Joining the ranks of guns, drugs, and illegal activities, payday loan advertisements are no longer allowed on Google.
What happened
"When reviewing our policies, 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's Global Product Policy Director David Graff blogged about the decision. "This change is designed to protect our users from deceptive or harmful financial products and will not affect companies offering loans such as Mortgages, Car Loans, Student Loans, Commercial loans, Revolving Lines of Credit (e.g. Credit Cards)."
The new policy takes effect July 13 and will apply to paid ads for loans and some related products where repayment is due within 60 days of the date of issue. In the United States, the prohibition will also include advertisements for loans with an annual percentage rate of 36 percent or higher. Links for payday lenders will still appear in Google's organic search results.
Reaction to the move was mixed. Consumer advocacy groups hailed the policy change, with Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, issuing a statement that Google's new stance "addresses many of the long-standing 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."
On the other end of the spectrum, the Online Lenders Alliance released a statement calling the ban an "unprecedented abuse of power" that will only exacerbate the inability of consumers to have access to credit. "It's disappointing that a site created to help give users full access to information is making arbitrary choices on the advertisements users are allowed to see from legal businesses," the group said. The Community Financial Services Association of America agreed, releasing a statement critical of the "blanket assessment about the payday lending industry rather than discerning the good actors from the bad actors. This is unfair towards those that are legal, licensed lenders."
Other search engines—including Yahoo and Bing—still permit payday loan ads; Facebook enacted a similar prohibition last August.
Google's position brings the company in line with state and federal regulators cracking down on the payday lending industry, from the Federal Trade Commission to New York's Department of Financial Services.
The Consumer Financial Protection Bureau (CFPB) has now released a report finding that online payday loans "add a steep, hidden cost" to consumers by racking up bank fees. The Bureau also expects to publish a rule on payday lending later this spring.
To read Google's blog post announcing the ban, click here.
Why it matters
In the blog post announcing the change, Google said it plans to continue to review the effectiveness of the new policy, "but our hope is that fewer people will be exposed to misleading or harmful products." Advocacy groups have reportedly now turned their attention to other search engines with the hopes they will follow in Facebook's and Google's footsteps and adopt a similar ban.
