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A report released today observes that most Americans support the US Postal Service providing a banking option for low-income Americans—a goal that could be accomplished through the creation of a Postal Banking Service. With the pandemic worsening already extreme income inequality, the report, released by Data for Progress and The Justice Collaborative Institute, observes that “the mainstream banking industry has reinforced economic disparities by excluding the poor from financial services that would help them escape poverty.” Private banks, though heavily subsidized by the federal government, are driven by profit, and the government has failed to persuade them to provide credit and services to low-income individuals.
As a result, one in four American households are unbanked or underbanked, forced to rely on exploitive, unregulated fringe lenders and services. These rates are even higher for Black and Hispanic people. The services people are forced to use include payday lenders operating in 36 states who offer short term, high-cost loans at a nearly 400% annual percentage rate, with borrowers ending up paying more in fees than they receive in credit. As a result underserved families spend around 10% of their annual income on fees and credit to access financial services that would be free if they could access bank accounts.
The Postal Service is uniquely situated to remedy these inequities. The Postal Service has a wide network of locations, many in rural areas, which major banks have largely abandoned. Because of its institutional structure, it is able to provide financial services at a much lower cost than the private sector. And people would be extremely likely to use the services; a 2020 consumer survey found the USPS to be the most trusted brand.
A Postal Banking Service could also help generate significant revenue for the Postal Service, a critical piece of our nation’s infrastructure at risk because of pandemic-created diminished and antagonism from the Trump administration. And elected officials have the support of the public in making this happen, with 58% of likely voters agreeing that access to a USPS account would save individuals who rely on payday and fringe lenders thousands of dollars a year in fees, and that the USPS could offer needed financial services in underserved areas that have few or no banks.
The United States Postal Service helped right our country’s financial ship once before, through the Postal Savings System created during the Great Depression. Report author Mehrsa Baradaran stated:
“Postal banking was America’s most successful experiment in financial inclusion. Today, there are many communities across the country that are banking deserts. The only financial service providers are fringe lenders and check cashers whose business model relies on the poor paying more for banking services than anyone else. This is a threat to our democracy. Yet post offices serve all of these communities regardless of cost and without exploitation. Postal banking can provide safe, accessible, and much-needs financial services to the most struggling communities in our country. It will make it less expensive to be poor.”
The report is available here.