BUSINESS

How The Post Office Could Take On The Payday Loan Industry

02/11/2015 08:31 am ET | Updated Feb 11, 2015
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With the idea of postal banking becoming more mainstream in the U.S., the head of the largest union of postal workers says he plans to make a revived banking service part of his union's upcoming contract talks with the U.S. Postal Service.

Mark Dimondstein, president of the American Postal Workers Union (APWU), told The Huffington Post that postal banking -- when post offices also offer simple banking services like checking and savings accounts -- is "an idea that should be reborn and whose time has come."

"Basic postal banking is done in many countries around the world, and in many of those countries it's a revenue-driver for the post office," Dimondstein said. "We think it's a win-win-win situation. It's great for the public. It's great for the post office. And it's great for postal workers."

Dimondstein's plans to make postal banking part of contract talks were first reported by Salon's David Dayen.

The U.S. Postal Service once offered simple banking services to the public, but federal reforms abolished the services in 1966. With the postal service now facing a drop in first-class mail and costly mandates from Congress, the notion of restoring banking has been bandied about as a way to get the agency on more solid footing while extending some basic services to underbanked communities.

In particular, it's been pitched as a potential alternative to the high-interest payday loans that poorer Americans rely on.

Last year, the postal service's Office of the Inspector General recommended that the agency consider offering check cashing, money transfers and modest loans to customers who don't have their own banks. The idea has gained currency not only with postal service boosters, but also with critics of Wall Street, including Sen. Elizabeth Warren (D-Mass.).

In an op-ed last year, Warren argued that the postal service is the one organization with "the public mission, the infrastructure, the experience and the well-trained employees needed to help address this problem" of predatory lending aimed at the poor.

One interested party that hasn't endorsed the concept of postal banking is the postal service itself. Patrick Donahoe, the postmaster general until earlier this month, "scoffed" at the idea during a press conference late last year, according to the Associated Press. "Our role is delivery," not banking, Donahoe said.

It isn't apparent yet how receptive Donahoe's replacement, Megan J. Brennan, might be to reviving postal banking services. Asked whether the agency's new management would entertain such a discussion, an agency spokeswoman said, "We'll just have to wait and see what's addressed during the negotiation process" with the union.

The divide over postal banking is part of a broader philosophical disagreement over the future of the post office. Heading an agency faced with red ink -- most of it due to a requirement imposed by Congress that the agency pre-fund retirement benefits years in advance -- Donahoe sought more latitude to streamline the postal service, pushing proposals that would eliminate Saturday delivery and close more mail processing facilities.

Postal unions have staunchly opposed such moves and argued that they will lead to the so-called death spiral, in which reduced services inevitably lead to the agency's demise.

APWU will begin negotiations for a new contract with the postal service next week, and the union expects the agency to seek concessions in employee health and retirement benefits -- a common feature in nearly all union contract talks these days. Though it isn't clear how postal banking could fit into such a contract, Dimondstein said he believes the negotiations will provide a good opportunity to put the proposal before postal management.

"We think it's most appropriate that the needs of [postal customers] are talked about at the bargaining table," Dimondstein said. "And I can tell you this: I haven't met a single person -- though I don't run into Wall Street bankers often -- who think this is a bad idea."

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