Architect of Postal Banking Proposal Speaks Out

March 31, 2014
American Banker 
payday lending news
While the U.S. Postal Service (USPS) already offers domestic money orders and global money transfers, a paper released in January proposes to greatly expand its menu of financial services to reach consumers in underserved markets.

David Williams, inspector general for the USPS, says the Risk Analysis Research Center within his office last year began exploring how to meet the needs of Americans on the financial margins. The report noted that 38 percent of the country's post offices are in ZIP codes with no banks and 21 percent are in ZIP codes with just one. At the same time, it estimated that the public spent $89 billion on payday loans, check cashing, and other alternative financial services in 2012 alone. As a solution, the IG's office suggested the post office could help consumers and also shore up its bottom line in one of two ways: by selling reloadable prepaid cards that would let unbanked or underbanked consumers purchase goods and services online or by making small-dollar loans that charge less than payday lenders but still generate a profit.

The proposal set off a firestorm of debate, with Democrats in Washington embracing the idea and industry interests -- particularly small, community banks -- deriding it. Postmaster General Patrick Donahoe, meanwhile, says the post office itself -- not the independent IG office that produced the report -- also has reservations about the concept. Although Congress is not likely to act in the short term, the IG's office says it has an eye on moving away from the conceptualization phase and toward a plan for implementation.

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