OPINION: Small, short-term loans could be processed by the post office
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All opinions contained were submitted by residents of Albuquerque.
Payday loans are high-interest, short-term, and based solely on a person’s paycheck. They are said to be small loans given to bridge a time gap or to deal with an emergency like an unexpected car repair. Payday lenders say these loans are necessary to help disadvantaged people find a financial solution. But one Study by the Pew Charitable Trusts found that only 16 percent of payday loan borrowers used the money for unexpected expenses. A whopping 69 percent of borrowers used their payday loans for recurring expenses like bills, rent, and groceries.
According to the Seven Pillars Institute for Global Finance and Ethics, payday lending is “a toxic mix of high operating costs and low returns.” A lender will have access to your checking account the day your paycheck is deposited and will take the full lump sum payment. That’s before you can pay other bills or withdraw cash. This could leave you short-staffed again, leading to another high-yield payday loan and another cut in your next paycheck.
Payday lenders say they provide a service to a segment of the population that does not have access to traditional bank or credit card credit. Opponents of these practices say they create financial slavery.
A middle solution, as suggested by Seven Pillars, could be to administer payday loans at reasonable interest rates through a government agency like the US Post Office.
What do you think?
When I started my “working years” in 1958, the post office had a bank. That’s where my first savings account was. There was almost unanimity among the elders in our church that avoiding debt like the plague is the way to go. Times have changed, but the essential things in life have not. The post office should provide basic financial services in every post office. We also had statutory living wages, with affordable housing, food and clothing. Hospitals were run by city and county governments and churches, so medical care was affordable. We have greatly degenerated and decayed. We need less Wall Street and more New Deal to have a civilized country.
Post Office Banking is a great way to start revitalizing underserved parts of this country. Post offices are in many areas avoided by banks and retail outlets. They provide existing infrastructure that would be impossible to replicate and an opportunity to begin rebuilding inner-city and rural economies. Services should include checking and savings accounts; credit and debit cards; credit and internet access. They could partner with credit unions to provide financial services.
As if it matters given the credit lobby. We have many credit unions that can help those who need short-term credit. Please keep the USPO out of the matter; they simply write off the bad loans at our expense. Credit unions can help with advice; If they rate the loans as having reasonable risk (not 36%), they should be able to make money and compensate the loan officers. I don’t know what regulations need to be changed, but personal service by actually taking care of the people who need money is important.
USPS is not a bank!
I am responding to your February 4, 2022 article regarding payday payout and Seven Pillars’ “middle solution” where the US Post Office handles payday loans. First, I’m a fan of our local post office and the people who deliver our mail and provide the latest services to get mail and packages from point A to point B – I have all the respect in the world for them! However, this famous phrase comes to mind from Pillars’ comments: “I’m from the federal government and I’m here to help.” President Ronald Reagan called the phrase “the nine most terrifying words in the English language”. A clear statement that governments are not always the solution and arguably should be the last resort when all others fail. The last place the USPS needs to be is in the business of the financial services industry. The US Postal System (USPS) lost $6.9 billion in fiscal 2021 and $7.6 billion in 2020 — the losses the USPS would incur would only increase as it tries to manage financial services products. When I visit the post office, the staff are often overwhelmed with staff, there are long lines, and it’s always a process I have to accept when I leave. The burden of providing and/or managing financial services and all the regulations that come with disclosures and the like would be overwhelming for an already overburdened workforce. According to a publication known as Government Executive and a Jan. 14 article by Eric Katzth 2022, the USPS, under a pilot program of 4 post offices in the Washington DC area, has provided financial services to just 6 people and sold gift cards since September 2021 and reports making $35.70 during that period. The financial services business is clearly not a place for the USPS to be, and the USPS’s provision of financial services is not the answer and certainly not a “middle solution”! (This email is from a bank president.)
You asked if we should “manage payday loans at reasonable interest rates through a government agency like the US Post Office.” –
I think personal finance should be taught in middle school and beyond.