Possible First-Class Change Could Cost Standard Mailers Millions

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The U.S. Postal Service is considering a broader interpretation of First-Class mail that would move many Standard mail pieces into the costlier First-Class category, sources told DM News.


First-Class mail is the agency's most profitable product but has been declining in volume. A USPS spokesman said that the issue is being discussed but that no action has been taken.


Several mailers -- mainly financial institutions -- said that in the past year and a half they have been told by local acceptance clerks at postal business mail entry units that Standard mail they have sent for years now must go at the First-Class rate.


Some of the mailers said that despite having letters from the USPS stating that the mail qualifies for the Standard rate, they have been told those exceptions should not have been given.


Strategic Direct Marketing Inc., Nashville, TN, a DM agency serving banks, credit unions and other companies, said the USPS ruled Jan. 16 that its "Skip-A-Payment" notices could not be mailed at the Standard rate because they contain specific account data such as a loan number or payment amount.


According to Strategic Direct, a ruling by Sheldon J. Gorovsky, manager of the USPS Rates and Classification Service Center, Fox Valley, IL, said: "[T]he inclusion of the loan number and the monthly payment amount is considered actual and personal information. … Consequently, the mail piece must have First-Class postage paid."


Strategic Direct president Randall Putala, who said the company has mailed Skip-A-Payment letters for more than 13 years at the Standard rate, thinks the new ruling will dampen clients' marketing plans.


But not all mailers disagree with such action by the USPS. One source said some mail getting through at Standard rates clearly should be charged as First Class. Spurring the confusion is the definition in the Domestic Mail Manual of First-Class mail as "matter that has the character of actual and personal correspondence."


"The definitional standard for what is or is not First-Class mail is, to say the least, fuzzy," said Ian Volner, a lawyer who specialized in postal issues at Washington, DC, law firm Venable, Baetjer, Howard & Civiletti. "There is a middle area where a mail piece is arguably in the structure of personal correspondence because it contains personal information, but it is also plainly promotional."


This ruling could cost financial direct marketers millions of dollars in extra postage yearly, Putala said.


"The largest financial mailers send tens of millions of Standard-class letters per year, including Skip-A-Payment notices, convenience checks and pre-approved credit card and loan offers," Putala said. "Many of these letters feature live account numbers plus individual balance and payment information, which under this ruling could disqualify them for Standard mail postage rates."


The difference between Standard and First Class for a typical bulk mailing is 8.8 cents per piece, or $88 per thousand. For large financial mailers that often mail 10 million pieces monthly, the ruling could raise their monthly mail costs by $880,000.


"It remains to be seen whether the large banks can afford to pay these additional fees," Putala said. "Many of these mailing programs are geared toward revenue generation, and are not mandatory or legally required mailings [such as a bank statement]. I believe this ruling will cause many banks and credit unions to rethink the benefit of these optional mailings and reduce their frequency or eliminate the programs entirely based on the increased postage costs. In the long run, it could actually reduce USPS revenues."


With financial institutions sending thousands of mail campaigns monthly, it is uncertain whether the postal service could enforce this ruling unilaterally.


"We will be glad to comply with this new ruling as long as the major banks and larger financial mailers must comply as well," Putala said. "We will be vigilant in monitoring the actions of the large mailers to be certain that smaller mailers are not being unfairly singled out by this ruling."


The postal service also aims to have a centralized process for appeals to prevent inconsistencies that often happen in the field. For example, the USPS last week transferred authority for final decisions from the rates and classification service centers to the manager of mailing standards at USPS headquarters. The mailing standards manager will issue the final ruling when a mailer appeals a classification or revenue-deficiency decision.


Sources also said a Federal Register notice is expected this spring that would clarify the issue, but postal officials would not confirm this.


DM News also has learned that the postal service and the mailing industry have formed a joint Mailers Technical Advisory Committee work group called Consistency of Mailing Standards & Business Mail Acceptance to study the issue. Its first meeting is Jan. 30.


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