Postal Banking. There has been a resurgence in interest among certain lawmakers in allowing the United States Postal Service (USPS) to offer retail banking services. In 2021, the USPS quietly launched an ICBA-opposed pilot to offer check cashing, bill paying, ATM access, and expanded money orders and wire transfers in Washington, DC; Falls Church, VA; Baltimore, MD; and the Bronx, NY. USPS reported that, across all locations, just six checks were cashed for a total value of $548.46, resulting in just over $35 in revenue for the cash-strapped USPS.
It would be a serious mistake for the USPS to enter a highly competitive, complex new industry with the potential to ruin itself and its core function and put American taxpayers at further risk. Effective banking management requires years if not decades to master.
FedAccounts. Proponents would make “FedAccounts” available to all citizens, residents, and nonfinancial businesses at taxpayers’ expense. These accounts would offer the same services as commercial bank accounts including the issuance of debit cards, ATM access, direct deposit and online bill pay services. They would also support internet and mobile banking.
These features put FedAccounts in direct competition with checking and savings accounts offered by community banks. Moreover, the possibility that such accounts could be used by the government to track an individual’s financial transactions creates serious privacy concerns.
The Fed has repeatedly said it is not suited to offer direct accounts to consumers and is not legally permitted to do so. For instance, proposals for no-fee FedAccounts would not provide for adequate cost recovery as required by the Monetary Control Act.
Feb. 02, 2022
The Postal Regulatory Commission is pressing the U.S. Postal Service on why it didn’t seek the commission’s approval before launching an ICBA-opposed postal banking pilot program last year.
Legal Questions: In a series of questions to the USPS last week, the PRC cited federal law requiring the USPS to get the commission’s approval for any “market test” for an experimental product. The PRC—which previously said it did not review or approve the pilot—noted the USPS itself referred to the pilot as a “time-limited test.”
Pilot Outlook: The PRC also asked the USPS how it plans to proceed with the banking pilot given it has attracted only six customers, whether the USPS plans to continue or expand the pilot, and whether it promoted the program at its four participating locations.
Low Demand: The Postal Service previously reported to the PRC that the pilot resulted in just six sales between Sept. 13 and Jan. 12 that have provided a total value of $548.46 in gift cards and brought in $35.70 in fees to USPS.
Background: The program offers check cashing, bill paying, ATM access, and expanded money orders and wire transfers at locations in Washington, D.C.; Falls Church, Va.; Baltimore; and the Bronx, N.Y. Customers may cash payroll or business checks to buy single-use gift cards worth up to $500 for a $5.95 fee.
ICBA Position: ICBA—which has spoken out against the pilot via NBC News, The Washington Post, and the Washington Examiner—strongly opposes postal banking. A three-part series of ICBA issue briefs delivered to policymakers last year explores the policy’s flaws and offers alternatives for reaching the unbanked.
