Study after study shows that people of color who are living paycheck to paycheck use predatory lending services. Government is part of the problem. It allows traditional banks to impose start-up fees for opening bank accounts, fines on people for not paying overdraft fees, and minimum balance fees, and then pile on more fees when people are unable to pay them– making being poor in America expensive. And when people can’t use traditional banks, they turn to predatory lending: businesses that offer check-cashing services, payday loans, and similar services. We can think of all the regulations we want to ban predatory lending, but at the end of day, people will still need an alternative that doesn’t cost them an arm and leg to have money in account and access it.

This exclusivity of our banking system was laid bare during the COVID-19 pandemic, when 20 million people received their government-provided stimulus checks in the mail rather than direct deposits. ​​The inaccessibility and high unnecessary fees of traditional banks made it difficult for people to access funds when they needed it most.

A common solution offered by consumer justice advocates is public banking. But rather than create new institutions the US Postal Service, with offices across the country,  could also serve as a system for public banking. One study showed 30,000 United States Postal Services are located in so-called banking deserts, defined as a neighborhood that has no bank branches in it or 10 miles from it. USPS services are well-suited to close gaps to access for those who can’t afford traditional banks but live close to post offices, which are more evenly distributed throughout the country. Postal banking could provide free bank accounts and allow people to receive money, withdraw their money, and make payments.

This was actually tried before. In 1910, Americans demanded postal banking and in 1911, Americans were able to make small deposits, get small loans, and set up savings accounts, protected by the federal government through the postal service. But in 1967, postal banking came to an end due to the rise of federally-insured banks, commercial banks, and the lobbying efforts of private banks.The deregulation of the 1990s and the motive of the banking industry to turn a profit, produced our current banking system, which is inaccessible to low-income people. This subjected working people to the only resort: predatory lending practices. While there may be more trust in private banking services, we still need a public option, as predatory lending needlessly robs people of their hard-earned money. Making matters worse, predatory lending services are becoming increasingly attractive to low-income populations as they are readily available and accessible on the internet.

Postal banking might be making a comeback. There are currently pilot programs of postal banking services in Washington, D.C., Falls Church, VA, Baltimore, MD and Bronx, NY. The pilot program was implemented by Postmaster General Louis Dejoy, appointed by the Republican-dominated USPS Board of Governors. Unfortunately, Dejoy implemented some of the same predatory and exclusive practices of private banks and other commercial lending establishments: prices for money-orders are 5% higher than fringe providers, remittance prices are seven times (300% higher) the cost of other providers, users can only cash payroll checks under $500, money orders are 6.5% higher than the private sector, there is no bill payment option, it is not accessible online, and the locations were not well-located to serve the unbanked.

Several conservative think tanks claim the pilot program is a failure. And they’re right. It failed but it was because it was made to fail. The conservative leadership of the postal service repeated the same predatory practices of the exclusive private banking system. Part of the reason the pilots have failed is because the postal service has partnered with a third party. Postal banking could be done right by using the Direct Express card, a reloadable card that allows users to pay bills, make purchases, pay bills, access low-fee ATMs at the postal service, and have a mobile app! Further, the Direct Express card would enable users to send cash remittances with low fees because the pilot program’s system is designed for large transfers when most people who send remittances are low-income immigrant workers and need to send small amounts at a time. The pilot only allows for wire transfers to just 10 countries, when there are 76 countries within the Universal Postal Unions International Financial system. And this can all create government jobs for low-income communities while reviving the postal service.

There is no denying that predatory lending is institutionalized racism by another name.  A study found that 9.6 million Latinos used check-cashing services over a three-month period in 2016, and many use these services to send remittances. The wealth gap between white and Latino families is 1.1 million dollars, and it’s even wider for Black families .

Postal banking, if done right, could save the US Postal Service and more importantly, narrow the racial wealth gap. Public institutions remain the best way for underserved communities to access a fair system without being cheated. It’s that simple.

Isabella Grullon is a sophomore at Hunter College majoring in Political Science and minoring in Public Policy and Africana/Latinx Studies.  Currently, she is a legislative intern at the New York Birth Control Access Project, advocating to increase access to birth control. She has interned at Resilient Cities Catalyst to develop high impact solutions to adapt to the shocks and stressors of climate change and at Slingshot Strategies as a political consulting intern to provide support to the NY Equal Rights Amendment campaign, Open Plans, National Popular Vote. She aspires to attend law school and become a civil rights lawyer to defend the voiceless.