For more than a decade, broad-based coalitions at both the state and federal levels have united consumer advocates, labor, clergy, civil rights champions and others in calling for an end to predatory lending. Although 16 states and the District of Columbia effectively ban payday lending, the majority of the nation is still subject to triple-digit interest rates applied to debt trap lending.
Even in states that have interest rate caps on payday loans, the small-dollar loan industry has tried a series of legislative maneuvers, or even attempts at voter updates through ballot initiatives, to overturn laws. In other cases, lenders have moved to longer-term versions of the typical two-week payday loan as yet another financial vulture preying upon working class citizens.
Recently a global corporate giant took decisive action against payday lenders and others that charge triple-digit interest rates.
Google, the Internet’s leading search engine, announced that effective July 1 it will ban ads for payday loans and other loan products that require full repayment within 60 days. In the United States, Google will also ban ads for loans with an annual percentage rate of 36 percent or higher.
“This change is designed to protect our users from deceptive or harmful financial products,” noted Google in its corporate blog.
David Graff, Google’s director of global product policy, went a step further adding: “We have an extensive set of policies to keep bad ads out of our systems and we take these policies very seriously. In particular, financial services is an areas we look at very closely because we want to protect users from deceptive or harmful products.”
What Google termed a “policy change” triggered a jubilant refrain from academicians, civil rights and consumer advocates. From their collective views, the decision was a pivotal breakthrough in the fight for financial justice for all.
“Banning predatory payday loan ads shows that Google is willing to put people before profits,” said Wade Henderson, CEO of The Leadership Conference on Civil and Human Rights. “This new policy addresses many of the long-standing concerns shared by the entire civil rights community about predatory payday lending… This ban puts payday loans in their rightful place alongside explosives and tobacco as dangerous products that deserve the highest level of scrutiny from regulators and businesses alike.”
“Unscrupulous payday lenders prey on the most vulnerable, including millions in communities of color in neighborhoods across America,” noted Janet Murguia, head of the National Council of La Raza. “This is a terrific example of how civil rights organizations and tech companies can come together to help protect the rights of all Americans online.”
“The Internet should not be a place that profits from your weaknesses,” said Alvaro Bedoya, executive director of the Center on Privacy & Technology at Georgetown Law in Washington, D.C. “If you’re broke and search the Internet for help, you should not be hit with ads for payday lenders charging 1,000 percent interest.
“For payday lenders, targeting the vulnerable is not an accident – it’s a business strategy,” Bedova added. “Today, the world’s most valuable company is saying: ‘We want no part in this.’ ”
Each year, more than $3.4 billion in excessive fees are drained from the pockets of payday borrowers, according to the Center for Responsible Lending. More than 75 percent of these fees are generated by borrowers trapped in 10 or more loans a year.
Other CRL research findings show that:
• Nearly 1 in 4 payday borrowers rely on retirement or public assistance as a means of income.
• The national average annual percentage rate, or APR, for payday loans is 364 percent, and often rates are much higher.
• Payday borrowers are more likely to become delinquent on other bills, delay medical care, and, in the worst scenarios, file for bankruptcy.
“I think this action is as unprecedented as it is significant,” said Keith Corbett, a CRL executive vice president. “By removing ads that lure financially-strapped consumers into unaffordable, long-term and costly debt traps, Google is displaying what corporate citizenship looks like. CRL’s hope is that others will soon follow suit.”