The U.S. Postal Service (USPS) is considering offering limited financial services following recommendations in a recent white paper by the Office of Inspector General (OIG). The services would target the more than one in four U.S. households that do not use traditional banking services, frequently because of a lack of income or credit. U.S. Representative Elijah Cummings, who has introduced legislation to allow the USPS to expand its offerings, lauded the plan in a press release, saying, “By authorizing the Postal Service to offer these financial services, millions of Americans could save billions of dollars on exorbitant fees and interest, while the Postal Service could obtain new revenue to improve its financial footing.”
If the plan is approved, the USPS could offer basic services such as check cashing, credit cards, and small loans. The offerings might include a Postal Card that could be used to make purchases, withdraw cash at ATMs, pay bills online, transfer money internationally, borrow money, and conduct mobile transactions. The Postal Service already offers money orders and international money transfers, and since 2011 has sold prepaid debit cards on a test basis.James O’Rourke
, Ph.D., management professor at the University of Notre Dame, believes the proposal would provide vital help to underserved consumers. “These are people who are at the base of the economic pyramid and who would otherwise turn to payday lenders and check cashing services,” he said. “The fees and interest charges are absolutely beyond the pale. They’re outrageous.” In fact, the OIG reports that the average payday loan carries fees equivalent to a 391 percent annual interest rate. On average, underserved households spend more than $2,400 per year, nearly 10 percent of their annual incomes, on financial fees and interest, a total of $89 billion in 2012 alone, the OIG found.
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