'Don't Be Evil': Google to Ban Payday Loan Industry From AdWords Next Month
Google has decided to stop showing advertising from the payday loan industry, saying that it is banning ads for payday loans and similar high-interest rate financial products starting July 13.
The search and advertising giant said it was banning advertisements for that industry due to its standing policy to "keep bad ads out" of its system. According to the Wall Street Journal, Google had already banned marketing of guns, explosives, and tobacco from its online advertising system, known as AdWords.
Google Bans Payday Loans
Specifically, starting July 13, Google will disallow ads for any loans that are due within 60 days, along with ads for loans with annual interest rates of 36 percent or higher.
"Our hope is that fewer people will be exposed to misleading or harmful products," said David Graff, Google director of Global Product Policy on one of the company's blogs. Graff then explained the thinking behind banning an entire industry that accounts for about $38.5 billion in the U.S. economy, through loaning smaller dollar amounts to about 12 million customers every year.
"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," wrote Graff.
"The 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, [or] revolving lines of credit," meaning credit cards, added Graff.
Pernicious Debt Cycles
"This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending," commented president and CEO of The Leadership Conference on Civil and Human Rights Wade Henderson on Google's change in AdWords. "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."
As The Washington Post noted, payday loans are often used to cover unexpected expenses, or to temporarily boost a stretched budget before the next paycheck arrives -- especially in lower-income communities But many of the short-term loans include fees and high interest rates that can end up putting customers in a cycle of debt that can drag on for months.
Indeed a 2012 Pew study showed that the average payday borrower spent five months in debt, along with spending $520 in fees and interest payments to continually borrow small amounts that averaged $375. Pew found that those payday loans, on average, charge an APR of 391 percent.
A Civil Rights Issue
The payday loan industry especially affects African Americans, who are more than twice as likely as others to have used a payday loan. A disproportionate percentage of the Black community (23 percent of all borrowers) find themselves in the payday loan system, compared to the total percentage of adult African Americans in the country, which was about 12 percent in Pew's 2012 study.
Meanwhile about 14 percent of payday borrowers are Latinos, which is actually a lower rate among the community compared to the 16 percent that Latinos made up of all U.S. adults in the 2012 study.
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