Why Turning Post Offices Into Banks Would Be Win-Win
Both America’s lower class and the United States Postal Service are struggling financially. If only there were a way to tackle both problems. It seems that U.S. Senator Elizabeth Warren has a proposal to address this situation. She wants to introduce basic banking services at post offices so that Americans could go to their nearby post office to cash checks and obtain small loans.
Why do Americans need easier access to banking services? It may surprise you to learn that a full 25% of Americans do not belong to any type of bank. Often, banks aren’t even accessible to citizens living in poverty; in plenty of poor areas, bank branches don’t even exist.
As a result, poor Americans must instead turn to check cashing businesses to complete their financial transactions. With nowhere else to cash their paychecks or receive small loans, they go to these predatory companies that charge them exorbitant fees and unconscionable interest rates.
Like more and more people are pointing out, it’s actually quite expensive to be poor. Studies find that the poorest Americans wind up spending an average of $2,400 per year on fees at these payday lender businesses. That’s approximately 10% of their total annual income, or as Warren points out, equivalent to these families’ food budgets. Check cashing companies are able to swindle the poor in this manner because they know their clientele has no other way to access the money they need to scrape by.
That’s why Warren hopes the post offices could step in. Surely there is a way to offer bank-less Americans simple financial services at reasonable prices rather than taking them for the little that they have. From a location standpoint, using post offices as stand-in banks makes sense, too. Post offices are everywhere, often at the center of their communities. USPS research uncovered that 59% of post offices are in zip codes with no more than one (but often zero) existing bank branch, so they would prove immediately useful to people without bank access.
For the record, the USPS Inspector General, David C. Williams, is already on board. After crunching the numbers, Williams sees that offering these services would not only save America’s least fortunate households about 90%, but would also net the USPS about $9 billion in additional revenue each year. It appears to be a win-win situation.
With that endorsement, Warren’s plan is more than a pipedream. Besides, comparable models have already proven successful — other countries have introduced similar financial services at their post offices and seen their profits rise significantly.
“The Postal Service is huge – employing more than a half million people – and its history is long and complicated. Any change will take time,” wrote Elizabeth Warren in her recent op-ed. “But this is an issue I am going to spend a lot of time working on – and I hope my colleagues join me. We need innovative ways to created pathways for struggling families to build economic security.”
Inevitably this proposal will face opposition in Congress because shady check cashing businesses have lobbyists and poor people do not, but let’s hope that Warren’s crusade to provide meaningful reform for the lower class through practical solutions wins out in the end.