The Postal Service is defending a nearly yearlong check-cashing pilot, despite a quiet rollout and a lack of customers.
USPS attorneys told the Postal Regulatory Commission, in a filing last week, that allowing customers to purchase single-use gift cards worth up to $500, using a business or payroll checks as payment, doesn’t count as the agency branching out into new, non-postal services, as restricted by the Postal Accountability and Enhancement Act.
USPS charges a flat fee of $5.95, won’t accept checks larger than $500 and won’t disburse cash for any checks. Four post office locations are currently participating in the pilot in Washington; Baltimore; Falls Church, Virginia, and the Bronx, New York.
USPS said the check-cashing pilot simply allows for a new form of payment for gift cards it’s been selling for more than a decade, along with greeting cards and stationery the agency has been permitted to sell.
“Whether they pay with cash, debit cards, payroll checks, or some other form of payment, customers are purchasing the same open-loop gift cards with the same functionality, which they otherwise could have purchased from another source, such as a grocery store, pharmacy, or online vendor,” USPS attorneys wrote. “A new payment method does not change the nature of the product that the customer is purchasing.”
“Open-loop” gift cards aren’t limited to use at certain retail stores or businesses, and can be used for purchases much like a debit or credit card.
USPS said the pilot has had six customers in the first quarter of fiscal 2022, bringing in $35.70 in revenue. The agency only had one customer in the second quarter of the fiscal year.
USPS said that data shows the new payment methods demonstrate a “minor expansion” of the customer base for the gift cards it sells, and that paying for gift cards using payroll and business checks serves a similar function to money orders.
USPS told the commission in March that it would continue the pilot “in its current form,” and has not yet specified an end date.
Some critics have called on USPS to focus on its primary mission of delivering mail and packages, rather than branch out into new lines of business.
The American Postal Workers Union, however, which represents the postal clerks who handle these transactions, says the pilot is a small, but significant step toward USPS offering more robust banking services.
“As a proponent of genuine postal banking, the APWU acknowledges that the paycheck payment program is not postal banking or even an expanded postal financial service,” Melinda Holmes, an attorney representing APWU, wrote in the union’s filing.
APWU said USPS intentionally kept the number of locations accepting paychecks limited in the initial launch “in order to test the new processes for accepting third party checks while minimizing risk.”
The union, however, urges USPS to provide additional services that would help support unbanked individuals, including international money transfers and money orders. APWU added that the agency is “in a unique position to provide basic, affordable, consumer-driven financial services via its existing infrastructure.”
“While it does not rise to the level of the kind of banking and financial services that our coalition partners press for, in the slowly evolving and conservative efforts of the Postal Service, it is, in the APWU’s opinion, a constructive step in addressing the realities of the postal customer base and how they pay for postal services,” APWU wrote. “But it is only a step in the direction of improving the convenience of buying postal products and not a leap in the direction of postal banking.”
Several congressional Democrats have introduced legislation in recent years that would expand USPS banking services, but none have made much progress on Capitol Hill.
The Postal Service Reform Act, signed into law in April, allows USPS to partner with state, local and tribal governments to offer more non-postal services to the public.
“Imagine a trip to the post office where you can pick up your bus pass, or your hunting license or your fishing license,” President Joe Biden said on April 6 during the White House signing ceremony.
The Association for Postal Commerce (PostCom) told the PRC that it generally supports USPS’s efforts to expand its product set, but said the check-cashing pilot exceeded the agency’s authority by conducting a market test of a new service without prior approval from the commission.
“Innovation and ongoing improvement in the Postal Service’s products is important to the future of the Postal Service and the mailing industry in general. If the Postal Service believes that check-cashing is a legally authorized product that would benefit its customers, then existing rules allow for the Postal Service to file a request for a Market Test with the Commission. In the case of the Pilot, the Postal Service appears to have attempted to circumvent that requirement,” Matthew Field, an attorney for PostCom, wrote.
PostCom also pointed to the scarcity of check-cashing customers as an indication that the pilot isn’t bringing many benefits to the public.
“Because PostCom’s members provide a substantial proportion of the revenue that ultimately funds said experimentation, PostCom has an interest in ensuring that, when market tests are conducted, the Postal Service exercises necessary managerial control and follows sound procedure,” PostCom wrote.
The American Bankers Association told the commission that the check-cashing pilot is “inconsistent with congressional intent, and goes beyond USPS’s mission of providing postal services.”
“The clear intent of the Pilot Program is the cash checking service,” David Androphy, a senior manager for Prudential Regulation & Asset Management, wrote on behalf of ABA. “Approval of check cashing services as a ‘postal service’ would set a troubling precedent that would expand the definition of postal service to cover retail activities that include banking and financial services products.”