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Another way to squeeze the payday lenders

I wholeheartedly approve of this.

The Postal Service (USPS) could spare the most economically vulnerable Americans from dealing with predatory financial companies under a proposal endorsed over the weekend by Sen. Elizabeth Warren (D-MA).

“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 a Huffington Post op-ed on Saturday. The op-ed picked up on a report from the USPS’s Inspector General that proposed using the agency’s extensive physical infrastructure to extend basics like debit cards and small-dollar loans to the same communities that the banking industry has generally ignored. The report found that 68 million Americans don’t have bank accounts and spent $89 billion in 2012 on interest and fees for the kinds of basic financial services that USPS could begin offering. The average un-banked household spent more than $2,400, or about 10 percent of its income, just to access its own money through things like check cashing and payday lending stores. USPS would generate savings for those families and revenue for itself by stepping in to replace those non-bank financial services companies.

[…]

But while ending triple-digit interest rates and fine-print tricks is a good thing for consumers, it doesn’t reduce the demand for those financial services. The USPS could slide into that space and meet that need without preying upon those communities. “Instead of partnering with predatory lenders,” David Dayen writes in The New Republic, “banks could partner with the USPS on a public option, not beholden to shareholder demands, which would treat customers more fairly.” America’s post offices are an ideal physical infrastructure for furnishing these services to communities currently neglected by banks. Roughly six in 10 post offices nationwide are in what the USPS report calls “bank deserts” — zip codes with either one or zero bank branches.

I noted that David Dayen story in a previous linkdump. I like this idea for the same reason why I like the idea of letting Wal-Mart open banks: It would provide low-cost banking and financial services, including short-term, low-dollar loans, to a large class of people whose only current options are high-cost predatory lenders. Anything that puts downward pressure on the price of these services and makes savings and checking accounts available to people who don’t have them is a win in my book. This idea should especially appeal to people who don’t care for having cities step in to regulate payday lenders, since it would reduce barriers to competition and allow for real customer-friendly innovation in a highly non-customer-friendly market. What’s not to like?

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