Google Bans High Interest & Payday Loan Advertisements

Two months ago, Google announced that they would be removing any advertisements promoting so-called “predatory” loans. Under their guidelines, any loans that require payment within 60 days or have an annual interest rate more than 35 percent will no longer be eligible for promotion through Adwords. The ban doesn’t just apply to direct lenders, but also to lead generators or any business that connects consumers with third party lenders.

Although Google initially planned for the ban to take effect July 13, they did not put the rule in place until July 20. No new ads are currently going to be accepted, and all existing ads will be removed manually in the coming weeks.

Credit card companies are off the hook, however. Google has exempted “revolving lines of credit” from established financial institutions from its 36 percent APR limit. Examples of banks that offer these high interest credit cards include Capital One, Aqua Card, and Marbles.

This is the first time Google has implemented such a broad ban on financial products. Typically, their large-scale bans have only applied to blatantly illegal business such as selling restricted weapons or drugs. By banning a product which operates within the law, Google has demonstrated that they are willing to chime in on policy issues. Although each state regulates payday loans differently, Google’s authority as a content provider may have more of an effect on the industry than any government regulation to date.

Google, who has disabled over 780 million ads in 2015 alone, stated that they feel the payday loans industry is “harmful” and “misleading.” Wade Henderson, CEO of the Leadership Conference on Civil and Human rights, had this to say about the new ban.

“This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. 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.”

Shareholders of Lendup, a popular short term lender, feel that the move is a conflict of interest. GV, the venture capital branch of Google’s parent company Alphabet, has been investing heavily in Lendup since before the company launched in 2012. Although the majority of Lendup’s financial products fall within Googles qualifications for Google’s payday loans, Lendup feels that their products are more of an alternative to traditional payday loans. Reasons cited include the fact that they do not automatically roll over balances into a new loan, and they also do not charge an early payment penalty – both of which are common practices in the payday loan industry.

“We do worry about how this will play out and think it paints with too broad a brush,” said Sasha Orloff, CEO of Lendup.

Although payday lenders make their products appear appealing by advertising fees paid for a short term loan, a 2012 study by Pew found very different results. They found that the annual percent rate averages to 391 percent, with most borrowers staying in debt for an average of five months and paying back $520 in fees on top of the initial balance of $375.

Some people feel that this move could actually benefit established lenders. By preventing competing lenders from promoting their sites through PPC, lenders that already have an established placement in the organic search results will have less competition.

While this is the first time Google has been proactive in banning products they view as harmful, it’s not the first time they have taken a stance against abusive ads. In 2013 and 2014, immense pressure was put on Google by the U.S. government to ban companies that charged a fee for otherwise free government services.

Google has a history of taking an activist stance on public issues. Their old motto was “Don’t be evil,” although it was replaced with “Do the right thing” in 2015.