WASHINGTON — Credit union trade groups have joined their banking industry counterparts in in rejecting a call for the U.S. Postal Service to offer financial products like prepaid cards, remittances and even small loans to the underbanked.
The agency's Office of Inspector General released a white paper Monday that said the cash-strapped Postal Service could earn nearly $9 billion annually by offering financial services to roughly 68 million consumers who are not served by traditional banks.
And though the white paper explicitly said the Post Office should work with local financial institutions — not compete with them — financial services trade groups reacted negatively to the proposal, saying it would pose significant risks to the system.
"You wouldn't have a FedEx and UPS had the Postal Service been a model of efficiency and service, so you want to unleash that failed model on the financial system?" said Cam Fine, CEO of the Independent Community Bankers of America. "It's the worst idea since the Ford Edsel."
The white paper said that if the Postal Service were to begin offering financial services to the underbanked, it would be a "major new revenue" stream.
"If even 10% of what the underserved currently spend on interest and fees instead went to more affordable offerings from the Postal Service, it could lead to $8.9 billion in new revenue per year," the report said.
'There Could Be Some Problems'
Eric Richard, CUNA's EVP of regulatory affairs questioned the profit motive of the agency's proposal. "To the extent that the goal here is more profit for USPS, there could be some problems," Richard said.
The financial services market is already crowded and competitive, he said, noting that credit unions currently provide a cooperative, not-for-profit alternative for consumers. "This is not an area in which there is a lot of low-hanging fruit that others have not picked."
Carrie Hunt, NAFCU's SVP of government affairs and general counsel, stressed that credit unions already offer "excellent savings mechanisms for their members," along with strong ties to local communities and already offer many services for the underbanked.
NCUA spokesman John Fairbanks said that the agency planned to review the report. The white paper, Fairbanks said, serves as a reminder of how many Americans "do not have adequate access to responsible and affordable financial services. This is a challenge of great concern to financial regulators."
Other countries, including Great Britain, Japan, Germany and China already use their post offices to offer savings accounts and other products.
The U.S. Postal Service established a savings system in 1911 but it closed in the mid-1960s after deposits declined largely because banks were able to offer a similar government guarantee on deposits through the Federal Deposit Insurance Corp.
In the white paper, the agency suggested that the Postal Service could "greatly complement" banks' offerings.
"The Postal Service could help financial institutions fill the gaps in their efforts to reach the underserved," the report stated. "While banks are closing branches all over the country, mostly in low-income areas like rural communities and inner cities, the physical postal network is ubiquitous. The Postal Service also is among the most trusted companies in America, and trust is a critical element for implementing financial services."
--Kevin Wack contributed to this report.
