How Post Offices Can Beat Payday Lenders

The fight to curb payday loans has reached one of America’s oldest institutions: the Postal Service. Democratic representatives Bill Pascrell of New Jersey and Ayanna Pressley of Massachusetts recently introduced an amendment to the Financial Services and General Government Appropriations Act authorizing post offices to provide small loans, savings accounts, and other financial services. The amendment sets aside $1 million to cover any overhead. It passed the House of Representatives on June 25.

Pascrell is a longtime supporter of the Postal Service. In an April 2019 article for this magazine, he argued that the USPS is an essential institution that has been bogged down by privatization efforts. Rather than take away money from the agency, Pascrell said that Congress should expand its functions. Post offices, he noted, could bring loan and ATM access to unbanked Americans, many of whom rely on payday lenders that charge exorbitant interest rates.

Bank access is a severe problem in the United States. In 2017, 6.5 percent of U.S. households were “unbanked” (no bank access), and 18.7 percent were “underbanked” (reliant on financial institutions that were not banks). Almost half of the country could not pull together $2,000 within thirty days in the event of an emergency (or at least they would struggle greatly to). Many of these people would have to take out payday loans to deal with such a shock.

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Who is the PO going to send to collect the money when these loans go bad?