Sen. Kirsten Gillibrand Wants To Turn Your Post Office Into A Bank

Beware, payday lenders.

For Americans who depend on payday loans to get by, a solution may be looming. Sen. Kirsten Gillibrand, D-N.Y., is proposing legislation that would expand the usual U.S. Post Office to include banking services.

Aimed at saving the post office and being a more affordable option than payday loans that often come with APR's as high as 400 percent, the legislation, called the Postal Banking Act, would offer much lower options at interest rates around 25 percent for loans up to $500.

"What Gillibrand wants most is to undercut payday lenders," University of Georgia Law Professor Mehrsa Baradaran told Slate.

"Payday lending traps compound the financial struggles of many hardworking people who are struggling to get by," Gillibrand tweeted.

On average, payday loans require a lump-sum repayment of $430 on the next payday. But borrowers often can't afford the high-interest rates while still covering basic daily expenses. In turn, most borrowers renew or reborrow the loans, making it even more expensive to pay off, according to The Pew Charitable Trust.

"It makes it expensive to be poor," Gillibrand added on Twitter. "A simple short-term $50 loan to pay a utility bill or repair a car could end up costing 400% more to repay in just two weeks!"

Additionally, the legislation, which could impact 30,000 post offices nationwide, includes retail banking services like domestic and international wire transfers, small dollar checking and savings accounts with no minimum balance, transactional services including debit cards, cash machines, bill payments and online services.  

Cover image Michael Gordon / Shutterstock.com.

(H/T: Slate)

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