Several years ago, I wrote in a previous blog about the idea of Post Offices making consumer loans and the potential that such offices would be the next point of competition for traditional consumer finance companies. See Back to Basics, Continued — What Is The Next Big Threat To Consumer Finance Companies? Actually, this is not a new idea. The United States Post Office Department (predecessor to today’s United States Postal Service (USPS)) provided basic banking services from 1911 until 1967. The old Post Office’s banking services were mostly depository in nature in that it helped millions of Americans save money by allowing deposits with the elimination of the “minimum deposit requirements” then imposed by many brick & mortar banks.
The new concept being circulated in Congress is to have the USPS become a consumer finance company as well—making consumer loans. The argument being propounded is that the USPS, with 31,000 locations in every Zip Code in the USA could help close a perceived gap in the availability of depository services and loan services as well. Those not having ready access to traditional financial services are more likely to be able to access such services if available at the local Post Office.
Consumer finance companies have met the challenge of competition from many sources over the years—including from credit cards, equity lines of credit, title pawn and check cashing. There is no reason to think that consumer finance will be stymied by consumer loans made available by the USPS. And, there is something to be said for expanding financial opportunity via 31,000 branches, to those Americans located in the most remote areas of our country.
I am confident that if Post Office Banking is resurrected, consumer finance companies will rise to meet the challenge.