Can a Post Office Be a Bank?

Originally published on The Huffington Post.

There has been lots of controversy over the U.S. Postal Service’s plan to sell off dozens of post office properties across the country by a real estate firm chaired by the husband of the Senior U.S. Senator from California, presumably to raise money to save the agency. Instead of privatizing the post office, there may be a better way to raise revenue for the post office by providing financial services for many who need access to credit and short-term capital.

Earlier this year, the Office of the Inspector General (OIG) of the U.S. Postal Service (USPS) issued a report arguing that USPS could offer banking services, including bill paying, check cashing and small loans to those 68 million Americans who have limited or no access to basic financial services, including short-term loans and possibly debit cards. This one-quarter of all U.S. households who are mostly lower-income individuals, are “unbanked,” mostly relying on private check cashers, pawn shops and payday lenders who prey on them to generate $89 billion in interest and fees, mostly charging exorbitant interest rates and charges on small short-term loans and cashing checks.

Instead of selling off public properties, many of historical significance, the OIG suggested that the postal service could discount financial services up to 90% and claimed that USPS could earn up to $8.9 billion in additional revenue by lowering charges to those that are underserved. The proposal has been supported by Senator Elizabeth Warren, who believes that post offices provide an ideal physical infrastructure for furnishing such services to many communities deserted by banking institutions: Roughly six in 10 post offices nationwide are in zip codes with either one or zero bank branches.

While the OIG report and Senator Warren’s goals are lofty, they won’t be easy to implement. Community Development Finance (CDF) has had five years of experience in running a non-profit check cashing and payday loan operation, as well as providing financial coaching, small business services and referrals to banks and credit unions. Dan Leibsohn, CDF’s Executive Director, believes that it is possible to create a large-scale economically viable financial services program to offer such programs, but wants to make sure that USPS knows all of the possible technical and logistical pitfalls as well as all the small business operational issues that need to be seriously considered before jumping into a national financial services program based upon numerous disparate local credit needs. In this regard, he has offered advice and insights based upon CDF’s experience running a similar community program in the Fruitvale area of Oakland, California.

Congress and USPS needs to realize that it will take an initial commitment of capital, staff time, training and oversight, as well as entrepreneurial skill and innovation to transition USPS into a successful national program to provide financial services to millions of Americans that need access to capital.



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