The Office of the Inspector General released a white paper on Jan. 27, suggesting that the Post Office provide non-bank financial services in an effort to boost revenue. This concept is in direct opposition to the consumer activists, as well as state and federal regulatory agencies, that have attacked private enterprise solutions in this arena for more than 20 years.
The white paper correctly suggests that a revenue opportunity exists for the post office to offer re-loadable debit cards, check cashing services, and small dollar loans to under-banked consumers. Additional competition in this arena might result in savings for consumers, as increased supply for these services will create pricing pressure.
There is, however, an inherently unfair advantage that the post office has over private enterprise. The post office need not make a profit on these services, while private enterprise must in order to stay in business.
It is this lack of a level playing field that raises suspicions. Breitbart News recently reported the Federal Government is engaging in a secret program, known as “Operation Choke Point,” intended to deliver economic damage to non-bank financial service providers.
It seems other than coincidental that the insertion of government-sponsored competition into the non-bank financial services space within weeks of the revelation of Operation Choke Point.
In addition, it seems odd that the FDIC and OCC should effectively kill bank deposit advance products simultaneously with the release of this white paper, which suggests an identical product be offered by the Post Office at a much lower rate.
The actual merits and potential profitability of a post office suite of products require further study. Part of the success of non-bank financial service providers is they have thousands of locations, and that transactions are handled quickly and efficiently. The post office would have difficulty competing in these regards.
Finally, there is risk to taxpayer funds with regards to these small dollar loans. There is no suggested mechanism to prevent default, potentially leaving taxpayers holding the bag on loans that go unpaid.