Google's Ad Policy Makes Payday Loans The Pornography Cigarettes Of Financial Instruments

Now here's an algorithm.
Author:
Updated:
Original:

Payday loans are decidedly not the most popular thing in American finance, but Google might hold them in lower estimation than Elizabeth Warren and Bernie Sanders speaking frankly after a few bong hits.

Google.PaydayPorn

Per American Banker:

A Google executive compared payday loans to tobacco, guns and pornography Wednesday while justifying the tech giant's decision to ban ads for high-cost, short-term consumer credit.

That's, umm, "intriguing" company. Care to elaborate how you got there, Google?

"We don't allow ads for products that we think are excessively harmful," said Vijay Padmanabhan, a policy adviser at Google.

But before you jump all over the Googleplex for being willy-nilly with what's "harmful," it should be made clear that Google has run the numbers on its own risk-assessment of loan products.

Seriously...

Under the new policy, Google does not accept ads in the United States for personal loans with annual percentage rates above 36%. The firm also bars ads for personal loans where repayment in full is due within 60 days.
"While users really do need small-dollar loans, they don't really need short-term loans," Padmanabhan said.
"Research shows that most borrowers of payday loans can only afford to give up about 5% of their next paycheck. And it makes sense, right? If you have savings, you don't take payday loans. If you take payday loans, you don't have savings, so how are you going to be able to part with more than 5% of your next check? So the reality is though these products are marketed as short-term products, users use them in ways that make them long-term products."

But that 36% figure, why?

At one point, Padmanabhan was asked why the company settled on the 36% benchmark.
"When you pick a number of this sort, there's a little bit of arbitrariness to it," he acknowledged.

Well, oftentimes, so is porn.

Google Exec Mentions Payday Loans, Porn, Guns in Same Breath [American Banker]

Related