Is There a Secret Plan to Expand Postal Banking?

Report pushes USPS program opposed by credit union trade groups.

The United States Postal Service intends to expand its controversial check-cashing service if regulators allow it, a coalition including the American Postal Workers Union and Americans for Financial Reform said this week.

“Postal leadership has indicated that, assuming the Postal Regulatory Commission (PRC) permits a full pilot to proceed, it intends to expand it to include domestic and international wire transfers/payments and bill payments at as many as 50 post offices within the same geographies,” the groups said, in a report pushing for adoption of a postal banking program.

Backstory and Context

USPS officials have said publicly they have no current plans to expand the program, which began in September 2021 and is limited to five locations—USPS retail post offices in the Washington, DC; Falls Church, VA; Baltimore, MD; and Bronx, NY areas.

Customers in these locations can cash a paycheck to purchase a single-use gift card for up to $500. Checks larger than that are not accepted, and no cash is disbursed.

The Postal Service did not make a formal announcement of the pilot program, but officials said it was part of the service’s ten-year improvement plan.

Earlier this month, USPS officials told the PRC that, “With respect to the Gift Card Pilot Program, nothing has changed since the most recent report filed on February 9, 2023.” They added that no decisions had been made about future plans and that no gift cards were sold between Jan. 1 and the end of March.

Inside the Report

The groups issuing the report contend that the design of the postal pilot program has doomed it.

“The test-run is only active in four locations, many of which don’t match the characteristics of unbanked communities,” they said, adding, “The program is too limited in scope, only allowing individuals to cash payroll checks under $500.”

They noted further that the Republican-controlled PRC has opened up multiple reviews of the program in an attempt to halt it.

The program was supposed to cover full markets through 50 locations in the four original cities, the groups added. However, even for the four test locations, the USPS did not market the program beyond placing signs in the windows of the four sites.

Those four locations also did not adequately represent the various geographic regions that the USPS serves, according to the report. Most notably, there was no rural location included.

Additionally, they said that the service charge of $5.95 for a $500 check is much too high.

What Comes Next?

In the report, the groups also attempt to make the overall case for postal banking. 

“Postal banks can and should be the most accessible and affordable provider of financial services,” the report stated. “After all, the USPS maintains 31,000 branches across the United States, more than Starbucks and McDonald’s combined.”

The groups suggested that the USPS could install low-fee ATMs in post offices, with no fee charged for people using benefit cards. And they said that ultimately, the postal service should offer free checking and savings accounts in partnership with the Treasury Department.

Financial trade groups oppose postal banking, with credit union trade groups saying that credit unions would be happy to serve underserved areas if Congress allowed them to expand their fields of membership.