Short on cash this week? Perhaps your friendly neighborhood post office could help.
That’s the idea proposed in a new Office of Inspector General report and quickly championed by U.S. Sen. Elizabeth Warren, a Massachusetts Democrat.
The inspector general for the U.S. Postal Service proposed that the nation’s infrastructure of post offices is superbly situated to help the millions of Americans known as the “underbanked.” These are mostly lower-income people who don’t use mainstream banks, perhaps because they can’t afford them, or they’ve been blackballed for transgressions such as a bounced check, or they simply don’t have access to a bank in their city neighborhood or rural community.
According to the report, the average unbanked household spends $2,412 a year — almost 10 percent of its income — on alternative financial services like check-cashing stores and payday loan companies. That’s money these families aren’t using to pay bills, shop for necessities or put into a checking account. Rather, it’s money that props up a predatory network that sucks money out of communities and continually asks for more.
Despite some consolidation, a post office branch is never too far away. So, the inspector general has proposed, what if these places offered services such as check cashing, small emergency loans, and reloadable prepaid cards? They could offer lower rates than the corner check-cashing shop or payday lender.
This is what you call a win-win situation. Lower-income persons could get closer to the kind of financial stability that comes from having a checking account. And the post office would gain a new source of revenue. As the inspector general report says, “If even 10 percent of what the underserved currently spend on interest and fees instead went to more affordable offerings from the Postal Service, it could lead to $8.9 billion in new revenue per year.”
Nice. So what’s standing in the way?
The quick-cash industry, of course, and its protectors in Congress.
As we have seen in Missouri, where attempts to cap sky-high interest rates on payday loans are repeatedly beaten back by a ton of cash from the short-term lending industry, these folks aren’t about to watch the U.S. Postal Service, of all things, horn in on their profits.
I can frame the pushback for you now: How dare an inefficient government bureaucracy, perhaps the most inefficient bureaucracy of all, even contemplate moving in on small businesses, the job-creators of the world, who have been in the trenches helping people turned away by the banks?
Well, here’s why. Those small business (most of which belong to chains, by the way) think nothing of charging their “neighbors” exorbitant rates destined to entrap them in debt. Repeat customers, in fact, are an essential element of their business model. In Missouri, the annual percentage rate of the average payday loan is more than 400 percent. The postal service is positioned to offer the same services at much fairer rates.
The inspector general’s idea isn’t new. Postal services in some other nations already offer financial services.
In an essay published on The Huffington Post, Warren vowed to pursue the idea.
“This is an issue I am going to spend a lot of time working on — and I hope my colleagues join me,” she said. “We need innovative ways to create pathways for struggling families to build economic security, and this is an idea that falls in that category.”
Good for her. It will be a heck of a fight, but worth the effort.
Barbara Shelly is a columnist for the Kansas City Star.
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