If the U.S. Postal Service wins congressional approval for its proposal to eliminate Saturday mail deliveries, the result could be a late-fee windfall for credit card issuers or that consumers will be prodded to pay more bills online.
Banking industry experts say the Postal Service's money-saving proposal, recommended by the agency's board of governors at an April 3 meeting, could force consumers to pay their card bills earlier, or risk owing penalties. These observers also say that if U.S. mail service were cut back to five days a week, the major credit card issuers - some of which recently paid large class action settlements over late-fee disputes - might have to soften their policies or extend grace periods to avoid customer outrage.
The proposed reduction in mail service, which is meant to offset an anticipated $2 billion to $3 billion Postal Service shortfall this fiscal year, could happen fairly soon. On April 4, William J. Henderson, the postmaster general and chief executive officer of the Postal Service, testified before the U.S. House of Representatives Committee on Government Reform that his agency had begun a 90-day study on the ramifications of such a move. The report is slated to be ready in July for presentation to Congress, which will make the ultimate decision.
The Postal Service says that new electronic media, such as e-mail and fax, have cut into its business. By this argument, a reduction in first class mail delivery could make consumers more inclined to use online bill presentment and payment and person-to-person e-mail services. Depending on the service and method of payment, Internet transactions tend to be processed faster than those sent by snail mail.
Even so, the majority of consumers would probably still rely on the old-fashioned method. "Obviously, if the Postal Service did this it would be another problem for consumers trying to pay their credit cards on time," said Ed Mierzwinski, executive director of the U.S. Public Interest Research Group in Washington. "Clearly, credit card companies have put a lot of roadblocks in the way of consumers by shortening the due dates, raising late fees. There are questions about whether credit card companies are posting bills on time."
Spokesmen for several credit card companies said it was too soon to know how a shorter mail delivery week would affect billing cycles.
"If they're only talking about delivery, but not other operations, that wouldn't be a problem because we actually go to the post office a couple of times a day and pick up our mail," said Jeff Unkle, a spokesman for the First USA division of Bank One Corp. "If they don't do any work on the weekends, we would have to assess how we would handle that, but any decision we'd make would minimize the impact to the customer."
A spokesman for Providian Financial Corp., Alan Elias, said his company already has provisions to protect customers over weekends. "The way our system is set up, if a payment is due on a Saturday or Sunday, we don't expect it to be paid until the following business day," he said. "And then we have a three-day grace period that kicks in after that."
Ken Kerr, an analyst for GartnerGroup Financial Services, said he did not think a five-day delivery week would prompt a stampede to electronic bill payment. "The reaction will be, 'I have to make my payment a day sooner,' " he said. Online bill payment "will be a slow rather than a rapid uptake."