Google’s judgment day hits payday lenders
Negative reaction on firm’s blog after online giant bans ads offering high-interest loans
Judging from the comments on Google’s public policy blog, not everyone is in love with the company’s decision to ban ads for payday loans “and some related products.”
“Stop deciding what’s best for us, Google,” carped one critic.
And: “Why don’t you go ahead and ban ads for the following harmful products as well,” wrote another, before itemizing a list that included red meat, video games and Coca-Cola.
Needless to say, the payday lending industry is also unhappy, complaining that Google is being discriminatory in taking the decision, although the company’s list of restrictions and prohibitions is already long and diverse.
Prohibited advertising content includes equipment that facilitates drug use, fireworks, tobacco products, academic cheating services and ads using profane language.
Advertisements for alcohol are allowed, but restrictions cover any ads that “show alcohol being consumed in conjunction with the operation of a vehicle of any kind, the operation of machinery or the performance of any task requiring alertness or dexterity” or that “imply that drinking alcohol can improve social, sexual, professional, intellectual or athletic standing.”
The restrictions are more extensive than can reasonably be stated here.
The simple truth is that Google is under no obligation to be a shill for usurious rates of interest and the trick and trap of short-term, small-money loans.
In taking the decision to shut off payday lenders, the company has underscored those much-talked-about foundational principles.
To develop services that improve the lives of as many people as possible — that’s one.
And, of course, the pledge written by the founders into the Google IPO: “Don’t be evil. We believe strongly that in the long term, we will be better served — as shareholders and in all other ways — by a company that does good things for the world, even if we forgo some short-term gains.”
Little good makes its way to the unbanked and the underbanked — those collateral-light borrowers with no options but to seek assistance from “alternative” lenders. It is this same group most in need of enhanced consumer protections.
The United States government recognized as much when it created the Consumer Financial Protection Bureau (CFPB) in the wake of the 2008 financial crisis.
The organization’s website offers a good primer on the type of operator filling the financial-services void.
On Wednesday, the CFPB filed a complaint in a Mississippi court against All American Check Cashing Inc. and MidState Financing Inc., alleging deceptive practices aimed at hiding fees and pressuring borrowers into multiple loans.
All American, writes the CFPB, “instructs its employees to hide the check-cashing fees by counting out the money over the fee disclosure on the receipt. . . . All American’s policies explicitly forbid employees from disclosing the check-cashing fee to consumers, even when directly asked. A training presentation for new employees instructs them to ‘NEVER TELL THE CUSTOMER THE FEE.’ Employees are directed to say they do not know what the fee will be, and to deflect consumers’ questions with small talk and irrelevant information so that ‘they are overwhelmed with info.’ ”
It is the CFPB that has shaped the first U.S. federal rules designed to govern the payday loan industry, which is regulated state by state. Affordable repayment options, a cap on “rollover” loans and placing the onus on lenders to ensure that consumers can repay their loans are among the key points.
But those proposed rules are now under attack. The harmless sounding Consumer Protection and Choice Act, which has been referred to the House Committee on Financial Services, will, if successful, block the CFPB regulations.
Perhaps Google has astutely assessed that now is the optimum time for progressive action. In announcing the ad ban, the tech giant quoted Wade Henderson, 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,” Henderson said. “These companies have long used slick advertising and aggressive marketing to trap consumers into outrageously highinterest loans — often those least able to afford it.” Henderson — and Google — are on the side of the wide majority. Polling by the Pew Charitable Trusts found that 75 per cent of Americans favour increased regulation of the quick-fix financial industry
“Approximately 12 million Americans use payday loans annually, spending an average of $520 in fees to repeatedly borrow $375,” Pew wrote in its survey.
Does anything more need be said? jenwells@thestar.ca