Funding for a trial program that would allow the U.S. Postal Service to experiment with offering banking services passed the House of Representatives on Friday, even as financial industry groups and Republican lawmakers rallied against the proposal.
The House approved the $2 million funding measure as part of a package of appropriations bills, despite opposition from banking trade groups such as the American Bankers Association and the Consumer Bankers Association, which argued that the Postal Service is ill-equipped to handle banking responsibilities.
Representatives Bill Pascrell, a Democrat from New Jersey, and Marcy Kaptur, a Democrat from Ohio, introduced the amendment into the appropriations package as a means to help provide financial services to the "unbanked" and shore up the struggling Postal Service's finances.
Advocates see the program as a way to provide free or affordable banking services to the substantial unbanked and underbanked populations, which often resort to high-cost services such as check cashers and payday loans. According to the Federal Deposit Insurance Corporation, 6.5% of American households were unbanked in 2017, and another 18.7% had a checking or savings account, but also utilized alternative financial services.
“With over 30 million unbanked and underbanked Americans, it is clear the free market banking sector has left too many working families behind, especially communities of color,” said Kaptur. “With a branch in every rural and urban ZIP code and trusted by all Americans, the Postal Service must provide a financial lifeline to those in need.”
Republicans disagreed, arguing that the post office would create harmful competition to community banks.
“This would be detrimental to customers and harm community financial institutions already struggling to comply with the regulatory burdens imposed by Dodd-Frank,” wrote Republicans on the House Financial Services Committee.
With over 35,000 branches as of 2014, a fully realized postal banking program could represent a significant public competitor to the retail banking sector. Big banks such as JP Morgan Chase, Wells Fargo and Bank of America have been steadily closing branches, predominantly in low-income areas.
Others have argued that the postal banking would not address the root issues that cause people to be unbanked or underbanked.
“There's a very robust financial services sector,” said Jeanine Jacokes, CEO of the Community Development Bankers Association, which opposed the amendment. “It's not that there aren't enough banks. There are all kinds of reasons that people don't access [to financial services]. The real problems are financial literacy and trust in the system. Saying, ‘Let's just have the post office do it,’ doesn't solve the problem.”
In addition to reaching underserved communities, some see the proposal as providing a needed revenue stream to the Postal Service, which had a net income loss of $8.8 billion last year. A 2014 report from the Postmaster General found that a postal banking program could deliver $8.9 billion in revenue to the beleaguered government institution.