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Nobody wants to bank at the post office – not even postal credit unions

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A recent report from the Trump administration throwing cold water on the idea of postal banking has an unlikely backer – the National Council of Postal Credit Unions.

The Trump administration Tuesday released a report on reforming the U.S. Postal Service, and it echoed many arguments the banking sector has made against the concept – namely that the USPS is ill-equipped to manage the risks involved.

“Given the USPS’s narrow expertise and capital limitations, expanding into sectors where the USPS does not have a comparative advantage or where balance sheet risk might arise, such as postal banking, should not be pursued,” the report states.

“Any new competition in the financial field is a threat to postal credit unions,” said Becca Cuddy, NCPCU board chair and CEO of Signature Federal Credit Union (formerly known as NAPUS FCU). A better strategy, she added, might be for external partners – including possibly banks – to partner with postal CUs or the council “rather than try to reinvent the wheel.”

With a dwindling membership base, many postal credit unions are transitioning into community charters because of continued reorganization and downsizing at the Postal Service.

But even as postal CUs seek to broaden their charters or grow their SEGs, further challenges remain – including, noted Cuddy, that many such institutions are located in postal facilities and will “probably be forced to leave” as a result of downsizing.

Return to sender

The debate over postal banking was launched in 2014 when the Postal Service’s Office of Inspector General floated the idea.

The proposal drew criticism from both the USPS and from lenders with which the Postal Service would have competed. “It’s the worst idea since the Ford Edsel,” said Cam Fine, who was then the CEO of the Independent Community Bankers of America.

The National Association of Federally-Insured Credit Unions on Wednesday echoed those sentiments.

"The Treasury's postal report confirms what we already know – providing banking services is well outside the U.S. postal service's wheelhouse. Entering this space would only exasperate the agency's financial woes," said NAFCU President and CEO Dan Berger. "NAFCU has been opposed to this proposal when it first appeared in 2014 and believes the postal service should remain focused on improving its core business of mail delivery instead of expanding into areas where it has no expertise.”

Berger added, "Credit unions are already highly regarded for their commitment to underserved and underbanked communities. Moving forward, Congress should look to remove regulatory barriers and allow credit unions to serve more communities in need of affordable, consumer-centric financial services."

Postal credit unions not only face the challenge of the potential for postal banking, but they aren’t immune to challenges the rest of the credit union industry is dealing with, said Cuddy.

“We're already seeing a decrease in postal credit unions and I anticipate that we will continue to see it because we've seen a decrease in the number of postal employees we receive as members,” she said “It's an ongoing issue for postal credit unions and their employees because [not all employees] are likely to look for a credit union, and it seems that the younger generation is not as well versed on what a credit union can offer. The convenience factor and ease of use that the larger banks offer is basically right in front of their face.”

Late delivery?

Despite Treasury's report, postal banking still the backing of several Democratic senators who are mulling presidential bids, including Elizabeth Warren of Massachusetts, Kirsten Gillibrand of New York and Sherrod Brown of Ohio, as well as Vermont Independent Bernie Sanders, so it could become a more prominent political issue over the next two years.

Supporters of the concept argue that the USPS, which operates more than 30,000 post offices, is well positioned to offer more affordable credit to millions of Americans who rely on payday loans. They also note that banking services would offer a new source of revenue for the struggling Postal Service.

The USPS reported a net loss of $3.9 billion in fiscal year 2018, its 12th straight year of net losses.

In April, President Trump created a task force to make recommendations on how to make the post office financially sustainable. The task force was chaired by Treasury Secretary Steven Mnuchin. It also included representatives from the Office of Management and Budget and the Office of Personnel Management.

The task force’s 69-page report recommends that the Postal Service explore some new business opportunities, such as offering licenses for hunting and fishing. The report also suggests that existing post offices should rent out space to other retailers.

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