The USPS can barely deliver a check, let alone process one.

You may be as weary of hearing from me on these issues as I am writing about them, but unfortunately this stuff is really happening; stuff that can have a significant and “unwelcome” impact on our financial industry. We’re, of course, talking about the pilot program that involves the USPS providing banking services.

Paul Merski, the vice president for congressional relations and strategy for Independent Community Bankers of America, emphasized that the Postal Service has not provided anything beyond a few simple financial services in nearly 55 years. Merski, quoted by cnbc.com, said that “this is just a bad idea that doesn’t seem to want to go away. The post office is having trouble keeping up with just the delivery of mail and losing billions of dollars each year for over a decade now. The Postal Service is in no way, shape or form equipped to compete in the financial services space.”

The program is already in the works, with four pilot locations: Washington, D.C., Falls Church, VA, Baltimore, MD, and Bronx, NY. With the new program, customers now have the opportunity to use a payroll or business check to buy a single-use gift card worth up to $500 for a transaction fee of $5.95.

Like the recent controversy over financial institutions reporting transaction information to the IRS and the SBA making loans directly to small businesses, the idea of the USPS competing with banks and credit unions has elicited passionate rhetoric from both sides.

Sen. Kirsten Gillibrand, a New York Democrat, along with Mark Dimondstein, the president of the American Postal Workers Union, for instance, have expressed their support of the program. Gillibrand has said that this program is a great first step toward serving the unbanked and underbanked in both urban and rural communities. Senator Gillibrand points to the roughly 8.4 million households in the U.S. that are "unbanked," and 24.2 million that are "underbanked, according to the Federal Deposit Insurance Corp. Dimondstein sees the expansion into banking “as a win for the people of the country, a win for the Postal Service itself, because it will bring in new revenue, and, of course, a win for the postal workers who are extremely dedicated to the mission.”

Proponents of the plan contend that many people do not have easy access to banks, but most can find a post office. A lack of access, they say, along with the costs associated with banking, and a distrust of the banking system, have discouraged some people from using banks, leaving them out of the system entirely. Banking trade groups, on the other hand, said the pilot program detracts from the industry’s own efforts to bolster financial inclusion. American Bankers Association spokesman Jeff Sigmund said in a statement: “It’s easier than ever to open a bank account in this country and the solution is not a government-subsidized service through the post office.”  In American Banker, Sen. Pat Toomey, ranking member of the Senate Banking Committee, argued that “the idea that the government is going to do a better job at providing banking services than financial institutions is just laughable. You would have to work very hard to come up with a worse idea than having the government become a national bank executed through the post office,” he said. 

Also, and importantly, it’s not like the industry has been simply sitting on its collective hands while millions go without banking services.  According to an August article in bankdirector.com: “To close that gap, (between the banked and un/underbanked) more than 100 financial institutions have certified one of their checking accounts as safe, affordable and transparent” through the Bank On program, which aims to leverage banks as a community partner. The goal? To make it easier and cheaper to bring unbanked and underbanked individuals into the community bank world. The Bank On program pairs certified checking accounts issued by local banks to community programs that support financial empowerment and wellbeing. The account standards were created by the Cities for Financial Empowerment Fund, with input from financial institutions, trade associations, consumer groups, nonprofits and government parties. The accounts must be “safe, affordable and fully transactional,” says David Rothstein, who leads the national Bank On initiative. “These accounts don’t carry overdraft fees or high monthly fees. They have a low minimum opening deposit and the account holder must be a full bank customer, with access to other services.”  Is the program working? Millions of Bank On accounts have been opened in recent years. “The Federal Reserve Bank of St. Louis maintains a data hub of account activity submitted by 10 participating banks, ranging from Bank of America Corp. and JPMorgan Chase to $2.9 billion Carrollton Bank, the bank unit of Carrollton, Illinois-based CBX Corp. More than 5.8 million accounts have been opened at these banks to date; 2.6 million accounts were open and active in 2019.”

Isn’t this the way a problem like this should be addressed?  By those who are qualified to be involved in the discussion, such as “financial institutions, trade associations, and consumer groups.  Not politicians.

Could the USPS use an additional $9 billion per year?  Could those 32 million Americans who are either unbanked or underbanked benefit from convenient, affordable access to bank and credit union services?  Absolutely. And there is nothing wrong with the federal government looking to find a solution. 

But once again, the Fed seems to be looking in the wrong place.


About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.



Here we go again! First the IRS. Now, the SBA.


Uncle Sam wants you… to stop making SBA loans to small businesses!

It’s hard to believe that twice within as many weeks we’re again talking about government overreach, but here we are.  Last week we talked about the push for banks and credit unions to morph into the enforcement arm of the IRS in its effort to reduce tax fraud. Today, we’re talking about what Alex Sanchez, President and CEO of the Florida Bankers Association rightly characterizes as yet “another zany idea” that’s been floated out by the current administration: The idea that it’s a good idea for the government to start making direct loans through the Small Business Administration (SBA) directly to small businesses.

“Legislation approved by the House Small Business Committee last week,” says Mr. Sanchez in recent correspondence from his office, “included an option for the SBA to originate small 7(a) loans through partnerships with third parties — which presumably could include some banks. At the same time, the bill would authorize SBA to originate and disburse direct loans.”

The recent American Banker article, “Proposed SBA expansion into direct lending irks banks, credit unions,” quoted Ian McKendry, a spokesman for the American Bankers Association. “With details still in short supply,” he said, “his group wants to better understand why it makes sense to create a direct lending program to compete with banks that are already meeting demand for 7(a) loans. This could have the unintended effect of making it more difficult for some lenders to continue participation in the 7(a) program.”

Yes, there may be details that are still in short supply, but I do think that some details are abundantly clear: Banks and credit unions are vehemently opposed to any federal proposal to let the Small Business Administration make 7(a) loans directly to businesses.  This detail is clear as well. The Biden administration’s $3.5 trillion spending package would give the SBA nearly $4.5 billion to make 7(a) loans of $150,000 or less directly to borrowers.  And while I appreciate Mr. McKendry’s gentility and even-handedness in expressing his thinking on the matter, it does seem pretty clear what the intent here is why. We know the intent… now for the why.

Some pretty vocal elected officials are making it known that they feel that banks have done, well, a crappy job of managing SBA money.  According to American Banker, Sen. Ben Cardin, chairman of the Senate Small Business Committee, and Rep. Nydia Velazquez, chairwoman of the House Small Business Committee, stated that “not enough of that record 7(a) funding is reaching the smallest small businesses. Both Cardin and Velazquez said smaller businesses also struggled to obtain loans last year during the initial phase of the Paycheck Protection Program, in large part because banks — which provided most of the funding under PPP — favored borrowers seeking larger, more profitable loans.” Velazquez went on to express her disappointment at the fact that despite their best efforts, smaller businesses were simply “left behind” when the loans were given out for the simple reason that they “didn’t have preexisting relationships with the banks and because those types of loans are not profitable.”

Conversely, legislators on the other side of the fence are, of course, taking a much different view. Rep. Blaine Luetkemeyer of Missouri, the ranking member of the House Small Business panel, said he is dead set against any direct lending option for SBA. "Private-sector lenders are far better equipped to handle direct lending — that is what they do,” Luetkemeyer said Wednesday. “Any attempt to expand the SBA’s direct-lending capabilities is extremely irresponsible and will put the American taxpayer dollar at increased risk.” 

Well, I suppose that one might try to argue that community banks simply weren’t getting SBA money out to small businesses as effectively as they could have… then again, over $30 billion in loans in the first 11 months of 2020 is nothing to sneeze at.

About Bank Marketing Center

Here at BankMarketingCenter.com, our goal is to help you with that vital, topical, and compelling communication with customers; messaging that will help you build trust, relationships, and revenue. In short, build your brand. To view our campaigns, both print and digital, visit BankMarketingCenter.com. Or, you can contact me directly by phone at 678-528-6688 or email at nreynolds@bankmarketingcenter.com. As always, I would love to hear your thoughts on this subject.