The payday loan industry has been banned from placing ads on Google. The search engine juggernaut announced that any advertisements related to the business are being removed.
Quoting its “keep bad ads out” policy, Google released a blog post Wednesday stating that advertisements for payday loans and related products will be officially prohibited as of July 13. The search engine, owned by Alphabet Inc., already has a ban in place for ads related to firearms, explosives, and tobacco.
By offering high-interest, small-dollar loans, the payday lending industry serves nearly 12 million U.S. customers every year and brings in about $38.5 billion. Google’s strict ad policy guidelines will most likely affect every payday loan company.
According to the online giant, the prohibition is only limited to loan products that carry an interest rate of 36 percent or higher and repayment is due within 60 days. Supporters if the new ban hope the move will significantly cripple businesses that prey on vulnerable customers.
“This new policy addresses many of the long-standing concerns shared by the entire civil rights community about predatory payday lending,” wrote Wade Henderson, president and chief executive of the Leadership Conference on Civil and Human Rights. “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.”
The industry sees the ban as imbalanced discrimination that amounts to censorship. CEO of the Online Lenders Alliance Lisa McGreevy said Google’s policy denies access to legal loans for Americans who may not be able to get access to the traditional financial system.
“The Internet is meant to express the free flow of ideas and enhance commerce,” said the Community Financial Services Association of America, the main trade group for the sector. “This is unfair towards those that are legal, licensed lenders and uphold best business practices.”
Loans generated online make up approximately half of the payday loan market and continues to grow. However, Google axing all the ads isn’t the only threat to the controversial industry.
Within the next few months, the Consumer Financial Protection Bureau, the federal agency charged with regulating the financial industry, is creating guidelines to make underwriting standards tougher. The new rules are predicted to wipe out a large portion of payday loan lenders.
The guidelines will control the number of times a borrower can roll over a loan and limits them to a maximum of three loans total. Lenders will also be required to verify income and borrowing history of a potential customer.
Statistics gathered by the agency showed roughly 50 percent of borrowers who got an online payday loan paid an average of $185 in additional bank charges or fees. According to the data, consumers also paid more on average when using an online lender than when applying at a brick-and-mortar storefront.
The ban is the first time Google has targeted a specific category of financial products. Facebook also declines ads placed by payday lenders. Yet, many others, like Yahoo, still display them.
Consumers searching online for a payday loan will still find links on Google. However, any ads on the top or right-hand side of the site will not be related to the prohibited product.
Google’s ban extends beyond the payday companies themselves. Many of the ads are placed on the network by marketing companies that sell consumer information to the lenders. Under the policy, these companies will also be subject to the same product disclosure requirements as the lenders.
Due to its advertising policy, Google eliminated over 780 million ads in 2015, most of which were for counterfeiting and phishing schemes. While the search engine may lose a little money, Google’s ban on payday loans will most likely not even make a dent in the billions in advertising revenue it earns every year.
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