Google bans payday loan ads
In a bid to protect its users from "deceptive" and "harmful" products, Google bans advertising for payday loans.
Joining the ranks of counterfeit goods, recreational drugs and hacking software, payday loans are now banned by Google's AdWord's policies. AdWord advertisements appear when someone searches for a specific term, with advertisers bidding to appear in those results.
In a company blog post, director David Graff announced that Google would no longer allow ads for loans where the repayments were due within 60 days, which covers virtually all payday loans. In the US, Google is also banning ads for loans with an APR of 36% or higher. The changes are set to come into effect on July 13 2016.
"We have an extensive set of policies to keep bad ads out of our systems – in fact in 2015 alone, we disabled more than 780 million ads for reasons ranging from counterfeiting to phishing," Graff wrote. "Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and wellbeing."
The response so far has been mixed. Payday loans have often been seen as controversial, but regulation has generally been left to governments and financial industry bodies. And Google doesn't take such a strong stance with other controversial content. Its policies still classify adult-orientated content, alcohol, gambling-related content and copyrighted content as "restricted", which means ads can't be shown in inappropriate contexts but aren't banned altogether.
Google's reach and market dominance mean the policy is likely to be influential. Its policies can change industries, not just in the US, but globally.
The US and Australia also have drastically different payday lending industries, which means global advertising standards may not be appropriate. In the US, loans are regulated at a state level, while Australian Small Amount Credit Contracts (SACCs) are regulated nationally.
Google's post says the change came about in a bid to protect users from harmful financial products. It cited unnamed research which showed payday loans can result in unaffordable repayments and high default rates. This is true, but the payday lending debate is a lot bigger than this.
Payday loans, with their high rates, high fees and short loan terms, keep finding borrowers. Arguments have been made and academic articles have been written that explain how they are providing a service that banks and credit unions can't – offering credit to high-risk borrowers.
It will be interesting to see how the market, especially in the US, changes in response to Google's announcement. The majority of lenders in America, unless banned in their state, offer loans with terms of less than 60 days. In Australia, higher loan amounts have been offered by several lenders that necessitate a longer repayment term.
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