In May, when Google announced it would ban all payday loan advertisements through its AdWords service, consumer advocates were thrilled. “Banning predatory payday loan ads shows that Google is willing to put people before profits,” gushed Wade Henderson of the Leadership Conference on Civil and Human Rights.
But months after the policy was implemented, brokers that connect borrowers to payday lenders still buy Google ads. They appear to have easily sidestepped the company’s rules, leaving consumers still vulnerable to high-cost debt traps that can ruin their financial lives.
Under Google’s rules, which went into effect in July, advertisers for what they call “personal loans” can be banned if they require repayment in full in 60 days or less, or carry an Annual Percentage Rate (APR) above 36 percent. This eliminates all payday loans, which are typically due within two weeks, and have APRs well over 300 percent.
The terms for the loans must be stated in a disclaimer at the site. The policy applies to direct lenders as well as those who connect borrowers with third parties. “We want to protect our users from deceptive or harmful financial products,” Google’s rules say.
But today, a simple Google query for “payday loans” yields a number of paid links at the top of the search, from companies like GOInstallmentLoans.com, WeLend2U and QuickLoanTree.
These are not payday lenders but what are known as “lead generators.” They take consumers’ personal information, run a credit history, and then sell the file to payday lenders, based on what kind of loan they can afford. Lead generators can get up to $200 for a good lead.
“Hiding behind lead generators allows payday companies to skirt state law,” said Jordan Birnholtz, co-founder of PawnGuru.com, a website that connects consumers and pawn shops. Birnholtz first discovered the lead generator ads because he tracks keywords to see how users enter his site.
Lead generators are covered under Google’s policy. But the various companies’ disclaimers are almost comically vague. “Rates start as low as 6.59%-35.8%,” reads the “Fees and Interest” page at GoInstallmentLoans.com. But “For those that do not meet the minimum requirements for a personal loan, alternative loan solutions may be offered to you,” where the above rates don’t apply. That negates the entire purpose of posting the rates.
QuickLoanTree advises it “cannot guarantee any APR.” It nevertheless says, “The maximum Annual Percentage Rate (APR) is 35.99%,” but quickly adds that “the lender can provide a different APR than our range.” Loans of Success, a separate lead generator, features the same language.
WeLend2U counsels that consumers “can be offered loans with APRs below 36% and have payment terms ranging from 61 days to 60 months, or more.” But it does not guarantee those rates, and later in its terms and conditions it adds, “The lender determines all fees and rates based on the information provided in the registration form,” rendering any rates they post irrelevant.
CashAnytime, another lead generator, similarly says that consumers can get a 36% APR loan due in more than 60 days, but “not all lenders can provide the maximum amount or terms advertised.”
Only BadCreditLoans comes close to meeting Google’s standards, saying borrowers “can” get loans with terms within the Google policy guidelines. They are the only site to prominently display a representative example of the total cost of the loan, as required.
“While things have improved it looks like some [lead generators] are, predictably, trying to get around the rules,” said Gynnie Robnett, Campaign Director for Americans for Financial Reform, a coalition of consumer groups.
This is extremely common for the payday lending industry, whose business model is in some part predicated on skirting regulatory barriers to get high-cost loans into customers’ hands. Payday lenders have asserted exemptions from state laws because they operate on sovereign tribal land; they’ve sold online loans inside payday storefronts to get around state interest rate caps. It’s only natural that they would use similar tactics to skate past the internal rules of a private-sector company.
In a statement, a spokesperson for Google said: “We continue to implement our policy and will take action on ads and advertisers that are not in compliance. These actions include removing ads and permanently banning advertisers from using AdWords.”
The company also claims that over 3 million proposed ad placements have been disapproved since they’ve implemented the policy change, and thousands of advertiser accounts have been either suspended or sanctioned. According to the Google blog, in 2015 they disapproved 780 million proposed ad placements ads for a range of abuses, including phishing scams and counterfeiting. “We’re always updating our technology and our policies based on your feedback—and working to stay one step ahead of the fraudsters,” Google writes.
But despite these attempts, the lead generator ads that are advertising on Google are almost defiant in their obvious bid to peddle high-cost payday loans to consumers. Their disclaimers are self-negating and do not commit them to serving any type of loan to a borrower.
“If Google wants to maintain this policy, they should maintain it,” said Jordan Birnholtz of PawnGuru. “It’s not a difficult task to look a couple pages into the website.”
According to PawnGuru data, millennials who use alternative financial products are three times more likely than other age groups to start their search online; Birnholtz says the ads target younger people with low financial literacy. And with Google the dominant search engine for Web users, compliance with their policies dictates to a large extent what ads Americans see.
Under Google’s policy, individuals or consumer associations can report ads that violate their standards. But as of Oct. 5, lead generator ads with dubious disclaimers were still running.
The advocacy groups that supported Google’s policy change continue to stand by them. “We expect some in the payday industry to try and game the system,” said Scott Simpson of the Leadership Conference on Civil and Human Rights. “Google is doing the right thing; predatory lenders are just continuing to be predatory.”