Google Bans Short-Term Payday Loan Ads

Google has announced it is set to ban advertisements for short-term payday loans following concerns about the “predatory nature” of payday lending.

The search engine giant will no longer allow ads for loans where repayment is due within 60 days of the date of issue.

These loans – which typically charge very high levels of interest – have come under fire from consumer groups for leading people further into debt.

Consumer Action Law Centre (Consumer Action) has welcomed the move by Google but said they have some questions over how the policy will be applied.

“We are heartened by the fact that a business like Google, that is providing a platform for many businesses to do their business in the virtual world, is actually thinking beyond the bottom line. That is a positive thing,” director of Policy & Campaigns Denise Boyd told Pro Bono Australia News.

“They have also announced that in the US there is going to be an additional ban on ads for loans that would carry an annualised percentage rate of 36 per cent or higher. Our assessment of that statement is that this suggests the ban is restricted to the US only, what we have done is we have written to the CEO of Google Australia Jason Pellegrino and we have asked him to clarify what the situation will be in Australia.

“What we want them to do is to extend the initiative that they have agreed on for the US, and extend that in Australia. Given that advocates in the US have recommended loans no higher than a 36 per cent APR because that is appropriate for their jurisdiction, here in the Australian jurisdiction consumer advocates are advocating that there should be a no higher than 48 per cent  APR able to be charged. That would bring payday loans into line with other financial products in this country.”

The ban, which will come into force on 13 June, was announced on Wednesday by Google’s Global Product Policy director David Graff via the Public Policy Blog.

It marks the first time Google has announced a global ban on ads for a broad category of financial products.

“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,” Graff said.

“This change is designed 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 (eg Credit Cards).

“We’ll continue to review the effectiveness of this policy, but our hope is that fewer people will be exposed to misleading or harmful products.”

According to Boyd, research they commissioned last year showed the number of people accessing payday loans online has rocketed in the last decade, with a trend moving away from shopfront lenders to online platforms.

“In 2005 nobody was finding out about payday loans via the internet or social media but by 2015, that figure had gone up to 43.6 per cent. Over the same period, people weren’t accessing payday loans online in 2005, they just weren’t doing it at all, but by 2015 this had gone up to 68.8 per cent, so nearly 69 per cent, that’s a massive jump,” she said.

“The conclusion that we reached there is that online advertising is a highly effective way for payday lenders to promote their product, so we think a decision by Google in Australia to similarly ban adverts online on their platform would actually make a significant contribution to the stated aspirations by Google to reduce the number of people who are exposed to misleading or harmful products.

“We help thousands of people who are struggling with credit and debt every year and many of them have had payday loans that pop up in their financial profile and we find they are a source of ongoing financial stress.”

Boyd encouraged anyone struggling with debt to seek help rather than resorting to a payday loan.

“Quite often people are lured into taking out a payday loan because it is presented to them, it is marketed to them, as a quick fix. What we find is that people might be struggling to make ends meet and they think this will be a quick way to solve those problems, what they don’t realise is that with the really quite high fees and charges, they end up with not enough money at the end of the next pay cycle or benefit cycle, and then they basically have to take out another loan to cover what is left from the loan they took our previously. That gets you into a vicious cycle of debt, so every time it is a little bit more,” she said.  

“What we say to people is that if you are struggling to make ends meet the last thing you need is a payday loan. What you need to do is talk to a financial counsellor. We are one of the providers in Australia of a free telephone counselling service in Victoria, we are part of a national advice line service, that is free and confidential and puts people in touch with trained counsellors who can assess the situation and give you advice, and the one thing they will not advise is to take out a payday loan.”