USPS paycheck program – favored by Sanders, AOC – starts without congressional authorization

The U.S. Postal Service is expanding into paycheck cashing services at four East Coast locations in a pilot program that resembles a policy pushed in the "Biden-Sanders Unity Task Force Recommendations" from the 2020 presidential campaign.  

In April, some lawmakers on the left, including Sen. Bernie Sanders, I-Vt., and Rep. Alexandria Ocasio-Cortez, D-N.Y., unsuccessfully pushed for a postal banking pilot program to be included in a spending bill.  

But the U.S. Postal Service established this particular program without congressional authorization or informing Congress, raising concerns among Republicans, one of whom called it a "gateway to socialized banking." 

The test pilot began on Sept. 13 at four U.S. Postal Service retail locations in the District of Columbia; Falls Church, Virginia; Baltimore; and the Bronx borough in New York City. 

In a statement last April, Ocasio-Cortez said her district in the Bronx would benefit from postal banking. 

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"So many families in my community in the Bronx can’t afford to be banked. So instead, they go into checking cashing places and pay relatively large fees – money that’s desperately needed for food, rent and diapers," Ocasio-Cortez said in April. "What we are asking the post office to do here is very basic – checking cashing, money wiring and taking out money from an ATM without a penalty, but it’ll make a dramatic difference in so many communities and so many families. It’ll also provide needed revenue to USPS."  

The pilot program is considerably less ambitious than what the progressive lawmakers have proposed. The four postal service locations are participating in a new service that allows customers to use payroll and business checks to purchase gift cards. It’s to provide customers with an alternative to traditional check cashing, according to the Postal Service.  

The customers at these locations can buy a single-use gift card of up to $500, using their business or payroll check as payment. No cash will be disbursed, according to the USPS, which started the pilot in collaboration with the American Postal Workers Union. 

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On Oct. 22, Rep. Patrick McHenry, R-N.C., the ranking member of the House Financial Services Committee, and Rep. James Comer, R-Ky., the ranking member of the House Oversight and Reform Committee, sent a letter to Postmaster General Louis DeJoy inquiring about the pilot program and why it was never revealed to Congress. 

Postal officials are downplaying the program. 

"We have been in touch with the congressional offices directly and have plans to brief them in the coming weeks," USPS spokesperson Tatiana Roy told FOX Business on Monday in an email.

"We believe once we have an opportunity to clarify the limited nature, authority and scope of the test pilot, the concerns expressed will be allayed," Roy continued. "The pilot is simply a test of a new payment method (payroll and business checks) for our existing gift card product, a product which the Postal Service has clear authority to sell to [the] public." 

McHenry, of the House Financial Services Committee, isn’t convinced. 

"Post offices are not banks. Providing financial products deviates from the USPS’s mission no matter how narrowly this study is defined," McHenry told FOX Business on Tuesday in a statement. "Postal banking is a gateway to socialized banking and will harm community banks and the customers they serve." 

In April, Sens. Sanders and Kristen Gillibrand, D-N.Y., along with three House Democrats – Ocasio-Cortez,  Bill Pascrell of New Jersey and Marcy Kaptur of Ohio – called on Congress to implement postal banking pilot programs in rural and urban communities across the country. Last year, Sanders and Gillibrand proposed the "Postal Banking Act" to provide banking services at post office locations.    

"No one in America should have to pay a 400% interest rate on a $375 loan from a payday lender," Sanders said upon introducing the bill in September 2020. "The time has come to put predatory lenders out of business and provide affordable banking options to all Americans through the United States Postal Service." 

Sanders pushed for expanding the U.S. Postal Service into banking during the 2016 and 2020 campaigns for the Democratic presidential nomination. The "Unity Task Force" recommendations, produced by the campaigns of then-candidate Joe Biden and Sanders after the Democratic primary, reference "postal banking" as one measure to ensure "equitable accessing to banking and financial services." 

"Government should provide easily accessible service locations, especially postal banking, to make it possible for everyone to access physical banking locations," the Biden-Sanders task force report says.  

The Washington Post noted in October the USPS was "quietly" implementing the program. The quiet part is what has concerned the two Republicans. 

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In February, DeJoy did not bring up the idea during his congressional testimony, the letter from Comer and McHenry notes. Earlier this year, the postal service issued a 60-page reform plan, "Delivering for America: Our Vision and Ten-Year Plan to Achieve Financial Sustainability and Service Excellence," that also made no mention of expanding into financial services.  

The two GOP House members also point to sustainability issues the postal service is already confronting in their letter to DeJoy. 

In 2020, the U.S. Postal Service incurred a net loss of $9.2 billion and has lost about $87 billion over the past 14 years, the letter notes.  

"Beyond the Postal Service’s balance sheet — which is in and of itself disqualifying for an expansion into financial services — there are other reasons to be concerned," the McHenry and Comer letter to DeJoy states. "For instance, a massive cybersecurity breach exposed social security numbers and other sensitive data for millions of USPS customers and employees. The Office of Inspector General found USPS operates with insufficient controls to combat money laundering schemes. It is unclear why the Postal Service believes itself to be ready for the added responsibility of offering expanded financial services." 

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But this idea could help the ailing financial situation, contends Mark Dimondstein, president of the American Postal Workers Union.   

"New services will not just have the post office doing well by the people, but will bring in needed revenue," Dimondstein told The Washington Post in October.