By Yushen Wang
Earn, invest, save; these are the words that we frequently put before the word “money.” Some of us can do those things on our phones as easily as making a call, but that’s certainty not true for all Americans.
Nearly 28 percent of US households (or 68 million people) do not have access to affordable financial services. And even if they want, they have to pay far more (on average of $2,400 per household per year) to only have access to banking services. But, shouldn’t it be a right to be banked?
Politicians, economists, and the general public are craving a change to this unethical phenomenon, through a proven method: postal banking.
International or older people may be more familiar with this term. Postal banking, which allows anyone to do their banking — from bill payment to taking out small loans — at the same post office where they buy stamps, is not a new concept in this or other countries. In fact, it was used in the US from 1911 to 1966, and was so central to our banking system that it was seen as a precursor to the safety provided by federal deposit insurance.
Postal banking was phased out so quietly that only after high-cost payday lenders and check-cashers flooded the low-income neighborhoods that banks had deserted, did people begin to worry. As the US Postal Service (USPS) Office of the Inspector General (OIG) explained in its 2014 report, unscrupulous financial services like check-cashing stores, pawnshops, and payday lenders gouged a total of $89 billion in interest and fees from the unbanked.
“The poor pay more,” wrote US Sen. Elizabeth Warren in a recent blog post, “and that’s one of the reasons people get trapped at the bottom of the economic ladder.” Righting that wrong is one of the main reasons we should promote a reinstatement of postal banking.
There are other reasons to bring back postal banking, too. OIG’s report showed that post offices could deliver these same banking services at a 90 percent discount, saving the average underserved household over $2,000 a year while still providing the USPS with $8.9 billion in new annual profits, significantly improving its troubled balance sheet.
Mehrsa Baradaran, associate professor at the University of Georgia School of Law, published her new book on postal banking this October to further lay out its necessities and promising effects:
… providing these services at much lower costs through postal offices has a triple advantage of reviving the beleaguered but too-important-to-fail postal service, putting the money back in the pockets of the poor, and providing an alternative to a harmful industry that has proved difficult to regulate …
Postal Banking is getting attention as a winning solution for good reason. The USPS is the world’s largest retail network, with over 30,000 locations, more than the total number of Walmart and Starbucks stores. Its public trust and confidence is ranked highest among all federal agencies by millennials. Natural advantages like security, existing experience in dealing with financial products, and a skilled workforce would make implementation easy.
The products that USPS can offer are diverse. Besides basic functions like money transfers, bill pay and check cashing, it can also provide its own prepaid debit cards and provide small-dollar loans. As Professor Baradaran mentioned in her book, postal savings accounts could provide a much-needed financial buffer that would even diminish the need for short-term credit. Having just a few hundred dollars stored away can make a significant difference to a moderate-income family facing an emergency.
Postal savings accounts can even reinvigorate a culture of bank saving that has been long lost in the US, but retained in Japan and Germany, precisely because of their strong postal banking network, Professor Baradaran explains in How the Other Half Banks. A 2015 survey discussed in the book shows that over half the US population have savings they do not deposit in banks, many admitting they store their cash in sock drawers, cookie jars, under mattresses or in their freezers. Professor Baradaran muses in her book whether it might be possible that, just as in the 1900s, hoarded money from across the country would pour into postal banks from under mattresses, as well as from prepaid cards or from funds otherwise wired abroad.
With promising benefits and an underbanking crisis facing the poor, Congress needs to take immediate action to bring a public option for financial services back to the United States. Senators Warren and Bernie Sanders, along with the US Conference of Mayors, have voiced their support for The Campaign for Postal Banking. Nobel Prize-winning economist Joseph Stiglitz also included a call for a postal savings bank in his report, Rewriting the Rules of the American Economy.
The number of supporters is increasing. In fact, on Thursday, 150,000+ petition signatures were delivered to the USPS Postmaster General, Megan Brennan, to push for immediate implementation of simple financial services like fee-free ATMs, bill paying and check cashing.
We are seeing the progress in the fight to protect low income Americans from predatory lenders and other unscrupulous financial services, but that’s not enough. The poor are waiting for a helping hand, and postal banking is a proven and familiar one. Your support and voices are needed to push Congress for action. The sooner postal banking is made law, the easier the road will be to getting the poor back on their feet.
Yushen Wang is a fellow in Public Citizen’s Congress Watch division