U.S. Postal Service Not Equipped to Handle Banking, Industry Trade Groups Says

Dive brief:

  • Bank and credit union groups have spoken out against the US Postal Service’s (USPS) Postal Banking Pilot Program that was launched last month, claiming that the government agency is unable to adequately manage an operation that includes financial services.
  • new USPS services, available in Washington, DC; Baltimore; Falls Church, Virginia; and the Bronx in New York, include check cashing, bill payment, and ATM access, as well as upgraded money orders and wire transfers, NBC News reported Monday.
  • Business groups, including the Consumer Bankers Association (CBA), the American Bankers Association (ABA) and the National Association of Federally-Insured Credit Unions (NAFCU), argue that banking services should be left to financial institutions, not be placed in the hands of a government agency already grappling with its own funding problems.

Dive overview:

“America’s well-regulated and well-supervised financial services system requires banks to have policies, procedures and controls in place to ensure adequate risk management, regulatory compliance, consumer protection and privacy protection. – areas that the US Postal Service has little or no knowledge of, “Billy Rielly, an ABC spokesperson, said Tuesday.” Policymakers should strive to encourage banks to innovate and s ” build on long-standing efforts to increase financial inclusion, without relying on a federal agency without the ability to securely provide millions of American families with the reliable products and services they expect from their bank . “

As part of the pilot program, customers can bring payroll or business checks up to $ 500 to participating post offices to purchase single-use Visa gift cards. The pilot program also allows customers to make bill payments and access ATMs at post offices.

The ABA said a government-subsidized, postal-run banking service would threaten progress of the Cities Financial Empowerment Fund (CFE) Bank On program, an effort to reduce the number of unbanked households. in the USA.

“It’s easier than ever to open a bank account in this country, including Certified Bank On accounts, which are now available in more than half of all US bank branches, and feature low costs, no fees. overdraft, robust transaction capabilities such as a debit or prepaid card and online bill payment ”, the told the ABA Banking Journal on Monday. “Policies that create new incentives for Americans to stay unbanked undermine important efforts to get people into the banking system so they can build their financial futures.”

The NAFCU said the program “stretched the limits” of the USPS ‘statutory authority and would allow the “underfunded and understaffed” agency to unfairly compete with nonprofit financial institutions.

The USPS, led by Postmaster General and appointed by the Trump administration, Louis DeJoy, is expected to lose $ 160 billion over the next 10 years, according to the Washington Post.

“Last week, the USPS informed American consumers that it could not handle its current mission of delivering mail on time,” NAFCU President and CEO Dan Berger said on Tuesday in a statement. communicated. “Now it has emerged that the USPS is quietly expanding its reach to financial services without providing much clarity on how it plans to balance its current duties with this new company.”

To better help underfunded and underserved people, Berger said Congress should instead allow all credit unions to add underserved areas to their membership areas.

“The USPS already has its hands full with its current mission and does not have the bandwidth to perform such a large and complex operation,” he added.

Industry trade groups have spoken out against efforts to revive postal banking services in the past.

The ABA, CBA, Credit Union National Association and The Clearing House urged may paper to find alternatives to postal banking services that include low and moderate income consumers. The groups argued that the driver’s licenses or passports needed to use these services can be expensive for some demographics.

In August 2020, NAFCU also pushed back efforts by the country’s largest bank, JPMorgan Chase, to rent space for the bank’s ATMs in post offices.

“Allow free mega-banks on Wall Street [rein] soliciting the customers of the community post offices would be nothing more than a seizure of power aimed at increasing profits ”, Berger said in a press release in response to reports that the New York-based bank had held preliminary discussions with the USPS.

Long-time advocates of postal banking services include lawmakers Sen. Kirsten Gillibrand, D-NY, who presented the law on postal banks in 2008, and repeatedly argued for post offices to offer expanded financial services, and Senator Sherrod Brown, D-OH, which introduced a bill last year requiring banks to maintain “digital dollar wallets” so unbanked consumers can access stimulus payments.

The bill would have allowed consumers to set up “FedAccounts” at local banks and post offices. A 2020 finance law adopted by the house included an amendment to allocate $ 2 million for a postal banking trial program.


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