Joint Economic Committee Dems Push Postal Banking

JEC Democrats say initiative strongly opposed by credit union groups could help reach unbanked population.

One-fifth of American households have trouble obtaining traditional financial services and providing those services in post offices would help solve that problem, Democrats on the congressional Joint Economic Committee (JEC) said in a report released last week.

“Unbanked and underbanked individuals and families incur steep economic costs for living on the margins of the financial system, which includes relying on predatory lending schemes that charge costly penalties and trap people in cycles of debt,” the Democrats on the JEC stated, in the report.

Postal banking can help solve that problem, they added. The Democrats also said that in many Black or Hispanic neighborhoods, check cashing services and payday lenders are more common than bank branches and offer more convenient operating hours.

Inside the Report

The pandemic-related Economic Impact Payments demonstrated the hardship that unbanked individuals face, the Democrats said, adding that Americans with bank accounts were able to have their checks directly deposited into those bank accounts.

“In contrast, unbanked individuals had to wait weeks for paper checks to arrive by mail and were also forced to pay a fee to access the money at a check-cashing store,” the report read.

The committee also said that alternative credit assessment models are important in helping people without credit scores achieve financial security.

“People of color and low-income Americans are also more likely than their white and more affluent counterparts to have no usable credit score or to be labelled as ‘credit invisible’ with no credit record,” the Democrats said.

In 2021, 46% of Black Americans and 37% of Hispanic Americans reported they had been denied credit or had been approved for less credit than they requested, compared with less than 25% of white Americans,” the report stated.

The Democrats asserted that legislation pending in Congress—the Postal Banking Act—can provide a road map for bringing financial services such as low-cost savings and checking accounts and small dollar loans.

“Barriers to full financial inclusion—like banking deserts and predatory lending practices—harm not only the marginalized communities that are directly affected; they also cause economy-wide losses by exacerbating racial and wealth inequality,” JEC Chairman Rep. Don Beyer, D-Va., said, in releasing the report.

Outlook for Postal Banking

Some Democrats have been pushing for postal banking for many years, but they face opposition from both credit union and banking trade groups, as well as Republicans in the House and Senate.

The House has passed FY23 Financial Services appropriations legislation that includes funding for expansion of a postal banking pilot program. The Postal Service has been testing a program to allow customers to cash business or payroll checks in exchange for gift cards. The program is being tested in four communities and with little publicity. And few consumers have used it, according to Postal Service reports.