Postal Banking Proposal Can’t Deliver for Taxpayers

Despite a failed pilot program that has illustrated the flaws of postal banking, some policymakers in Washington remain determined to implement this faulty policy idea. Fortunately for consumers, recent history helps show why postal banking should remain in the discard pile. 

Pilot Shows Lacking Demand 

 Sens. Kirsten Gillibrand (D-N.Y.) and Bernie Sanders (I-Vt.) recently reintroduced legislation to add a bank branch to each of the nation’s post offices. But an ongoing U.S. Postal Service pilot program demonstrates that doubts about postal banking are well-founded. 

The USPS last year launched a pilot program offering check cashing, bill payment, ATM access, and expanded money orders and wire transfer services at locations in Washington, D.C.; Falls Church, Va.; Baltimore; and the Bronx, N.Y. 

Unsurprisingly for a program that charges a $5.95 fee for customers to exchange payroll or business checks for single-use gift cards, interest in the program has been limited. The Postal Service has reported that the pilot resulted in just six sales between Sept. 13 and Jan. 12 that  provided a total value of $548.46 in gift cards and brought in $35.70 in fees. 

While the Postal Regulatory Commission has raised questions about why the USPS didn’t follow federal law in seeking the commission’s approval before launching the program, the pilot itself reflects broader concerns about the idea of postal banking. 

Postal Banking Poses Risks 

The Postal Banking Act is founded on an idea from the USPS Office of Inspector General designed to generate revenue for the cash-strapped agency. But the result would be to put the livelihoods of many Americans in the hands of an entity unable to balance its own books and with no experience in underwriting loans — putting taxpayers at risk of further postal bailouts. 

Financial services are best provided in a competitive, private, and free marketplace so they can openly and efficiently benefit customers. Financial institutions already offer low-cost financial services to underserved communities to help them break away from the debt cycle of payday lenders. According to the FDIC, 88% of banks offer small-dollar loans and 81% offer free counseling to underserved consumers. 

Community banks and other institutions put a premium on hiring professionals who are educated, trained and experienced in the many and often complex facets of banking. They wouldn’t want customers’ finances entrusted to anyone less, but that is precisely what would happen if an agency built for mail delivery instituted banking services. 

The Postal Service’s inability to manage its own primary business suggests it is ill-equipped to handle credit or lending. The USPS has lost $87 billion over the past 14 fiscal years, including $9.2 billion in fiscal 2020 and a projected $9.7 billion in fiscal 2021. Further, at the end of fiscal 2020, USPS's total unfunded liabilities and debt were $188 billion — more than 250% of its annual revenue. 

If the money-hemorrhaging Postal Service can’t efficiently operate its primary business,  taxpayers shouldn’t expect it to succeed in the inherently risky banking and financial sector. Investments don’t always pay off, and sometimes borrowers default on their loans. If Congress pushes the post office into the banking industry, it will expose taxpayers to additional subsidies and financial rescues down the road while harming the USPS’s already-stressed primary function of mail delivery. 

This is another case of Washington putting good money after bad. Turning mail carriers into bank tellers and debt collectors — further inserting the federal government into Americans’ personal finances — would not ward off insolvency at the Postal Service. Quite simply, the USPS is unprepared, untrained and unqualified to handle the nation’s financial future.