Payday lenders reeled after Google moved to ban the payday loan industry from its advertising networks. The action came amid growing social and political concerns over the effects payday loans, and similar products have had on consumers. Already financially strapped, payday loan customers accept interest rates and finance charges that make their loans almost impossible to repay.
Google’s Policy Change
Google’s global product policy director announced the move to ban payday lenders via a recent blog post. Effective in mid-July, the new policy will forbid the advertisement of short-term loans of sixty or fewer days. The new rule also prohibits advertisers from promoting loans that come with annualized interest rates more than 36 percent.
Google’s Protection Policies
According to Google, the move against payday loan companies will protect Internet users from becoming victims of harmful and deceptive products that will worsen their financial predicament. Google aims to prevent ruthless financial companies from harming the low-income and minority communities that have a disproportionate reliance on short-term high-interest loan products. Even before the move against the payday loan industry, Google had implemented policies designed to protect the general livelihood and well-being of its audience.
Consumer Advocates Respond
Consumer advocacy groups have welcomed the move Google has taken to reduce the exposure of Internet users to so-called “debt-trap” loans that seem to cause more harm than good. Payday lenders’ aggressive marketing efforts have created a huge industry that profits on the misery of people who have limited access to traditional loans and financing options. The Leadership Conference on Civil and Human Rights Coalition condemned payday lenders by characterizing them as companies that use aggressive marketing tactics to trap people into accepting outrageous interest rates they cannot pay.
Industry Groups Defend Themselves
Industry advocates have decried Google’s move as censorship, blasting the tech giant for making a blanket assessment of an entire industry that often serves people whom banks and other lenders refuse. The Online Lenders Alliance draws support from Federal Reserve Board findings that show that almost half of the American population cannot manage $400 of unexpected expenses. The trade group says that Google’s move will introduce more hardship for people who have limited options available to them when financial emergencies occur.
Google users often see advertisements from payday lenders when they enter searches that indicate financial hardship. For example, when people search Google for help paying for rent, they will often see an ad for a payday loan. Such a person already has money problems that will likely worsen with the additional requirements of an expensive payday loan. Acting out of desperation, however, people will often take the payday loan, hoping for better days after surviving the crisis. Sometimes, better times never come.
A Pew Charitable Trust report shows that payday lenders offering emergency loans operating about 16,000 stores in 36 states comprise two-thirds of the payday-loan industry. The other one-third of the sector operates websites that allow customers to take out loans online. Online lenders usually charge annual interest rates higher than 300%, an amount that exceeds charges made by some physical payday loan stores.
Still in Google Search
Despite Google’s move to ban payday lenders from its advertising networks, the company will not ban such companies from appearing in Internet search results, so people in dire financial circumstances will still have the ability to find payday loan providers. Google spokespeople have said that the payday lending policy for advertisers will undergo further review. Companies selling traditional lending options such as student loans and credit cards will continue having Google advertising privileges. Similarly, Internet users should expect to keep seeing advertisements for car loans and mortgages while using Google products.
The Impact on Google
Although the Pew report says that payday lenders have spent a significant amount of money on advertisements, Google will not disclose the amount of lost revenue the firm expects as a result of its new policy. Right now, payday lenders pay from almost $5 to nearly $13 per click in Google AdWords for keywords that relate to their industry, suggesting that Google could lose a significant amount of revenue after the ban takes effect.
Taking More Action Consumer advocates say they have already begun lobbying other online advertising networks to make similar moves against the payday loan industry. Georgetown Law Center’s Center for Privacy and Technology has reportedly already contacted Yahoo and Microsoft about the matter but have yet to make any official policy decisions. Microsoft operates the Bing search engine that ranks as the second most popular search site in the world. Opponents of the payday loan industry hope to lobby the Federal Government to seize more oversight over the industry, in hopes of eliminating the state-by-state regulatory variations. A Consumer Financial Protection Bureau report has found that payday lenders that make automatic debits to client bank accounts compound the problems with payday loans by causing an overdraft or non-sufficient funds charge. About one-half of online emergency loan borrowers should expect to receive nearly $200 in bank-related fees.
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