Banking on the Post Office

Several years ago when my wife Susan and I traveled across Ireland by local bus, we headed toward a national cultural site a few miles beyond the nearest town. The route the bus took crossed a rural peninsula, and finally to the little community. As we wound through the country roads, old people climbed aboard, and when we arrived at the end of the line, still some miles from our destination, they all disembarked for the post office. We needed some stamps, so we followed.

But at the post office, no one did much postal business. Instead, they picked up their monthly retirement checks – then cashed them, before returning to their homes on the next bus. Of course, in between, there was time for a short stop at the pub and maybe the grocery store. As tourists, we seemed to be the only people interested in the local church.

I had not thought about this scenario much until I saw a piece in The Atlantic magazine in which a successful American writer realized that in a crisis he couldn’t come up with $400. Neither could 47 percent of the respondents in a recent poll by the Federal Reserve Board. People said they would either borrow the money or sell something.

Which must be why people borrow from check cashing stores, paying exorbitant interest rates above 300 percent. However, in most instances, I’ve learned, it doesn’t take a crisis. Most pay check loans cover monthly bills – rent, utilities and basic living expenses. Sadly, the customer base for these financial services involves a huge percentage of working America. Some 19 million households use payday lenders, nearly one in six, according to the Community Financial Services Association of America, which represents storefront lenders. Furthermore their director told Congress in February that “as many as 76 percent of Americans are living paycheck to paycheck.” That’s a huge potential market for customers who either do not or cannot use banks for their financial services.

Or perhaps the banks do not want these customers. In 2013, Bloomberg reported that 93 percent of bank closures since late 2008 had happened in zip codes below the national median income level. A recent study by the the Federal Reserve Bank of New York found that poor people were more than twice as likely as their higher income counterparts to live in “banking deserts” – rural and urban areas where banks do not have branches within ten miles of the community’s center.

But those same areas have post offices! Almost 40 percent of U.S. post offices are in zip codes where there are no banks. So it would make sense that an infrastructure network so embedded across the nation should provide financial services. And they used to. Your local post office used to sell federal savings bonds. It used to offer savings accounts – which immigrants found especially useful. Post offices still sell money orders. And some already offer wire services to transfer money to a handful of other countries.

Adding to those amenities would not be a giant leap. The Post Office proposes a “Postal Card” as the key to an array of financial services, including: ATM withdrawals, in-store purchases, paying bills, on-line payments, mobile transactions and even small loans. Such a system could save a poor family dependent on check-cashing stores an estimated $2,000 a year on interest and fees. With a positive image among the general public, a noted record on privacy and security, and a ubiquitous presence, the post office seems like a natural.

So who would oppose such a thing? I asked my friend Ruth Goldway that question. She served several terms on the Postal Commission, a number of years as its chair. “The banks,” she said. Even though they do not serve a vast segment of the population, they oppose any expansion of financial services that they don’t control. Offered the opportunity to partner with the post office, including something as simple as providing counter space in a location without banks, they don’t seem interested.

Goldway also pointed to conservative ideologues in Congress. They oppose any expansion of services by the post office. Instead, they would like to kill it, and they have been working toward that goal for some years.

So while 139 other countries, including Ireland, provide some financial services through their postal systems, America doesn’t. Offering such options could add to the post office’s bottom line and make the system financially self-sustaining, but that’s not the path where our elected leaders care to go. Yet, the overwhelming majority of check-cashing store users would prefer it.

Too bad. As Ruth Goldway said to me: “The post office is the place where people connect with their government.” I agree with her. We saw that in Ireland.

(Photo by Mollylou12)