Why sluggish mail delivery matters to financial institutions

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The controversy surrounding the U.S. Postal Service could create headaches for banks and credit unions who otherwise have been trying to steer well clear of the political fight over potential election tampering.

While Postmaster General Louis DeJoy faces mounting criticism over how his operational changes have threatened mail-in voting and slowed critical medicines from reaching ill Americans in the middle of a pandemic, there is a growing concern that the recent postal service slowdown could lead to more late fees accrued on debt payments.

If these charges begin to mount while the economy remains shuttered to prevent new surges of the coronavirus, financial institutions and credit card companies could face new pressure to waive fees while fixes are considered for the postal service.

Bankers and some advocates have also warned of potential problems with granting further debt relief for consumers and small businesses if crucial documents are held up along the way.

DeJoy was pressed during a Senate Homeland Security and Governmental Affairs hearing Friday on whether the U.S. Postal Service took into account the potential costs that would mount on loan payments if bills were delayed by his controversial changes. The brief back-and-forth echoed concerns that some advocates and lawmakers have raised in recent days.

“Did you do any analysis about the fees if mail is late, the late fees that people would get when they paid their rent or their car payment or their utility bill if the mail is slowed down and the impact that the charges and those fees would have on working families?” Sen. Jacky Rosen, D-Nev., asked.

“The analysis that we did is that if we moved the mail on schedule that all late deliveries would have been improved,” DeJoy said.

“Obviously that isn’t the case,” Rosen said.

Sen. Gary Peters, D-Mich., the ranking member of the committee, received more than 7,500 postal delay stories from constituents in his state and across the U.S. since launching an investigation on Aug. 6, his office said in an email Friday. These include reports of delayed financial documents, bank statements, paychecks and bills, according to Peters’ office.

Employees at Mission Federal Credit Union in San Diego have noticed that some of the checks they are processing, mostly from bill-pay providers, are dated a bit older than in the past, Robert Miller, chief operating officer, said in an interview. But Miller noted that could be from a delay related to the bill-pay providers rather than the mail slowing down.

Other than that, the $4.5 billion-asset institution hasn’t noticed a difference with its mail delivery.

Like many other institutions, Mission Federal has seen members using its digital banking more since the start of the pandemic. That has included more members making deposits using remote deposit capture rather than sending a check through the mail. Besides that, management actively works to get bill-pay providers to set up electronic payments rather than sending in paper checks.

“A lot of what we do is through electronic signature and digital banking,” Miller said. “Members can do it themselves through the mobile banking app. Mail is really not used for transactions as much.”

DeJoy said throughout Friday's hearing that the changes made to the postal system, like altered trucking schedules and the removal of mail-sorting equipment, is a result of fewer letters coming through a cash-strapped system. He has said these changes would be paused until after the election and that a committee was being formed to help solve problems with delays. But it’s unclear what reversals would be made to speed up mail delivery.

Sen. Sherrod Brown, D-Ohio, the ranking member of the Senate Banking Committee, raised concerns about the financial challenges consumers could face due to delays in mail delivery.

“Any delay in mail service could mean people — through no fault of their own — risk financial hardship by not being able to take action on notices or offers of assistance they don’t receive on time,” Brown said in an Aug. 18 statement. “The Trump Administration’s sabotage of the postal service is not only a blatant attempt to steal an election that will rely on mail-in ballots — it is yet another instance of President Trump harming Americans for political gain.”

Several industry representatives reached about the issue said they have not received reports of problems from the mail delay so far. But the issue is top of mind as forbearance plans granted at the start of the pandemic may need to be renewed after applications for further relief are sent in by consumers and business owners. The process of applying for forgiveness through the Small Business Administration’s Paycheck Protection Program is about to begin but could be jeopardized as well, according to some bankers.

“We’re watching it,” said Charles Crawford, chairman and CEO of $223 million-asset Hyperion Bank in Philadelphia. “If there is a [mail] slowdown, it will impact us.”

Crawford said he is preparing to send bank employees to small businesses in person to collect paperwork needed for PPP relief that otherwise would be mailed, like receipts. He added that the issue is one more reason why Congress should streamline the process and automatically forgive loans for smaller businesses.

“It’s another element, with the postal system, it’s another stressor on the business community,” Crawford said.

A spokesperson for the SBA declined to comment on whether the mail slowdown was a concern to the agency.

Consumer advocates, too, are worried the lag in mail could hurt those who have been slow to bank digitally and still send in their payments through the U.S. mail.

“We are generally concerned that the delays with USPS could lead to a variety of consumer penalties, such as late fees, and are especially concerned that those issues could disproportionately impact consumers who do not bank online, and particularly low-income people,” a spokesman for Public Justice said.

Throughout the hearing, DeJoy deflected questions about why the changes were made by pointing out that the postal service was having trouble paying its own bills and called on Congress to pass reforms that would help the agency operate in the black. He said in the meantime newly formed committees were working on plans that would speed up processing mail but would not commit to when he would turn those plans over to lawmakers.

“I am working toward on-time delivery,” DeJoy said.

Jackie Stewart contributed to this article.

A version of this article originally appeared in American Banker.
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