Google to ban payday lending ads, calling industry ‘harmful’

It’s the same line being drawn by advocates of a South Dakota ballot initiative that would cap interest rates of local payday lenders. Payday loans are often used to cover an unexpected expense or to make ends meet before the next paycheque. But in fact, the majority of borrowers end up rolling over a payday loan at least once before getting out of debt.

The payday loan industry draws in 12 million Americans a year, with the average borrower taking out eight loans of $375 each, and paying $520 in interest, according to the Pew Charitable Trust. “This decision is a pivotal development in our continued quest for all financial products and services to be fair and transparent”, said Keith Corbett, executive vice president of the Center for Responsible Lending. “Google is to be praised for doing its part to limit use of these abusive loans”.

“Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well being”, he stated. But the ads that appear at the top and right will not show ads from the payday lending industry. When several states capped the interest rates on payday loans, the industry pivoted into loans tied to auto titles or moved their operations onto Indian reservations. “This loan turned into a repayment burden that far exceeds the initial amount, which in turn locked the lender into a debt that sometimes carried them into months or sometimes years”. This clearly comes to bear on lawmakers’ opinions, as it did in a February 2016 House Financial Services Committee hearing on the CFPB’s new rules, where Rep. David Scott (D-GA) echoed the words of a payday lending lobbyist nearly exactly.

What’s interesting to see here is that Google is acting more aggressively than the government. From that point on, search results pages will stop displaying paid marketing from payday lenders.

Google will no longer show ads for payday loans, after deciding that it doesn’t want to promote predatory lending practices that are harmful to consumers. The firm announced Wednesday it had taken the ultimate step against payday loan companies, and will refuse to take their ads starting July 13.

If you are looking to borrow a stack of cash immediately, you soon won’t be able to find this type of loan ad on Google in the near future.

The change to Google’s advertising policy will only affect lenders that fall into the short-term high-interest category. Two-thirds of the revenue and loans generated in the industry is done at brick-and-mortar shops, as opposed to online payday loans, said Alex Horowitz, an expert on the payday lending industry at Pew. “By banning ads for payday loans, Google is highlighting how corporate accountability can be a positive for the company, its shareholders and society”.