Google has announced that it will no longer be showing ads for payday lenders, effectively barring them from advertising on the platform. Google is defining payday loans as loans due within 60 days of being issued. Google is also banning ads in the US for loans with an annual interest rate of 36 percent or higher. Other types of loans, like car and student loans, can still be advertised.
The new policy goes into effect next month starting June 13th. After that date, the ads that appear on the top and right-hand side of a search results page will no longer show marketing from the payday lending industry. However, consumers will still be able to find payday lenders from a Google search.
The decision is the first time Google has announced a global ban on ads for a broad category of financial products. The company made the decision after reaching the conclusion that the lenders use predatory lending practices that are harmful to consumers. Georgetown’s Center on Privacy & Technology worked with Google on setting this new policy. A statement regarding the policy says that “it prevents some people from taking out a potentially harmful loan, and it means Google isn’t profiting off of their misfortune.”
Payday lenders provide consumers with small, short-term loans that have extremely high interest rates. The entire balance of the loan is typically due on a person’s next payday, giving the person very little time to come up with the additional money to pay off the loan. Because of this, many borrowers end up rolling over the loans, incurring more fees, or taking out a new loan to pay off the previous one.
Payday lenders have been widely criticized for quickly pushing a person further into debt. In a blog post, David Graff, Google’s product policy director, wrote, “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.” Google already bans a wide range of products from being advertised through its search engine, including illegal drugs, counterfeit goods, and explosives.
Critics of payday lenders say they hope the move by Google might undercut the industry, which finds many of its customers online. Facebook has already banned payday loans from being advertised. The decisions by Facebook and Google might have a bigger impact than any single regulation in restricting access to payday lenders. Yahoo and Microsoft’s Bing both still allow payday lenders to post ads.