Exclusive: Google crackdown on payday lenders - websites must follow new rules or see their ads banned

Google will crack down on payday lenders by imposing strict rules on the information they must display on their websites and threatening to ban them from advertising through the search engine if they don't comply, This is Money can exclusively reveal.
The world's number one search engine has ordered short-term lenders to 'prominently' display how much they charge in APR on their website's homepage and include information about what happens if customers fail to make payments.
The changes to Google’s advertising policy will also affect other types of short-term lenders, such as guarantor loans and those who lend for of periods less than 12 months. The rules will also apply to 'lead generation' or loan broker websites that trawl for users details that they then sell on to lenders.

Click: Google has issued new rules to pay day lenders and is set to ban them from advertising on the search engine if they don't comply

Payday loans come with eye-watering rates of interest – sometimes as much as 16,000 per cent – and have been accused of pushing some customers into a spiral of debt.
In an email to lenders Google said they must prominently display information about interest rates and charges, how debts are collected, if the loan will impact the customer’s credit score, whether policies will be renewed automatically and the implications of non-payment.

 

Failure to comply will ban the firm from appearing on Google AdWords results. These are the ads that appear to the right hand side of search results, but also automatically on countless websites.
Google will electronically monitor websites to check they are complying with the rules and those which do not meet it high standards will be banned.
At present payday loan firms are required to display APR rates on the homepage of their websites and, while many firms already display this information, there is inconsistency within the industry. Some lenders some use different size fonts or colours to confuse customers and obscure the true costs of loans.

Debt: Google has decided to introduce strict new rules for payday lenders on how they can advertise through the search engine.

Google will require that information is in the same font, size and colour as the 'base' text of the website.
A spokesman from Google refused to comment on why it had decided to make the changes but in the email to companies it said: ‘We've given much consideration to our stance on the advertising of this content and the potential effect our policy decision could have on AdWords advertisers.’
Russell Hamblin-Boone, chief executive of the Consumer Finance Association, which trade body for a number of payday lending companies, said: 'We welcome any move which improves transparency and protects consumers from rogue payday lenders.

'Our members already comply with 7 different pieces of sales, marketing and advertising related laws, as well as specific stipulations in our own Code of Practice. Transparency is key to consumer protection so we commend Google for recognising the need to tackle rogue lenders'
An OFT spokesman said: 'We welcome any initiative which improves the information available to consumers at the advertising stage or before they apply for a loan. In some cases this is necessary anyway to ensure that the advertising complies with statutory regulations and does not mislead consumers.'
Guarantor loan company, Amigo Loans, is making changes to its website, despite not actually offering loans for less than 12 months, to follow the lead from Google. James Benamor, founder and CEO of Amigo Loans, said: ‘This is a big step from Google, with the payday industry spending tens of millions on advertising each year with them, it's good to see them sticking to their values and putting customers ahead of profits.’
Last month Mumsnet banned adverts from payday lenders on its website. Co-founder, Justine Roberts, said:  ‘There are clear problems with this industry, and until it is cleaned up, we don't want anything to do with it.’ 

Booming: Google AdWords contributed 82 per cent of the search engine's revenue according to a profit report in October

Advertising contributes 82 per cent of Google’s revenue, bringing in $11.53 billion (£18.6billion) in the last quarter. In October, Google’s quarterly profits fell 20 per cent from a year earlier to $2.18billion (£1.35billion).
The move is an aggressive attempt to crackdown on cowboy lenders and those not following rules already in place from the Office of Fair Trading.  
Recently the government has been focusing on strengthening regulation on the payday lending industry but the changes from Google have potentially a greater impact as they will block the main route that rogue lending firms and lead generation companies reach consumers.
A campaign led by Labour MP Stella Creasy, is pushing for a cap on the cost of credit to help improve regulation. The government are currently debating whether the Financial Services Bill should include an amendment to cap interest rates after a vote was backed in the House of Lords last week.
Last month the Office of Fair Trading issued a warning to lenders about unacceptable debt collection practices after it found that 20 companies, which is it is now investigating further, were breaking rules.
A previous change has meant that payday loan firms only appear on AdWords results when someone has searched specifically for 'payday loans'. This will ensure users only see the ads when they are already aware of other types of lending, Google said.
That was imposed following a 'consumer advisory' alert - a warning from one of a number of official bodies in various countries that are responsible for consumer protection, including the Office of Fair Trading.

Posted in: World business