Payday Lending

Google Is Banning Payday Lending Ads. That Sucks.

The ad giant's new policy is good-hearted but desperately wrong-headed.

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Google

Today Google announced that it will soon stop carrying ads from payday lenders. That sucks. Here's why:

In the past, Google has mostly restricted itself to eliminating ads that were actively fraudulent or illegal (ads for prescription drugs without a prescription, counterfeiting, phishing) or ads that made for a bad user experience (auto-downloads, ads that trick you into clicking). 

But a special announcement that Google will be banning ads for short-term high-interest loans (and other related products) because "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" suggests that the company is stepping into new nannyish territory.

Now's the part where we all chime in together for the obligatory yet deadly serious libertarian chorus: Google is a private company and can do whatever the heck it wants here. If the honchos in Mountain View want to ban ads from anyone who uses Comic Sans, they can (and perhaps already do). If they want ban all ads originating from Washington, D.C., they can (and perhaps should). If they want to ban ads featuring puppies playing with babies, they can (and probably shouldn't). There is no such thing as the right to have your ad carried by Google, and nor should there be.

But Google has erred in making an exception to their general policies by banning ads because they think the services offered are yucky—which is what this policy comes down to.

For the most part, Google isn't in the business of stopping retailers from advertising stuff that's broadly legal but not a very good idea for some individuals to buy—bulk orders of Mountain Dew and silver baby spoons from Tiffany's remain fully legit in Google's eyes. (Google did block 780 million ads last year, and their policies are understandably lengthy and complex.) But credit card ads abound, not to mention ads for student loans. So why suddenly target payday lending?

In general, entities that provide goods and services to poor people are easy for rich people to look down on or to condemn as exploitative. You can see this everywhere, from restrictions on large cheap sodas to bans on restaurants selling convenient, caloric fast food in low-income neighborhoods to cops who choke people to death for selling single cigarettes to customers who can't afford a whole pack. Is it a good idea to smoke a loosie after finishing your Whopper and Big Gulp? Nah, probably not. But it's no worse than pulling a Nat Sherman from a fresh pack after you finish your Ruth's Chris ribeye and chocolate souffle, yet nobody's holding hearings or issuing press releases about that.

Banning payday loans (or banning advertising for them) doesn't make the demand for payday loans go away. It simply channels that demand to less savory corners of the real and digital worlds. Bans also make it harder for people with jobs and bank accounts (both of which you must have to get a payday loan) to get information about what might be the best of a bad set of options to get some quick cash.

Here's a case study from another industry: When classified sites like Craigslist started getting legal heat for selling ads associated with sex work and backed off the practice, demand and supply for the world's oldest profession remained intact. But at least some of the sex workers who had previously been able to advertise for and vet clients from the comfort of their living room sofa were pushed into street solicitation, with its attendant risks of violence from clients and police. 

The same thing is already happening payday lending: As states dropped ceilings on interest rates and limited the physical locations where lenders can do business, customers fled to the internet where rates are typically higher, not lower, and it can be harder for a non-savvy customer to distinguish between a legit operation and a fly-by-night shop. Industry studies have found that when loans aren't available, the remaining choices are even less attractive, including having utilities cut (and then expensively reinstated in the next pay period), account overdrafts which result in stiff fees, or borrowing money from guys who are more like to ruin your kneecaps than your credit.

By creating a special category for payday lenders, the guys and gals at Google are following the cues of lawmakers and regulators, who have been after the industry for a long time. Dozen of states have made payday lending outright illegal or capped rates, and there are already federal restrictions in place about making short-term high-interest loans to servicemembers and public sector pensioners. 

But Google's move most resembles the maneuver by the Justice Department and the Federal Deposit Insurance Corporation (FDIC) in 2014. A December report that year from the House Committee on Oversight and Government Reform found that the feds were using a secretive anti-fraud initiative to smack down payday lenders: Operation Choke Point. It was supposed to be targeted at reducing banking fraud. But internal documents showed regulators taking advantage of a lack of due process to squelch a variety of legitimate transactions by legal but potentially unsavory businesses.

Here's the head of the FDIC in Atlanta being a little too candid in an email unearthed by the investigation: "I literally can not stand payday lending. They are abusive, fundamentally wrong, hurt people, and do not in any way deserve to be associated with banking." 

You can imagine this same email circulating at Google HQ. It's compelling and emotional and the author certainly means well. Ad bans won't solve the problem and they won't make the lives of would-be payday loan customers better. They're a bad idea. But if you're looking for a silver lining, at least no one goes to jail or has their bank accounts seized when Google decides they find an entire industry unsavory. You can't say the same for the government.

NEXT: Testifying in Congress on presidential overreach in foreign affairs

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  1. Ads for state lotteries and aftermarket wheel rentals can pick up the financial ruin-slack.

  2. *passes the hat for Montel Williams*

    Does anyone want to help fund my startup loansharking business?

    1. Only if you are loaning to sharks or loaning sharks to people.

  3. Women and children hardest hit.

      1. It was just a little corporal punishment.

    1. Yes so right. I knew a man who had an independent, 2-employee payday loan shop. His customers were mostly single moms with terrible credit who needed cash to fix their crappy cars so they could keep getting to work every day. They could get loans from him, the creepy guy at the bar, or the mobster. The payday lender was the least evil of the three. The rate of default and bankruptcy was so high that he probably only made a 6 or 8% return overall. Better off in the stock market, which is what he ultimately did. He closed up, put his money in mutual funds and laid off his employees.

  4. Sites like this clearly show the APR. Yeah 200% APR is shitty but it’s an unsecured loan to someone with terrible or no credit. Also I found this site by clicking on a google ad after searching “payday loan”. This seems like they are on the up and up. Nothing too obscure for my dumb dumb brain to handle.

    1. “Google’s ban, which goes into effect July 13,”

    2. Let’s not forget that you’re not actually ever going to pay 200% since you won’t be keeping the loan for a year or more anyway.

      1. Let’s not forget that you’re not actually ever going to pay 200% since you won’t be keeping the loan for a year or more anyway.

        You’ll pay an annual rate that high for the entire length of the loan.

  5. These loans are usurious – they are deeply un-Islamic. While I fully support the freedom of people to defile themselves with such products, I commend google on this wise and sacred decision.

    1. What else do you fully support peoples rights to defile themselves on? Goats, Sheep and little boys perhaps?

  6. “I literally can not stand payday lending.”

    Is there a way to figuratively not stand something, or are even our heads of government grammar retards now?

    1. Oh I just can’t even with you right now.

      1. Oh my god, like, I know, right??

  7. Payday loans suck. They’re the perfect example for something that is deplorable, but that should nonetheless remain legal.

    Ultimately, they are there because there is a large contingent of people who have a very high time preference for consumption — for using their money once it comes into their pocket. This attitude is guaranteed to make you poor; payday loans go beyond even the awfulness of living paycheck to paycheck to in fact having people live enslaved to debt. Our potential debtor lacks the means to enslave himself without the lender, and enslaves not only himself but every family member within his financial proximity — unsavory, to say the least.

    Payday loans aren’t a root cause — there is a real economic demand for them. Virtually all of this demand is coming from people who have skewed priorities, and I’m not clear on why libertarians should care if Google declines to advertise this kind of business and the damage it does to their PR.

    1. Especially when Google long prohibited several dozen ad categories … most MUCH larger, like gun and ammo, which is their right and doesn’t seem to have hurt them in the marketplace. Capitalism works that way, as you say,

  8. Ah, the quiet racism (or classism) of deciding that a group of people is too dumb to think cognitively and need to be saved from themselves.

    OTOH

    1. Ah, the quiet racism (or classism) of deciding that a group of people is too dumb to think cognitively and need to be saved from themselves. Ah, the quiet racism (or classism) of deciding that must be Google’s motive. I mean, they’re YUGE … and a corporation,

  9. I’ve noticed a few “usurious” lending ads on TV lately, and they all seem to be based out of Indian Reservations.

    Do they get special treatment under lending laws too?

    1. You know who else had usurious lending practices?

      1. The Lombards?

      2. Richie Aprile?

  10. The trouble with Payday loans is that they use the government to collect funds from the inevitably delinquent borrowers.

    There should be some actual risk in giving people who can’t afford it loans, yet the government takes that risk away by lending its thugs to anyone who asks

    1. How is that different from the enforcement of any other contract?

    2. Lending its thugs to anyone who pays taxes you mean? That’s what civil court is and people like you have worked hard to ensure that binding arbitration is less and less of an option.

      1. “people like you”?

      2. Lending its thugs to anyone who pays taxes you mean? That’s what civil court is and people like you have worked hard to ensure that binding arbitration is less and less of an option.

        How could it possibly be an option here? Binding arbitration is more than an anti-gummint soundbite. It exists ONLY for those who gain by the process. Like voluntary.
        Why would a lender choose binding arbitration?
        How many contacts have you read. Many, or most, agree to prohibit arbitration. Also voluntary

    3. Enforcement of fucking CONTRACTS is anti-libertarian now?

      Holy shit, Reason.

      1. Reason said that?
        Holy shit, Acosmist.

  11. Their motto is “don’t be evil” not “don’t be stupid”.

  12. Google has an incredibly tight relationship with the Obama administration.

    The Obama administration has been vehemently opposed to pay-day lenders for years, but lacks the ability to regulate them.

    Connect the dots, Reason.

    1. Connect the dots, Reason.

      Connect your brain, anti-reason
      You’ve just attacked free markets and voluntary exchange on a libertarian website.
      I hope to HELL that Obama never defends people with two legs. I’d have to cut off one of mine.

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  14. “Research has shown that these loans can result in unaffordable payment”.

    Does this mean no Obamacare ads?

  15. banning ads because they think the services offered are yucky?which is what this policy comes down to.

    How is that our business? See link below.

    Google isn’t in the business of stopping retailers from advertising stuff that’s broadly legal

    They’re in the business of ACCEPTING ads, under whatever policies and prices they choose. Legal is irrelevant.

    bulk orders of Mountain Dew and silver baby spoons from Tiffany’s remain fully legit in Google’s eyes.

    Its’s called capitalism, and you essentially defended a soda ban. There are three players in this market,

    1) Consumers use search engines, plus many millions of websites who run Google ads
    2) Websites (like this) who run ads for revenue.
    3) Advertisers

    Consumers can switch to other search engines, a minor loss.

    Both publishers and advertisers can specify what types of ads to disallow or what types of websites to target.
    Always bad to assume, but the odds are quite good that MANY websites don’t allow payday lenders.

    PLUS …. Google has ALWAYS prohibited many ad topics (like everyone else)
    Guns and ammo are MUCH larger markets. Banned. Hasn’t hurt them.

    Here’s a summary of prohibited content with LOTS of details to the side.

    Katherine is my favorite Reason editor, but I’m wondering how this got published.
    (I’m a web developer for 23 years)

  16. My suspicion is that a lot of people use the proceeds of these loans for major necessary expenses. I don’t think we should condescend people that decide that they have to resort to this. Payday lenders don’t make a large margin of profit either given the credit risk and the alternative for some might just be illicit loans.

    Although this is all hot air because Google should do whatever it wants.

  17. I am making $89/hour working from home. I never thought that it was legitimate but my best friend is earning $10 thousand a month by working online, that was really surprising for me, she recommended me to try it. You will lose nothing, just try it out on the following website.

  18. This was expected. Facebook Ads also has restrictions regarding ads promoting payday loans. Now it’s Google.
    The next logical step would be Google blocking search queries related to payday loans, but I doubt that Google will do that. Funny thing is that with one hand Google bans payday loan ads, but with the other (Alphabet) it invests into payday loan businesses (LendUp).

    Samantha from Loans Canada Online http://loanscanadaonline.com

  19. I don’t understand why Google feels the need to police an entire industry. Payday Loans fulfill a market need.

    Who is Google to decide whether or not users can access these sites through paid search links?

    Besides, at least in Canada, there are lots of payday loan companies who are really careful to provide good advice to those who find themselves in dire situations.

  20. Google ban is started rolling out the week of July 20, but we still can find ads like https://www.mrpayday.ca/ despite a new policy. So it is not an actual ban and the advertisers still can use Google to promote landing pages.

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