Pending Legislation Would Prevent Postal Banking Through the Fed

(This article first appeared in the Jan/Feb 2024 issue of the American Postal Worker magazine)

In previous editions of this column, we have examined one simple way to enact nationwide postal banking in this country. By partnering with the Federal Reserve, which already functions as the bank to commercial banks, the Postal Service could enroll everyone in the country with an individual government-secured account to generate savings, pay bills, and conduct other basic financial services.

Unfortunately, new legislation in the House of Representatives would foreclose that possibility if enacted. The CBDC Anti-Surveillance State Act, proposed by Rep. Tom Emmer (R-MN-06), would prohibit the Federal Reserve from offering “products or services directly to an individual” or “maintain[ing] an account on behalf of an individual.”

The legislation appears to be aimed, at least in part, at advocates, such as the Campaign for Postal Banking, who have called on lawmakers to consider using the Federal Reserve and a partner like the Postal Service, to offer accounts to all. Today, the Federal Reserve has accounts for more than 5,000 commercial financial institutions, where they maintain balances to make and receive intrabank payments. That same system could be extended to individuals, offering every person access to a secure bank account.

The most recent study of the unbanked and underbanked population by the Federal Deposit Insurance Corporation (FDIC), found that lack of access to trusted, affordable banking services were the top reasons the country’s 5.9 million unbanked households did not have an account. Offering government-backed accounts through the Federal Reserve, accessible at local post offices, could easily address the concerns of many of the country’s unbanked families.

The Campaign for Postal Banking will continue to monitor the progress of Rep. Emmer’s legislation and work with postal workers and our allies to ensure that this anti-postal banking measure is defeated.

CFPB Proposes Rule to Increase Transparency in Banking

The Consumer Financial Protection Bureau (CFPB) has proposed a new rule that would empower consumers to find better options for banking their hard-earned money. The CFPB rule, proposed in November, would require banks to enable consumers to share credit history, interest rates, and automatic payments information with competing institutions, helping them to fi nd more favorable interest rates and other improved services.

Banks often obscure this information or make it impossible for consumers to share it with other banks. That makes it more difficult for consumers to shop around for improved financial services.

The rule is especially timely now, as the Federal Reserve has increased interest rates and banks have increased the interest they charge for mortgages and other loans. But the rates they pay depositors have failed to keep up. In just the last quarter, the country’s four largest banks have pocketed an extra $64 billion from the difference between their lending rates and the interest they pay depositors, according to The Lever.

“Banks make it very hard for consumers to choose where they want to go if they’re not happy with services,” Elyse Hicks, a lawyer at the Campaign for Postal Banking’s partner organization Americans for Financial Reform, told The American Prospect. “So, this particular rule is giving consumers that power back … instead of [them] being taken advantage of with overdraft fees, or insufficient funds fees.” The pending rule from the CFPB comes as the payday lending industry is threatening the agency’s very existence. A banking industry lobby money-fueled lawsuit before the Supreme Court threatens to rule the CFPB’s funding unconstitutional. The suit was heard by the Supreme Court in October. The Court is expected to rule in Spring 2024. The CFPB was created in the wake of the 2007-2008 financial crisis and seeks to regulate the country’s banking industry in order to protect consumers and prevent the runaway behavior by the banks that led to the Great Recession. ■