Google Bans Ads for Payday Loans

Published

July 5, 2018

Jill Krasny is a former editor for Credit.com. Her work has appeared in The New York Times, Esquire, The Financial Times and Travel + Leisure.

Effective July 13, Google is banning ads for payday loans and related products, the company said Wednesday in a statement. With this, Google will not display ads for loans that require payment within 60 days of the date of issue. In the U.S., ads for loans with an APR of 36% or higher will also not be shown.

Google disclosed this measure is “designed to protect our users from deceptive or harmful products.” The policy will not impact mortgage, car loan, student loan, commercial loan or credit card issuers.

“I think this action is as unprecedented as it is significant,” Keith Corbett, Center for Responsible Lending Executive Vice President, said in a statement. “By example, Google is demonstrating how profitable enterprises can also be ethical and supportive of financial fairness.”

According to the Community Financial Services Association of America (CFSA), a trade organization for companies that offer small dollar, short-term loans or payday advances, “These policies are discriminatory and a form of censorship. The internet is meant to express the free flow of ideas and enhance commerce. Google is making a 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 and uphold best business practices, including members of CFSA. Companies that restrict advertising of payday loans also do their users a disservice because consumers may need access to short-term credit that they cannot get from traditional banks. According to the FDIC, 24 million households are underbanked. Thirty-five states and the CFPB have recognized the need for short-term credit products like payday loans.”

The news comes on the heels of a recent study by the Consumer Financial Protection Bureau (CFPB) indicating online payday lenders have created hazards for borrowers that lead to overdraft fees and loss of access to checking accounts. When borrowers don’t have enough funds in their accounts to pay the lenders, repeated withdrawal attempts can result in several non-sufficient funds charges averaging $185.

“In one extreme case, we saw a lender that made 11 payment requests on an account in a single day,” noted CFPB director Richard Cordray.

Last year, Facebook unveiled a similar policy to this, banning ads for “paycheck advances or any other short-term loan designed to cover someone’s expenses until their next payday.”

Payday loans can be costly and leave lasting damage on your credit report. Their short terms make the cost of borrowing high, and if not followed you can be charged expensive additional fees. In most cases, the average percentage rate (APR) on a payday loan averages about 400%, with some even as high as 5,000%.

Before you consider applying for one, know your alternative options. (You can view your free credit report once a year from AnnualCreditReport.com and see two of your credit scores for free, updated every 14 days, on Credit.com.)