Treasury Department: Post Office Shouldn’t Give Out Loans

Inside Subprime: Jan 7, 2018

By Grace Austin

A new and unusual way for the financially ailing U.S. Postal Service to make money has brought a firm negative reaction from a governmental task force.

A December 2018 report, led by the Treasury Department, is advising USPS from getting involved in small-time consumer banking. The 69-page report looks at ways for USPS to generate more revenue. It comes from a task force created in April 2018 by Executive Order by President Donald Trump to seek ways that USPS can become profitable. USPS loses billions every year.

The report states that, due to the Postal Service’s limited knowledge of personal banking and restrictions on capital, it wouldn’t be a wise foray into retail banking.

It comes after Democratic lawmakers introduced the April 2018 Postal Banking Act bill, which was designed to establish retail banking in thousands of post offices across the country. Post offices would provide services like checking and savings accounts and low-cost, short-term loans. Proposed by Sen. Kristen Gillibrand, D-N.Y., the bill was supposed to reduce the number of “unbanked and underbanked” consumers who often don’t have access to such mainstream, basic financial services, and can often resort to such predatory services as payday loans.

Payday and title loans can draw low-income consumers into cycles of debt, with high interest rates and tacked-on fees.

High-profile Democratic lawmakers like Bernie Sanders have supported a national postal banking system, while national banking and credit union trade groups have come out strongly opposing it, saying retail banking is outside the expertise of the USPS.

“We are very concerned that allowing the U.S. Postal Service to provide banking services will be beyond the Postal Service’s core competencies, will raise a number of serious regulatory and consumer protection questions, and will present significant competitive issues for private sector entities,” the American Bankers Association, the Credit Union National Association, the Independent Community Bankers of America, and the National Association of Federally Insured Credit Unions wrote in a joint letter sent to the House in July 2018.

Still, it’s not an outrageously novel idea for the Postal Service. USPS offered savings accounts from 1911 to 1967.

The current debate goes back to 2014, when the USPS Office of Inspector General brought up the idea that the Post Office could issue low-interest loans to consumers; it’s brought contention and debate from both sides ever since.

The report goes on to recommend that the Postal Service seek other ways of becoming profitable, like offering hunting and fishing licenses, raising prices, and renting out space to other retailers. It doesn’t, however, recommend full privatization, another idea that had been floated around by the Trump administration.

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