Create Post-Office Banks For Under-served Americans: Gillibrand

Taking the U.S. Postal Service into the 21st century while helping millions of Americans get access to banking services is the purpose of major new legislation now before Congress. U.S. Senator Kirsten Gillibrand announced legislation to create a Postal Bank, which would establish a retail bank in all of the U.S. Postal Service’s 30,000 locations.

“For millions of families who have no access or limited access to a traditional bank, the simple act of cashing a paycheck or taking out a small loan to fix a car or pay the gas bill can end up costing thousands of dollars in interest and fees that are nearly impossible to pay off," Gillibrand said in the announcement. "The Postal Bank would solve this problem by putting a retail bank branch in all of the U.S. Postal Service’s 30,000 locations, providing low-cost, basic financial services to all Americans, and effectively ending predatory lending nationwide.

"Politicians in Washington have taken millions of dollars from payday lenders to help protect this industry’s predatory behavior on hardworking families, and it has to stop.”

The Postal Bank would effectively end predatory payday lending industry practices overnight by giving low-income Americans, particularly communities of color and rural communities, access to basic banking services that they currently don’t have, she said.

High-cost, predatory financial products like payday loans cost the average underserved household 10 percent, or $2,412, of their gross income in fees and interest. This adds up to about $100 billion of lost savings for low-income families across the country, and results in diminished funding for rent, food, and childcare, as well as an inability to build credit, Gillibrand staffers said.

The lack of access to traditional banking services makes it nearly impossible for low-income Americans to escape the cycle of poverty because they are often forced to spend large percentages of their income to cash their paychecks or pay back high-interest predatory payday loans.

This isn't a new idea — but it's being re-fashioned for the 21st century.

“Postal banking was America’s most successful experiment in financial inclusion. Today, there are many communities across the country that are banking deserts," said Mehrsa Baradaran, Associate Professor of Law at the University of Georgia School of Law and an expert on Postal Banking who authored How the Other Half Banks: Exclusion, Exploitation and the Threat to Democracy. "The only financial service providers are fringe lenders and check cashers whose business model relies on the poor paying more for banking services than anyone else. This is a threat to our democracy.

"Yet post offices serve all of these communities regardless of cost and without exploitation. Postal banking can provide safe, accessible, and much-needs financial services to the most struggling communities in our country. It will make it less expensive to be poor."

Under Gillibrand’s bill, any American could open an account at the Postal Bank.

Gillibrand’s legislation would establish a retail bank in all of the U.S. Postal Service’s 30,000 locations, including the 1,506 locations in New York State.

Post Offices are located in nearly every community, including many rural and urban low-income communities that have seen many recent bank closures and communities in the Hudson Valley where there seems to be a bank on every corner. The Postal Bank would be accessible to Americans of all income levels.

Specifically, the Postal Bank would offer the following services:

• Small-Dollar Checking Accounts: Low-cost checking accounts for direct deposits, check cashing, and bill paying.
• Small-Dollar Savings Accounts: Interest-bearing savings accounts that build wealth and could be used in combination with other federal, state, and local savings programs.
• Small-Dollar Loans: Low-fee and low-interest rate micro-loans for customers.
• Transactional Services: Debit cards, low-fee cash machines, online services, and bill payments.
• Remittance Services: Domestic and international wire transfers

“Millions of Americans are being forced into payday lending schemes that only exacerbate their money problems, and Congress has the ability to wipe out these predatory practices right now by creating a Postal Bank that would be accessible to everyone, everywhere,” Gillibrand said.