US Postal Service offers new banking services in four cities

Pilot programme marks potential return of postal banking to compete with predatory payday loan companies and expand access to America’s ‘unbanked’

A select number of US Postal Service offices in four cities are offering a some banking services – including cashing cheques – as part of a test programme that could help reduce millions of Americans’ reliance on predatory payday loan and cheque-cashing stores while boosting the beleaguered agency’s finances.

It marks one of the largest efforts yet to re-establish a postal banking system, which was largely phased out in the 1960s, following calls among progressive lawmakers and advocates to democratise banking access for millions of so-called “unbanked” or “under-banked” Americans.

The pilot programme, in collaboration with the American Postal Workers Union, quietly began offering cheque-cashing and bill-paying services, access to ATMs and expanded wire transfer and money order offerings last month in New York City, Washington DC, Baltimore and Falls Church, Virginia. A wider postal banking programme would require an act of Congress, though progressive lawmakers including Alexandria Ocasio-Cortez have supported measures to revive postal banking.

Pay cheques up to $500 can be exchanged for Visa cards for a flat fee of $5.95 – putting the USPS into direct competition with cheque-cashing companies that often charge higher fees for similar services.

Postal banking was supported by Senator Bernie Sanders in his 2016 and 2020 presidential campaigns, and the idea was rolled into his and Joe Biden’s task force agenda during Mr Biden’s 2020 run.

Roughly 60 million Americans who live in areas with access to the USPS office do not have a community bank branch, according to a May 2021 study from the University of Michigan. Banking services at local post offices could benefit Americans living in both urban and rural areas, particularly people of colour in rural areas, according to the report.

Nearly one in five US adults are unbanked, according to the Federal Deposit Insurance Corp, or FDIC, which estimates that 8.4m million American households do not have accounts with a bank. Another 24.2m households are “underbanked,” or have checking and/or savings accounts but also rely on payday loans and similar services.

Last year, as the federal government issued direct payments to support Americans during the pandemic, the union said that reviving postal banking is “one way to ensure that everyone in the country had access to essential financial services, and in times like these when the government is eager to get money into consumers’ hands quickly, it would be able to reach them quickly and efficiently, without exacerbating existing problems of income inequality and other inequities of our existing financial system.”

The University of Michigan study reported that the USPS likely “is well-positioned to offer basic retail financial services to the 20 million people who received stimulus checks by mail and the 33 million people that banks routinely exclude each year by charging high costs and fees.”

The programme also follows growing contempt among union members and Democratic lawmakers against Postmaster General Louis DeJoy, who was appointed by Donald Trump and is overseeing implementation of cost-cutting cuts to mail deliveries that will slow a third of all letter and parcel delivery to 27 states, according to an analysis by The Washington Post.

“The people deserve the prompt, reliable and efficient mail service promised under the law,” union president Mark Dimondstein said in a statement last week. “We believe management’s response to months of poor performance should be to improve service and regain the public’s trust, instead of this focus on moving the goalposts and slowing service standards.”

US Rep Bill Pascrell, among the most prominent critics of Mr DeJoy’s administration, said on Twitter that “the future of USPS depends on implementing” postal banking.

“Postal banking will unite rural and urban communities and crush predatory payday lenders,” he said.