Postal banking services would help underserved communities and shore up struggling USPS, say lawmakers

Photo provided by Sen. Gillibrand’s Office
U.S. Senators Kirsten Gillibrand (D-NY), at podium, and Bernie Sanders (I-VT), and U. S. Representatives Alexandria Ocasio-Cortez (D-NY), Bill Pascrell (D-NJ), and Marcy Kaptur (D-OH) called on Congress to implement postal banking pilot programs in rural and urban communities across the country as part of the Fiscal Year 2022 Senate and House Financial Services and General Government Appropriations Appropriations Bill and eventual final conference agreement.

A coalition of Democratic lawmakers is pushing a plan for the 2022 budget they say will generate new revenue for the struggling U.S. Postal Service while filling a void in banking services — especially for rural and urban Americans.

The legislators, led by U.S. Senators Kirsten Gillibrand of New York and Bernie Sanders of Vermont, say that millions of Americans live in “bank deserts” — regions without immediate access to a brick and mortar bank — and nearly 63 million Americans are considered “underbanked.”

Ninety percent of the zip codes lacking a bank or credit union are in rural areas. However, low income communities of color are also historically underserved by mainstream financial services — approximately 46 percent of Latino households and 49 percent of African American households are underbanked, according to Gillibrand’s Office.

“Mainstream financial institutions and predatory lenders often take advantage of underbanked Americans with high fees and interest rates that keep them in a cycle of poverty,” Sen. Gillibrand said. “Expanding basic financial services at post offices in both rural and urban communities would help families who know just how expensive it is to be poor in America.”

Instead of relying on prepaid debit cards, rent-to-own stores, and overdraft fees, families in both rural and urban areas might see access to more traditional, and reputable, basic banking services, proponents of the plan say.

“We need to use the 30,000 [existing] locations of the Postal Service to do what large banks aren’t doing right now,” Sanders said during a livestream event to promote the bill and the pilot program. “The truth is large banks have turned their backs on the needs of lower income people.”

Gillibrand and Sanders’ Postal Banking Act would establish a nonprofit bank offering low-cost checking and savings accounts, ATMs, mobile banking, and low-interest loans. According to a report from the USPS Inspector General, this proposal would create $9 billion in revenue for the U.S. Postal Service each year.

“So many families in my community in The Bronx can’t afford to be banked. So instead, they go into check cashing places and pay relatively large fees — money that’s desperately needed for food, rent and diapers,” says Rep. Alexandria Ocasio-Cortez, one of three House members who are also supporting the plan. “Others go to the ATM, and sometimes they can only afford to take out $5, but they’re paying $3 in fees. 

“What we are asking the Post Office to do here is very basic – check cashing, money wiring, and taking out money from an ATM without a penalty — but it’ll make a dramatic difference in so many communities and so many families. It’ll also provide needed revenue to USPS.” 

Predatory financial services often exploit the most vulnerable populations — including low income households, rural communities, veterans and families of active duty personnel — especially in times of economic crisis.

Rep. Bill Pascrell, Democrat of New Jersey, and Rep. Marcy Kaptur, Democrat of Ohio, are also promoting the idea. The group is asking for $6 million for the Postal Service in the next budget to test a pilot program. 

The idea was shot down by the U.S. Senate last year, after passing the House, but the Democratic lawmakers feel its time has come.

“The COVID-19 pandemic has demonstrated all too well that too many Americans are being left behind by the current financial system led by Wall Street bankers and rapacious payday lenders,” Kaptur said. “As the economy was plummeting and unemployment soared in 2020, the U.S. Congress moved swiftly to provide relief through economic stimulus payments, unemployment insurances, and so much more – yet many who needed the assistance the most lacked the most basic banking services to access these funds.”