Though Google is the search engine for everything, when it comes to advertising, it draws the line at certain products. You won't find ads on there for guns, tobacco, explosives, and recreational drugs. And, from July 13, you won't find them for payday loans either. Google now won't take money to advertise the quick-credit industry, responding to advocates who say it preys on personal weakness and lands people with unreasonable levels of debt.
Google will no longer accept ads with a repayment schedule shorter than 60 days, or where loans have an annual interest rate (APR) of 36% or higher. "Research has shown that these loans can result in unaffordable payment and high default rates for users," says David Graff, Google's director of global product policy, in a blog post.
To be clear, users will still be able to search for any loan products they want and the loan companies will still appear in the main results. But they won't see ads to the side of the page when searching terms like "I'm having trouble paying my bills" or "I need money quick."
Importantly, the ban also applies to marketing companies that act as intermediaries between lenders and customers. Typically, when you search for "need money to pay rent," you're presented with a page from a "lead generator" that starts taking down your details. It will then sell on your information to the highest bidder for your business.
A report last year from consulting firm Upturn showed how these companies often share data "recklessly." In some cases, the data has been used to commit alleged fraud. In 2014, the Federal Trade Commission sued one payday lender for taking $25 million out of customer bank accounts without their consent.
Economic justice groups welcomed Google's decision. "Curbing the harm of payday lending is a civil rights priority," said Wade Henderson, president of the Leadership Conference on Civil and Human Rights, a coalition of 200 national groups, in a conference call. "Part of payday lenders' marketing strategy is to prey on consumers at their moment of greatest desperation and they're using the Internet as part of this aggressive pursuit."
The Upturn report argues that online lenders are "often worse for consumers than their storefront counterparts: They are associated with higher fees, longer-term indebtedness, higher rates of borrower abuse, and startling rates of fraud."
There are thought to be more payday outlets in the U.S. than McDonald's and Starbucks stores combined. Twelve million American take such loans each year, according to a 2012 report from the Pew Charitable Trusts. On average, borrowers take on eight loans of $375 each and pay a total of $520 in interest and fees.
Last year, the Consumer Financial Protection Bureau proposed new rules on payday lenders. They would require companies to make a thorough assessment of ability to pay, would restrict how many loans consumers could take out in a year, and would stop lenders from garnishing bank accounts "in ways that tend to rack up excessive [bank] fees." It will (probably) release the final rules this summer.
Arguably, though, Google's ban could have more impact. Facebook already doesn't allow payday loans ads. And consumer advocates hope that Bing and Yahoo will now follow the other companies' lead.