Last February, I wrote that the next big challenge for the consumer finance industry is coming from the competition with banks and credit unions -- WHAT IS THE NEXT BIG THREAT TO CONSUMER FINANCE COMPANIES? My prediction is borne out by recent developments, but apparently I neglected to mention the Post Office.

In a recent development, the Comptroller of the Currency is inviting banks back into the small loan business. Comptroller Joseph Otting stated in a recent bulletin that banks should offer installment loans that can be paid back over short periods of time—45 days to one year. While this sounds like an invitation for banks to compete with pay-day lenders, it also is likely that banks returning to this market would compete with traditional installment lenders for smaller dollar loans. Otting suggests that if banks report to credit bureaus, this practice could help consumers achieve higher credit scores. In a Political Pro article, the author points out that in the bulletin, the Comptroller does not specify what level of credit scores or debt-to-income ratio should be a bank's target.

In a second development, some Members of Congress are exploring the concept of permitting or even requiring the U.S. Postal Service, an independent agency of the government, to make small loans. (I say it is independent, but it still looks to Congress from time-to-time for financial bail-outs.) The thinking is that post offices are located throughout the USA and are well positioned to serve economically challenged areas. It has also been pointed out that in various times in our nation's history, post offices have served such a function. Of course, those in the installment loan industry, know that the persistent deficits run by the USPS are only going to increase if the government gets into the small loan business. It is highly unlikely that the USPS can run a profitable loan business.

So, the future threat is well upon us. It is time to dust off your customer service skills because you are about to go head-to-head with some well-financed competitors.