Payday loans, a business widely regarded as predatory lenders, have enjoyed screwing over lower and middle-income Americans for decades. If you’ve made the mistake of using one of these services through a Google search engine, the chances are that you’re accustomed to seeing numerous payday loan advertisements whenever you search for something in Google.
Well, that’s about to change. Google has decided to make it harder for predatory lenders to tempt their victims. In a blog post, Google’s director of global product policy said:
“When ads are good, they connect people to interesting, useful brands, businesses and products. Unfortunately, not all ads are–some are for fake or harmful products, or seek to mislead users about the businesses they represent. We have an extensive set of policies to keep bad ads out of our systems – in fact in 2015 alone, we disabled more than 780 million ads for reasons ranging from counterfeiting to phishing. Ads for financial services are a particular area of vigilance given how core they are to people’s livelihood and well being.
In that vein, today we’re sharing an update that will go into effect on July 13, 2016: we’re banning ads for payday loans and some related products from our ads systems. We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36% or higher. 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.
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 (e.g. Credit Cards).
According to 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.”
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.”
Of course, officials from the payday loan industry were not very pleased with Google’s decision; they called the new policy “unfair” and “discriminatory” because it failed to differentiate between the different kinds of payday lenders.
Social media sites like Facebook have already clamped down on predatory lending posts and advertisements.
For years, advocates such as Senator Elizabeth Warren (D-MA) have tried and failed to bring about legislation that would reign in and perhaps ultimately destroy the predatory lending industry. Warren even proposed that the U.S. Postal Service once again get into the business of making small loans with reasonable interest rates to help those consumers who feel they have no other options than to use payday loan services.
“USPS could partner with banks to make a critical difference for millions of Americans who don’t have basic banking services because there are almost no banks or bank branches in their neighborhoods,” Warren wrote in a Huffington Post op-ed in 2014.”
However, nothing came from that plan, mainly due to the strong influence predatory lenders have in Washington, lobbying millions of dollars each year to fight against any legislation that could undermine their poisonous financial practices and profits.
Today, you can find payday loan offices in just about every neighborhood in America, but they are more concentrated in lower income communities. They offer “easy money” for those who find themselves in desperate financial positions. Once a person takes out the loan, they are often encouraged to extend the loans as much as possible so that the company can profit off of the criminally high-interest rates. Once the final extension is exhausted, they can drain the customer’s bank account before referring the borrower to a collection agency, which then joyfully harasses the indebted. Meanwhile, the bad credit that didn’t allow them to get a traditional loan gets even worse, promoting the cycle to restart again and again.
HBO’s John Oliver produced a very informative episode of “Last Week Tonight,” which exposed the predatory lending industry as a pervasive financial cancer that destroys people’s lives, supported in the past by many of the GOP’s elected leaders.
For years, Republicans have defended the payday loan industry, stating that “financial consumers” should have the freedom to choose and that nobody forces anyone to take out these loans. However, the problem has become so big that even conservatives are starting to rail against the industry.
Texas is widely known for being an extremely politically conservative state. However the lone star state isn’t very payday loan friendly, or at least not anymore. There are currently at least 12 pending forms of legislation aimed at reforming the payday loan industry. You can see them all here.
The truth is that short-term loans are a fact of life for millions of struggling Americans. However, there are common sense solutions that would allow lenders to profit and borrowers to gain access to affordable loans services. This video offers a few ideas.
Featured image attribution Dan Kitwood/Getty.
