Special Postal Rate for Discover Is Rejected

The Postal Service’s request for a Negotiated Service Agreement (NSA) with Discover Financial Services has been rejected by the Postal Regulatory Commission because it failed to guarantee a profit for USPS. Discover’s is the first NSA proposal ever rejected by the PRC.

Under regulatory requirements, the PRC may not add an NSA to the market dominant product list unless it contributes to enhancing operational efficiencies, reduces costs, or increases overall contribution to institutional costs.

Under the proposed NSA, Discover would receive a rebate of 2.25% if it were to meet or exceed specified annual revenue thresholds and a rebate of 2.5% for exceeding aggregate total baseline volume for eligible mail. Were Discover to fail in achieving the revenue mark, it would have to pay a penalty of 10% of the difference between the revenue threshold and the revenue it actually generated.

The Postal Service calculated that, should Discover meet its requirements, the agreement would put a loss of $18 million on its books. The only scenario forecasting a positive financial impact in the USPS proposal would be if Discover missed its targets and was forced to pay the penalty.

“The Commission is not insensitive to the financial challenges faced by the Postal Service,” read the PRC’s decision. “Although the Postal Accountability and Enhancement Act granted new flexibility to the Postal Service in setting postal prices, it also made clear that only NSAs that improve the net financial position of the Postal Service or enhance the performance of certain postal operations may be approved.”

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