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google payday loan ad policy update August 23, 2016

Posted by Bradley in : consumers , add a comment

Today a “borrow money” search produces ads with some different language that shows tailoring to the policy. The APR statement at rapidloansdirect.com, a business which seeks to match borrowers with lenders, includes this language:

Offers provided to consumers who originated via a paid Google advertisement feature rate quotes of no greater than 35.99% APR with terms from 61 days to 180 months. Your actual rate depends upon credit score, loan amount, loan term, credit usage and history and will be agreed upon between you and the lender.

But this seems like a new policy. Best company’s bottom line is:

RapidLoansDirect is not the best option for obtaining a personal loan. High-interest rates between 19% – 420% can be expected regardless of your credit history. Their customer service has had its share of issues, currently having a “C” rating with the Better Business Bureau. For these reasons, we do not recommend them as a personal loan company at this time.

A search for “payday lending” produces an ad for bluetrustloans.com which states:

APR’s range from 471.7846% to 841.4532% depending on the duration of the loan and the loan origination fees.

Like 471.7846% is so much lower than 472% that it makes sense to quote the rate to 4 decimal places!

google payday loan ad policy August 21, 2016

Posted by Bradley in : consumers , 1 comment so far

Earlier this year Google announced that it would be banning certain payday loan ads. Today I searched for payday lending and at the top of the results page were 3 ads. The top one was for Big Picture Loans. That also happens if I search for “need money fast,” or even “borrow money.” The page the ad link takes me to says this:

Annual Percentage Rate (APR) may vary based on when your first payment is scheduled, pay frequency, total loan duration, and the amount funded. Your payment schedule will be included in the Truth in Lending Act (TILA) section of your Loan Agreement. You can reduce finance charges by paying more than your minimum scheduled amounts. There are no prepayment penalties. Typical installment loan APR Range based on an initial payment scheduled 21 days from the effective date of the loan and all payments thereafter being every 14 days: 780.03% – 788.62%. Click Rates to view our loan and APR calculator and payment schedules. Returned payments, late payments and non-payments may result in additional fees or charges to your account pursuant to the terms of the loan agreement and as allowable under Tribal law and may result in additional fees from your financial institution. If you default on your loan, we may report the account status of your loan to a consumer reporting agency, which could have a negative impact on your credit report. This is an installment loan product, therefore, loans do not automatically renew. For more details, please refer to the loan agreement.

A month after the policy was supposed to come into effect and I think this ad violates or should violate any sensible payday loan policy. The ad does refer to installment loans – a potential weakness in the Google policy I identified in May. But the specified APR is so high that in itself it should result in the ad not being shown, shouldn’t it?

payday loans: csr and regulation May 13, 2016

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Google’s new policy on payday loan ads which will be banned defines the relevant loans as follows:

We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36% or higher. When reviewing our policies, 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.

The policy doesn’t just seem to apply to the worst sort of payday loans. The NY Department of Financial Services says that payday loans are typically repayable within 2 weeks and can carry an interest rate of 400%. The Google announcement doesn’t say how Google will think about issues such as roll-over of loans (where loans originally repayable within a two week period end up being outstanding for longer because they are rolled over into new loans) or high fees which might not be characterized as part of an APR. A study by the FCA in the UK published in 2014 found that payday lending consumers were frequently surprised by roll-over or extension of the loans and the fact that this would raise the cost of the loans.

Reactions (NYT) focus on whether companies like Google should engage in this sort of censorship. One article (by Danny Yadron and Maria L La Ganga) states:

What’s different now is that an increasingly small number of technology firms control what an ever expanding number of people see online. And they’re willing to go beyond what is circumscribed in law to make their own decisions – maybe shaping society in areas where governments won’t act.

This article, and the Google announcement, seem to suggest that what Google is doing here is engaging in corporate social responsibility (CSR). But in fact payday lending is an area where Governments are becoming more active: payday lending is already illegal in a number of states (such as New York, although the rules in different states do vary) and it has been targeted by the CFPB: just this week the CFPB announced that it had taken Action Against Check Cashing and Payday Lending Company for Tricking and Trapping Consumers and last month the CFPB published a report which shows that online payday lending customers are at risk of being subject to overdraft and non-sufficient funds charges imposed by their banks and even of having their checking accounts closed. New rules on payday lending are expected soon. And other jurisdictions, such as the UK and Australia, regulate payday lending. So it’s really about getting ahead of (or alongside) regulation rather than CSR, isn’t it?

critiquing consumer surveys May 5, 2016

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This article identifies some of the problems with the endless consumer surveys we are subjected to all the time:

Problems with surveys are two-fold, researchers said. First, too many surveys with too many questions turn off consumers. Second, results that are tied to employee bonuses — or jobs — prove inaccurate. Combined, these problems are turning a useful method of interacting with customers into a headache.

But there’s often an additional problem, as the surveys tend to focus on the performance of the people who are actually providing the services. If I book Sears to provide repair services for a washing machine the survey will ask me how happy I was with the service provided by the person who actually came to my home to work on the machine. The surveys control the service providers pretty well. They don’t tend to ask for feedback on how pleasant or unpleasant it is to interact with the firm as a whole rather than the particular individuals you deal with. And if the experience overall is horrible but the person you actually interact with seems to do a good job and is pleasant to deal with, of course you will give them the high score. But this may be misleading.

The article suggests that it can be a problem if customers are effectively “bribed” to give positive feedback. I am not so sure: asking your customers to speak to you before giving you a lower score than 10 so you can persuade them to give a higher score is in some sense about consumer satisfaction.

on not sounding too good to be true… November 13, 2014

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Investors who used the search term “secure investment” seemingly found their way to a website at secureinvestment.com which “acknowledged that currency trading was risky” – and it was.

how can we tell what is too good to be true? November 13, 2014

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Financial regulators try to help people make good decisions bout their money by encouraging them to focus on whether what they were being offered was too good to be true or not. I think any scheme that calls itself a “Profits Paradise” (a scheme operated from India, although designed to appear to be American) sounds too good to be true. It isn’t clear from the SEC’s announcement how many people responded to the rich promises by investing, although the SEC Order states that “By mid-January 14, 2014, the Website had more than 4,000 visits each day, including more than 200 U.S. visits.” The fact that the SEC published an investor alert alongside the press release suggests that the SEC thinks that people need to be reminded to be careful about investing. But if this scheme didn’t scream “too good to be true” what would?

wolterskluwer/aspen casebook petition May 7, 2014

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I just signed the petition here to urge this publisher to abandon its plan to require students to return their books at the end of the semester.

uk: payday lending plans November 25, 2013

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The UK government plans to cap the cost of payday loans in amendments to the Financial Services (Banking Reform) Bill. According to the Chancellor of the Exchequer:

It’s all about the government being on the side of hardworking people.

cfpb: payday lending enforcement and final rule on mortgage disclosure November 20, 2013

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The CFPB announced an enforcement action against Cash America International, Inc with respect to its payday lending practices which includes refunds to customers, a fine of $5m for the violation and for destroying records before the investigation and promises with respect to future compliance. I have been feeling grim because I will be discussing McKenzie Check Advance v Betts in class tomorrow, and this is a step in the right direction. The CFPB also announced new rules on mortgage disclosures. There’s lots of information about this rule on the CFPB website, including a blog post which explains how the final rule is different from the proposed rule, a report on the study of old and new mortgage disclosures, and a page for consumers. Much more user friendly than the usual sort of financial regulation rule announcement.


payday loans – a policy problem on both sides of the atlantic November 6, 2013

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The CFPB invites the submission of complaints about payday loans starting today (and the Pew Charitable Trusts published a report last week on payday lending). Meanwhile, the UK Business, Innovation and Skills Committee yesterday held an evidence session on the regulation of pay-day loan companies (a follow-up to the Committee’s 2012 report).