U.S. regulators for years have been warning consumers about payday loans and the “debt traps” they become for borrowers through fees or interest rates that can amount to more than the original loan amount.
Google said Wednesday it would ban ads from payday lenders, starting July 13, 2016. The loans affected are those carrying repayment periods within 60 days of the date of issue, and those carrying annual interest rates of 36 percent or higher, Google said.
Google: “When reviewing our policies, 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.”
The Internet giant said the change is meant to “protect our users from deceptive or harmful financial products and will not affect companies offering loans such as Mortgages, Car Loans, Student Loans, Commercial loans, Revolving Lines of Credit (e.g. Credit Cards).”
The $38.5 billion payday-lending industry also has to deal with a pending rule from the U.S. Consumer Financial Protection Bureau that could cripple the industry with tough underwriting standards.
Payday lenders cater to some 12 million U.S. borrowers annually, offering quick-cash loans with fees that can equate to interest rates above 300 percent. Google’s move was reported earlier by the Washington Post.
In a blog post, Google quotes Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights: “This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. These companies have long used slick advertising and aggressive marketing to trap consumers into outrageously high interest loans – often those least able to afford it.”