{"id":8533,"date":"2018-05-04T12:04:10","date_gmt":"2018-05-04T19:04:10","guid":{"rendered":"http:\/\/occupysf.net\/?p=8533"},"modified":"2018-05-04T12:04:10","modified_gmt":"2018-05-04T19:04:10","slug":"gillibrands-post-office-banking-bill-bypasses-years-of-careful-quiet-work-to-kill-payday-lending","status":"publish","type":"post","link":"http:\/\/occupysf.net\/index.php\/2018\/05\/04\/gillibrands-post-office-banking-bill-bypasses-years-of-careful-quiet-work-to-kill-payday-lending\/","title":{"rendered":"Gillibrand\u2019s post office banking bill bypasses years of careful, quiet work to kill payday lending"},"content":{"rendered":"
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A huge potential benefit to the poor. And a spotlight not everyone wanted.<\/h4>\n<\/div>\n
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ALAN PYKE<\/a>\u00a0<\/span><\/span>
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\"Sen.<\/picture><\/div>
SEN. KIRSTEN GILLIRBAND (D-NY), LEFT, INTRODUCED LEGISLATION WEDNESDAY ON A HIGH-PROFILE IDEA SEN. ELIZABETH WARREN (D-MA), RIGHT, HELPED POPULARIZE. SOME STAKEHOLDERS HAD BEEN HOPING TO KEEP THE IDEA OFF THE FLOORS OF CONGRESS AND USE EXISTING LAW INSTEAD OF NEW LEGISLATION. (CREDIT: TOM WILLIAMS\/CQ ROLL CALL)<\/figcaption><\/figure>\n
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The popular progressive idea of using the United States Postal Service to help families struggling with their finances escape the trap of predatory payday lending got a renewed bounce this week from a prominent senator widely expected to run for the White House in 2020.<\/p>\n

Sen. Kirsten Gillibrand\u2019s (D-NY) Postal Banking Act, announced Wednesday, would launch a new set of basic financial services at USPS branches. For the tens of millions of families who either have no bank account or are categorized as \u201cunderbanked\u201d because they also rely on expensive alternatives like payday loans, the idea could create new opportunities to start saving money or to hurdle an unexpected expense without dropping into almost permanent debt.<\/p>\n

The campaign to get USPS to offer such services\u00a0has been going on for a long time<\/a>, just in a delicate and quiet way. The new bill ups the stakes dramatically, creating a rallying point for both supporters of the idea \u2014 and their opponents, who have both legislative majorities and the White House.<\/p>\n

\u201cI\u00a0think she\u2019s probably making a different calculus,\u201d\u00a0said Mehrsa Baradaran, a law professor and the preeminent expert on postal banking. \u201cThis is a bold move. If you put this out there and say \u2018hey let\u2019s do this thing,\u2019 then more people could get on board and push it through.\u201d<\/p>\n

One person\u2019s bold gamble is another\u2019s miscalculation. Many supporters of the idea, stung by past harms done to the USPS on Capitol Hill, consciously decided years ago that they would not bring this idea to Congress and focus instead on using the agency\u2019s existing authority to act.<\/p>\n

\u201cWe\u2019re happy to have Sen. Gillibrand\u2019s enthusiasm added to the chorus,\u201d said Katherine Isaac of the Campaign for Postal Banking, \u201cbut we\u2019re still pushing for the things the postal service can do now.\u201d<\/p>\n

A fake crisis, and a real opportunity<\/b><\/h2>\n

The idea Gillibrand\u2019s pushing has been prominent in progressive circles for more than four years. Its full history is far longer \u2014 post offices\u00a0did actually provide similar services<\/a>\u00a0in the early 20th century \u2014 but as a modern political cause in an era defined by a Wall Street crash and stunning inequality of wealth and opportunity, it\u2019s in its fifth year.<\/p>\n

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Victims And Industry Workers Fight Over The First-Ever Federal Plan To Curb Predatory Payday Loans<\/h3>\n<\/div>\n<\/div>\n

The USPS\u2019s Inspector General\u00a0<\/strong>kicked off\u00a0the push in 2014 with a report that built on Baradaran\u2019s work and detailed how the agency could begin offering financial services. Prominent finance reporter David Dayen\u00a0quickly picked up on the report<\/a>\u00a0as a solution to the\u00a0stubborn predation<\/a>\u00a0of the payday lending industry, which\u00a0we now know<\/a>\u00a0siphons\u00a0billions of dollars<\/a>\u00a0out of poor communities each year by trapping families in cycles of debt. Sen. Elizabeth Warren (D-MA) soon gave the idea the\u00a0massive signal boost<\/a>\u00a0others hadn\u2019t been able to, and post-office banking was suddenly in vogue.<\/p>\n

The IG\u2019s findings came in part out of a desire to help USPS get onto firmer financial ground. Though the idea was framed as a boon to the public, the report also made the bottom line clear: The agency could net some $9 billion a year in new revenue.<\/p>\n

Postal banking\u2019s rebirth, then, came out of a sense that the agency is in a funding crisis. But that crisis is fake, manufactured intentionally by lawmakers in 2006 when Congress imposed\u00a0an absurd accounting rule<\/a>\u00a0on the service. The change makes its future obligations to retired postal workers seem artificially dire. The appearance of insolvency that\u2019s haunted USPS for more than a decade since would largely evaporate if lawmakers reversed that pension-funding rule.<\/p>\n

That 2006 legislative debacle illustrates why the staunchest advocates for postal banking have spent four quiet years working on the administrative side. Warren has introduced some 250 pieces of legislation in her time in the Senate, none of them tied to postal banking.<\/p>\n

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The Day Payday Loan Sharks Feared Is Here, But It\u2019s Consumer Groups Who Are Outraged<\/h3>\n<\/div>\n<\/div>\n

To the extent Gillibrand\u2019s breaking new ground here, she\u2019s able to in part because others felt leery that a Congress led by Sen. Mitch McConnell (R-KY) and Rep. Paul Ryan (R-WI) would be prone to doing more harm than good. Gillibrand is the second congressional supporter of the cause to try the legislative route. Rep. Cedric Richmond (D-LA)\u00a0introduced his own version of the idea back in 2014<\/a>. It died in committee, but it also didn\u2019t become the bugaboo vehicle for worsening policy that some people working on this idea fear.<\/p>\n

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The behind-the-scenes advocacy has been slow. But it\u2019s also shown signs of progress from where things stood immediately after the IG\u2019s report, Dayen\u2019s coverage, and Warren\u2019s public remarks on the idea helped create an opportunity for change.<\/p>\n

The USPS initially rebuffed the pressure,\u00a0issuing a curt statement<\/a>\u00a0that both promised to explore potential expansions of financial services and warned that the agency wouldn\u2019t move forward alone. \u201cOur core function is delivery, not banking,\u201d it said.<\/p>\n

Advocates kept the pressure on and eventually chipped away at that initial resistance. USPS agreed to look into pilot program versions of postal banking in a 2016 memorandum of understanding appended to contract negotiations with the American Postal Workers\u2019 Union (APWU). Those conversations have continued since, Isaac said.<\/p>\n

\u201cDifferent players have different tactics. We looked at the situation in 2014 and 2015 and decided to go in the non-legislative direction,\u201d Isaac said. \u201cSen. Warren knows that and has been supportive of that direction, and has done things like meet with the Postmaster General as recently as two months ago to urge her to get busy on pilots around the country to figure out what works and what doesn\u2019t work.\u201d<\/p>\n

A USPS spokesman declined to comment on the Warren meeting or the state of the pilot program work agreed to in the 2016 bargaining process.<\/p>\n

The delicate balance of price and sustainability<\/b><\/h2>\n

However it might get done, some version of postal banking that includes alternatives to payday loans would be a huge lift for the masses of working poor who are currently one car repair away from a for-profit debt trap.<\/p>\n

But unless the new class of loans can manage to be both genuinely affordable to users and somewhere close to break-even for the lender, no version of a change like this can survive for very long. The details of how postal banking loans get priced therefore become incredibly important, for the public and USPS alike.<\/p>\n

\u201cIf this is about saving the post office then it\u2019s about revenue. But Sen. Gillibrand came to it from my lens, that this is a public option for the unbanked,\u201d Baradaran said. \u201cSuper low interest loans, probably way too low, but she really wants to be bold and say this is about the public not about saving the post office.\u201d<\/p>\n

Other organizations that have tried to clear payday lenders out of the paint may have found the balance point of sustainability and non-exploitative prices. But it\u2019s a far cry from where Gillibrand\u2019s bill aims.<\/p>\n

Small-dollar short-term lending of this sort can break even at interest rates\u00a0roughly one sixth of the average payday loan price. It can even be profitable without trapping people in endless reborrowing cycles, as\u00a0experiments with modest regulation in Colorado have shown<\/a>.<\/p>\n

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Predatory Payday Lenders\u2019 Top Democratic Ally Flip Flops On New Rules<\/h3>\n<\/div>\n<\/div>\n

Research suggests that low-cost alternatives to payday lending are only sustainable at annual interest rates in the mid-double-digits, Alex Horowitz of the Pew Charitable Trusts said in an interview. Such products would generate some amount of revenue, but not necessarily at levels forecast in 2014 by those worried about USPS\u2019 bottom line. Go much above 100 percent, and Horowitz\u2019s research suggests people start thinking you\u2019re preying on poor folks in a newer, gentler way.<\/p>\n

Gillibrand\u2019s bill would throw out that delicate balancing act between what\u2019s sustainable for a lender and what\u2019s fair to a borrower. Where a payday lender currently charges about $350 in total to borrow $400 for three months, the current alternatives offered by credit unions charge about $39 for the same loan. The credit unions say they are just about breaking even at that price, and could actually be profitable if they charged for like $60, according to Horowitz.<\/p>\n

Under Gillibrand\u2019s postal banking bill, USPS would charge $1.12 for the same three-month $400 loan product, Horowitz calculated.<\/p>\n

That\u2019s a recipe for a free money store with a blue-and-white eagle logo on the front. And that would be a very good thing for low-income families \u2014 and for the broader economy that relies on lower- and middle-income family spending to grow.<\/p>\n

But it\u2019s also apt to provoke backlash among the tightfisted conservative set who generated USPS\u2019 fake funding crisis in the first place \u2014 the exact thing the people working this cause for years have feared from legislative approaches. If the perfect is sometimes the enemy of the good, Gillibrand may just have delivered the \u201cperfect\u201d side of a political risk equation that others have diligently worked from the opposite, more attainable end for half a decade.<\/p>\n

\u201cWe can\u2019t predict the future on that,\u201d the Campaign for Postal Banking\u2019s Isaac said.\u00a0\u201cBut we want to work with anybody who thinks it\u2019s a good idea. Time will tell which strategy is the right one.\u201d<\/p>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

A huge potential benefit to the poor. And a spotlight not everyone wanted. ALAN PYKE\u00a0APR 27, 2018 (thinkprogress.org) SEN. KIRSTEN GILLIRBAND (D-NY), LEFT, INTRODUCED LEGISLATION WEDNESDAY ON A HIGH-PROFILE IDEA SEN. ELIZABETH WARREN (D-MA), RIGHT, HELPED POPULARIZE. SOME STAKEHOLDERS HAD BEEN HOPING TO KEEP THE IDEA OFF THE FLOORS OF… Continue reading → <\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"_links":{"self":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/8533"}],"collection":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/comments?post=8533"}],"version-history":[{"count":1,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/8533\/revisions"}],"predecessor-version":[{"id":8534,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/posts\/8533\/revisions\/8534"}],"wp:attachment":[{"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/media?parent=8533"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/categories?post=8533"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/occupysf.net\/index.php\/wp-json\/wp\/v2\/tags?post=8533"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}