Google’s decision to purge ads for high-interest-rate loans is a big blow to the payday-loan industry, which is already facing mounting regulatory pressure to rein in its business.
Google, owned by Alphabet Inc., said in a blog post Wednesday that as of July 13, it is banning advertisements for payday loans and related products, citing its policy to “keep bad ads out” of its system. Google already bans ads for firearms and tobacco.
The $38.5 billion payday-lending industry caters to some 12 million U.S. customers annually, offering them small-dollar loans at interest rates that can exceed 300%.
Google’s ban will affect literally all of the payday-loan market, given the strict standard it is using. The company said the ban would affect loans for which repayment is due within 60 days of the date of issue and those carrying annual interest rates of 36% or higher.
“This new policy addresses many of the long-standing concerns shared by the entire civil rights community about predatory payday lending,” Wade Henderson, president and chief executive of the Leadership Conference on Civil and Human Rights, said in the Google blog post. “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.”
Google’s move was reported earlier by the Washington Post.
The industry fired back immediately, saying the new policy was “discriminatory and a form of censorship.”
“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.”
“Google’s new policy will prohibit legal loans for many Americans who otherwise do not have access to the financial system,” Lisa McGreevy, president and CEO of the Online Lenders Alliance, said in a statement. “The policy discriminates against those among us who rely on online loans.”
Online loans account for roughly half of the payday-loan market and their share is growing, analysts say.
Payday lenders are poised to face a new rule from the federal Consumer Financial Protection Bureau that could wipe out a wide swath of the industry by imposing tough underwriting standards. The agency is expected to roll out the final draft of the rule within the next few months, as it prepares to implement the first federal regulation on companies that are now overseen by states.
Google says payday ads will join its extensive set of policies to keep out undesirable advertising, noting it disabled more than 780 million ads in 2015 alone for reasons ranging from counterfeiting to phishing.
“Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well being,” the company said in the blog.
By: Yuka Hayashi (WSJ, Washington).
Review: Emerging Market Formulations &
Research Unit, Flagship Records.
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