Credit union groups have long opposed USPS locations offering postal banking services.
The U.S. Postal Service (USPS) is continuing its pilot financial services program even as its own regulatory commission is questioning its legality.
“No final determinations have been reached with regard to ending the pilot, or with
regard to any other potential steps that might be taken to modify the pilot,” the postal service said in response to a compliance report issued by the Postal Regulatory Commission (PRC).
In its report, the PRC reminded postal officials that it—and not the Postal Service—ultimately determines what products may be offered in Post Offices. “Any market test for an experimental product, including services ancillary to only competitive products, must be first reviewed and approved by the commission at least 30 days before initiating such tests,” the report stated.
The commission said it was requiring the Postal Service to file regular reports and that it would review the pilot if it lasts beyond the end of March.
Why the USPS Plans to Continue the Program
“The Postal Service remains of the view that the pilot program is an appropriate and limited test of an alternative payment method for the established gift card product, which does not implicate the current Mail Classification Schedule, and that no further regulatory action is warranted at this time,” postal officials said.
They added that if the commission chose to take initial attempts to modify or end the program they would be “active participants” in that case.
How Does Postal Banking Work?
The Postal Service began the pilot program at USPS retail locations on September 13 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.
How Credit Unions and Others Have Responded
The program has been a political football. Congressional Republicans have questioned the legality of the pilot, while a group of Democratic lawmakers has called on Postmaster General Louis DeJoy to expand it.
Traditionally, credit union and other financial services trade groups have been against postal banking.
B. Dan Berger, president/CEO of the National Association of Federally-Insured Credit Unions (NAFCU) made this opposition clear after Democrats called for the expansion.
“This program stretches the bounds of the Postal Service’s statutory authority and allows the underfunded and understaffed USPS to unfairly compete with credit unions who are already meeting the needs of low- to moderate-income individuals,” he said.