Home > Uncategorized > Google to stop showing Payday ads

Google to stop showing Payday ads

May 13, 2016

Great news this week for people who have been preyed upon by sketchy online lenders: Google will be cutting off their access to customers through its “AdWords” advertisements (but not its native search).

Specifically, Google’s new AdWords Policy now requires lending advertisers to show their APR is at most 36% and that they do not require loans to be paid back within 60 days.

Some comments:

  • This goes into effect on my birthday, July 13th. What a thoughtful present!
  • It doesn’t apply to other kinds of loans, even if they’re terrible.
  • I’ve read that it is supposed to apply to “lead aggregators” for payday loans but I don’t see in the new policy how that might work. In other words, if the advertiser isn’t offering a loan at all, but is offering to connect people with “great loans,” how does Google check to see what they underlying offers really look like?
  • Payday lenders are tricky, and they get around rules all the time to continue their business. For example, take a look at this Washington Post article to see a few ways they might try. How is Google going to keep up with them?
  • On the other hand, one of the main ways payday lenders get around state bans on payday lenders is by coming on to people online, and Google is closing off this avenue explicitly, which will really help for people living in New York, for example.
  • What I’m leading up to is that Google is leaping over regulators like the CFPB, which kind of makes Google into a quasi-regulator itself. I’m curious as to how it will play out. How many people will be employed by Google to track this stuff down?
  • Also, how much money are they walking away from? At least something like $35 million, according to this article. It’s a lot of money but less than 1% of their total revenue.

The payday lending industry, which has a well-paid lobbying arm doing sneaky things, is up in arms, as we might expect. Their argument is along the lines of calling it “discriminatory and a form of censorship,” as if there’s some freedom of speech issue here. There isn’t, since Google is a private platform and can control what it puts on its site.

But there is something interesting going on, if we were to pursue that argument a bit further. Imagine Google ads as a kind of corporate town square, where companies get to broadcast their wares to potential customers. Then, given the nature of targeted online advertising, we should really imagine it as a series of back alleys in which the most vulnerable and desperate individuals, chosen just as much for their zip codes as for their search query, are taken aside and promised their problems will all go away if they just sign on the dotted line.

One last comment. I might be making too much of this, but it feels like a turning point. Instead of just getting rid of truly obvious bad actors (illegal drugs, counterfeit goods, explosives), Google has actually gone further and made a judgement call, and a good one. I’m thinking that means they are starting to acknowledge the responsibility they have to the worst-off of the people who inhabit the environment they create. And that’s a good thing. I hope they get rid of for-profit college ads next.

Categories: Uncategorized
  1. May 13, 2016 at 8:33 am

    I am curious if companies like google are under some sort of competitive pressure to be better regulators. It would also be interesting to check if the regulation has an effect by using a differences in differences design with the states where payday lending is legal as a controll group. At worst you would underestimate the effect that way.

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  2. Gordon.
    May 13, 2016 at 10:24 am

    Firstly, the amount of money involved is tiny: GOOG’s 2015 revenues were $75 billion, so this is less than 5 bps. Secondly, ” http://bankstocks.com/who-appointed-google-chief-nanny/ ” was the email above yours in my inbox – so that would be one of the counterpoints to your position.

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  3. JR
    May 13, 2016 at 11:14 am

    It sounds good to me; in other posts, though, you raised questions about corporate accountability which would seem to apply here as well. What if Google decided to eliminate ads for alcohol and tobacco, R-rated movies, the Sanders campaign and infant formula? Or too put it another way, do we want what is pretty close to a private monopoly to be making such decisions? (You could certainly argue that this was, de facto, the situation existing through most of our prior history.)

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    • May 15, 2016 at 4:07 am

      Google lacks the democratic controll, but if you disagree with how Goggle regulates its market you could (at least in theory) start your own. So I don’t think that one is necessarily better than the other.

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      • Josh
        May 19, 2016 at 8:54 am

        “in theory” being the operative words here”. In practice, it seems that for many of these businesses — not necessarily search but social networking being a good example — it is clearly a natural monopoly and that monopoly then has great power, without any democratic input. The idea that people will “vote” against bad behavior by going to a competitor is not plausible.

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  4. May 13, 2016 at 8:45 pm

    Are you sure you would say this if the subject wasn’t payday loans but something you think is good for society. “There isn’t, since Google is a private platform and can control what it puts on its site.”

    Its tempting to be opportunistic about these things.

    Its not a first or anything for Google either. There is lots of legal stuff they don’t allow in AdWords. Like beer. But wine is allowed :S

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  5. May 13, 2016 at 11:33 pm

    I misparsed the headline, and was thinking WTF are these ads that actually appear on payday, that would be creepy, but of course payday lenders are super-exploitative. And of course ads that are payday ads in both senses would really be targeting people like fish in a barrel.

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  6. Auros
    May 14, 2016 at 4:35 am

    Those lobbyists making the “freeze peach!” argument need to be sat down in front of XKCD #1357 and forced to read it over and over until it sinks in. 😛

    https://xkcd.com/1357/

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  7. Josh
    May 19, 2016 at 9:01 am

    Cathy, I just listened to your Slate Money discussion of this and was very surprised to hear you endorse it without apparent qualification. Yes, you (and I) may think that this particular decision by Google is a beneficial one but I don’t think it would be good to have Google become the de facto regulator.

    You say “I’m thinking that means they are starting to acknowledge the responsibility they have to the worst-off of the people who inhabit the environment they create. And that’s a good thing.” If they really want to acknowledge their responsibility I would like them to create some kind of democratic oversight. That would be a good thing.

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    • May 19, 2016 at 9:10 am

      I would prefer it if Google were a government operated utility. Maybe someday that will happen. But for now I think it’s better that it at least takes responsibility for its influence.

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