The payday loan chain ACE Cash Express had a brief moment of notoriety in 2014, when an ill-advised illustration from an internal training manual slipped into public view.
Surprisingly forthright, the graphic depicted the cycle of debt for which payday lenders frequently get criticized. It suggested that Irving, Texas-based ACE was seeking to trap its customers on a borrowing treadmill.
Almost two years later, when Google banned ads for U.S. loans with annual percentage rates above 36%, the tech giant cited the payday lending debt cycle as a key reason.
Google’s 2016 ban drew praise from consumer advocates and civil rights groups, along with jeers from one then-executive at ACE Cash Express.
“Extremely disappointed,” wrote Manjush Varghese, who was then the vice president of e-commerce at ACE. “I have been a long-standing, responsible advertiser on Google.”
But as it turned out, there was less to the Google ban than initially met the eye. A year after it took effect, American Banker found numerous ads on Google from ACE Cash Express and other payday lenders, often on the first page of search results.
Some of the ads appeared to be clear violations of the search engine’s policy. Other ads appeared to be exploiting a loophole in Google’s ad ban, which has not been previously reported. This loophole enabled payday lenders to continue advertising on the site as long as both the ad itself and the specific page where the user landed after clicking on the ad did not mention high-cost loans.
In short, payday lenders have found multiple ways to get around Google’s year-old ad ban. Similarly, the payday industry has dodged the rules in numerous states where lawmakers have tried to crack down. And now consumer advocates expect high-cost lenders to probe for weaknesses in the Consumer Financial Protection Bureau’s new payday lending rules, which were unveiled last week.
“Subterfuge is as core to the payday lenders’ business model as is trapping borrowers in a cycle of debt,” said Diane Standaert, director of state policy at the Center for Responsible Lending.
“While we do not comment on individual advertisers, we have reviewed and removed the ads in violation of our policy on lending products,” the spokeswoman said in an email.
Loan sharks in 2017 operate mostly online. Because the Internet is borderless, companies can set up shop overseas and make loans to Americans without regard to federal and state consumer protection laws.
Online payday lenders typically charge higher interest rates than in-store lenders, according to a 2014 report by the Pew Charitable Trusts.
Pew found that 30% of online payday loan borrowers reported having been threatened by a lender or a debt collector. It also determined that advertisers were typically paying $5 to $13 per click on online loan ads. That is a hefty price, given that a click does not necessarily translate into a loan.
Google, which collected a whopping $79 billion in ad revenue last year, has made a lot of money from the clicks of cash-strapped consumers. So the search payday loans Cuyahoga Falls Ohio giant was acting against its own financial self-interest when it announced plans to crack down on payday loan ads.
The policy, which was announced after the company consulted with consumer groups, had a similar rationale as the Silicon Valley giant’s rules against advertisements for guns, ammunition, recreational drugs and tobacco products.