Sen. Gillibrand Announces Bill to Bring Small Dollar Loans to Post Offices

Senator Kirsten Gillibrand (D- NY) revealed a new plan to offer small dollar credit products and other basic banking services at more than 30,000 post offices across America. She touts the idea of a “Postal Bank” to “effectively end predatory lending nationwide.”

The Postal Bank concept is pressed as a way to bring access to bank services to more underserved communities. There are few banks located in low income and rural areas. However, post offices are located in nearly every small town in America.

Services offered by postal banks would include low cost checking accounts for direct deposits, check cashing, and bill paying; interest-bearing savings accounts; small dollar installment loans; transactional services like debit cards and ATMs; and wire transfers.

The U.S. Postal Service (USPS) has kicked around the idea of postal banking for years. A USPS white paper in 2014 explored the opportunity to provide alternative financial services at post offices. The USPS Office of the Inspector General found that post offices could compliment bank offerings, not compete with the banking sector.

Post offices are already in the financial services game. The USPS has long offered money orders and international wire transfers.

Community Financial Services Association of America, a payday lending trade association, CEO Dennis Shaul welcomed competition, but warned that: “To date almost all of the attempts to create small-dollar loan alternatives have been charity-based, required government subsidies, or were unprofitable and unsustainable. The private sector remains the best opportunity for serving small dollar, short-term loans.”