Why You Won’t See This Kind of Ad on Google or Facebook
There are plenty of things that you shouldn’t search on Google. But if you don’t want to be targeted by lenders with questionable practices, terms like “can’t make rent” are among the worst. Type that kind of query into Google looking for some internet wisdom on paying your bills, and you’ll immediately see payday loan ads from companies offering short-term loans. (These loans are, incidentally, are one of the worst ways to get some cash in a pinch.) But payday loan ads won’t show up anymore thanks to Google’s latest update to its AdWords policy.
Starting in July, the search engine giant won’t allow ads for loans where repayment is due within 60 days, or for loans with an APR of 36% or higher in the U.S. As per an announcement on Google’s Public Policy blog, Google uses an extensive set of policies to “keep bad ads out of our systems” and in 2015 alone, disabled more than 780 million ads “for reasons ranging from counterfeiting to phishing.”
David Graff, Google’s director of Global Product Policy, writes that the company is particularly vigilant about ads for financial services because of their impact on “people’s livelihood and wellbeing.” He explains of payday loans that “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. This change is designed to protect our users from deceptive or harmful financial products.”
Gillian B. White reports for The Atlantic that ad targeting for payday loans is harmful because an act as simple as searching for a term like “need money to pay bills” can begin a “dangerous cycle.” Information about an individual’s location, bank accounts, income, and financial health can be collected by lead generators and then dispersed through an opaque process “that can result in fraud, targeted high-priced loans, and harassment from multiple high-cost lenders.”
A report from tech-focused consulting firm Upturn, titled “Led Astray,” concluded that weak privacy policies and abuse of basic consumer protections run rampant in online payday lending. Targeted ads are often annoying and sometimes creepy. But it makes sense that Google would consider payday loan ads a more dubious breed, especially since there’s a growing consensus around the sentiment that payday loans are harmful to vulnerable users.
These short-term loans carry interest rates that can exceed 100% if users can’t pay on time, and rolling a loan over comes with additional fees. White notes that users of payday loans are primarily low-income, minority households without college degrees (or extensive financial education). These users often can’t turn to their friends or family if they need a few hundred dollars to pay their bills for the month.
The sometimes-illegal practices of lead generators enable online payday lenders to target already-vulnerable consumers, and then to persuade them to take out loans that will be more harmful than helpful in the long run. The Atlantic notes that Google has gone after advertisers it deems dangerous in the past, but keeping track of such companies and the ever-increasing number of ways they collect data and post ads is a continuous and exhaustive process that requires vigilance not only the part of companies like Google, but also from lawmakers and regulators.
Google’s choice to exclude payday loan ads altogether will send an important signal, and will also have a real impact on on payday lenders. Yuka Hayashi reports for the Wall Street Journal that Google’s ban will cover “virtually all” of the payday loan market given the strict standards that Google is using. The 36% rate cap that Google cited has traditionally been considered a benchmark by regulators and consumer groups that advocate for limiting interest rates on consumer loans. Online loans account for about half of the payday loan market, and analyst say that their share is growing — in spite of the fact that 15 states have effectively banned payday loans by imposing rate limits of 36% or lower.
One of Upturn’s suggestions on combating predatory lending practices online was to ban payday loan ads outright, as Google has now done. Google isn’t the only major tech company to stop allowing payday loan ads, and under the “Prohibited Content” section of Facebook’s advertising policies are “payday loans, paycheck advances or any other short-term loan intended to cover someone’s expenses until their next payday.” While Google and Facebook can’t stop predatory lending on their own, the choice to ban payday loan ads will make it harder for predatory lenders to find vulnerable consumers. Will you still be able to find a payday lender on Google? Absolutely. But hopefully, searching for advice about a major or minor financial crisis will no longer signal a herd of predatory lenders to follow you around online.