Google announced on May 11 that effective on July 13, 2016 it will ban all payday loan advertisements from its site. Google was responding to concerns raised by consumer advocates who argued that the lending practice exploits the poor and vulnerable by offering them immediate cash that must be repaid at exorbitant interest rates. Google joins Facebook in prohibiting such advertisements. The decision marks the first time that Google has announced a global ban on advertisements for a broad category of financial products.
Consumers will still be able to find payday lenders from a Google search, but the ads that appear on the top and right hand side of a search results page will no longer show marketing from the payday lending industry. Many low-income Americans use payday loans to get cash quickly while planning to repay the balance when they get their next paycheck. But once a borrower has committed to a payday loan, he may end up facing unexpected financial risks. According to a recent analysis by the Consumer Financial Protection Bureau, half of borrowers who took out online payday loans were later charged an average of $185 in bank fees or penalties when the lender submitted automatic payment requests that exceeded the amount in the borrower’s bank account.
The CFPB is working on a proposed rule relating to payday lending that it expects to unveil later this spring. The agency is considering rules that would limit the number of times a consumer could roll over a payday loan, capping them at two or three loans total. The proposed rules might also impose a requirement that the lenders determine whether the consumer has the ability to repay the loan.
To enforce the policy, Google will require lenders who wish to advertise on Google’s network to disclose the term and interest rate of the loan they wish to promote before they are permitted to place ads. In addition to the payday loan ad ban, Google will not display ads from lenders who charge annual percentag rates of 36% or more in the United States. The same standards will apply to sites that serve as middlemen to connect distressed borrowers to those lenders.