Sen. Elizabeth Warren Suggests Post Office as Substitute for Payday Lenders
by Maritza Gomez, age 16
A new legislative
proposal could protect vulnerable citizens from the deceitful
practices of payday lenders. The proposal, supported by Democratic
Senator Elizabeth Warren of Massachusetts, would allow the United
States Postal Service to partner with banks to provide basic banking
services to people across America.
A 2012 report from
the USPS’s Inspector General found that 68 million Americans did
not have bank accounts. These Americans spent over $89 billion on
fees and interests from short-term loans and check cashing services
alone. The report found that individual households spent more than
$2,400, or about one-tenth of their annual income, on fees and
interests.
The payday lending
business has operated without regulation for decades, profiting from
loopholes, and avoided state-implemented reform attempts. The threat
of new rules from the Consumer Financial Protection Bureau already
put an end to the unfair and questionable practices of some
traditional banks like the payday lending business. The bureau did
this by prohibiting the deposit-advanced loans, which have similar
features to payday loans like high interest rates and fees. However,
the lending business still exists.
Senator
Warren proposed a way to eliminate the practices of payday lenders.
In an editorial for the
Huffington Post
, she said, “USPS
could partner with banks to make a critical difference for millions
of Americans who don’t have basic banking services.”
She
argued that USPS could do this by replacing non-bank financial
service companies like check cashing and payday lending stores, and
providing essential services to citizens living in “bank deserts”:
areas that do not have access to banking services. This would make
financial services including debit cards and small-dollar loans
accessible to people living in these communities through their local
post office.
In addition to
helping these citizens, USPS would benefit by self-generating
revenue. In fact, doing business in communities that lack bank
services would lead to profits of up to $9 billion for the struggling
federal mail agency. This profit would help USPS overcome the
financial crisis Congress’ harmful policies caused them. These
policies require USPS to hold assets in their pension fund that are
enough to cover 75 years of future pension costs. Congress’ refusal
to remove these pension requirements forced USPS to the brink of
bankruptcy. Even though the agency receives no taxpayer money, it is
required to work under Congress’ authority.
Senator
Warren’s proposal would not only provide citizens with an
alternative to the damaging financial situations caused by payday
lenders, but also it would give USPS a way out of its financial
crisis.
[Source:
BillMoyers.com
]
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