About one in four Americans either does not have a bank account or is forced to use high-interest alternatives such as payday lenders. In fact, there are some communities that don’t have any traditional banks at all.
The demographics of those forced “outside the system” financially skew younger, non-white, and poorer. They spend about $89 billion per year on interest and fees alone.
But there is a U.S. Postal Service post office in every community in the country, operating with low costs and freely accessible to all. Could this be a solution to the problem?
Almost every other country already does it: 183 other nations offer some form of financial services through their postal services.
What the bill does
It would be available and open to all, allowing features including checking accounts, savings accounts, low-interest loans, wire transfers, and debit cards.
There is actually historical precedent for this, as the USPS ran a banking system between 1910 and 1966. At its peak during the Great Depression, it comprised about one-third of the entire banking industry.
But the system was abolished due to a combination of reforms in the wider banking industry and the USPS being forced to issue higher interest rates amid the growing economy. It hasn’t existed for 52 years now, and most Americans by now probably don’t know that it ever happened at all.
What supporters say
Supporters argue the bill would take an existing and widespread institution that they claim is well-equipped to take on an additional task that would help millions of people, especially the most financially vulnerable.
“Millions of Americans are being forced into payday lending schemes that only exacerbate their money problems, and Congress has the ability to wipe out these predatory practices right now by creating a Postal Bank that would be accessible to everyone, everywhere,” said Senator Gillibrand. “For millions of families who have no access or limited access to a traditional bank, the simple act of cashing a paycheck or taking out a small loan to fix a car or pay the gas bill can end up costing thousands of dollars in interest and fees that are nearly impossible to pay off.”
“The Postal Bank would solve this problem by putting a retail bank branch in all of the U.S. Postal Service’s 30,000 locations, providing low-cost, basic financial services to all Americans, and effectively ending predatory lending nationwide,” Gillibrand continued. “Politicians in Washington have taken millions of dollars from payday lenders to help protect this industry’s predatory behavior on hardworking families, and it has to stop.”
What opponents say
One opponent is the former head of the U.S. Postal Service.
“The key thing for any successful business is to work within their core. We don’t know anything about banking,” Postmaster General Patrick Donahoe said in 2014 when speaking about the idea, which had been floated theoretically but not actually introduced as legislation.
“We’d be perfectly interested in talking to someone who would want to use the facility to accept a deposit,” Donahoe continued, “but to set a banking system up and lend money to the unbanked? We don’t know anything about that.”
Odds of passage
It awaits a potential vote in the Senate Homeland Security and Governmental Affairs Committee. The bill has not yet attracted any cosponsors.
Republicans are unlikely to support a bill that’s so opposed by the traditional banking industry, especially as the winds under GOP control are shifting the other way, such as a potential repeal of the Dodd-Frank financial industry reform of 2010.