Flickr user mempix

Your Post Office Now Wants to Be Your Bank

USPS is thinking about financial services—debit cards and small loans. But first, America's banks would have to get on board, or at least out of the way.

The post office isn't known as the most efficient or reliable business in America. It can't run its operations at a profit, it's got serious financial troubles, and just try mailing a package on a Saturday without waiting in line for 30 minutes.

Now imagine relying on this institution for your banking needs, everything from loading up a debit card to taking out a small personal loan. It's a hard sell, but one that progressives and congressional Democrats are making as they search for a way to keep this American institution running.

The idea, most recently floated in a white paper by the U.S. Postal Service's inspector general and supported in theory by Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt.,estimates that the money-losing agency could make $8.9 billion a year by offering limited banking services to the tens of millions of people who are not served by traditional banks. (These are people locked out of the current banking system due to geography or relative poverty and who often rely on payday lenders, pawnshops, and title loans for their cash.)

Theoretically, the USPS could partner with banks, who would help it offer branded, reloadable prepaid cards; set up and manage Web and mobile access to financial services; service accounts and loans; and maybe even fund and hold the loans on their own balance sheets. In return for the banks' participation, the USPS would offer its massive network of post offices, 38 percent of which are in ZIP codes that don't have a bank, and its trustworthy name. The banks could reap "substantial revenue" through the arrangement, the white paper predicts.

A marriage made in heaven? Hardly. The banks are not quite on board with the idea of allowing the Postal Service to expand into their realm.

Their stated concern is competition, although Camden Fine, president of the Independent Community Bankers of America, says that might not be the deal breaker. "Have you ever stood in the lines at Christmastime at a post office?" he asked.

He instead points to the Postal Service's dismal financial situation. Since 2007, the USPS has struggled mightily to stay afloat financially. Congress is at least partly to blame for the agency's financial woes; legislation passed in 2006 required the organization to rapidly set aside money to "pre-fund" its retiree health plans. Also at fault is the financial crisis, which hastened the country's shift to cheaper or free digital communication. The USPS has had a net loss for the past seven fiscal years, most recently $5 billion in 2013. Insolvency constantly threatens.

So Fine worries members of his trade group might lose money, either as taxpayers or bankers, if they paired up with the struggling Postal Service.

"Let's say they went down that same dismal road of non-success they have had with the delivery of mail, then when they start racking up losses. Who's on the hook for those losses? It's either going to be the bank, or the taxpayers, or both," Fine said.

Now, banks certainly have their own reputational trouble and some recent history with owing their very existence to the U.S. taxpayer. Still, they say their squeamishness comes from their concern about giving an entity somehow related to the U.S. government access to a piece of the financial market. (The Postal Service has been self-supported for decades, although it has borrowed money from taxpayers to make ends meet in recent years.) Think Fannie Mae and Freddie Mac, the mortgage giants the government had to save by taking into conservatorship.

"Given the Postal Service's unique governmental status, its entry into the financial services market would raise serious unfair competition concerns with the potential to allow it to become the next Government Sponsored Enterprise (GSE) in the broad based financial services arena," four industry groups said, referring to Fannie and Freddie, in a recent letter to Sens. Tom Carper, D-Del., and Tom Coburn, R-Okla., the authors of a postal reform bill. A government-backed postal bank would be just as unfair, they say.

The industry is fighting to kill the Carper-Coburn proposal that would give USPS's expansion the best chance for legal survival. If the industry succeeds, the Postal Service might still be able to go it alone, to a certain extent, by using its current authority to provide money orders and international money transfers. Ruth Goldway, who acts as the Postal Service's chief regulator as head of the Postal Regulatory Commission, said she would be "delighted" if the USPS came to her with a proposal for postal banking.

More complicated may be establishing banking services without industry help. The Universal Postal Union, the United Nations' postal branch, surveyed countries around the world that have postal banking and found the business models—the degree of involvement of the financial services sector—vary quite a bit.

Although banking trade groups say they haven't yet ruled out the possibility of future partnerships, here, with the banking lobby still as powerful as it is, the USPS might be on its own.

This article appears in the February 10, 2014, edition of NJ Daily.                          

(Image via Flickr user mempix)

NEXT STORY: Time Running Out on Debt Ceiling

X
This website uses cookies to enhance user experience and to analyze performance and traffic on our website. We also share information about your use of our site with our social media, advertising and analytics partners. Learn More / Do Not Sell My Personal Information
Accept Cookies
X
Cookie Preferences Cookie List

Do Not Sell My Personal Information

When you visit our website, we store cookies on your browser to collect information. The information collected might relate to you, your preferences or your device, and is mostly used to make the site work as you expect it to and to provide a more personalized web experience. However, you can choose not to allow certain types of cookies, which may impact your experience of the site and the services we are able to offer. Click on the different category headings to find out more and change our default settings according to your preference. You cannot opt-out of our First Party Strictly Necessary Cookies as they are deployed in order to ensure the proper functioning of our website (such as prompting the cookie banner and remembering your settings, to log into your account, to redirect you when you log out, etc.). For more information about the First and Third Party Cookies used please follow this link.

Allow All Cookies

Manage Consent Preferences

Strictly Necessary Cookies - Always Active

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data, Targeting & Social Media Cookies

Under the California Consumer Privacy Act, you have the right to opt-out of the sale of your personal information to third parties. These cookies collect information for analytics and to personalize your experience with targeted ads. You may exercise your right to opt out of the sale of personal information by using this toggle switch. If you opt out we will not be able to offer you personalised ads and will not hand over your personal information to any third parties. Additionally, you may contact our legal department for further clarification about your rights as a California consumer by using this Exercise My Rights link

If you have enabled privacy controls on your browser (such as a plugin), we have to take that as a valid request to opt-out. Therefore we would not be able to track your activity through the web. This may affect our ability to personalize ads according to your preferences.

Targeting cookies may be set through our site by our advertising partners. They may be used by those companies to build a profile of your interests and show you relevant adverts on other sites. They do not store directly personal information, but are based on uniquely identifying your browser and internet device. If you do not allow these cookies, you will experience less targeted advertising.

Social media cookies are set by a range of social media services that we have added to the site to enable you to share our content with your friends and networks. They are capable of tracking your browser across other sites and building up a profile of your interests. This may impact the content and messages you see on other websites you visit. If you do not allow these cookies you may not be able to use or see these sharing tools.

If you want to opt out of all of our lead reports and lists, please submit a privacy request at our Do Not Sell page.

Save Settings
Cookie Preferences Cookie List

Cookie List

A cookie is a small piece of data (text file) that a website – when visited by a user – asks your browser to store on your device in order to remember information about you, such as your language preference or login information. Those cookies are set by us and called first-party cookies. We also use third-party cookies – which are cookies from a domain different than the domain of the website you are visiting – for our advertising and marketing efforts. More specifically, we use cookies and other tracking technologies for the following purposes:

Strictly Necessary Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Functional Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Performance Cookies

We do not allow you to opt-out of our certain cookies, as they are necessary to ensure the proper functioning of our website (such as prompting our cookie banner and remembering your privacy choices) and/or to monitor site performance. These cookies are not used in a way that constitutes a “sale” of your data under the CCPA. You can set your browser to block or alert you about these cookies, but some parts of the site will not work as intended if you do so. You can usually find these settings in the Options or Preferences menu of your browser. Visit www.allaboutcookies.org to learn more.

Sale of Personal Data

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Social Media Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.

Targeting Cookies

We also use cookies to personalize your experience on our websites, including by determining the most relevant content and advertisements to show you, and to monitor site traffic and performance, so that we may improve our websites and your experience. You may opt out of our use of such cookies (and the associated “sale” of your Personal Information) by using this toggle switch. You will still see some advertising, regardless of your selection. Because we do not track you across different devices, browsers and GEMG properties, your selection will take effect only on this browser, this device and this website.