Postal banking could benefit millions

The US Postal Service’s Office of Inspector General (OIG) recently issued a report showing how postal banking could be expanded.

Post offices already provide limited banking services such as the sale of money orders, the most widely used alternative banking service in the US.

Expanded postal banking would make safe and affordable basic banking service available at local post offices for all postal customers, especially those living in rural and urban communities that are either not served or under served by traditional banks.

After the OIG report was released, unions representing employees of the Postal Service issued statements supporting postal banking.

“It’s a no brainer,” said Mark Dimondstein, president of the American Postal Workers Union (APWU). “The Inspector General’s report confirms that the Postal Service can act now to provide consumers with affordable financial services while strengthening the public Postal Service.”

APWU is currently negotiating a new collective bargaining agreement with the Postal Service and postal banking is one of its priority bargaining proposals.

“We look forward to the day when people can get their checks cashed by their trusted neighborhood (postal) clerk,” added Dimondstein.

A statement by the National Postal Mail Handlers Union issued in response to the OIG report said that the union supports legislation that will expand financial services at post offices.

Fredric Rolando, president of the National Association of Letter Carriers, praised the OIG’s report and said that postal banking has worked for years in other countries.

“(The OIG’s postal banking) model has been successful in many other countries and has the potential, according to the OIG, to generate at least $1.1 billion of revenue annually, which would allow the Postal Service to continue its innovative efforts,” said Rolando. “The OIG’s recommendations are a good place to start, and we urge the Postal Service to take steps to immediately pursue these opportunities to fill the unmet needs of those in under served communities.”

The OIG’s report, entitled “The Road Ahead for Postal Financial Services,” lays out four approaches for establishing postal banking.

Approach #1 would expand financial services that post offices are already authorized to provide including the sale of money orders ($21 billion in 2014), electronic money transfers, check cashing, bill paying, and postal operated ATMs.

At some point, the OIG would like to make more financial services, such as affordable interest-rate loans and savings accounts, available at post offices.

Between 1911 and 1966, the US Postal Services did offer postal savings account, but pressure from the banking industry ended this service.

Postal loans are available to postal patrons in UK at affordable interest rates.

Implementing postal lending and saving services would require legislative action.

Making these services available at post offices would be a great service to the 68 million people who live in communities under served by traditional banks.

According to the Campaign for Postal Banking, one in 13 US households doesn’t have a bank account. One in four households live in communities under served by banks.

Traditional banks have pulled up stakes in many of these communities. The banks have been replaced by the alternative financial services industry–check cashing stores, payday lenders, auto title lenders, etc.

They charge high fees and interest for the services they provide.

The average under served household, whose annual income is $25,500, spends $2,412 a year on fees and interest charged by alternative financial services companies.

Postal banking would provide an affordable alternative to the high-cost alternative financial service industry.

Postal banking would also provide easy access to financial services,

There are more than 30,000 post offices in the US, considerably more retail outlets than other large retail companies.

Many of these post offices are located in communities that have been deserted by banks. The Campaign for Postal Banking reports that 59 percent of US post offices are located in zip codes where either no bank (38 percent) or only one bank (21 percent) is located.

The OIG reports that the Postal Service has the infrastructure and the capacity to provide financial services to its customers. Expanding those services “would help the Postal Service improve the lives of millions of Americans as it fulfills its universal service obligation.” said the OIG report.

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Privatization supporters manufacture Postal Service “crisis”

As the US Postal Service prepares to default on a $5.5 billion payment to the US Treasury, postal worker unions are blaming privatization proponents for blocking congressional action that would make it possible for USPS to meet its financial obligation and begin making reforms that protect services and deal with the challenges of delivering mail in the 21st century.

“The postal debacle is a manufactured crisis, and it is being exploited by those who want to privatize the Postal Service,” said Cliff Guffey, president of the American Postal Workers Union. “The House Republican leadership’s bill to ‘fix’ the Postal Service couldn’t be clearer.”

The Republican leadership’s bill to which Guffey refers is HR 2309 sponsored by Rep. Darrell Issa of California. The bill, according to APWU, would end Saturday delivery, close thousands of rural post offices, shut down hundreds of mail processing facilities, and create a commission that could override union contracts.

Worst of all, HR 2309 does not address the main cause of the Postal Service’s financial problems–a requirement enacted by Congress in 2006 that makes the Postal Service pre-fund its 75-year retiree health care obligation.

As a result of this requirement, the Postal Service must pay the US Treasury billions of dollars a year until 2016 to fund the payment of medical bills, some of which won’t come due until 2081.

The Postal Service has said that it won’t be able to pay the $5.5 billion pre-funding payment that is due August 1. Another payment of $5.6 billion is due in September.

During the two years before the pre-funding requirement went into effect, the Postal Service operated in the black. Its deficit began to mount as the pre-funding requirement went into effect. This pre-funding requirement now accounts for about 85 percent of the Postal Services’ red ink. For this year, the pre-funding requirement is responsible for 94 percent of its deficit.

There is alternative legislation pending before Congress that would save the Postal Service from default and enact reforms needed to make postal services more closely align with the needs of a modern economy that relies more on electronic communications.

HR 1351 allows the  Treasury to credit the Postal Service for the more than $13 billion the Postal Service has overpaid to its pension plan. Such a credit would allow the Postal Service to use its own money to meet its immediate pre-funding obligation.

HR 1351 also includes some of the postal reforms that the Senate passed last spring and sent to the House for consideration.

In addition to addressing the pre-funding obligation, the Senate bill, according to one of its sponsors Sen. Bernie Sanders, maintains overnight delivery standards and Saturday delivery and “creates a commission. . . to (develop) ways for the Postal Service to become more entrepreneurial as it adjusts to mail volume changes caused by e-mail and the Internet.”

But rather than allowing HR 1351, which has 230 co-sponsors to advance, Rep. Issa, who chairs the congressional committee that oversees the Postal Service, has insisted that his bill move forward instead.

Fredric Rolando, president of the National Association of Letter Carriers, said that Issa’s decision to avoid action that could address the pre-funding obligation is a deliberate attempt to create an artificial crisis that can be used as an excuse to cut postal services.

Critics of the Issa bill say that the cuts to service required by Rep. Issa’s bill will spark customer ire that will eventually be used as an excuse to dismantle postal services and privatize what’s left.

AllGov.com reports that Rep. Issa has received more than $35,000 in campaign contributions from PACs and individuals associated with the Postal Services’ main competitor UPS.