A new report from the Office of the Inspector General of the U.S. Postal Service proposes using the Postal Service for a variety of financial services for low-income Americans, including small loans and debt collection. The idea got a high-profile endorsement from Sen. Elizabeth Warren (D-Mass.) Saturday in an op-ed for Huffington Post.
According to the report, approximately 68 million adults – or one in four U.S. households – don’t have a bank account or use services like payday lenders. The average under-served household spends more than two thousand dollars per year on interest and fees. For the debt collection industry, this contributed to $6.7 billion in cancelled debt for 2011 alone. If collectors could avoid just five percent of this cancelled debt, the industry would end up saving $335 million a year in write-offs; this doesn’t even include the millions of dollars potentially saved in collection costs, and legal and administrative fees.
The USPS would go about instituting these changes by offering credit services like small personal loans. First, consumers would be offered a Postal Service prepaid card. Then, “Postal Loans” would be available to people who have their paychecks directly loaded onto that card; consumers could borrow up to half of their gross paycheck. Every borrower would pay at least five percent from their gross pay per paycheck until the loan is paid off; the USPS could automatically withhold payments from the consumer’s paycheck, and then put the difference on the card.
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