Google has taken a moral stand that will likely send advertising money to its competitors. The firm announced Wednesday it had taken the ultimate step against payday loan companies, and will refuse to take their ads starting July 13.
The firm’s announcement drew quick criticism from a payday lending executive – who manages a Texas company ordered in 2014 to pay $10 million for “illegal, predatory behavior.”
Google will deny ads for loans requiring repayment within 60 days, and in the U.S., will refuse ads for loans with annual interest rates of 36 percent or higher. “When reviewing our policies, research has shown that these loans can result in unaffordable payment and high default rates for users,” Google said in a blog post. “This change is designed to protect our users from deceptive or harmful financial products.”
Facebook already prohibits payday loan ads. Yahoo allows payday loan native and display ads in the U.S., Canada and four Asian countries, and globally for search ads. Twitter and AOL have no prohibition on the ads.
The payday loan industry draws in 12 million Americans a year, with the average borrower taking out eight loans of $375 each, and paying $520 in interest, according to the Pew Charitable Trust. “Pew’s survey found that borrowers are 52 percent women and 55 percent white; 58 percent rent their homes; 85 percent do not have a four-year college degree; 72 percent have a household income of less than $40,000; and 52 percent fall in the 25 to 44 age category,” the trust reported. African-Americans are 105 percent more likely to take out payday loans than any other ethnic group, according to the trust.
Google already restricts payday lenders, only sending AdWords ads to the screens of users who have searched for “payday loans” or similar words. Google’s display ads for payday lending are only shown on sites related to payday loans, according to Google.
And the tech behemoth also prohibits a host of other ad types in display advertising and AdWords: for counterfeit goods; “dangerous products” such as recreational drugs, psychoactive drugs and drug paraphernalia; and weapons, ammo and explosives. Additional bans reflect a moral motivation: because Google values “honesty and fairness,” it refuses ads “designed to enable dishonest behavior,” such as ads for hacking software and academic cheating services.
Google’s payday loan ad ban announcement angered Manjush Varghese, general manager of Texas-based payday lender ACE Cash Express, who jumped in to make the first comment on the blog post: “I have been a long-standing, responsible advertiser on Google,” Varghese wrote. “Our prior attempts to engage with the policy group at (Google) have been consistently rebuffed . . . Unfortunate when selective, biased data guides decisions at such a reputable company . . . your decision will only end up harming consumers in the long run.”
ACE Cash Express was hit for $10 million in penalties and consumer refunds in 2014, by the federal Consumer Financial Protection Bureau. “ACE used false threats, intimidation, and harassing calls to bully payday borrowers into a cycle of debt,” bureau director Richard Cordray said in announcing the penalties against ACE. “This culture of coercion drained millions of dollars from cash-strapped consumers who had few options to fight back. Today we are taking action to put an end to this illegal, predatory behavior.”
Photo: A man walks past a building on the Google campus in Mountain View. (AP Photo/Jeff Chiu)
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