Banking groups are bucking the notion of the U.S. Postal Service getting involved in banking after the USPS rolled out a pilot program in four locations.
Last month, the Postal Service began allowing customers to cash payroll and business checks at its locations (up to $500) in exchange for disposable gift cards. Aaron Stetter, executive vice president for policy and political operations with the Independent Community Bankers of America, said that his group feels as though the rollout is a “foot in the door” for the government to weigh future, expanded proposals.
The goal of postal banking is to bring the unbanked and underbanked population into the banking system. Stetter told the Washington Examiner during an interview that instead of the government stepping in and using the USPS to bring that group into the fold, the unbanked should utilize the thousands of community banks across the country.
Stetter said that while the USPS thinks it may be able to turn a revenue through offering banking services, the complexity of the banking system would make the venture costly.
“We feel that the Postal Service just lacks that ability to get into financial services and to do it adequately,” he said. “Why create a stripped-down kind of second banking system for poor people when the goal should be to get every American citizen into the traditional banking system?”
The American Bankers Association, the largest banking trade group in the United States, is also opposed to running banking through the post office.
Jeff Sigmund, a spokesman for the ABA, told the Washington Examiner that the solution to high retail check cashing fees should not be a government-funded service through the Postal Service. He said that it is “easier than ever” to open a new bank account in the U.S.
“Policies that create new incentives for Americans to remain unbanked undercut significant efforts to bring people into the banking system so they can build for their financial future,” Sigmund said.
The pilot program in question rolled out on Sept. 13 in Baltimore, Washington, D.C., Falls Church, Virginia, and the Bronx, New York. The Postal Service said that the pilot is being done in collaboration with the American Postal Workers Union.
While the U.S. formed a postal banking system in 1911, that program was undone by Congress in 1966. Some liberal lawmakers have since pushed to revive it, with regulatory hawks such as Sen. Elizabeth Warren of Massachusetts advocating for the idea.
Sen. Kirsten Gillibrand, who has previously brought forward legislation to establish a retail bank in all Postal Service locations, told the Washington Examiner on Monday that the pilot program is a “great first step.”
“While the products it will offer are not as expansive as those contained in my legislation, the Postal Banking Act, a pilot program will demonstrate the value to these communities, and show that the USPS can effectively service underbanked urban and rural communities,” the New York Democrat said in a statement.
While postal banking has been embraced by some Democrats, Republicans are not fans of the idea.
Sen. Pat Toomey, the ranking member of the Banking Committee, torched the notion of having the Postal Service become involved in banking. He said one would have to “work very hard to come up with a worse idea.”
“Even if the U.S. Postal Service was the most competent, professional, and best-run organization on the planet, they should not be in the business of banking. We have banks,” the Pennsylvania Republican said in a statement to the Washington Examiner. “The idea that the government is going to do a better job is just laughable.”
The Postal Service also might have a challenging time with logistics should it extrapolate upon the pilot.
Billy Rielly, a spokesman for the Consumer Bankers Association, asserts that the U.S. financial services system is filled with complex policies, controls, regulatory compliance, and risk management that the Postal Service has little to no knowledge of.
Lawmakers should be working to encourage banks to innovate and build upon “longstanding efforts to increase financial inclusion, not deferring to a federal agency without the capacity to safely provide millions of American families the reliable products and services they have come to expect from their bank,” Rielly said in a statement.
Congress would have to pass legislation in order to expand the pilot program beyond what it is right now.
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Original Author: Zachary Halaschak
Original Location: Banks criticize USPS experiment with banking services