Removing Barriers Blog

Letter to Senate on USPS Hearing and Postal Banking Proposal
Posted January 21, 2016 by Chandler Schuette

Today, we sent a letter to the Senate Committee on Homeland Security and Government Affairs, before its hearing on the future of the US Postal Service (USPS). We have an interest in the Postal Service due to a 2014 Office of Inspector General (OIG) white paper entitled, “Providing Non-Bank Financial Services for the Underserved,” which suggested that the postal service is well positioned to provide certain financial services to Americans who are underserved or unserved by the mainstream financial services sector. 

We agree that more could be done to ensure that the nearly 70 million Americans that are presently underserved or unserved, but we are skeptical that the USPS is the right way to reach them.  Instead, our letter urged Congress to ensure that current laws and regulations are not hindering consumer access to credit unions. 

We stressed to the committee that the regulatory burden facing credit unions in the aftermath of the financial crisis has been severe, with more than 200 regulatory changes since 2008.  That’s why we have been encouraging Congress and the regulators to look for ways to reduce credit union regulatory burden to free up resources to provide additional services to members. 

Our letter also expressed support for NCUA’s recently proposed field of membership regulation that should make it easier for credit unions to add communities and other groups to existing fields of membership, resulting in increased availability of credit union services to underserved consumers. However, we also encouraged Congress to look more broadly at credit union field of membership restrictions. Importantly, our letter explained that about 1/3rd of credit unions are community chartered or designated low-income, which that means many of them can already serve a broad variety of the public, including those who are currently under-banked.

When credit unions were first established in the US, they used field of membership limits as a credit worthiness tool so that credit unions would lend to members they knew. Today there are many other ways to determine a borrower’s credit worthiness. It is a very legitimate question to ask whether those restrictions on credit unions make sense in the 21st century financial services environment. Congress has allowed some credit unions to add underserved areas to their fields of membership - and many have. But the law is arcane and the implementing rules complicated. Congress should grant any federal credit union the power to add an underserved area to its field of membership. 

So we strongly encouraged Congress to explore how the Federal Credit Union Act and other banking laws constrain credit unions’ ability to do more to serve the underserved. We hope that Congress can work to expand consumer access to mainstream financial services through institutions established for that purpose, before making changes to the Postal Service.