Dodgy lenders shown the door
Payday lenders will soon find it harder to prey on their victims online, with Google moving to ban the short-term loan industry's ads from its websites.
From 13 July Google AdWords, the search giant's advertising arm and its main source of revenue, will ban ads from lenders who offer loans with a life of less than 60 days. The payday lenders will be in good company on the ban list, which currently includes sellers of weapons, drugs and counterfeit
This is the first time Google has imposed an advertising ban on financial services. "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," wrote David Graff, Google's Director of Global Product
Policy, in a blog post.
"We'll continue to review the effectiveness of this policy, but our hope is that fewer people will be exposed to misleading or harmful products."
Four text ads currently appear at the top of all Google search results. A search for "quick loan" or "short loan" typically brings up ads for payday lenders in all four ad spots.
The Australian payday lending market is worth between $670 and $908 million according to Martin North from Digital Financial Analytics.
The entire payday lending industry was awarded a Shonky Award by CHOICE in 2015. Payday lenders are notorious for fleecing customers and irresponsibly offering loans
to people with little capacity to repay them. Hidden fees, exorbitant interest rates and lenders' willingness to offer loans to help cover loans can be
traps for Australians on lower incomes tempted by the prospect of a small loan to get them through the week.
Payday lending traditionally conjures images of scungy shopfronts with bright signage and barred windows. However, increasingly people are coming to
short-term lenders through slickly-designed websites and mobile apps, with money paid into and repayments taken directly from customers' bank accounts.
Despite the cleaner image newer lenders are trying to promote, it hasn't stopped some of them from cutting corners. In March ASIC ordered lender Nimble to
repay over $1.5 million to more than 7000 customers. The financial regulator found that Nimble had failed to assess their customers' financial situations
before offering the loans.
CHOICE asked Google Australia if there were plans to remove mobile apps offering short-term loans from Google Play, but did not receive a response by publication time.