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Your new payday lender: The Post Office?

A plan to offer more financial services to people who don't use traditional banks has the support of Sen. Elizabeth Warren.

By Credit.com Feb 6, 2014 11:40AM

This post comes from Christine DiGangi at partner site Credit.com.


The Office of the Inspector General is exploring the idea of having the U.S. Postal Service provide financial services to those underserved by the nation's banking structure. Namely, the poor.


A report issued late last month notes that about 68 million American adults — more than a quarter of U.S. households — make up that underserved population. These Americans are more likely to turn to payday loans and cash-checking services for their money needs.


Mailbox (© CorbisThose products carry high costs, and in 2012, this group spent about $89 billion in interest and fees associated with those financial offerings, meaning cash-strapped Americans pay more than others to do everyday financial tasks like getting loans or cashing checks.


The idea has at least one vocal supporter in Congress. In a Huffington Post op-ed, Sen. Elizabeth Warren (D-Mass.) praised the idea, saying it would not only alleviate financial pressure on those without banking services, it would also help the Postal Service overcome the financial troubles it has battled as letter volume has declined in recent years.


"The Postal Service is well positioned to provide non-bank financial services to those whose needs are not being met by the traditional financial sector," the report said, and it outlines those ideas, describing potential payment services, savings products and credit services.

The existing postal infrastructure, combined with the limited financial services already offered at USPS locations (i.e., money orders and international money transfers), gives the concept some traction.


"With post offices and postal workers already on the ground, USPS could partner with banks to make a critical difference for millions of Americans who don't have basic banking services because there are almost no banks or bank branches in their neighborhoods," Warren wrote in her op-ed. She highlighted the way such partnerships could help those living paycheck to paycheck, again touching on the double-whammy of limited services and high interest rates available to non-banking Americans.


Payday loans can carry interest rates of about 300 percent, and most people can't afford to pay them off within the original terms of the loan. Check cashing fees may not seem like that much — a check up to $1,000 costs $3 to cash at Walmart stores, for instance — they add up, taking away from the limited money the consumers may have in the first place.


Warren seems fired up about the idea and said she plans to diligently explore the matter. If more affordable, accessible non-banking financial services emerge for underserved populations, it could make a huge difference for struggling families' budgets and, consequently, their quality of life.


More from Credit.com:




31Comments
Feb 6, 2014 12:47PM
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What could go wrong here? 

A government backed institution giving loans to people with bad credit. 

I don't see a bailout in the future.  All these loans will be paid back in full with no issues at all;-)

 

We're screwed:-(

Feb 6, 2014 3:14PM
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Yep here comes another ticking time bomb.  Payday loans are the biggest rip off.  The reality is those types of places try to get you hooked on doing the loans and charge you high interest rates.  This creates a pattern were you are always behind and losing money.  The fact that the post office would do something like this speaks volumes about our government right now.  What a bunch of crooks.
Feb 6, 2014 3:33PM
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This might be the dumbest idea since ebonics
Feb 6, 2014 3:05PM
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This would make sure that the USPS would be "too big to fail", just like the big banks!
Feb 6, 2014 3:10PM
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A man was telling his buddy "You won't believe what happened last night.
My daughter walked into the living room and said, "Dad, cancel my allowance
immediately, forget my college tuition loan, rent my room out, throw all my
clothes out the window, take my TV and my laptop. Please take any of my
jewelry to the Salvation Army or Cash Converters. Then, sell my car, take my
front door key away from me and throw me out of the house. Then, disown me
and never talk to me again. Don't forget to write me out of your will and
leave my share to any charity you choose."

"Holy Smokes," replied the friend, "she actually said that?"

"Well, she didn't put it quite like that. She actually said,
'Dad, meet my new boyfriend-- Mohammed. We're going to work together on
Hillary's election campaign!'"
   

Feb 6, 2014 4:03PM
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....Really???????????????? When does the stupidity stop??????????????????????? (another area the government does not need to be in) payday loans are high interest rates for a reason (lots of deadbeats)  Our representatives all need to be thrown out.
Feb 6, 2014 3:30PM
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Oh yeah, the USPS jumping in with the loan sharks, who charge extortionist interest rates, and are known for the practice of predatory loans.  Now, does that sound like something the US government would do?  Unfortunately, yes it does...
Feb 6, 2014 3:20PM
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HA!  this will most definitely fail for the US snail service the payment checks will get " lost in the mail"
Feb 6, 2014 4:20PM
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Great, just what the post office needs...something else to screw up.
Feb 6, 2014 4:23PM
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The USP&LSS = The United States Postal and Loan Sharking Service.  The government's answer to taxing the poor - charge exorbitant interest for a short-term loan!!!  What will they come up with next?  What shall we call these new charges?  Obamaloans?
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Oh boy, so getting a loan will become "goin' postal", or will that still be the guy shooting up the post office .... like in the good ole days?

Soon, I think very soon, there will be no other possible course of action for places like Texas but to leave the newly twisted version of what used to be the United States, hopefully really soon!
Feb 6, 2014 4:28PM
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Visit your Post Office and take out a loan to pay for your roll of stamps.  How convenient is that?
Feb 6, 2014 5:47PM
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"She highlighted the way such partnerships could help those living paycheck to paycheck"
Almost everyone I know living paycheck-to-paycheck (including a business partner) do so because they cannot budget money.  Financial education would go further to serve these individuals than another government  program or handout.
Feb 6, 2014 6:25PM
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Wait, hold your chonies everyone! This could be just the beginning of a completely revamped USPS. Why stop at just payday loans. How about adding check cashing, loans agains pink slips, and even home equity. But wait again, all USPS facilities could be stocked with condoms and adult toys. Not done yet - CVS is going out of the tabacco buz, so each USPS facitly could stock up on tabacco products and even alcohol. Offer discount shipping. As long as we're at it, Colorado sells pot and is making bank on marijuana taxation. USPS could do the same. I'm sure I have only scratched the surface.
Feb 7, 2014 10:43AM
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So the government is going to start doing what they are spending billions going after others for. Sounds like a liberal idea.
Feb 7, 2014 12:11AM
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I can't believe what our US Government is resorting to. Why not stop congress from taking billions away from the postal service every year. Maybe USPS would go in the black again. There are two many Title Loans, and Check Cashing places taking advantage of the poor. They are popping up on every street corner in Arizona. What does that tell you about the economy?

US Gov please stay out of this business!

Feb 6, 2014 3:22PM
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And I'm sure the employees will be just as friendly, and customer service oriented as they are now. They hire trolls.
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