All opinions included were submitted by Albuquerque residents.
Payday loans are high-interest, short-term and based solely on an individual's paycheck. Ostensibly, they are small loans made to bridge a time gap or deal with an emergency, like an unexpected car repair. Payday lenders say these loans are necessary to help disadvantaged people in a financial fix. But a study by the Pew Charitable Trusts found that only 16 percent of payday-loan borrowers used the money for unexpected expenses. A whopping 69 percent of borrowers used their payday loans for recurring expenses like bills, rent and food.
According to the Seven Pillars Institute for Global Finance and Ethics, payday lending is "a toxic mixture of high operational costs and low returns." A lender has access to your checking account on the day your paycheck is deposited and takes the full lump sum payment. That's before you can pay other bills or withdraw cash. This might leave you short-handed again, precipitating another high-interest payday loan and another cut out of your next paycheck.
Payday lenders say that they provide a service for a segment of the population that does not have access to conventional bank or credit card loans. Opponents of these practices say it creates financial slavery.
A middle-of-the-road solution, as proposed by Seven Pillars, might be to administer payday loans at reasonable rates through a government agency like the U.S. Post Office.
What do you think?
When I was beginning my “work” years in 1958, the post office had a bank. My first savings account was there. It was nearly unanimous amongst the elders of our community that one avoided debt like the plague. Times have changed but the essentials of life haven’t. The post office should provide basic financial services at every post office. We also had living wages required by law, with affordable housing, food and clothing available. Hospitals were operated by city and county governments and churches, so medical services were affordable. We’ve degenerated and deteriorated considerably. We need less Wall Street and more New Deal to have a civilized country.
Post Office Banking is a good way to start revitalizing underserved parts of this country. Post offices are located in many areas avoided by banks and retail outlets. They provide an existing infrastructure that would be impossible to reproduce and an opportunity to start rebuilding inner city and rural economies. Services should include checking and savings accounts; credit and debit cards; loans and internet access. They could partner with credit unions to provide financial services.
As if it mattered given the loan lobby. We have many credit unions that can help those in need of short term loans. Please keep the USPO out of the issue; they will simply write off the bad loans at our expense. Credit unions can assist with counseling; if they price the loans at reasonable risk (not 36%) they should be able to make money and compensate the loan officers. I don't know what regulations need to be changed, but personal service by actually caring about the people needing money matters.
USPS Is Not a Bank!
I am responding to your article dated, February 4, 2022 regarding Payday Payout and the “middle of the road” solution from Seven Pillars having the US Post Office administer payday loans. First, I am a fan of our local post office and the folks that deliver our mail and provide the current services to move mail and packages from point A to point B -- I have all the respect in the world for them! However, this famous phrase comes to mind from Pillars comments, “I’m from the federal government and I’m here to help.” President Ronald Reagan called the phrase “the nine most terrifying words in the English language.” A clear statement that government is not always the solution and should probably be considered the last solution when all others fail. The last place the USPS needs to be is in the financial services industry business. The US Postal System (USPS) lost $6.9 billion dollars in FY 2021 and $7.6 billion dollars in 2020 -- the losses incurred by the USPS would only get deeper trying to administer financial service products. When I visit the post office, many times workers are stretched on staffing, there are long lines and it is always a process that I have come to accept to endure when I go. The burden of providing and or administering financial services and all of the regulations that are tagged along with disclosures and such would be overwhelming for an already stretched staff. Further, according to a publication known as the Government Executive and an article by Eric Katz dated January 14th 2022, the USPS under a pilot program of 4 post offices in the Washington DC area, has provided financial services to just 6 people since September 2021 selling gift cards and reported making $35.70 during that timeframe. The financial service business is clearly not a place the USPS should be and having the USPS provide financial services is not the answer and sure isn’t a “middle of the road” solution! (This email is from a bank president.)
You asked if we should “administer payday loans at reasonable rates through a government agency like the U.S. Post Office.” -
I think personal finance should be taught in middle school & beyond.
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