Lawmakers Debate Bill that Would Authorize No-Fee FedAccounts

In a July 21 hearing before the House Financial Service Committee, lawmakers debated the merits of an updated version of the Banking For All Act we mentioned in the in the July/August edition of this column.

The Access to No-Fee Accounts Act, as the updated bill is being called, would authorize what are called FedAccounts, where people could have access to a no-fee account with no minimum balance requirement backed by the Federal Reserve at their local post office, community bank or credit union. The system, proponents argue, would address one of the principal reasons millions of people remain unbanked or underbanked in this country – they often do not have enough money to meet traditional financial institutions’ minimum balance requirements to keep an account open. Without access to a bank account, the underserved often pay exorbitant rates to cash a check, pay their bills or send money to family or friends either across town or around the world.

With FedAccounts, consumers would be able to conduct the usual types of financial transactions that people with bank accounts today are able to regularly do. With a debit card, they could access cash at ATMs, make purchases at stores and buy goods online. Direct deposit, increasingly the way most people get their paychecks, would be made possible. Paying bills could be free or significantly cheaper than the predatory check-cashing and bill-pay counters that prey upon the unbanked and underbanked today.

At the hearing, Ameya Pawar, a senior fellow at the Economic Security Project, referred to the University of Michigan research we presented in the last edition of this column in his testimony, noting the value the postal network would bring to a banking system designed to serve everyone. He noted that “there are 21 million people who live in census tracts that do not have a single bank or credit union, and that is where the post office can fit in and serve as a conduit.”

In her testimony at the hearing, University of California at Irvine Law Professor (and friend of the Campaign for Postal Banking) Mehrsa Baradaran also made the case for why the Postal Service is well situated to serve as the access point for these new services. “Over the past ten years, as banks have become bigger and more profitable, 93% of bank branch closings were in LMI (low and medium-income) communities. Rural Americans have lost over half of their banks. Banks don’t serve these communities for the simple reason that there aren’t enough profits,” Baradaran said. “In fact, as banks have deserted many of these low-profit ZIP codes, the Post Office has remained, in accordance with its public mission.”

The hearing was also an opportunity to discuss another piece of legislation which could expand postal financial service. The Public Banking Act of 2021 is draft legislation which would encourage the creation of public banks at the state and local government levels. The bill would grant these new public banks equal footing with existing banks to access the Federal Reserve’s inter-bank payment systems and FDIC deposit insurance. Additionally, the bill would instruct the Postal Service to partner with these new public banks in order to offer retail financial services to consumers like the ones discussed above.

Today, the network of public banks in the country is small, but as we have reported here before, it is growing. In 2019, California passed legislation allowing cities and counties there to develop public banks, many modeled after the long-existing public Bank of North Dakota. While it may be trickier for the Postal Service to ultimately partner with a patchwork of smaller local public banks, the inclusion of the Postal Service in the draft bill is indicative of the gaining support for expanded postal financial services in Congress.

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