It's an idea that's been on the table for some time: New York U.S. Senator Kirsten Gillibrand is pushing legislation to create a Postal Bank, which would establish a retail bank in all of the U.S. Postal Service’s 30,000 locations.
Arguing that post offices could give low-income Americans access to financial services including an alternative to deal with check-cashing services and pay day lenders, the Democrat says a postal bank would be especially beneficial for communities of color and rural communities. "Right now, no one is servicing their needs, except for perhaps payday lenders, who have very predatory practices. And so we want to create an alternative so you don't have to be taken advantage of through a payday lender who might charge you literally 400 percent interest. If you have a $50 car payment or repair that needed to be done it could cost you $200 just to do that repair."
Gillibrand spoke Monday in Schenectady.
The proposal for a postal savings system was introduced at the 1908 Republican National Convention. In recent times several influential politicians including Senators Bernie Sanders and Elizabeth Warren have embraced the concept, which was included in the Democratic Party’s 2016 platform. "It doesn't cost a thing and post offices will make money if they are able to write these kinds of low interest loans and services so it's a win-win and it's one that really helps the post offices get stronger and more solvent, and it doesn't undermine banks because they're not offering services to these people anyway."
WAMC reached out to several area financial institutions; none returned calls for comment on the idea. "Getting these services would make a huge difference in rural areas where you always have a post office and also in cities. it would apply everywhere and our state would really benefit from it," said Gillibrand.
In April, President Donald Trump announced he will launch a task force to look into the viability and operations of the postal service.
Gillibrand's bill was introduced April 18th, according to her office, the postal bank idea resurfaced in 2014, and in a 2016 memorandum of understanding appended to contract negotiations with the American Postal Workers’ Union, the postal service agreed to look into a pilot program.
In a more recent statement, the Postal Service said it “currently provides certain financial services appropriate to our existing infrastructure including money orders, electronic funds transfers and U.S. Treasury check cashing to meet customers’ needs.” It added that its mission is to provide the American public with trusted, affordable, universal mail service. “Our core function is delivery, not banking.”
From Sen. Gillibrand's website: The Postal Bank would effectively wipe out predatory payday lending industry practices because low-income workers would be able to take out low-interest, small-dollar loans from the Postal Bank instead of being forced to rely on predatory payday lenders. High-cost, predatory financial products like payday loans cost the average underserved household 10 percent, or $2,412, of their gross income in fees and interest. This adds up to about $100 billion of lost savings for low-income families across the country, and results in diminished funding for rent, food, and childcare, as well as an inability to build credit. Under Gillibrand’s bill, any American could open an account at the Postal Bank.
Specifically, the Postal Bank would offer the following services:
- Small-Dollar Checking Accounts: Low-cost checking accounts for direct deposits, check cashing, and bill paying.
- Small-Dollar Savings Accounts: Interest-bearing savings accounts that build wealth and could be used in combination with other federal, state, and local savings programs.
- Small-Dollar Loans: Low-fee and low-interest rate micro-loans for customers.
- Transactional Services: Debit cards, low-fee cash machines, online services, and bill payments.
- Remittance Services: Domestic and international wire transfers.