Internet giant Google has today announced that they will ban all payday loan advertisements from their site (which typically appear on the top and right-hand side of the search results page). The ban comes after pressure from critics of the lending practice, who argue that it exploits the poor and vulnerable by offering them immediate cash with high interest rates.
This is actually the first time that Google has announced a global ban on ads for a broad category of financial products – in the past, they have really only placed bans on ads for illicit activities (such as the sale of guns and drugs) and have limited those that are sexually explicit or graphic in nature. It is hoped that this ban will protect those in vulnerable financial situations.
It is important to note, however, that users will still be able to find payday lenders by performing a Google search.
It is said that millions of people use these short-term loans in order to get cash quickly, planning to repay the balance upon receiving their next paycheck. What seems to be occurring, however, is that these people get caught up in a vicious cycle where fees quickly mount up and the annual interest rates can be in the triple digits – paying the loan back becomes near impossible.
A US Consumer Financial Protection Bureau analysis that was carried out recently found that half of people who took out online payday loans were later hit with an average of US$185 (AU$252) in bank fees or penalties. This occurred when the lenders submitted automatic payment requests that borrowers simply couldn’t afford to repay.
In order to enforce this new policy, businesses seeking to market their financial products through Google will be required to disclose the length of the loan and the annual interest rate before they’ll be allowed to place an ad. These same standards will also apply to websites that serve as middlemen, responsible for connecting borrowers to these payday lenders.
Although industry officials have labeled the ban as “discriminatory”, Google doesn’t appear to be backing down on their decision and the new policy will come into effect on July 13.