Joint Trade Letter on Postal Reform

Dear Chairman Carper and Ranking Member Coburn:

The undersigned representatives of the financial services industry write to commend you on your
efforts to advance bi-partisan postal reform. The financial services industry is one of the largest
customer segments of the Postal Service. The statements, bills, and promotional materials sent
by financial institutions account for a significant amount of mail volume and annual revenue.
Reliable, cost-effective postal services are critical to our business.

The Postal Service is a critical piece of a U.S. mailing industry that collectively represents over
$1 trillion in economic activity and supports more than 8 million jobs. The long-term health and
viability of the U.S. mailing industry and, by extension, the Postal Service, is critical to the
health of the U.S. economy. That’s why it’s imperative for Congress to enact meaningful postal
reform legislation.

The recently released substitute amendment to S. 1486, the Postal Reform Act of 2014,
appropriately relieves the Postal Service of unrealistic prefunding obligations for retiree
healthcare and gives the Postal Service new tools to cut costs and restructure its operations.
Despite these positive elements, we cannot support the substitute amendment due to very strong
concerns over the postal rate provisions of Section 301 and the authorization of nonpostal
activities in Section 302.

The centerpiece of the Postal Accountability and Enhancement Act of 2006 (PAEA) was a cap
limiting annual rate increases to the Consumer Price Index (CPI cap). This CPI cap was
designed to ensure stable, predictable, and affordable postal rates while forcing the Postal
Service to focus on increased productivity to reduce costs. Without the rate stability and
predictability guaranteed by the price cap mail volume losses and the Postal Service’s financial
difficulties over the past would have been greater as mailers sought less expensive alternatives
such as electronic communications. The CPI price cap has been an incentive for the Postal

Service to aggressively manage costs. Removing this incentive will make increasing prices an
easier decision versus the tougher decisions required to increase efficiencies and manage costs.

The postal rate provisions in Section 301 would make the recent, ill-advised exigent increase
permanent, legislate price increases above inflation, and allow the Postal Service to unilaterally
repeal the price cap. Section 301 would also preserve the statutory monopoly of the Postal
Service while significantly diminishing the oversight responsibilities of the Postal Regulatory
Commission (PRC). We strongly oppose these provisions.

To that end, we support the amendment sponsored by Senators Baldwin and McCaskill
(OLL13707) to amend language in Section 301 of the substitute. The Baldwin-McCaskill
amendment would ensure the PRC maintains its current rate review authority and conducts
future restructuring efforts to address postal rate adjustments. This oversight will better enable
the Postal Service to implement a sustainable financial path while serving the mailing

Additionally, Section 302 of the substitute authorizes the Postal Service to engage in “nonpostal
activities” provided the activities fall within certain criteria and demonstrate the ability for the
Postal Service to make money. We are concerned this language will encourage the Postal
Service to engage in nonpostal activities in direct competition with banks and financial
institutions. Given the Postal Service’s unique governmental status, its entry into the financial
services market would raise serious unfair competition concerns with the potential to allow it to
become the next Government Sponsored Enterprise (GSE) in the broad based financial services
arena. A recent white paper issued by the Office of the Inspector General for the U.S. Postal
Service advocating that the Postal Service engage in financial services activities such as making
loans, taking deposits, and other services underscores the validity of our concerns. Accordingly,
we believe further changes to Section 302 are necessary.

The crisis facing the Postal Service is the result of volume losses due to electronic diversion and
unsustainable costs. Raising prices on existing customers fails to address either of these issues.
Worse, raising prices would be self-defeating; it will hurt existing mail users and cause more
mail to leave the system.

As mailers and interested stakeholders, we commend you for your leadership on this issue.
However, given our strong opposition to Section 301 and significant concerns with Section 302
we cannot support the substitute amendment as currently offered.


American Bankers Association
The Financial Services Roundtable
Independent Community Bankers of America
Consumer Bankers Association

Cc: Senate Homeland Security and Government Affairs Committee