Post Office Cries Fraud, Public Cries Foul

Private mail station box holders face rule changes almost nobody wants

by Doug Nufer, The Free Press

Many years ago he received a credit card in the mail. He hadn't asked for it. No responsible financial institution should have wanted to have anything to do with him. But there it was, ready to roll. So, inspired by an American Express commercial that had been the rage, he used the card to disappear, burning $25,000 along the way as he blazed a trail to paradise.

For years, businesses in search of customers have taken advantage of cheap rates that are, in effect, subsidized by people without bulk mail permits. Multinational banks to independent news journals, they send come-ons to names on mailing lists. Mail fraud has been around forever, too, in a variety of scams that target businesses or consumers. Months ago, the United States Post Office (USPS) took steps to crack down on what they claim is a hotbed of mail fraud, private postal box stations known as Commercial Mail Receiving Areas (CMRAs).

In a March 25 press release, Chief Postal Inspector Ken Hunter said the changes were a response "to concerns voiced by the law enforcement community, consumer organizations, mail order firms and financial institutions." He went on to clarify, "The rulemaking grew out of increasing concern from the financial and commercial segments, who were seeing a rise in criminal elements taking advantage of the anonymity of mail to 'steal' financial identities and re-route goods and services illegally."

CMRA box holders received word that, in order to receive mail after October 24, they would have to re-register with their mail stations, giving two pieces of ID, and they would have to make sure all mail addressed to them had the box number indicated on the second line of the address, after the designation PMB for private mail box. That way, if a business, such as a bank, wants to send junk mail in the form of, say, a pre-approved credit card application, to someone on a mailing list, the sender will know that the potential customer is a box holder at a CMRA and not, say, an executive in a suite of offices. Postal inspectors have received complaints from businesses about a tendency of many CMRA box holders to identify their mail boxes as "suites."

"The sole purpose of these changes is to increase the security of the mail," says Postal Inspector James Bordenet, the public information officer based in Seattle. "We are not targeting the CMRAs. We are targeting the illegal use of CMRAs."

In addition to these rule changes, he says the USPS has been working with financial institutions to make them less vulnerable to fraud. He also praises CMRAs for being cooperative with postal inspectors when they "smell a rat."

Many of the mail fraud cases he mentions are sucker crimes, such as a foreign lottery trolling for action or an operation dangling (but neglecting to ship) beanie babies. Clearly, there are scads of scams, but beyond anecdotal evidence, are there statistics to back up the need for a crack-down? For most box holders this change is a tremendous inconvenience that will cost thousands of dollars in lost revenue from refused delivery of incoming checks and from expenses to replace old stationery. Will their losses be offset by what's gained by eliminating one mail fraud loophole?

Redlining bad addresses

Bordenet doesn't have the stats but Charmaine Fennie does. Fennie isn't a USPS employee. She's president of the Associated Mail and Parcel Centers, an organization of CMRAs. She cites a study published in the USPS Postal Bulletin, which gives the figures for "withholding of mail" addresses-- addresses where the USPS won't deliver mail, because of criminal activity. In an 18 month period, 125 residential addresses, 89 boxes at USPS offices, 68 boxes at CMRAs not affiliated with her organization, and 37 boxes at CMRAs with her organization had their mail withheld by the USPS. Although this indicates a higher percentage of mail fraud occurring wherever people rent mail boxes, as there are many more residential addresses than USPS or CMRA box addresses, it shows that fraud is pervasive rather than concentrated in CMRAs.

Fennie says that most CMRAs have already properly registered their box holders. After all, CMRA operators need to know who their customers are, so they can collect from them. Although she doesn't see a disproportionate amount of mail fraud at CMRAs, she does see a reason for the USPS crackdown.

"We truly believe that these regulations are strictly punitive," she says, indicating how the USPS proposed its rule changes soon after the CMRAs organized to prevented the USPS from competing with them.

Pack and Send sent packing

In 1994 the USPS began a service called "Pack and Send," where they packed parcels at a postal counter. The CMRAs filed a complaint with the Postal Rate Commission, claiming the rates were priced too low to cover costs. They also testified before Congress and started legislation (HR 198) to limit the USPS to collecting and delivering mail. In December, 1996, the Rate Commission sided with the CMRAs and in February, 1997, the USPS stopped Pack and Send. Later the USPS asked to resume the packing service, and again the Rate Commission said no. Meanwhile, the Coalition Against Unfair USPS Competition got the Commission to grant a six month moratorium on USPS services that would compete with CMRAs. The moratorium expired in November, 1998.

The idea of the USPS competing with private mail stations may seem absurd. For a few dollars more, the 10,600 CMRAs help ease the demand for post office boxes while providing extra services the USPS can't offer, such as access to United Parcel Service and Federal Express delivery. CMRA operators complain that the USPS has no business being a regulator AND competitor of CMRAs, particularly since the USPS pays no taxes. Despite this advantage, the USPS lost $85 million between 1995 and 1997 when it tried to develop new products, according to a General Account Office report cited by UPS CEO James P. Kelly in a guest editorial in the CMRA's News & Ideas newsletter.

"The only thing this does is hurt the law-abiding customers. The crooks are going to find ways around it," says Dean Cook, manager of Post Options in Seattle. Post Options has operated for ten years and is currently expanding. With over 1000 boxes, it is one of the largest CMRAs (60-120 is a more typical box count). Cook estimates it will cost him $15,000 to comply with the rule change. He has already been spending his own money to make copies of forms the federal government had promised to provide.

On June 24, at a meeting of USPS officials and CMRA representives, CMRAs and their customers got something of a reprieve. The USPS moved back the address change compliance date from late October to April 26, 2000, and postponed CMRA customer registration for two months, to August 26. The USPS also agreed to reconsider its refusal to let the CMRAs insure mail, as Chief Inspector Hunter "marveled" that the USPS should want to exclude this source of income. The USPS will review a provision that would allow anyone to obtain information that businesses put on the CMRA registration forms (Form 1583) and not to force CMRAs to forward mail to former customers unless the customer has authorized and paid for this service.

Charmaine Fennie attended the meeting and praised the USPS for addressing some of the problems the new rules will create for CMRA customers, and for writing down what they have said they will do. However, she stresses, the USPS still intends to register all box holders with two pieces of ID and to return mail that isn't properly addressed to post boxes.