mechanism for simple activity like payroll check cashing or small loans.

Some critics, however, see this as an unnecessary and potentially expensive intrusion into commerce and banking by a federal agency ill-equipped for such activity. The low profit of such banking activity could mean that the Postal Service sees little, if any, actual return, and some analysts suggest it could actually cost the Post Office more money and send it deeper into the red ink. Others raise the issue of training, security and logistics. Postal employees are not bankers, nor are they typically equipped for the complexities of loans. The combined downside could be an expensive adventure in neighborhood banking and something that could cost taxpayers millions of dollars.

But supporters of the plan say that the Postal employees can be easily trained to learn such processes, and that the Postal Service is ideally equipped to adapt to this new set of tasks.

And few would argue the point that payday lenders and check cashing services are nothing more than predatory operations designed to take advantage of people without means. Banks have expressed an interest in partnering with the Postal Service as long as the feds are willing to back up the loans and pursue those who do not pay them back. Under Warren’s proposal, the Treasury Department would be empowered to garnish wages of those who do not fulfill their obligation to repay loans or debts.
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