U.S. Postal Service wants to provide non-bank financial services to underserved Americans

The U.S. Postal Service wants to go into the small loan business. The agency announced plans for a proposal to provide non-banking financial services to the 68 million adult Americans who don't have bank accounts or who use check cashing services or payday loans to survive. This move could translate into $8.9 billion per year for the Postal Service, which lost $8.5 billion last year. The agency, which said people who used check cashing and payday loans spent $89 billion on interest and fees, "is well positioned to provide non-bank financial services to those whose needs are not being met by the traditional financial sector. It could accomplish this largely by partnering with banks, who also could lend expertise as the Postal Service structures new offerings," according to a release from the Office of the Inspector General. (USPS graphic)

According to the agency, they not only have the means to offer services banks can't offer but also are better suited to serve people in more rural remote areas that don't have banking institutions; 38 percent of post offices are located in zip codes without a bank and 21 percent are in places with only one bank. When asked why they didn't have a bank account, 32.7 percent of people said they don't have enough money, 21 percent said they don't need or want one, 7.5 percent said they don't like or trust banks, 6.6 percent said were unable to open one because of prior problems, 6.4 percent had accounts but closed them and 5.4 percent said bank fees or balance requirements are too high. The Postal Service said it can help people in all those areas. (Read more)

"Banks generally don’t like to make small loans, even to credit-worthy borrowers, since they cost about the same to underwrite and service as large loans but don’t generate nearly the revenue," Steve Clark writes for The Brownsville Herald. "Historically, those left out in the cold by the traditional financial sector tend to be worse off financially, partly because they have less money to begin with but also because they end up paying much more for loans through payday lenders."

"According to the report, the average payday loan of $375 costs borrowers the principal amount plus an average of $520 in total interest and fees through the life of the loan. The same loan through the post office would cost the borrower the principal loan amount plus $48 in total interest and fees over the life of the loan," Clark writes. The report says that less expensive loans and other financial products, along with savings incentives, "could help bring significant financial stability to millions of Americans, allowing them to pay their bills and avoid eviction, foreclosure, and other socially and economically expensive ills.” (Read more)