Google’s Payday Loan Ad Ban References The Truth in Lending Act (TILA)August 15, 2016 | By: Sean Murray
Did the government pressure Google?
Payday loan ads have mostly disappeared from Google’s search results after they banned ads for personal loans where the Annual Percentage Rate (APR) is 36% or higher. In a May 12th post, shortly after the proposed ban was announced, I speculated that the sudden change was likely due to government intimidation, rather than the come-to-Jesus moral reckoning claimed by Google’s Director of Global Product Policy, David Graff.
Google’s official Adwords policy regarding personal loans now cites the Truth in Lending Act, hinting that compliance with the policy is really about compliance with federal law.
Advertisers for personal loans in the United States must display their maximum APR, calculated consistently with the Truth in Lending Act (TILA).
This policy applies to advertisers who make loans directly, lead generators, and those who connect consumers with third-party lenders.
The TILA regulations can be found at 12 CFR Part 1026. The description of which charges are included and excluded from the calculation of “Finance Charge” is found in Section 1026.4. The APR calculation for “Open-End Credit” is found in Section 1026.14. The APR calculation for “Closed-End Credit” is found in Section 1026.22.
The timing of this change is suspicious since just one month before Google announced the ban, the owners of an online payday loan lead aggregator were hit with a lawsuit by the Consumer Financial Protection Bureau (CFPB). Among the allegations is that the defendants ran a lead aggregation business that did not attempt to match consumers with the best loan for their needs, as consumers were led to believe by some lead generators.
“In particular, consumers are likely to be steered to lenders that charge higher interest rates than lenders that comply with state laws, that do not adhere to state usury limits, or that claim immunity from state regulation and jurisdiction,” the complaint says.
The company the defendants ran, T3Leads, was also sued by the CFPB in a separate action.
Google too, as master aggregator, arguably does not attempt to match consumers with the best loan for their needs, nor have they likely been continuously vetting their lending advertisers for legal compliance. While Google has not been sued or accused of any wrongdoing, the CFPB seemed to be laying the groundwork for such a challenge in the future. And as a blanket hedge or perhaps after a direct threat, they’re now applying certain federal loan laws as if they were already subject to them.
You can see an example of the before-and-after of Google’s search results HERE.Last modified: August 15, 2016
Sean Murray is the founder of deBanked, an 11-year veteran of the merchant cash advance industry, a casual Lending Club and Prosper note investor, the co-founder of Daily Funder, an alternative lending speaker, consultant, writer, and enthusiast. Connect with me on LinkedIn or follow me on twitter.