Opinion

The Great Debate

Transforming Post Offices into banks

By Helaine Olen
February 5, 2014

The U.S. postal service inspector general put out a report last week suggesting an intriguing way to shore up the ailing institution’s finances: Let the mailman double as a bank teller.

The plan? The post office would offer services designed to appeal to America’s unbanked and under-banked — the more than 50 million adults who either have no checking or savings account, or use high-cost, predatory services like payday loans to supplement traditional banking needs.

This sounds like a win-win. Americans — particularly low-income Americans — clearly need greater access to low-cost financial services. At the same time, many financial institutions have been complaining for years that providing banking services to low-income Americans is costing them money. So much so that they can barely bring themselves to open bank branches in anything less than well-heeled neighborhoods.

Surely, they would embrace any plan that could help rid them of these undesirable customers, while offering a new-found opportunity to make money.

Not so fast.

The banking sector immediately threw a hissy fit. “This would be like the banking industry moving into running the airlines,” Richard Hunt, the president and chief executive of the Consumers Bankers Association told American Banker last week. Another executive compared the plan to the Ford Edsel.

What gives? Is it just that bank archenemy Senator Elizabeth Warren (D-Mass.), whose relationship with financial services most resembles Batman’s with the Joker, said she liked the scheme almost immediately?

Let’s take a look.

If the plan went through, in addition to selling stamps and processing mail, the post office would offer prepaid cards — one that would allow users to pay bills online, and withdraw money at ATMs. The post office would also develop services to let customers save and borrow money.

It’s not like the banks would be on the outside looking in. There is a continuing role for them in the inspector general’s plan. Not only could they handle the back office support for these new financial products and services, they could even buy the loans from the post office.

What could the financial services world possibly object to in this? Well, as I say to my children: Just because someone says something, doesn’t mean it’s true.

Turns out banks are not actually losing money on low-income Americans. In fact, the less than wealthy have turned into a nice little profit center for the big banks. If these customers want to stay, the banks make them pay.

The median overdraft charge is $34 at large banks and $30 at smaller financial institutions, according to a report from the Consumer Financial Protection Bureau. The result? Moebs Services, a financial research firm, estimated banks took in $32 billion in overdraft fees in 2012.

That’s not all. Until a recent threat of crackdown by the Consumer Financial Protection Bureau, any number of banks offered something called “deposit advance products.” These were, in essence, a payday loan available at the bank, with annual interest rates of more than 300 percent.

Moreover, many banks see their walk-in customers as an easy source of sales, pitching them on everything from auto loans to high-cost, less-than-well-performing mutual funds. How much so? Well, the Los Angeles Times reported last month that Wells Fargo threatened to fire employees who didn’t meet stringent sales goals:

Wells Fargo branch manager Rita Murillo came to dread the phone calls.

Regional bosses required hourly conferences on her Florida branch’s progress toward daily quotas for opening accounts and selling customers extras such as overdraft protection. Employees who lagged behind had to stay late and work weekends to meet goals, Murillo said.”

The result?

“Wells Fargo & Co. is the nation’s leader in selling add-on services to its customers. The giant San Francisco bank brags in earnings reports of its prowess in ‘cross-selling’ financial products such as checking and savings accounts, credit cards, mortgages and wealth management. In addition to generating fees and profits, those services keep customers tied to the bank and less likely to jump to competitors.”

This sort of borderline predatory behavior doesn’t exactly make for great customer service. It might, in fact, leave customers searching for alternatives.

As Felix Salmon pointed out, if the post office could somehow get congressional approval to offer up banking services, there is nothing to stop it from attracting a more financially fit crowd.

No wonder the banks don’t like the plan.

 

PHOTO (TOP): U.S. Post Office and Court House in Larado, Texas. Courtesy of LIBRARY OF CONGRESS

PHOTO (INSERT): The entrance of a United States Post Office is seen in Manhasset, New York, August 1, 2012. REUTERS/Shannon Stapleton 

 

Comments
17 comments so far | RSS Comments RSS

Great idea; including issuing ‘branded credit cards’ – as long as the earnings are used to offset the losses on mail… First new idea on re-making the post office in a competitive manner that I’ve heard..

Posted by willich6 | Report as abusive
 

Giving USPS one more reason to fail? If it can’t compete against UPS and FedEx, why would it do better against BofA and Wellsfargo? Has anyone estimated the cost of safeguarding every “moving ATM” in the street?

Posted by Whatsgoingon | Report as abusive
 

Im not suprized that the banksters would object!

Posted by KyleDexter | Report as abusive
 

Great Idea!! Don’t we all feel sorry for the poor banks.
They just barely make ends meet with all there customer service and bargain fees. LMAO

Posted by mickey58 | Report as abusive
 

If the banks are complaining about it….. it’s probably a good idea. Do it.

Posted by AlkalineState | Report as abusive
 

Give it a good push, Elizabeth Warren! Banks have been victimizing the downtrodden with fees for taking out cash, transaction fees, service fees, below the balance fees and overzealous overdraft fees and interest on savings well below what wealthy people could get.

Enough.

Elizabeth Warren for president!

Posted by breezinthru | Report as abusive
 

Its be a good idea, but the banks will figure out how to compete with that.

Posted by GitmoDollahz | Report as abusive
 

This is a well-established concept in Europe, and one that could add vigor to the economy by stanching one drain on struggling wager earners’ wallets. Of course, it would take political backbone to accomplish, which seems unlikely given the financial industry’s lobbying power with both parties.

Posted by Oldbizeditor | Report as abusive
 

This is a good idea. US Postal Service is in desperate need of income to fit the bill for pension plan, and people need affordable banking.

If banks complain- that means something good is going on!

Posted by kommy | Report as abusive
 

I fail to see how incompetance in mail delivery will lead to competance in banking.

Posted by NANBGHASAIC | Report as abusive
 

The USA is so far behind other countries. Other countries’ Post Offices have been successfully running banks for many many years, and in many/most (but not all) with no support from the government, or at an arms-length from the government.

It would take political common sense and wise congress & senate to enact this, but these are non-existent in the USA.

Grid lock & nonsense rules

Posted by Patricknz | Report as abusive
 

@whatsgoingon:

To be clear; It is UPS & FedEx who do not want to do the great job, at a great price of fifty cents an ounce, as the USPS does!

Posted by Flash1022 | Report as abusive
 

The Post Office was once in the banking business. At one time, you could open up a savings account at any post office. It paid 2% interest, except in the State of Mississippi, where your account paid only 1%.

Posted by MossyMorse1118 | Report as abusive
 

To be clear, congress chooses to run the post office at a loss. The Postal sevice is not inefficient and have great value for consumers. Congress likes bad things to happen so they can claim they have saved us from something. Now, that said, the banking idea is a great idea.

Posted by brotherkenny4 | Report as abusive
 

Average Americans should move their money to a good local credit union or bank. It’s OUR money and the BIG banks think it’s theirs. Time to show them who really makes the world go around. It’s not them.

Posted by njglea | Report as abusive
 

A great idea if you’re Communist. The second of a two-part invasion for a gov’t takeover of two key drivers of the US economy…healthcare and banking. Evil insurance companies and evil bankers. See a trend folks? The non-public puppet masters pushing this are damn smart, and terrifying. Wake up.

Posted by sarkozyrocks | Report as abusive
 

To make sense of this, and other crazy b.s. we see unfolding in the US, and to peek behind the curtain a bit, Karl Marx’ Das Kapital will help. A recent comment by Nancy Pelosi suggesting the work disincentive from Obamacare is a great and liberating thing for mankind is right out of Marxism. Clearly, very smart Communist puppet masters are influencing US Democratic leadership and ideology whether they’re aware of it or not. In my opinion, for various unique reasons, American communism taken to its natural ends would be the most brutal, bloody and heinous in human history so far. Communism is gaining ground in America whether the average Joe realizes it or not. Wake up before it’s too late.

Posted by sarkozyrocks | Report as abusive
 

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