Postal banking? Let credit unions deliver the goods
Last month, Senator Bernie Sanders (I-Vt.) and Congresswoman Alexandria Ocasio-Cortez (D-N.Y.) called for legislation that would allow financial services to be delivered through the U.S. Postal Service as a way to give low- to moderate-income consumers better access to the mainstream banking system.
At first glance, the idea could have merit. In the words of Senator Sanders, “If you are a low-income person, it is, depending upon where you live, very difficult to find normal banking. Banks don’t want you. And what people are forced to do is go to payday lenders who charge outrageously high interest rates. You go to check-cashing places, which rip you off…I think that the postal service, in fact, can play an important role in providing modest types of banking service to folks who need it.”
But like many well-intentioned ideas, this one may not be feasible as proposed. The operational and regulatory hurdles inherent in the provision of financial services, even basic ones, are likely to be too high for entities not designed for it. Instead, here’s a modest suggestion to achieve the goal of giving consumers a lifeline to basic financial services through the U.S. Postal Service: let credit unions do the job.
Why credit unions? Let’s look at the way the world works. Unlike post offices, credit unions have a strong, well-established track record of efficient delivery of financial services and access. With all due respect to the USPS, their role is that of delivering mail, a role that should remain.
Given the evolution of technology, credit union service options continue to grow and become more consumer friendly. Kiosks and mobile branches are becoming the rule, not the exception, and consumers are voting with their feet (and their wallets) by increasingly using those services. Legal issues about leased space in federal facilities shouldn’t be a problem either — there is ample precedent for this to occur. As CEO of the Defense Credit Union Council, I know this first-hand, as both the Federal Credit Union Act and Department of Defense regulations allow credit unions to operate on military installations rent-free. The same concept could govern credit unions in post office lobbies.
Other questions are also easily addressed. As part of the overall effort to expand access, the National Credit Union Administration could consider field-of-membership additions in a set radius, say five or 10 miles, around a participating post office. NCUA could apply the same standards they currently use to approve a low-income community, and consumers who need services can get them.
While we’re talking about regulatory changes, a process could also be established by NCUA that allows credit unions to bid for the right to provide these services at a post office. This is both workable and necessary — credit unions that do not want to participate don’t have to, while those that do can meet whatever legal requirements necessary for a credit union to set up shop and start serving consumers.
The ubiquity of post offices, married with service-oriented, member-owned credit unions, is a solution that everyone can get behind.
Everyone, however, except the banking industry. Their peals of righteous indignation can already be heard. But candidly, that should not ever be a consideration on whether or not to pursue an initiative, especially one that stands to benefit so many consumers and achieve the lofty public policy goal of improving availability of fairly priced financial products.
Credit unions should never apologize for trying to serve people. And this post office idea comes along at a time when credit unions are looking for ways to fulfill our legal mandate to serve.
In short, credit unions are ready, willing and able. Let’s get to work.