Google recently updated its personal loan advertising guidelines that will have an impact on a lot of financial players in the market. According to its new advertising guidelines, Google’s not going to let misleading ads and sites that openly promote dangerous payday loan offers to use its AdWords advertising space.
…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.
Because of the Short Payback Periods
As per new AdWords guidelines, Google will no longer accept and show ads promoting payday loans requiring repayment within a couple of months. The reason being, Google doesn’t intend to host brands that run ads promoting higher interest rates and short repayment cycles as they may lead a lot of borrowers to sink into unmanageable debts. By banning offers from websites that can possibly harm the end user, Google’s latest policy update will help businesses that offer better repayment options to the consumer.
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).
Taking a cue from Facebook and other online advertising platforms, Google’s banning ads from websites that mislead users into buying short repayment cycle bound personal loans. As per its existing Ad policies, Facebook bans any form of paid advertising on its platform that promotes payday lending, irrespective of their repayment terms.
Because of the High APRs
Also, Google intends to restrict advertisers that promote personal loans having more than 36% of APRs. This, in turn can impact several online businesses which offer personal loan schemes, with over 36% cap through their site content or via SEM ads.
Short Repayment Loans and Payday Loans are particularly infamous for offering loans at higher Annual Percentage Rates (APR). However, escalation in the rate of interest can reach over 400% mark, which totally depends on the borrowed sum. Leveraging these kinds of loans puts greater financial burden on the consumer, who finds himself unable to clear the debts owing to the saddling of high-interest rates.
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.
Google’s latest endeavor is so designed to protect consumers from getting involved in deals that could harm them financially. In order to protect borrowers, Google’s pushing for small loans at 36% APR cap on both federal and state legislationlevels, which will help counter the devastating impact that 300% loans have had on struggling families.
By restricting sites offering personal loans with high APR and short payback time, Google’s trying to protect the consumer from getting involved in deals that are difficult to pay off. However, this may take time, as the 36% Rate Cap is Gaining Renewed Acceptance and notices are being sent across to personal loan issuers to make their site content and offers compliant with the new personal loan based guidelines in the next couple of months.