NOTICE: Small, short-term loans may be processed by mail
This letter is provided as the author’s opinion/comment. You can submit your own letter to firstname.lastname@example.org
All opinions included were submitted by Albuquerque residents.
Payday loans are high interest, short term and based solely on an individual’s salary. Apparently, these are small loans made to bridge a time gap or deal with an emergency, like an unexpected car repair. Payday lenders say these loans are needed to help disadvantaged people in dire financial straits. But one Pew Charitable Trusts study found that only 16% of payday loan borrowers used the money for unexpected expenses. A whopping 69% of borrowers used their payday loans for recurring expenses like bills, rent, and food.
According to Seven Pillars Institute for Global Finance and Ethics, payday loans are “a toxic mix of high operational costs and low returns.” A lender has access to your checking account on the day your paycheck is deposited and takes the entire lump sum payment. This is before you can pay other bills or withdraw money. That could leave you shorthanded again, precipitating another high-interest payday loan and another cut to your next paycheck.
Payday lenders claim to serve a segment of the population that does not have access to conventional bank loans or credit cards. Opponents of these practices say it creates financial slavery.
An intermediate solution, as proposed by Seven Pillars, could be to administer payday loans at reasonable rates through a government agency such as the US Post Office.
What do you think?
When I started my “working” years in 1958, the post office had a bank. My first savings account was there. It was almost unanimous among the elders of our community that debt was avoided like the plague. Times have changed, but the essence of life has not changed. The post office should provide basic financial services in every post office. We also had decent wages required by law, with affordable housing, food and clothing available. Hospitals were run by city and county governments and churches, so medical services were affordable. We have degenerated and deteriorated considerably. We need less Wall Street and more New Deal to have a civilized country.
Postal banking is a great way to start revitalizing underserved areas of this country. Post offices are located in many areas avoided by banks and retail outlets. They provide an existing infrastructure that would be impossible to replicate and an opportunity to start rebuilding the inner city and rural economies. Services should include checking and savings accounts; credit and debit cards; loans and internet access. They could partner with credit unions to provide financial services.
As if that matters considering the lending lobby. We have many credit unions that can help those who need short-term loans. Please keep the USPO out of trouble; they will simply write off bad debts at our expense. Credit unions can help with advice; if they rate the loans at reasonable risk (not 36%), they should be able to make money and pay the loan officers. I don’t know what regulations need to be changed, but personal service with genuine care for people in need of money is important.
USPS is not a bank!
I am responding to your February 4, 2022 post regarding Payday Payout and Seven Pillars’ “middle-of-the-road” solution for the US Post Office to administer payday loans. First of all, I’m a fan of our local post office and the people who deliver our mail and provide the current services to move 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 government is not always the solution and should probably be considered the last resort when all others fail. The last place the USPS needs to be is in the financial services industry. The United States Postal System (USPS) lost $6.9 billion in fiscal year 2021 and $7.6 billion in 2020 – USPS losses would only get worse as it tries to administer financial services products. When I visit the post office, the workers are often overstaffed, there are long queues, and it’s always a process that I’ve come to accept to endure when I go there. . The burden of providing and/or administering financial services and all the regulations associated with disclosures and the like would be overwhelming for an already overburdened staff. Furthermore, according to a publication known as Government Executive and an article by Eric Katz dated January 14and 2022, the USPS in a 4 post office pilot program in the Washington D.C. area, has provided financial services to only 6 people since September 2021 selling gift cards and reported earning 35, $70 during this period. The financial services industry is clearly not a place where the USPS should be and having the USPS to provide financial services is not the answer and is certainly not a “middle-of-the-road” solution! (This email is from a bank president.)
You asked if we should “administer payday loans at reasonable rates through a government agency like the US Post Office”. –
I think personal finance should be taught in college and beyond.