Google has released an update to its personal loan advertising policy that will impact many advertisers in across financial verticals. According to Google, ads and websites that promote dangerous payday loan offers will be restricted from advertising with AdWords.
…we’re banning ads for payday loans and some related products from our ads systems. We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36% or higher.
Advertiser Restriction #1 – Short Payback Periods
Google will also begin restricting websites that offer payback periods of less than 60 days. Short repayment periods, combined with high interest rates, can cause borrowers to sink into unmanageable debt. The update to Google’s policies will benefit websites with better repayment options while eliminating offers from websites that can harm the end user.
This change is designed to protect our users from deceptive or harmful financial products and will not affect companies offering loans such as Mortgages, Car Loans, Student Loans, Commercial loans, Revolving Lines of Credit (e.g. Credit Cards).
By restricting the types of personal loans websites can promote, Google follows Facebook and other online advertising platforms. Facebook currently prohibits any paid advertising that promotes payday lending, regardless of the repayment periods.
Advertiser Restriction #2 – High APRs
Google will begin restricting advertisers that promote personal loans with APRs over 36%. This means a website cannot offer any personals loans over the 36% cap through site content or SEM ads.
Payday and short-term personal loans are notorious for offering high annual percentage rates (APRs). Interest rates can reach 400% or more, depending on the amount borrowed. Consumers who borrow using these types loans can face overwhelming debt as the high interest rates saddle them with even greater financial burdens.
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.
This move is designed to protect consumers from lending that could harm them financially. In doing so, Google based its 36% APR cap on both federal and state legislation created to protect borrowers.
Google’s goal is clear – weeding out and preventing the types of loans typically associated with predatory lending. The change will not take effect immediately, however. Personal loan issuers must make their site content and offers compliant with the new regulations within the next 60 days.
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