The Democratic Party's attempt to reach financially underservedpeople by allowing the United States Postal Service to offer basicbanking services at local offices is misguided, credit union tradegroups contended.

Democrats should instead push for local credit unions to meetunbanked and underbanked individuals' needs, they argued. TwoDemocrats have already introduced legislation, in the form of aDemocratic National Convention platform document, calling for theUSPS to offer basic banking services.

Those Democrats ignored a request to change their platformbefore it could be considered at the convention inPhiladelphia.

“At a time when many of the largest banks have shunnedcommunities across America, Democrats believe that we need to giveAmericans affordable banking options, including by empowering theUnited States Postal Service to facilitate the delivery of basicbanking services,” the document stated.

The trades agreed there is a gap for financially underservedpeople, but disagreed with the Democrats' proposed solution.

“We agree that there is a problem with the number of unbankedand underbanked,” CUNA Chief Advocacy Officer Ryan Donovansaid.

Donovan asserted the answer is to expand access to credit unionsrather than allow the post office to offer banking services. Hesaid a network of credit unions that serve postal employees alreadyexists and noted that network could be expanded.

“The credit union should be providing the service, not the postoffice,” he said.

NAFCU officials agreed.

“We would be pleased if we could serve a larger percentage ofthe underserved,” Carrie Hunt, NAFCU's executive vice president ofgovernment affairs and general counsel, said.

Donovan also downplayed the significance of the platformdocument, stating it will not be important to anyone after the DNCadjourns.

“Party platforms are not policy-making documents,” Donovansaid.

The Republican Party platform does not contain the postalservice expansion.

While it's very unlikely such a proposal will be enacted thisyear, the idea of allowing the post office to offer bankingservices has a life beyond the Democratic platform. In January2014, the USPS Office of Inspector General issued a report statingthe postal service was in a good position to offer basic bankingservices to an underserved population.

“To be clear, the Postal Service should not aim to takecustomers away from mainstream banks and credit unions,” the reportsaid. “To the contrary, the mainstream financial services communitywould be a beneficiary of a successful suite of postal financialservices and products for three key reasons: Partnerships, paymentsand new customers.”

In addition, Sen. Elizabeth Warren (D-Mass.) has said the USPScould replace payday lenders by providing a ready source of creditfor people who have taken out the high-interest loans when theyneeded the money.

Warren's proposal cited the OIG report.

“With nearly 60% of post office branches in ZIP codes wherethere are either one or no bank branches, postal banking could fillthe void banks have left by closing branches nationwide,” she wrotein a U.S. News & World Report op-ed.

Sen. Bernie Sanders (I-Vt.) and the American Postal WorkersUnion have also supported the efforts. While the two senatorsviewed the proposal as a way to reach people who need bankingservices, the labor union saw it as a way for the financiallytroubled organization to diversify.

In addition, consumer and labor groups have formed a coalitionknown as the Campaign for Postal Banking.

That group cited figures that showed many nations around theworld offer banking services through post offices. In addition, inthe past, the U.S. had a postal banking program that allowedcustomers to open a savings account. President William Howard Taftstarted it in 1911, but it ended in 1967.

Credit unions aren't the only opponents of Warren's plan.Citizens Against Government Waste, an interest group that fightsfor less federal spending, gave her a “Porker of the Month Award,”a dubious prize given to someone the group believes is pushing forwasteful spending.

“Banking and non-banking services are currently well-served byprivate-sector business with expertise in those areas,” the group'spresident, Tom Schatz, said. “If the USPS wants to get into bankingor any other business, then it should give up its governmentprivileges and move toward a fully competitive model.”

Donovan said when CUNA officials met with Warren after shefloated the idea, the two sides agreed an underserved populationexists that needs easy access to financial services.

The USPS OIG outlined the types of financial services postoffices could offer. For instance, it said, post offices couldoffer payment services including electronic money orders, billpayments and e-commerce payments.

Post offices could also offer a branded, reloadable card calledthe Postal Card, the OIG said, adding it could partner with afinancial institution on the service to include an interest-bearingsavings feature.

But the postal service is not in a good position to offer suchservices, NAFCU President/CEO Dan Berger said in a letter tothen-Democratic National Committee Chair Rep. Debbie WassermanSchultz (D-Fla.) earlier this month.

Berger said because the Postal Service is in such a poorfinancial condition, it would be under intense financial pressureto turn a profit from such services. He said credit unions are in agood position to expand their services but are prohibited fromdoing so.

“Credit unions are well-equipped to offer the underbankedfull-service financial products, but are often limited by outdatedlaws and overregulation,” Berger wrote.

Berger said the problem could be solved by the enactment of H.R.5541, The Financial Services for the Underserved Act of 2016,introduced last month by Reps. Tim Ryan (D-Ohio) and DonaldNorcross (D-N.J.).

He asked the Democrats to delete the postal plan from theirplatform and take the approach outlined in H.R. 5541.

That legislation would also allow credit unions to expand theirmembership in underserved areas.

The Democrats kept the postal proposal in the party'splatform.

H.R. 5541 has been referred to the House Financial ServicesCommittee. However, given the controversial nature of the bill,coupled with a shorter Congress session scheduled for this fall, itis unlikely that such legislation will pass this year.