Elizabeth Warren backs proposal to make the USPS a ‘public option’ for payday lending

By Travis Gettys
Monday, February 3, 2014 15:31 EDT
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A letter carrier delivers the mail. Photo: Shutterstock.com.
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Post Office branches could replace payday lenders under a proposal endorsed by Sen. Elizabeth Warren (D-MA).

The Office of the Inspector General reported last week that 68 million Americans — more than one-fourth of all households – have no checking or savings account and spent about $89 billion in 2012 on interest and fees on non-bank financial services.

Those households spend about $2,412 a year on these fees – or roughly the same amount they spend on food, Warren noted in a column posted Saturday at The Huffington Post.

“Think about that: about 10 percent of a family’s income just to manage getting checks cashed, bills paid, and, sometimes, a short-term loan to tide them over,” Warren wrote. “That’s more than a full month’s income just to try to navigate the basics.”

Warren said that same OIG report examined the possibility of the U.S. Postal Service offering some basic banking services, including bill payment, check cashing or small loans.

Under the proposal, which has been discussed in public policy circles for years, USPS would form partnerships with banks on a public option, with no shareholder demands, to offer financial services at post office branches to the most economically vulnerable Americans.

The inspector general’s report suggests that customers could cash paper checks at the Post Office and deposit the money onto a “postal card” that could be used like a debit card to pay for purchases or withdraw cash at ATM.

The report also suggested that USPS could offer interest-bearing savings accounts and small loans as a less-costly alternative to payday lending.

“Families rely on financial services more than ever, but those who need them most — who struggle to make ends meet — too often must contend with sky-high interest rates and tricks and traps buried in the fine print of their loan products,” Warren argued.

The Postal Service has offered simple financial services before, reported The New Republic, beginning in 1911 and stopped in 1967 only after banks took away its market share by offering higher interest rates.

The post office, however, continues to issue domestic and international money orders and prepaid debit cards through American Express.

The inspector general’s report argued that this would allow USPS to enter banking without congressional approval, despite 2006 restrictions placed on offering of new, non-postal services, because it is already offering non-bank financial services.

Warren said policymakers have already started working on ways to protect consumers from predatory lenders, such as the new Consumer Financial Protection Bureau to regulate the industry and hold payday lenders accountable.

The senator pointed out that postal services in other countries have already started offering similar services and have seen their earnings increase – which could help save the constitutionally authorized government agency, which ended last year with a net loss of $5 billion.

USPS has lost money for seven consecutive years after Congress passed a measure requiring the service to prefund its employee benefit obligations, among other recommendations.

[Image: A letter carrier delivers the mail via Shutterstock]

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