United States Senator for New York Kirsten Gillibrand has just introduced major new legislation to create a Postal Bank, which would establish a retail bank in all of the U.S. Postal Service’s 30,000 locations. As detailed by the Senator’s announcement, the Postal Bank “would effectively end predatory payday lending industry practices overnight by giving low-income Americans, particularly communities of color and rural communities, access to basic banking services that they currently don’t have. The lack of access to traditional banking services makes it nearly impossible for low-income Americans to escape the cycle of poverty because they are often forced to spend large percentages of their income to cash their paychecks or pay back high-interest predatory payday loans.”
Mehrsa Baradaran, author of How the Other Half Banks: Exclusion, Exploitation and the Threat to Democracy, has worked closely on this issue with both Gillibrand and Senator Elizabeth Warren. As Baradaran details in Gillibrand’s announcement, postal banking was once a great service to the American people, and can be so again:
Postal banking was America’s most successful experiment in financial inclusion. Today, there are many communities across the country that are banking deserts. The only financial service providers are fringe lenders and check cashers whose business model relies on the poor paying more for banking services than anyone else. This is a threat to our democracy. Yet post offices serve all of these communities regardless of cost and without exploitation. Postal banking can provide safe, accessible, and much-needed financial services to the most struggling communities in our country. It will make it less expensive to be poor.
Below, Baradaran details the predations of the fringe lending industry and the promise of postal banking: