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The Post Office as an Alternative to Shady Private Banks

A Senate bill would fill a void in many rural and low-income communities by reintroducing low-cost lending at neighborhood post offices.

"In some places, annual interest rates for these lenders average over 500 percent." (Photo: John Donges )

"In some places, annual interest rates for these lenders average over 500 percent." (Photo: John Donges )

Millions of Americans live in “banking deserts,” without adequate access to brick and mortar banks and the services they provide. Rural and poor communities, where local banks left town thanks to the recession or the big banks buying them out, are especially affected.

Often it’s risky payday lenders who come along to fill the void.

They exploit America’s 88 million “underbanked” people, making ridiculous profits by charging sky-high interest rates on people just trying to survive paycheck to paycheck.

In some places, annual interest rates for these lenders average over 500 percent. That badly hamstrings low-income people with fees and interest payments, all because they lack simple banking services.

The practice is especially predatory toward people of color. The recession shuttered around half of all black-owned banks, leaving black Americans over 100 percent more likely to use a payday lending service than white people, according to a Pew Charitable Trust survey.

But the problem is also rampant in white, Hispanic, and Native rural communities. The National Community Reinvestment Coalition estimates that most of the over 6,000 bank branches closed between 2008 and 2016 were in rural areas.

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Brian Wakamo

 

Brian Wakamo is a Next Leader at the Institute for Policy Studies and a recent graduate of American University.

 

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