Postal banking, in which U.S. post offices nationwide are able to function as low-cost banking hubs providing basic services such as savings accounts and micro-loans, has long been endorsed by anti-poverty groups as an inexpensive way to serve communities that have been largely abandoned by—or gouged by—commercial banks and lenders.
A new bill introduced by Sen. Kirsten Gillibrand seeks to prod the Postal Service into doing just that.
“It is really an elegant solution,” said Gillibrand, who emphasized that benefits to the postal system, though significant, were a secondary consideration. “You have a system that already works. And you have the ability to let the unbanked have banking in a way that’s affordable.”
Under Gillibrand’s proposal, Americans could cash paychecks and deposit money in accounts free of charge at each post office location. Deposits would be capped at the larger of two amounts ― $20,000, or the median balance in all American bank accounts.
The postal banks would be able to distribute loans to borrowers of up to $1,000 at an interest rate slightly higher than the yield on one-month Treasury bonds, currently about 2 percent.
That last bit will means the bill will likely face stiff opposition from the payday banking sector, a group that has gotten its way with surprising (and campaign donation-fueled) regularity despite a history of rampant customer abuse. While the industry is holding its fire at the moment, that will likely change if the bill begins to attract wider support—not an issue with the current Republican leadership, but far more likely if the House or Senate changes hands in November.
A postal banking system would be an alternative to the for-profit payday lending system, in which people routinely pay triple-digit fees to borrow money for bills that come due before their next paycheck. The average payday loan of $375 typically costs a borrower an additional $520 in interest and fees, according to Pew Charitable Trusts.
[...] The average underbanked household has an annual income of $25,500, and spends nearly 10 percent on alternative financial products and associated fees, according to a 2011 KPMG study.
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