Google is banning ads for payday loans and related products, the company said today in a statement. Effective July 13, , Google will not display ads for loans that require payment within 60 days of the date of issue. In the U.S., ads for loans with an APR of 36% or higher will also not be shown.
Google said the measure is “designed to protect our users from deceptive or harmful products.” The policy will not impact mortgage, car loan, student loan, commercial loan or credit card issuers.
“I think this action is as unprecedented as it is significant,” Keith Corbett, Center for Responsible Lending Executive Vice President, said in a statement. “By example, Google is demonstrating how profitable enterprises can also be ethical and supportive of financial fairness.
According to the Community Financial Services Association of America (CFSA), a trade organization for companies that offer small dollar, short-term loans or payday advances, “These policies are discriminatory and a form of censorship. The internet is meant to express the free flow of ideas and enhance commerce. Google is making a blanket assessment about the payday lending industry rather than discerning the good actors from the bad actors.
“This is unfair towards those that are legal, licensed lenders and uphold best business practices, including members of CFSA. Companies that restrict advertising of payday loans also do their users a disservice because consumers may need access to short-term credit that they cannot get from traditional banks. According to the FDIC, 24 million households are underbanked. Thirty-five states and the CFPB have recognized the need for short-term credit products like payday loans.”
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Study shows online payday lenders create hazards for borrowers
The news comes on the heels of a recent study by the Consumer Financial Protection Bureau (CFPB) showing online payday lenders have created hazards for borrowers that lead to overdraft fees and loss of access to checking accounts. When borrowers don’t have enough funds in their accounts to pay the lenders, repeated withdrawal attempts can result in several non-sufficient funds charges averaging $185.
“In one extreme case, we saw a lender that made 11 payment requests on an account in a single day,” noted CFPB director Richard Cordray.
Last year, Facebook unveiled a similar policy, banning ads for “paycheck advances or any other short-term loan designed to cover someone’s expenses until their next payday.”
Payday loans can be costly and leave lasting damage on your credit report. Their short terms make the cost of borrowing high and, if not followed you can be charged expensive additional fees. In most cases, the average percentage rate (APR) on a payday loan averages about 400%, with some even as high as 5,000%. (You can track how your spending affects your credit by checking your two free credit scores, updated monthly, on Credit.com.)
Before you consider applying for one, know your alternative options.
More from Credit.com
- Is a Personal Loan an Alternative to a Payday Loan?
- Credit Cards You Can Get If Your Credit’s Not So Hot
- What Is Credit Monitoring?
This article originally appeared on Credit.com.
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