Should the U.S. Postal Service get in the check-cashing business?
April 2, 2014
By Jeremy Quattlebaum, Student Voices staff writer
How often do you use snail mail to send a letter or pay a bill? It’s probably a rare occurrence, and that’s one reason the U.S. Postal Service has been struggling financially for years.
The agency has posted $26 billion in net losses since 2011 because of a sharp decline in mail volume and a congressional requirement that it make advance payments on future retirees’ expected health care costs. The Postal Service is an independent agency of the federal government that receives no direct tax dollars for its day-to-day operations, but it is subject to congressional control. Article I, Section 8, Clause 7, of the Constitution gives Congress the power and the responsibility: “To establish Post Offices and post Roads.”
Some of its proposals to solve its financial predicament – cutting Saturday delivery and closing post offices – have been blocked by Congress.
But the Office of Inspector General of the U.S. Postal Service has come up with a new plan to help the struggling Postal Service become profitable: For starters, letting you cash your paycheck at a post office.
In the United States, 68 million people are underserved by banks, meaning that they live in areas where there are few banks, if any, or they don’t have bank accounts or regular access to a bank account. The FDIC, the regulatory agency that oversees banks, estimates that 8 percent of Americans do not have any type of bank account or connection to a bank. This means that every time they need to cash a check, they have to go to a check-cashing business. And these services are expensive.
Check-cashing outlets charge high interest rates or fees. Sen. Elizabeth Warren (D., Mass.) says that these check-cashing services cost households $89 billion in 2012 and that mostly low-income people use the services. “The poor pay more (for banking services), and that’s one of the reasons people get trapped at the bottom of the economic ladder,” Warren wrote in a Huffington Post blog entry.
“USPS could partner with banks to make a critical difference for millions of Americans who don’t have basic banking services because there are almost no banks or bank branches in their neighborhoods,” Warren wrote.
The inspector general’s report recommends that the Postal Service, which already sells money orders, extend its basic banking services by first offering reloadable debit cards, much like companies such as T-Mobile and Walmart.
The report says the Postal Service could earn $8.9 billion a year if it captured just 10 percent of the interest and fees generated by the 86 million Americans who are underserved by banks. The inspector general also says that the plan offers a public service by helping low-income Americans who are underserved by banks.
“The physical presence is already there to serve the needs of Americans,” Charles Crum, an economist in the Inspector General’s Office told the Washington Post. The Postal Service has 32,000 locations. “Also, the Postal Service is not beholden to shareholders to maximize profits,” so it could keep fees low, Crum said.
While banks don’t have much interest in setting up in small, rural towns or economically depressed areas, they still aren’t excited that the Postal Service might be competing on their turf. Ken Clayton, chief counsel for the American Bankers Association, a banking lobbying group, told the Washington Post: “We’re deeply concerned that the U.S. Postal Service is trying to drive the creation of a new [government-sponsored entity] engaged in banking services, which is not subject to the same level of regulation.”
“This new entity could be perceived by many as a government-endorsed and preferred provider of financial products,” he said. “The impact on banks already serving these communities would be substantial.”
Some experts also question whether the Postal Service can actually make money from financial services. James Campbell, a consultant on postal policy, told Time magazine: “It doesn’t sound crazy, but it doesn’t sound like a big moneymaker, either.” He said the plan also did not address the steep decline in mail volume.
What do you think?
Should Congress let the Postal Service offer check-cashing and debit-card services? Would that be fair competition for private businesses? Is helping underserved individuals important? Join the discussion and let us know what you think!
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