Google’s tagline was “don’t be evil,” but foolish policies have welcomed predators and online evils the company claimed it would stop. Google’s prohibition on short-term loan advertising was projected as an attempt to help consumers. Since it was launched in July, it has become an abject failure, ultimately driving legitimate lenders for products over 36 percent APR out of the marketplace. According to Search Engine Land, a respected industry publication that reports on search engine data trends, scammers have started ignoring Google’s rules to get around the ban. Thanks to misguided or coerced policy and weak enforcement, instead of accurate ads for expensive products, applicants are now inundated with scams, deceptive ads, or ads from companies who simply won’t help them.
This story is not new. Rules and regulations irresponsibly put in place almost always have the people paying the heaviest price. For the sake of underbanked American consumers, Google should restore the competitive marketplace and immediately discontinue their ill-advised outright ban on short-term loan advertising, while implementing common sense steps that help consumers find safe, transparent, and secure online financial products:
Require Ad Accuracy
According to best practices published by the Online Lenders Alliance (OLA), a leading trade association for online financial services, loan advertisers must “ensure that their advertisements describe loan terms that are actually available.” Although OLA’s industry data suggests a median loan amount of around $700, Google’s pages are filled with personal loan ads offering thousands or more in emergency cash. I’ve just recently seen an ad that claims “$35,000 loans for any credit type.” Such false, deceptive advertisements have already been targeted by industry self-policing efforts. Google should help protect consumers and require similar accuracy from their advertisers.
Ditch “Maximum APR” Disclosure Requirement
Consumers know that short-term loans can be an expensive form of credit. They also know to assess their finances and make an informed decision based upon the true cost of the products they are considering. By requiring the disclosure of a hypothetical maximum annual percentage rate (APR), Google forces consumers to contemplate the annual cost of a product that they will only utilize for a fraction of that period.
Google provides no consistent methodology for making this APR calculation and forcing loan applicants to compare apples to oranges, creating confusion and obscuring the true cost of short-term credit.
Address sham “Loan Comparison” websites
Loan comparison websites are supposed to allow consumers to rate their experience using products and view the ratings provided by other customers. But what if a loan comparison website isn’t powered by past and current borrowers, but rather some guy hired to create reviews?
Unfortunately, many online loan matching services operate in this way. Knowing full well that reviews and ratings build trust between a lender and their prospects, these culprits manipulate that relationship by providing arbitrary or fake reviews designed to do only one thing: deceive consumers.
Google should monitor for and eliminate these sham comparison sites from their pages.
Enforce Your Rules and Live by Them
All the consumer protection policies in the world don’t matter without the ability to monitor and enforce them. Based on search results, just today, for alternative lending products, Google does not have such a mechanism in place. If they take consumer protection seriously, Google should start by investing in the people and systems necessary to enforce these policies.
Finally, if expensive forms of short-term credit are as deceptive or harmful as Google asserts, the company is obligated to pressure their venture capital sister company to completely divest from LendUp, the high-rate payday lender in their portfolio. Or at least have a difficult discussion with officials at LendUp about their use of predatory and misleading marketing practices, which earlier this year resulted in a $3 million fine from the Consumer Financial Protection Bureau.