Should the post office offer banking to survive?
By Olivera Perkins, The Plain Dealer, June 26, 2016.
A national coalition pushing for post offices to also provide banking services, as a way of keeping the U. S. Postal Service afloat, will hold a public meeting Tuesday in Cleveland.
A Grand Alliance to Save Our Public Postal Service, a coalition of more than 130 civil rights, environmental, faith-based and labor organizations, will hold a “field hearing” 6 p.m. Tuesday at East Mt. Zion Baptist Church, 9990 Euclid Ave.
Cleveland is one of five cities nationally in which the Alliance is holding such meetings. A coalition spokesman said Cleveland was chosen to highlight the plight of the underbanked, who frequently rely on check cashing, payday loans and other high-priced, often unregulated, financial services. Underbanked communities are those in which there aren’t enough banks to meet demand.
The Alliance says that about a quarter of Cleveland households are underbanked, citing statistics from the Assets and Opportunity Local Data Center in Washington, D.C. The national average is 20 percent.
Residents of underbanked communities would welcome an alternative to the high fees imposed at check cashing and other “shadow banking” businesses, said Deb Kline, director of Cleveland Jobs with Justice, a coalition of labor, faith and community organization focused on workers’ rights. She plans to attend Tuesday’s meeting.
“We have post offices located in areas, both inner city and rural, where we have banking deserts,” Kline wrote in an email. “This is why we have seen a proliferation of predatory check cashing and payday lending stores. Giving people an alternative, banking services at the post office would undoubtedly help eliminate the need for these predators.”
The Postal Service needs to revise its business model in order to address continuing financial struggles. Bill payments, business communication and other transactions that used to only be handled through First-Class mail can now be done online, eroding revenues from the Postal Service’s most profitable product, according to a General Accounting Office study released in January. At the same time, more business has shifted to shipping and packages, which isn’t as profitable as First-Class mail because these services are more labor intensive, the study found.
The Postal Service had a net loss of $5.1 billion in fiscal year 2015, which marked the ninth consecutive year of net losses, according to the GAO.
A report last year by the USPS Office of Inspector General said that postal banking “could benefit the 68 million underserved Americans who either do not have a bank account or rely on expensive services like payday lending and check cashing.” The report offered postal banking options, including:
- Expanding upon the financial products already offered at post offices, including money orders and international money transfers.
- Partnering with banks, credit unions and other financial institutions to provide products such as reloadable prepaid cards and small loans
- Establishing a full-fledged post bank
The report said postal financial services have proven profitable in other industrialized countries, accounting for 14.5 percent of revenue annually. If the same holds true for the Postal Service here, that would amount to $10 billion in revenue generated from financial services.
U.S. Rep. Marcy Kaptur, Democrat of Toledo, whose district includes parts of Lorain and Cuyahoga counties, is scheduled to attend the meeting. She said that if residents in underserved areas could get banking services at the local post office, it would be a win-win for them as well as the Postal Service.
“Postal banking should absolutely be on the agenda, especially in a city like Cleveland where so many are shut out of traditional financial services,” said Kaptur, whose district includes parts of the city.
Kline said said by offering banking, the Postal Service would be returning to its roots.
“Postal banking is not a new concept,” she wrote in an email. “The post office provided banking services until the late 60’s, and is greatly needed again today.”
U.S. Rep. Marcia Fudge, Democrat of Warrensville Heights, whose district includes parts of Cleveland, also believes postal banking should be explored.
“As a trusted institution with brick-and-mortar facilities in every corner of the United States, our public Postal Service is uniquely positioned to serve as a communications, finance and service hub for the 21st century,” she said in a news release.
Fudge said more than the declining amount of First-Class mail was causing the Postal Service financial problems.
“Unfortunately, my colleagues in Congress have unfairly burdened the Postal Service with a costly, unfunded mandate to pre-pay health care for retirees,” she said. “No other agency or business has to pay these costs in advance – and neither should the Postal Service.”
Alliance members will be passing out leaflets Monday — about the meeting and their push for postal banking — near payday lenders and check cashing businesses on Cleveland’s East Side.
The Alliance is holding meetings in Baltimore, Greensboro, North Carolina; New York City and San Jose, California.
Baltimore was chosen to highlight voting by mail and Greensboro to highlight how postal jobs have been a pathway to the middle class for African-Americans and other minorities, according to an Alliance spokesman. New York City was chosen because of its role as a banking center and San Jose was chosen to highlight the impact of e-commerce on the Postal Service.
For information about Tuesday’s meeting in Cleveland: (216) 431-1903.
