Postage Bonus May Be Fleeting
US banks mailed 7.9 mil pieces of mail in 1999 at a cost of $2.6 bil; some
69% of the mailings were statements; the banking industry will be affected by
proposed postage hikes for the industry
>From AMERICAN BANKER, January 25th, 2001
ORIGINAL TITLE: Postage Bonus May Be Fleeting. FULLTEXT: BY LISA DAIGLE
WASHINGTON A postage rate cut that promised to save banks $26 million,
partially offsetting the Jan. 7 first-class letter rate increase, may be
short-lived. Though the U.S. Postal Service increased the cost for
first-class letters weighing 1 ounce by a cent, to 34 cents, the industry took comfort in a simultaneous 1-cent decrease in the cost of each additional ounce, to 21 cents. Industry officials are now worried, however, that the Postal
Service’s rate-setting panel may reverse course and recommend a 1- or 2-cent
increase for each additional ounce of first-class letters, said Irving D. Warden, associate general counsel of the American Bankers Association. Such a hike would particularly hurt banks because account statements often
weigh more than an ounce. “A conservative estimate based on our survey of
banks shows that every extra penny on the additional-ounce rate costs banks an additional $26 million a year,” Mr. Warden said. Banks mailed 7.9 billion pieces in 1999 at a cost of $2.6 billion, according to an ABA study. Of these mailings, 69% were statements and 35% weighed more than 1 ounce. Observers said persuading the rate-setting panel, the Postal
Rate Commission, to refrain from raising prices will be a challenge because it is under pressure from senior officials. The Postal Service Board of Governors in December asked the commission to reconsider the method it uses to calculate rate changes. Though a Dec. 20 Postal Service memo did not specifically ask for an increase in the additional-ounce rate, Mr. Warden said that adjustments to the formula would likely increase the additional-ounce rate. The Postal Service said that it is facing a budget shortfall in fiscal 2001 if the cost of each additional ounce remains at current levels. Its December
memo said that the rate changes as put into effect in January will result in
$726 million of lost revenue. A Postal Service spokesman said losses of $480
million had been expected even before the rate adjustments earlier this
month. It is uncertain when the commission will make a recommendation. ISSN
0002-7561; Issue 17; Volume 166; Page 4 Copyright 2001 Thomson I
nformation Services Inc. (c) 2001 Resp. DB Svcs. All rts. reserv.
$$AMERICAN BANKER, 25th January 2001
