Oregon Senator Jeff Merkley (Dem) and Representative Suzanne Bonamici (Dem) on Thursday applauded the announcement that Google would change its advertising policies to ban advertisements for payday loans on its platforms.
Merkley and Bonamici are the lead sponsors of the Stopping Abuse and Fraud in Electronic Lending (SAFE Lending) Act in the Senate and the House, respectively. The SAFE Lending Act would crack down on abuses in online payday lending, such as payday lenders’ use of “remotely created checks” to reach into consumers’ bank accounts electronically and take out money without their authorization.
“Payday loans are often advertised as an appealing financial liferaft, but in reality, they are an anchor designed to drag working families into a vortex of debt,” said Merkley. “It’s terrific that Google is utilizing its power to help keep American families from being ensnared by predatory payday loansharking. Now, it’s time for Congress to do our part and pass legislation that would take on abuses across the online payday lending industry.”
“Google’s decision to ban ads for predatory payday lenders is a step in the right direction for protecting vulnerable consumers,” said Bonamici. “Oregon has some of the strongest laws in the country to address predatory payday lending, but too often online lenders use loopholes to get around our state laws and trap people in a cycle of debt. That’s why Senator Merkley and I introduced the SAFE Lending Act to crack down on some of the worst abuses in the payday lending industry. I applaud Google’s leadership in protecting American families from unscrupulous lenders who take advantage of people struggling to make ends meet.”
Payday loans are typically short-term loans that use the borrower’s next paycheck as collateral. In states without strict payday lending regulation, the annualized interest rates on the loans often reaches 300% or higher. A study by the Consumer Financial Protection Bureau found that four out of five payday loans are rolled over or renewed because the consumer cannot afford to pay the loan back without re-borrowing, and one in five loans ends in default.
Specifically, the new Google policy will ban ads for loans where repayment is due within 60 days, and within the US, will ban ads for loans with an APR of 36% or higher. Google wrote in a post announcing the new policy, “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 change is designed to protect our users from deceptive or harmful financial products.”