Today, 63 million Americans are either unbanked or underbanked.
This is a problem that deserves congressional attention, particularly during a worldwide pandemic and a period of economic uncertainty. But as members of Congress look for a solution, it is important that they empower existing not-for-profit, community-based credit unions, with a track record of success, to serve these Americans – rather than advancing complex, untested proposals such as postal banking programs.
The United States Postal Service is a known commodity, whose track record of hit and miss mail delivery practices, budget shortfalls and questionable customer service is well-documented. For many Americans, relying on the USPS to deliver a letter or package on time, especially during the holidays, is cause for concern – let alone counting on the USPS to properly deposit or cash a check.
Proponents of postal banking programs have at least one fact straight: There are too many unbanked and underbanked American consumers relying on high-interest, high-fee loans through check-cashing services, pawn shops, payday lenders and paycheck advance shops.
But the key to providing those in need with access to financial services is in reducing regulations that limit credit unions’ ability to serve these populations.
Today, 124 million Americans are members of a credit union. More so, credit unions’ services are highly regarded by those that use them, leading Consumer Reports to conclude that they are “among the highest-rated services [they’ve] ever evaluated.” Additionally, the industry already has the nation-wide infrastructure and banking expertise to successfully serve all those in need of financial assistance.
Credit unions are trying to do more to meet the needs of the unbanked and the industry remains ready and willing to help. However, credit unions are only able to serve consumers in a designated area due to field of membership laws; they cannot help those in underserved areas outside of their specific field of membership.
Moving forward, Congress should look to remove regulatory barriers and enable credit unions to serve more communities in need of affordable, consumer-centric financial services by allowing all types of credit unions to add underserved areas to their fields of membership.
Over the years, credit unions have demonstrated their commitment to helping our nation’s most financially vulnerable communities succeed. Between 2010 and 2019, credit unions doubled their share of mortgage loans made to low- and moderate-income borrowers, according to a National Association of Federally-Insured Credit Unions analysis. Over that same time frame, large banks’ share of loans to LMI consumers dropped drastically from 34.4 percent to 19.4 percent and community banks’ footprint dropped from 13.8 percent to 10 percent too.
In addition, 89 percent of credit union members have access to financial literacy or education program offerings and 96 percent have access to free checking accounts, according to a National Association of Federally-Insured Credit Unions analysis.
With three times more designated Minority Depository Institutions than their counterparts in the banking industry, and while boasting 27 percent of all certified Community Development Financial Institutions, credit unions have continued to prove their commitment to serving all consumers through not only their words – but their actions.
In a post-pandemic world, innovation in banking services is crucial. Unlike the USPS, credit union service has evolved rapidly with new partnerships and investments in emerging digital technology. It has become the norm for credit union customers to have access to contactless kiosks, new payment platforms, and mobile banking options.
While the postal service works to improve its core business of mail delivery, policymakers should focus on real steps that can improve the current system. The solution to providing service to America’s unbanked and underbanked populations is clear: Expand credit unions’ ability to serve those communities.
Postal banking proposals should be returned to sender.
B. Dan Berger is president and CEO of the National Association of Federally-Insured Credit Unions.
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