Google bans all payday lenders ads on its AdWords platform, calling the industry “deceptive” and “harmful”
Google announced on 11 May 2016, that it was to ban all ads for payday loans, or loans where repayment is due within 60 days of the date of issue from 13 July 2016. The decision by Google comes nine months after Facebook officially banned payday loan ads last August.
Payday loans or short-term loans will not show at the top of Google’s search results, adding the short-term loan industry to a blacklist that includes guns, tobacco and drugs, dealing a bitter blow to the industry. The move by Google will cut off a crucial channel for many online-only payday and short-term lenders from Google’s dominant search engine.
This avenue of advertising is a key online shop-front for these types of lenders, with lenders bidding fiercely against each other for a prime position at the top of its results, with pay-per-click costing more than £10 per click.
Google will also ban all ads for loans in the United States with an APR of 36% or higher, as research has shown that these loans can result in unaffordable payment and high default rates for users.
Google said: ‘This change is designed to protect our users from deceptive or harmful financial products and will not affect companies offering loans such as Mortgages, Car Loans, Student Loans, Commercial loans, Revolving Lines of Credit (e.g. Credit Cards).
Google global product policy director David Graff says: “When ads are good, they connect people to interesting, useful brands, businesses and products.
“Unfortunately, not all ads are – some are for fake or harmful products, or seek to mislead users about the businesses they represent. We will no longer allow ads for loans where repayment is due within 60 days of the date of issue.”
According to Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, “This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. These companies have long used slick advertising and aggressive marketing to trap consumers into outrageously high interest loans – often those least able to afford it.”
“I think this action is as unprecedented as it is significant,” Keith Corbett, Center for Responsible Lending Executive Vice President, said in a statement. “By example, Google is demonstrating how profitable enterprises can also be ethical and supportive of financial fairness.
“This change is designed to protect our users from deceptive or harmful financial products,” Google’s director of global product policy, David Graff, wrote in a blogpost announcing the ban, which goes into effect this summer.
It has long been argued by politicians, consumer groups and charities that payday loans target the poor and vulnerable with extremely high interest rates, causing consumers to spiral further into debt that can last for months. As you would expect the move was instantly criticised by the Consumer Finance Association (CFA), which represents short-term lenders.
A spokesperson said: “UK consumers enjoy a vibrant, highly competitive credit market and we will be interested to read the evidence that Google uses to justify overruling open market advertising of a legal, regulated industry to deny people freedom of choice,” the CFA’s chief executive Russell Hamblin-Boone said.
“Short term loans are a legal source of credit used by millions of people across the UK and the industry is highly regulated with a cap on the total cost of credit.”
Amy Cantu, a spokeswoman for the Community Financial Centres Association of America, the trade group representing payday lenders, said: “These policies are discriminatory and a form of censorship. The internet is meant to express the free flow of ideas and enhance commerce. Google is making a blanket assessment about the payday lending industry rather than discerning the good actors from the bad actors.
“This is unfair towards those that are legal, licensed lenders and uphold best business practices, including members of CFSA. Companies that restrict advertising of payday loans also do their users a disservice because consumers may need access to short-term credit that they cannot get from traditional banks. According to the FDIC, 24 million households are underbanked. Thirty-five states and the CFPB have recognized the need for short-term credit products like payday loans.”
Jonathan Taplin, director of the Annenberg Innovation Lab at the University of Southern California, said: “Facebook and Google have the right to not run ads. In this case, Taplin went on to say he was not convinced Google was acting to better society. “I’d call it a publicity stunt,” he said. “Their notion of what’s bad and what’s good is fungible.”
Google disabled more than 780 million ads in 2015, for reasons ranging from counterfeiting to phishing.