Bank at the US Post Office?

My brother (thanks big brother-I guess this means you read the blog-yay!) sent me an article published in The Hill with an interesting proposal!  Published on April 26, 2018, The poor need bank accounts, and USPS has the answer highlights a bill introduced by Senator Gillebrand  which would create “provide a public option in basic banking services through the U.S. Postal System.”

Why, you may ask, propose that the USPS get into the banking business?  Well, because there is a “persistent problem of widespread financial exclusion, which means a household is either unbanked or underbanked. Recent data shows that 7 percent of households are simply unbanked since they lack a checking or savings account at a bank.”  Consider the implications of not having a bank account. If you have to cash a check, where do  you go? “Instead, they have to rely on the predatory alternative financial services, such as payday lenders, check cashing services and the like.” 

The article also introduces us to the concept of “underbanked” which means “19.9 percent of American households … at some point during the year, they rely on high-cost alternative financial services to meet their financial needs. That leaves over one-in-four American households excluded from mainstream financial services.”  Although these alternatives may work for those unbanked or underbanked, they are not without costs, both financial and otherwise.

The article discusses reasons why low-income households find themselves in this situation, including a focus on higher-profit activities and closing branches.  So this is where the USPS comes in under the bill.

The Gillibrand bill seeks to address the lack of universal access through the creation of a postal bank. An added bonus of this measure is that it regulates consumer financial protection abuses by making predatory lending practices uncompetitive.

The bill would allow all households to open accounts at the post office, with a $20,000 limit on checking and savings accounts. Further, the bill allows for small-dollar loans capped at $500 at one time.

The rates on these loans are reasonable, with the bill linking the interest rates to the 1-month Treasury bill constant maturity rate, though a low, fixed rate may be preferable.

Through offering financial services at post offices, the bill would provide much of the physical infrastructure needed to counteract the trend of bank-branch closings. The USPS already has the geographic infrastructure to support universal access: a post office in every ZIP code.

The article offers suggestions for services as well as pitfalls. Interesting concept.