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Postal Banking Still Lingers, It’s Time to Close the Loophole



By Nicholas Anthony, Cato Institute


Despite the pilot postal banking program reaching only 6 people and failing to secure new funding for an expansion, the United States Postal Service (USPS) has not let the program go. It’s time for Congress to tighten the statutory language and close the postal banking loophole.

Representatives Patrick McHenry (R‑NC), James Comer (R‑KY), and Blaine Luetkemeyer (R‑MO) wrote a letter last week questioning Postmaster General Louis DeJoy’s decision to extend the existing pilot program given both its lackluster results and questionable nature. The representatives argued that the USPS “violated a statutory restriction on offering or developing new products outside the scope of USPS’s traditional postal services.” However, in their defense against similar questions, the USPS has argued that,

The Postal Service remains of the view that the pilot program is an appropriate and limited test of an alternative payment method for the established gift card product, which does not implicate the current Mail Classification Schedule, and that no further regulatory action is warranted at this time.

The USPS might have a point­. As I explained last November, the authorities and statutes that guide the USPS do prevent massive, unchecked expansions from taking place. However, there is some room for discretion in what might be called the postal banking loophole.

In short, the Postal Accountability and Enhancement Act of 2006 restricts the USPS from offering new products that are significantly different from existing products. An illustrative example occurred when the Postal Regulatory Commission approved the USPS’s sale of gift cards in 2014. When confronted with the question of whether gift cards were significantly different from existing products, the Commission argued that gift cards are not significantly different from money orders:

Like money orders, gift cards may convey money, either as cash, as payment, or as a gift, and may be redeemed at locations where the card is accepted at other than postal facilities. Like money orders, they are not reloadable. Gift cards may often be transmitted in greeting cards. Moreover, the availability of gift cards in postal facilities increases customer convenience, stimulates demand for postal services, and enhances the use of the mail.

The case with the postal banking pilot program in 2022 is much like that of gift cards in 2014. The $5.95 fee to cash a check is the same price one would pay for a gift card, the $500 daily maximum is also the maximum that can be loaded on a gift card, and the gift cards received in exchange for checks cannot be reloaded just like their standard gift cards. In short, it seems that the designers of the pilot program were very careful to mimic the existing program because of the authority granted in 2014. And it seems this careful approach is why they’ve remained committed to what otherwise appears to be a violation of existing statutes.

Congress should remove the postal banking loophole by amending the Postal Accountability and Enhancement Act to specifically prohibit the USPS from engaging in financial services without congressional approval. Otherwise, the USPS’s attempted expansions may become a never‐​ending story.


Nicholas Anthony is a policy analyst in the Cato Institute’s Center for Monetary and Financial Alternatives