Emerge: Google Defends Ban on Payday Loan Ads

Written by FinTech Futures
16th June 2016

Nope, it’s not censorship, nor restraint of trade. Rather, Google’s recently announced ban on online payday loan ads shows that the search engine giant wants to do good by consumers. That’s what Vijay Padmanabhan, a policy adviser at Google, said this week in New Orleans at the Emerge: Consumer Health Financial Forum.

Google last month said that starting July 13, it would ban ads for U.S. loans that carry APRs of at least 36 percent, a cap also employed by 13 states, the District of Columbia and the military. Google also will not accept ads for loans that require repayment within 60 days. Consumers using Google to find information about payday lenders still will be able to find what they’re looking for via search results. Google already bans ads for guns, pornography and tobacco products.

The Google ad policy change drew complaints from the payday loan industry—not surprising, giving that Google accounts for around 64 percent of all U.S. desktop searches, according to Web measurement firm comScore. And phones running Google’s Android operating system command about 83 percent of the mobile market, according to IDC.

Padmanabhan dismissed those concerns. “Like any business, we need to make judgments about who we allow to advertise on our property,” he told attendees. He said his own research led to the conclusion that short-term, high-cost loans harm consumers more than help them. “We are guided by the mission of protecting users,” he said.

Padmanabhan also addressed the seeming hypocrisy of Google Venture’s, the company’s investment arm, helping to fund online lender LendUp, whose loans sometimes have APRs of greater than 36 percent. He said the ad ban would apply to those products and that, in any case, Google Ventures is separate from the search engine and online ad business, with both operating under the holding organization Alphabet.

Google’s move on payday loans comes amid other looming changes for the industry. The CFPB has proposed a rule to further regulate short-term lending—for instance, by requiring lenders to assess borrowers’ ability to repay loans and ban repeated attempts to debit accounts for repayment that the bureau says can result in excessive fees. Congress may put the brakes on the rulemaking. The House Committee on Appropriations recently approved an appropriations bill with an amendment that prohibits the CFPB from finalizing or implementing a rule restricting payday lending until the agency submits a report, including public comment, on how the rule would affect consumers with limited access to credit.

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