It's often said that being poor is really expensive, and one of the most painful ways is what millions of Americans have to pay in order to make sure their bills are accounted for. If you're poor, time and money and intertwined in ways that people who aren't poor don't have to worry about. When your income and your expenses are right around the same amount, you have to worry about timing constantly. I'm not getting paid for a week, but this utility bill is due in three days, and I have to set aside enough for food and gas—how should I handle that? If I write my rent check on the same day as I get my paycheck, will the former clear before the latter? For many, the only choice to avoid catastrophes like getting evicted or having your power cut off going to one of the payday lenders and check-cashing operations you can find in every poor neighborhood. And since those payday lenders know their customers have no other options, they make them pay through the nose. As an analysis by the Consumer Financial Protection Bureau showed, "Fees at storefront payday lenders generally range from $10 to $20 per $100, though loans with higher fees are possible...A fee of $15 per $100 is quite common for a storefront payday loan, and would yield an APR of 391% on a typical 14-day loan." The median interest rate for the loans they examined was an incredible 322 percent.
If we wanted to do something about this appalling exploitation of the poor, what are our options? One solution is tighter regulation of payday lenders, limiting their usurious interest rates and requiring them to offer reasonable terms to their customers. Colorado passed requirements like that a few years ago, and they've succeeded in reducing the amount of misery payday lenders can pour upon the state's most vulnerable citizens (there are details here). But there's another option. There's an organization that has thousands of locations around the country, already performs some financial transactions (selling money orders), and is eager for new sources of revenue. It's called the Postal Service. If they began offering some limited banking services, it would seem like a win for everyone—poor Americans would get access to banking without crippling interest rates, and the USPS would make money. Who could possibly object?