Kirsten Gillibrand Has an Ambitious Plan to Take on Payday Lenders: The Post Office

[Gus Money]

While it might seem like a chore to go to the bank in an age of online payments and mobile apps that allow you to deposit a check with the snap of a picture, for some families, access to any bank could be life-changing. A 2015 survey by the Federal Deposit Insurance Corporation (FDIC) found that 26.9 percent of American households had either no bank at all or relied on nonbanking institutions for financial services. (These numbers are up to four times higher in black and Hispanic communities than for white Americans.) Unbanked families spend an average of $2,412 a year, or about 10 percent of their average annual income, on interest for financial services that most bank customers get for free.

Sen. Kirsten Gillibrand (D-N.Y.) has introduced legislation that would allow the United States Postal Service to branch out and offer basic financial services, including savings accounts and loans, to the underbanked. Rep. Yvette Clarke (D-N.Y.) introduced the bill in the House a month later in May. Although Gillibrand’s legislation is unlikely to get much traction in a majority-Republican Congress, the potential 2020 presidential candidate has been rallying support for the legislation online and in her home state of New York.

While postal banking might seem like a modern invention to save an increasingly maligned public agency, the idea actually has deep roots in American history. In 1910, legislation was passed during the Taft administration to create a “postal savings system.” The plan, which was an attempt to counter public distrust in private banks, aimed to encourage immigrants and those skeptical of banking to invest and practice financial thriftiness.

According to USPS, at its peak in 1947, the postal bank had $3.4 billion in deposits. But by 1964 deposits had dropped to $416 million. Private banks enjoyed higher consumer confidence thanks to the FDIC and post-World War II reforms, and people shifted their accounts away from the post office. Congress eventually abolished the system in 1966.

But financial inequality has gotten worse in the decades since. Growing overdraft fees, limited free checking options, decreases in loans to low-income communities, and closures of thousands of banks since the 2008 financial crisis are just a few factors that have ramped up the reliance of low-income Americans on pricey check cashing services and payday lenders. Payday lenders, which offer short-term, high-cost loans at nearly 400 percent interest, have thrived under the Trump administration thanks to increasingly lax consumer protections.

 

[tru_m.a.c]

At least she's trying

I've heard similar arguments for modeling broadband service off of the postal service as well

 

[Don Homer]

all these ppl tryna be fake progressive

 

[Jhoon]

all these ppl tryna be fake progressive

States/cities should be the bank of its citizens. But you know the Well Fargo folks will have a conniption.

 

[Wargames]

I like the idea...... also it not a bad idea to look at legislation from that 1910 era, as a country we have through bad leadership landed ourselves in a pre-WW2 economic system. A Great Recession is very likely due to a lack of Keynesian economic policies. The Post office acting as a bank is just the type of small move needed to keep people from being screwed by corporations and business hucksters.

 

[HE_Pennypacker]

Absolutely absurd to me that 1/4 of people in a developed nation can’t have a simple chequing account to get their pay directly deposited at something like $5/month in fees.

I really like this kind of idea.