Predatory lending practices have been around for a long time. You probably see many brick and mortar payday loan buildings where you live and payday loan lending has extended to the Internet. If you’re not familiar with the payday loan process it involves the borrower taking an advance on their paycheck which usually involves an insane amount of interest. For example in one possible scenario, a person who takes a payday loan could take a loan on their $500 paycheck but only be issued $300 giving the loan issuer a 40% take on the incoming paycheck (this is just an example actual interest rates and other situations vary). Why anyone would want to give up that amount of their paycheck to get cash in hand a week early is beyond me.
Now Google has put a new policy in place in its ad service that will stop displaying payday loan ads on any website. This is a step in the right direction to at least minimize the amount of predatory lending ads being displayed on websites.
In that vein, today we’re sharing an update that will go into effect on July 13, 2016: we’re banning ads for payday loans and some related products from our ads systems. We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36% or higher. When reviewing our policies, research has shown that these loans can result in unaffordable payment and high default rates for users so we will be updating our policies globally to reflect that.
Support for Google’s decision is pretty overwhelming and for the most part, is being viewed as a positive step being taken by the company. Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights said:
“Banning predatory payday loan ads shows that Google is willing to put people before profits. This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. Low-income people and people of color have long been targeted by slick advertising and aggressive marketing campaigns to trap consumers into outrageously high interest loans. This ban puts payday loans in their rightful place alongside explosives and tobacco as dangerous products that deserve the highest level of scrutiny from regulators and businesses alike.”
Hilary Shelton, director of the NAACP Washington Bureau and senior vice president for policy and advocacy of the NAACP said:
“We commend Google for their very courageous, thoughtful, and responsible policy position to help curb the tide of predatory lending by banning search ads for payday loans on their site. Payday loans, many of which vary in their interest rate from 200 to 600 percent, have already driven too many people deeply into the debt trap, a disproportionate number of whom are people of color and folks of modest means. This is a debt trap that in many cases began as a $200 to $300 loan to perform necessary tasks such as repairing a broken car or fixing a leaky pipe. 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.”
What do you think of Google’s new payday loan ad policy? Let us know in the comments below or on Twitter, Facebook and Google+.[button link=”http://googlepublicpolicy.blogspot.com/2016/05/an-update-to-our-adwords-policy-on.html” icon=”fa-external-link” side=”left” target=”blank” color=”285b5e” textcolor=”ffffff”]Source: Google[/button]
Last Updated on January 23, 2017.