Google has banned PPC advertisements that contain information about payday loans. In an official statement, the search engine giant indicated that from July 13th, 2016, they will not accept PPC advertisements that feature payday loans. The company further explained that they will not allow people to post advertisements of loans that have a repayment period of less than 60 days of issuance.
For U.S. citizens, the company indicates that they will totally ban advertisements that show loans where the APR is 36% or more. To justify its decision, the company indicates that they have performed research and observed that these types of loans normally result in payment that is almost impossible to afford. These loans also have high default rates. People are usually unable to pay these loans in the time period and interest rate that is expected by the lenders. This is predatory lending and Google will not endorse it.
Was Google justified in making that decision?
It is an accepted fact that payday loans can be harmful to the financial situation of the borrower. In most cases, these loans ask for 700% APR or even more. For example, it will cost the borrower £90 to borrow £200 for a period 3 months. By any standards, this is a high cost for a loan. Actually, this is one of the mild ones in the market because there are other PPC loans that are far more expensive. When you consider the fees for missed or late payments, the loan turns into an extortion scheme. So from a moral perspective, Google is justified in banning PPC loans whose APR is too high. The move will not stop loan companies from advertising but it will limit predatory lending.
What is the effect of this decision on the payday loan companies?
This decision by Google results in a number of effects for the payday loan companies. These effects include:
- They are no longer able to entice consumers with extortionate payday loans
- PPC advertising becomes one of the Google SEO services that predatory lenders can no longer use
The decision by Google will effectively hurt the PPC lenders who charge too much interest and expect repayment in a very short time. However, critics will wonder why the company has not taken such a firm stand on PPC advertisements for other online services such as gambling.
It is a well-known fact that gambling can be an addictive and destructive activity. It is also interesting to note that 77% of the PPC keywords chosen in the United Kingdom are related to gambling. By making a moral decision against predatory PPC lending, Google will now be expected to take a stand against other vices that exist on the Internet.
From now on, lenders of payday loans that charge more than 36% APR will not be allowed to post PPC advertisements. Google has made this decision to protect the consumers. Many are waiting to see if the company will take a similar stand against other online vices.