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| Google to Ban All Payday Loan Ads | Google to Ban All Payday Loan Ads |
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| Google announced Wednesday that it would ban all advertisements for payday loans and related products on its website because they often lead to unaffordable repayment terms and financial harm to consumers. | Google announced Wednesday that it would ban all advertisements for payday loans and related products on its website because they often lead to unaffordable repayment terms and financial harm to consumers. |
| David Graff, the director of global product policy at Google, announced in a blog post that the global ban would take effect July 13 and would apply to loans for which repayment was due in 60 days and for loans that carry an annual percentage rate of 36 percent or higher. | David Graff, the director of global product policy at Google, announced in a blog post that the global ban would take effect July 13 and would apply to loans for which repayment was due in 60 days and for loans that carry an annual percentage rate of 36 percent or higher. |
| “This change is designed to protect our users from deceptive or harmful financial products,” Mr. Graff wrote. “Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well-being.” | “This change is designed to protect our users from deceptive or harmful financial products,” Mr. Graff wrote. “Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well-being.” |
| It is the first time that the company has banned such a broad range of financial advertisements on its site, but the move was welcome by advocates seeking stricter controls on an industry long accused of targeting low-income and minority communities with loans that carry egregiously high interest rates. | It is the first time that the company has banned such a broad range of financial advertisements on its site, but the move was welcome by advocates seeking stricter controls on an industry long accused of targeting low-income and minority communities with loans that carry egregiously high interest rates. |
| Lisa Donner, the executive director of Americans for Financial Reform, said in a statement that Google’s decision would stop abusive lenders from marketing what she described as “debt-trap products that do serious and lasting harm to consumers.” | Lisa Donner, the executive director of Americans for Financial Reform, said in a statement that Google’s decision would stop abusive lenders from marketing what she described as “debt-trap products that do serious and lasting harm to consumers.” |
| Wade Henderson, president and chief executive of the Leadership Conference on Civil and Human Rights, a coalition representing more than 200 national organizations, said in a statement, “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.” | Wade Henderson, president and chief executive of the Leadership Conference on Civil and Human Rights, a coalition representing more than 200 national organizations, said in a statement, “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.” |
| But the Community Financial Services Association of America, which says it works to preserve “access to short-term credit for millions of Americans,” criticized the move, calling it “discriminatory and a form of censorship.” | |
| “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.” | |
| The Online Lenders Alliance, an association representing online financial services companies and their customers, also said that Google’s new policy “goes too far.” | |
| “The Federal Reserve Board noted last year that 47 percent of Americans are not prepared to handle a $400 unexpected expense,” said Lisa McGreevy, the alliance’s president and chief executive. “This is yet another tactic that further limits the ability of families to have access to credit to fulfill their financial obligations.” | “The Federal Reserve Board noted last year that 47 percent of Americans are not prepared to handle a $400 unexpected expense,” said Lisa McGreevy, the alliance’s president and chief executive. “This is yet another tactic that further limits the ability of families to have access to credit to fulfill their financial obligations.” |
| Payday loans are typically marketed as a way for people to cover a cash shortage in between paychecks. Ads crops up online when users type in “need money to pay rent” or other search terms that signal financial distress. | Payday loans are typically marketed as a way for people to cover a cash shortage in between paychecks. Ads crops up online when users type in “need money to pay rent” or other search terms that signal financial distress. |
| Approximately one-third of the payday loan market is online, and two-thirds of the industry operates out of about 16,000 payday loan stores in 36 states across the country, according to a Pew Charitable Trusts report in 2014. The report said interest rates for online payday loans were typically higher than those for storefront loans, and they usually exceed 300 percent annual percentage rates. | Approximately one-third of the payday loan market is online, and two-thirds of the industry operates out of about 16,000 payday loan stores in 36 states across the country, according to a Pew Charitable Trusts report in 2014. The report said interest rates for online payday loans were typically higher than those for storefront loans, and they usually exceed 300 percent annual percentage rates. |
| Consumers will still be able to find payday loan companies through an organic search on Google, but their ads will not be highlighted. Mr. Graff said the company would continue to review the policy, and added that it would not affect companies offering services such as mortgages, car loans, student loans, commercial loans and credit cards. | Consumers will still be able to find payday loan companies through an organic search on Google, but their ads will not be highlighted. Mr. Graff said the company would continue to review the policy, and added that it would not affect companies offering services such as mortgages, car loans, student loans, commercial loans and credit cards. |
| Google has taken similar action against advertisements for other products or services that it deems harmful or dangerous, such as guns, fireworks and tobacco. Last year, Google disabled more than 780 million advertisements for reasons ranging from counterfeiting to phishing. | Google has taken similar action against advertisements for other products or services that it deems harmful or dangerous, such as guns, fireworks and tobacco. Last year, Google disabled more than 780 million advertisements for reasons ranging from counterfeiting to phishing. |
| The company declined to say how much it expected to lose in revenue from the ad ban. The Pew report said online lenders spend “substantial advertising dollars” on keyword-search-linked ads: Keywords related to payday loans typically cost $4.91 to $12.77 per click, which is high, it said. | The company declined to say how much it expected to lose in revenue from the ad ban. The Pew report said online lenders spend “substantial advertising dollars” on keyword-search-linked ads: Keywords related to payday loans typically cost $4.91 to $12.77 per click, which is high, it said. |
| Advocate are pushing to expand the ban on payday loan ads to other search engines. Alvaro Bedoya, the executive director of the Center on Privacy and Technology at Georgetown Law Center, said in a conference call on Wednesday organized by members of the Leadership Conference on Civil and Human Rights that they have also urged Microsoft and Yahoo to ban the ads. | Advocate are pushing to expand the ban on payday loan ads to other search engines. Alvaro Bedoya, the executive director of the Center on Privacy and Technology at Georgetown Law Center, said in a conference call on Wednesday organized by members of the Leadership Conference on Civil and Human Rights that they have also urged Microsoft and Yahoo to ban the ads. |
| Microsoft, through its search engine Bing, and Google account for most of the online search activity worldwide. | Microsoft, through its search engine Bing, and Google account for most of the online search activity worldwide. |
| Because the industry is currently regulated on an ad hoc basis by states, organizations like the leadership coalition are also calling for greater federal oversight of the payday industry, whose practices have been described as discriminatory. | Because the industry is currently regulated on an ad hoc basis by states, organizations like the leadership coalition are also calling for greater federal oversight of the payday industry, whose practices have been described as discriminatory. |
| The Consumer Financial Protection Bureau is expected to announce proposed federal rules for the industry this year. In a report in April, it noted that attempts by online lenders to deduct payments from consumers accounts can add a steep, hidden cost to online payday loans. Half of online borrowers can rack up an average of $185 in bank penalties because at least one debit attempt results in an overdraft or fails, the report found. | The Consumer Financial Protection Bureau is expected to announce proposed federal rules for the industry this year. In a report in April, it noted that attempts by online lenders to deduct payments from consumers accounts can add a steep, hidden cost to online payday loans. Half of online borrowers can rack up an average of $185 in bank penalties because at least one debit attempt results in an overdraft or fails, the report found. |