Senators Brand Postal Banking Experiment Potentially Unlawful

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Senators Brand Postal Banking Experiment Potentially Unlawful

A pilot program that would allow the United States Postal Service (USPS) to provide certain financial services has come under fire from a group of 20 US Senators who believe the program “exceeds the Postal Service’s legal authority” and is a threat to the USPS core business of mail delivery.

In a November 15 announcement, the Senators called the program misguided, citing USPS losses of more than $75 billion from 2007-2019 and a recent announcement that USPS will further slow mail service and increase prices in attempt to fix its “notoriously poor financial footing.”

The program enables customers to purchase gift cards, which can be used like debit cards, of up to $500, using payroll or business checks, for a small flat fee.

Senator John Boozman (R-AR) further explained the rationale for the challenge to the pilot program in a December 1 opinion piece in The Hill, in which he said:

“During the Obama administration, USPS agreed its core function is “delivery not banking.” In 2018, a task force created to review and identify necessary postal reforms recommended avoiding expanding into new sectors like banking — and with good reason.”

He went on to point out that the alternative was local financial institutions, which:

“…. help propel economic growth and job creation by providing access to credit. These lenders understand needs in the areas they serve and offer opportunities for small businesses and families to secure vital funding.”

 NILA has found that, despite its obvious shortcomings, USPS banking is often cited as an alternative to community-based, non-bank lenders and used to justify onerous new laws and regulations. The following previous blog posts discuss this matter in more detail:

Illinois Letter Counters “Public Banks and Postal Service” Claims (March 2021)

Going Postal? Cato Institute on Post Office Banking (Nov 2020)

USPS and Small-Dollar Loans (July 2019)

NILA also deals with this issue with Questions 27 and 28 of our Frequently Asked Questions.