Are Payday Loans Unreliable? The Same Question Again and Again.

Courtesy of Exoduslending.org
 

There are various ways to get some money when you are broke: to moonlight, to sell something, to borrow from your friends or to approach some special organizations such as loan organizations.

Loan organizations that provide people with money are mostly payday. This means that a person who borrows money from them should pay this sum back on the first payday; otherwise it would be increasing every following day according to the interest rate. Because of that many people reject taking such payday loans, but on the other hand it is a great opportunity when you need to get money immediately. Anyway before borrowing from any of such organizations we have to find out more information about them and look what is going on in this field of payday loans.
 


The recent news

Today almost everyone is aware of the trial of Scott Tucker and his attorney. Tucker is a race driver, a participant of the popular races such as Level 5 and Le Mans 24. Tucker and his attorney, Timothy Muir have been accused of racketeering, money-washing, and illegal debt collection.

It is said that there have been several lending organizations under Tucker’s control. And their mutual income for nine years (from 2003 to 2012) exceeded 2 billion dollars. It is claimed to be one of the largest criminal cases in the United States connected with the sphere of payday loans.

The investigation of Tucker’s case was conducted by Federal Trade Commission. It found out that the interest rates of the loans were concealed and the debt of a person who took 300 dollars could turn into 1000 dollars within a year. In fact interest rate could reach even 700 per cent.

Manhattan U.S. Attorney Preet Bharara also admitted that Tucker spent about 100 million dollars that he earned from these organizations on buying racing cars and a house and financing his team. In 2018, Scott Tucker was sentenced to more than 16 years in prison.
 


Is the situation so bad?

As in every business in loan business there are also people who act unfair, whose only aim is to earn money and as much as possible. Scott Tucker’s case is a good example. But it does not mean that every organization that provides such loans is bad and not worth to be trusted. There are organizations that would expect you to pay the sum clearly stated in the contract taking into account your prescribed interest rate and would not ask some extra money for nothing.

You may ask how to find such an organization. The answer is simple: just check. Before taking a loan, check the information about the organization that lends you. They should have Better Business Bureau accreditation. It is a non-profit organization that helps consumers to find out if they are dealing with reliable companies or not. If your company has such BBB accreditation it means that you can trust it. Also, the organization should have all the contact details including physical address, phone support or live chat.

In addition, before taking a loan try not to be lazy and search the internet for some reviews of the work of the organization. If many people are satisfied with its work, so it is a good sign.

The next thing you should do is to read your contract carefully and ask a consultant if something is not clear for you. Signing the contract you have to be sure that you fully understand its content, know the terms when you should pay and the sum of money that you have to pay back.

Payday loan is a very controversial issue. Many people have a negative attitude to it and they have their reasons for it. But sometimes people need to get some money immediately and payday loan can solve their problem. Anyway before borrowing from both the organization and people you should at first think if you really need it.

Christmas Loans?!

Courtesy of Getty Images

 

Christmas is coming, but you do not have enough money to buy presents for your friends and members of your family? Do not worry! There is a great way to get money! It is Christmas loans! Or, maybe it is not such a good way?

Almost everyone has been in this situation when you do not have money to buy presents that can make people you love happier. You do not know what to do. Then you see those advertisements of Christmas loans and you think it is a great idea to borrow some money, because only then you can afford buying good presents. But do not hurry to visit these organizations, at first you have to think what are advantages and disadvantages of such a loan.


What are Christmas Loans?

Christmas loans are the loans that are provided by special organizations at Christmas time. It is said that at this time interest rate is lower than usual. It means that borrowing money from one of these organizations you have to pay back less money than in any other season. You can take any sum you need. And then you will be able to buy some small presents or even take your family somewhere abroad. Moreover, you do not have to wait for credit verification to take a Christmas loan, and thus it does not matter what credit history you have. Sounds good, does not it? But do not hurry to take a loan. We have to understand what Christmas loans are.


Lower interest rate?

Usually such organizations that lend Christmas loans claim that their interest rate is extremely low. But is it so? Most of Christmas loans are payday loans. This means that if you do not pay back your loan fully on the first payday, the next day your debt become higher due to the interest rate you have.

All you should have to get such payday loan is your bank account and income. The organizations that lend you the money get access to your bank account and collect the money you have to pay back from there. If a person does not pay back the money, at the end they might have the debt which is much larger when the original sum they have borrowed.


Is your personal data safe?

Sometimes it happens that the organizations that offer you a loan do not do it in fact. They might just collect the information about the people who contact them, and then sell it to other lending organizations.

You might think that only one organization has your personal data, but unfortunately it can be transmitted to the third parties. That’s why sometimes you can receive a call from organizations that you do not know, but that wants to find out if need any money.


Check the organization you want to borrow from

If you want to take a Christmas loan, you have to be sure you can trust the organization that provides such loans. At first, you have to check the contact information of this organization. Its website should have all the contact details. Also, the information on the website should be grammatically correct and have no spelling mistakes; otherwise it is obvious that this site exists only to make this organization look more substantial.

Christmas loan might seem a very good way of getting money for people who are broke. But if you have decided to take such loan, you have to be 100% sure that organization that gives you a loan is reliable and does not offer payday loans.

And to be sure in it, you have to check all the information about this organization beforehand and understand if you are able to pay back the money or not. You have to decide yourself if you need to take a Christmas Loan or not, but before doing it you should also ask yourself “Is it really the best option”?

Another Way to Make It till the Next Paycheck?

Courtesy of Even.com

 

Meet Even“the bank app that plans, so you don’t have to.”

According to its developers and founders this platform is a new hope for the majority of people who live from paycheck to paycheck.

To think about it, their target audience is really huge – according to the data about 70% of Americans actually live like this.


The Goals

The idea behind the application is to provide people with the access to their honestly earned cash at the time when they actually need it, not just at fixed salary dates.

The company’s CEO Jon Schlossberg explained why it is important – the app gives more freedom as well as saves from forced and frequently unfavorable financial decisions.

When you have to count days till your paycheck, and you need money now (for any emergency expense), you are more likely to resort to literary any option, high-interest loans and pawn shop services included. Late fees are a common story and overdrafts are a nightmare. These are the consequences of low income, for sure, also mismanagement, undoubtedly; but it is also the problem of a paycheck-to-paycheck living situation.

Thus, Even is meant to deal with that. The platform can serve both workers – on fixed salary and hourly-paid. It will allow receiving at least half of the paycheck as soon as this amount is earned – once a pay period.


What Is It?

Even is a finance management tool. It has been developed with the assistance of the Stanford University researchers and the Consumer Financial Protection Bureau (CFPB) and is specifically meant to help people to deal with their earnings wiser.

The app teaches to plan and stick to the limits – one can only have one pay advance in a pay period. It doesn’t seem to help when more frequent payments are allowed – not from the point of view of financial situation improvement and wiser decision-making. Too frequent payments are able to make the situation worse.

Only half of the earned amount is accessible at a pay period. Which is usually quite enough since diapers and school supplies (that often cost no more than $50) are most common things that cause a problem (according to the research data.) Such small cash injections form the future earnings represent much safer and less riskier option than applying for cash advances from third parties (where you are bound to repay with interest included.)

Right now Even does not provide opportunities for large money injections as it goes against this product’s main purpose – to solve financial issues (allowing large withdrawals at any time is unlikely to improve anyone’s situation.)

It may seem strange to introduce such a clever tool and set it up with very strong limitations; however, there is a lot of sense in making people learn more about their money, how they actually spend, and how they can plan better, if they want to.


The Idea

The idea is to teach – and also to demonstrate not just Instapay‘s potential but how all such services in general and the ones of Even’s in particular can make a difference to a person’s financial situation.

Pretty often people who live from paycheck to paycheck don’t really have time to realize how their money come and go: by the time they get their salary, the list of expenses is too huge, too may items to cover – very little is left, again. Getting information about the cash flow is a key to change some habits, a key to better financial management.

Even is a complicated tool – it took developers three years to create it. Now it allows a user to connect their bank account to the app and have all the income and expense information processed. They get individual recommendation on personal finance management – which sounds really promising.


Will It Work?

The idea is great, especially if you take the number of people they strive to help. However, as in any startup, there are still many issues to resolve.

One of the next goals is the provision of larger pay advances (>50% of a paycheck.) And by the description of it, these larger advance option might be a good alternative to payday loans. At least, the company’s CEO hopes, it will be a better option.

The company also plans to provide its users with an easier access to both automated budgeting tools and Instapay in combination and they hope to achieve even better results.

At the present moment Even is being tested by a great number of Walmart workers, and it is expected that many more will sign up and use it in the nearest future, so, we are likely to see some feedback and results pretty soon.

Last Year Results: Every 6th Utah Payday Loan Store Got out of Business

Courtesy of Utahtitleloansinc.com / Google Image © 2017 Google.com

 

In accordance with the new state report 1 out of every 6 Utah payday loan stores closed for the period of the last year. It seems that recent changes in legislation were not introduced in vain – borrowers started using other options.

However, payday lenders had to counteract as well, and they did – they raised loan APR to nearly 485 %, which is almost twice as much as the Mafia lenders of the 60s used to charge for their loans. And that’s saying something.

One more interesting thing the report shows is that all the more Utah borrowers are unable to repay their debts even at the end of the 10th week (a maximum-allowed roll-over period in Utah.)


Closing Facts

Thus, now Utah has got 462 stores instead of 553. Though, some stores disappear, many others stay and refuse to lose their ground – not even fast food chain stores combined can overcome them in numbers.

There are 50 payday lending companies in Utah and about 32 online ones. Add 61 car title firms, and you get the picture – high interest loans industry feels pretty comfortable here.


Interest Rates

What about the rates? The report states that those have grown as well. APR for the previous year equaled 459.14%, now it is 484.74%. That’s impressive. Some of the companies even managed to charge 1,407.86% APR for a one-hundred dollar loan per week. Quite impressive.


Endless Debt Circle?

Payday loans are notorious and represent the subject of heated debates all over the country; and Utah is no exception. Here the situation is peculiar because payday lenders can actually charge such high interest loans. And they do.

The thing is that (as it has already been mentioned) borrowers fail to repay the loans and get into debt traps as a consequence – only 45,114 loans taken were not repaid even after a 10-week rollover period. The previous year was no better – 43,564 but, still, the number has grown.The report shows that more people get into a difficult financial situation by using small-cash high-interest loans (even if this option is sometimes more affordable and far more convenient than a credit card loan.)


Measures Taken

Well, what has already been done? There have been several legislative attempts to help borrowers as well as to bring more order to this industry regulation. Two years ago an extended payment plan (in writing) was introduced as a compulsory requirement for each loan default case.

One more law allows quick loan cancellation at no cost in cases when a borrower changes their mind fast. The report states that is resulted in 3,819 cancelled loans this year and 2,332 in the previous year.


Measures to be taken (more?)

This spring new law took effect – it prohibits taking new loans before the old ones are repaid. So, the present report only shows the data for a small period of time; however, it seems to be working – people do as they are told. But not everyone, of course.

Surely, it’s a good trend that new regulations appear and they are aimed to protect Utah citizens in the first place. However, some more laws would be nice, some policymakers think, and, perhaps, they are right. After all, interest caps proved to be a good thing for many neighboring states.

The new Consumer Financial Protection Bureau rule that is to take effect in 2019 will require payday lenders to check the solvency of their customers as well as their ability to cover basic expenses before issuing a loan. Plus, it will limit the number of successive loans to 3. As we have already written, it is hard to predict whether the new rule will actually see the light as it has already gained a number of opponents in the present Cabinet and in the Congress.

Google Payday Loan Algorithm and Its Updates

Courtesy of Carlos Muza / unsplash.com

 

Why is it that Google named its 2013 algorithm update so peculiarly – Payday Loan Update – and how it affected various websites, payday loan ones including? Here are some facts.


The Payday Loan Update was one of the major and also pretty much significant updates that Google initiated. Its target was various spammy queries associated with such notorious industry sectors as porn and expensive payday loans (hence the name). As a result, about 0.3% of super spammed queries were affected.


Some History

  • Payday Loan Update (2013) – The first one, it was aimed at payday loan and porn industry and other sectors with heavy amounts of spammed queries. The update got huge reaction.
  • Payday Loan 2.0 (2014) – Google updated the payday loan algorithm to target spammy sites.
  • Payday Loan 3.0 (2014) – Came out less than 30 days after the previous one, this Google anti-spam algorithm update actually had all the spammy queries targeted.

Thus, in the result both spammy queries and spammy sites were affected by the Payday Loan updates.


Three Examples of Websites Affected by the Payday Loan Update (that are interesting from the SEO point of view)

There are many case studies of the sort, here are just three to start with. Their examples are quite informative; and they also provide us with better understanding of how Google updates generally work (how to fall into disfavor, how to recover, or not to lose your search engine position in the first place) and what useful lessons can be drawn from such experience (especially for the industry players.)

Link Research Tools case study by Bartosz Góralewicz concerns the British website Cashlady, and it is a very interesting text that deals with spammy links and Google manual penalty as well as possible ways to lift it.

TrenchWorthy case study by Josh Sturgeon offers all types of examples: paid backlinks, guest (sponsored) posting, even hacking as a way of getting a new link. It also focuses on blog comments which are spammy but still capable of making it through the Google’s filter. It is an interesting case study, worth reading.

Moz case study by Steven Macdonald concerns the British website Peachy.co.uk and describes how it ended up with an 81% organic traffic loss after Google Payday Loan Update. It might be interesting to see how one website managed to use almost all the unhealthy linking techniques in order to get good rankings and search engine position. They had to made a huge effort to recover – deal with their links as well as content and usability. The decision to shift their content focus to education is also a fascinating one (and is pretty much popular and successful technique nowadays.)


Google Payday Loan Adwords Ban

However, Google didn’t stop there and introduced another restrictive measure – this time it targeted the AdWords sector. All payday loans or similar ads were to be banned. This was in 2016, and a year later Google doesn’t seem to change its mind no matter how liberally-oriented AdWords placement initially was meant, no discrimination intended.


Lessons to Learn

So, what were all those steps supposed to teach industry-related businesses?

Well, in order to be good, comply with the Google’s Webmaster Guidelines and do your best improving your search rankings by using white hat methods, not scammy ones. That’s what serious reliable businesses do, they don’t resort to manipulation, and they are also aware that it’s quite easy to get caught now – Google is much more fastidious and it reacts very fast.

That’s what some payday loan websites and their affiliates should start doing, too – using only clear well-thought SEO strategies; the industry is notorious enough to be called predatory and not to be trusted in the first place.

What to expect in the future? Will there be any more restrictive actions from Google that would deliberately concern payday loan industry and websites? It’s hard to tell. Policymakers are presently trying to figure out which side will win and whether the recently drawn CFPB payday loan rule will actually come into effect in 2018. If it does, perhaps, we will see Payday Loan 4.0 Update in the nearest future.

New Life for Deposit Advance Loans, or Not?

Courtesy of Jeremy Paige / unsplash.com

 

Everyone remembers deposit advances – they were sort of payday loans but slightly safer, somewhat nicer. Right? Wells Fargo and a range of other banks offered them a while ago – these small-dollar loans were also meant for emergency situations and had quite considerable interest rates.


Then, in 2014 policymakers introduced pretty restrictive guidelines to the industry and banks stopped issuing such loans – for good (or so it seemed.)

Now deposit advances might come back, especially in the light of the changes taking place in the Consumer Financial Protection Bureau (CFPB), or they will not – due to the recent payday loan rule, the making of the same CFPB.


Why the bother?

In fact, these two products are pretty much the same. They are small cash short-term emergency loans that are offered under pretty considerable interest. However, there is a difference.

Deposit advances were offered by banks and solely to the existing customers; thus, there was no actual need for a credit check each time a borrower applied, and there was also an additional share of safety in the procedure – less risk involved. Such advances were pretty popular and now it is clear why.

Surely, small cash loan industry opponents do see deposit advances and payday loans as pretty much the same thing; they tend to avoid noticing the differences and only focus on the triple-digit interest rates of the latter. However, both caused many borrowers appearing in the same debt situation again and again.


What’s next?

In accordance with the recent news the restrictive guidance on deposit advances has been removed, the step was justified by the Office of the Comptroller of the Currency (OCC) by its conflict with a payday lending rule.

Now that the OCC’s guidelines are about to be gone, it seems that banks will be willing to start offering deposit advances again. However, it is not clear yet how things will go on. The new payday lending rule from the CFPB comes into effect in 2019, and a great number of things still stay unclear.

Many banks won’t find it worth the bother to try and introduce the platform for such deposits for such a short term, when they will have to terminate it in about a year. Those, however, with the platforms at hand, may have a try.

At the moment, however, it makes little sense to expect any changes from either Wells Fargo, Bank of Oklahoma or Regions Bank; and Fifth Third Bank is weighting its options.


So, no alternative after all?

It looks like it’s a bit early to consider deposit advances as an emergency cash alternative in the nearest future. Too much is going on the industry regulation.

Payday loans stay among the most popular and accessible options for many and for now. And despite all the more restrictive legislation and the new rule, people choose them above other options – even when they have access to credit cards and other traditional loan options.


Surprising, isn’t it. Well, not so much, if you think about it.

Numerous researches and statistic reports can now be found about payday loans and the reasons why people are drawn to them. Apart from the sheer necessity there are also other less obvious facts. The laws of decision-making are still being studied and new ideas are being formed. One of the reasons why people do choose payday loans and will go on doing so is a bias towards optimism (according to Marianne Bertrand and Adair Morse), on the one hand.

On the other hand, all these people heading to a payday loan store appear to be pretty much aware of the pros and cons of the deal and are quite accurate in the assessment of their risks and chances (according to Ronald Mann from Columbia Law School.) His idea is that despite the interest rates being so high, payday loans are still being considered as something temporary and unlikely to grow exponentially, there is no risk of long-term involvement.

Thus, it feels much better (on every level) than the option of a credit card loan (provided that it is accessible at all.)

Taking into consideration the fact that small cash loans are a life-saver for many communities, deposit advances may have become another. But in the light of the recent events as well as the new payday lending rule, “the regulator pushes that borrower out of the payday market, the regulator might well be pushing the borrower into borrowing in a more open-ended (and potentially riskier) credit card transaction,” – suggests Ronald Mann.

It stays to wait and see if he’s right.

Payday Lenders Spring Conference

Courtesy of Trump National Doral Miami

 

Payday lending business has been going through a difficult time recently due to all the more restrictive steps taken by both state and federal regulatory bodies. The annual conference of the Community Financial Services Association of America is to bring the discussion of all the problems and perspectives of the industry to the new level in  Miami in April.


These high-interest loans have always been both a matter of concern and an object of heated discussions at all levels. They are considered predatory for being excessively expensive, and yet, they represent the only available credit opportunity for many low-income individuals with bad credit and limited access to traditional loan products.


One of the major issues to be discussed at the CFSAA conference is definitely the finalized rule of the Consumer Financial Protection Bureau that is planned to go into full effect in a two-year period. This rule was not welcome by the CFSAA as it obliges all lenders to check creditworthiness of their customers, which, basically, deprives the industry both of its sense, efficiency and profit.


Payday loan industry supporters see the CFPB’s rule as misguided, indeed. The opposition has a long history as the CFPB was founded in 2008 right after the financial crisis and was meant to bring order to the industry. Yet, lenders themselves and their advocating groups only see its efforts as bothersome and life-complicating when it comes to such small cash short-term lending.

It is curious that the the CFSAA conference is to take place at Donald Trump’s Miami golf resort as the bureau was not an idea of Republicans, quite the opposite. The latter have been trying to interfere with its work since the elections (e.g. a bill proposed by Ted Cruz aiming to eliminate the CFPB), and now it is quite possible that the President and the Congress won’t make the rule happen. However, the CFSAA did not make any comments on that matter so far.


Surely, the coming conference is likely to reveal many interesting alternations. One of the most talked-of is the possibility of the CFPB director Richard Cordray being dismissed and replaced by a more industry-friendly executive. Taking into the fact that payday lenders and their advocates are not inclined to accept the the CFPB rule easily, we are definitely to wait more developments in the sector in the nearest future.

New Chance for Your Credit History?

 
Credit history check is one of the steps in a traditional lending process. And it is universally known than poor credit leaves you with fewer chances for approval, while good credit makes you all the more attractive customer for any lender.


Sadly as it is, nowadays all the more potential borrowers refer to the former group – they either have poor credit history, or none at all. The existing scoring system is not perfect and it leaves a lot of people behind.

Thus, the government is now making an attempt at finding a way to improve the situation and provide more customers with a loan opportunity they haven’t been eligible for before.

Earlier this spring the Consumer Financial Protection Bureau has made a new proposal that involves using “alternative data” as basis for credit score calculations.

Under the term of “alternative data” is meant the information that traditionally isn’t included into a person’s credit report. Among other it includes:

  • Cell phone payments,
  • Rent payments,
  • Cable TV payments,
  • Other related bank account information,
  • Etc.

It is also discussed that some other types of alternative data (not directly related to a person’s financial situation) might also be taken into consideration in the process of credit score formulation (e.g. occupation, education).


At the present moment the bureau encourages both customers and loan industry workers to send their comments on the subject.


Credit scores are also known as FICO scores at the consumer financial market. Strictly speaking, they represent your level of creditworthiness in the eyes of a lender. They are three-digit scores that are calculated with the help of a mathematical formula with the highest score of 850 and a minimal score of 350. However, in the present-day financial situation even 600 score is not always sufficient for many lenders.

Credit scores are calculated by three major bureaus — Equifax, Experian and TransUnion. They also create and keep your credit record with all the major financial information.

One of the things with this system is that it takes into consideration only financial side at large (mortgage payments, credit card repayment history and so on) and it also keeps track of all the “problems”. As a result, a great number of consumers end up with either no credit history, or it is so bad, not one lender will consider it.

It is hard to create a good score, especially when you’ve never owned a credit card. In this respect, having more versatile information at hand is beneficial – a traditional credit score can be improved with some extra bonus added from another sector. This is an alternative way for a consumer to demonstrate and prove their creditworthiness for a lender.

In this respect, some of the credit companies have already started putting these ideas into practice:

  • FICO Score XD has been recently introduced by Fair Isaac (FICO creator). The new system will take into consideration such alternative data as cellphone and cable payments as well as property records.
  • CreditVision Link – a new scoring model that takes alternative data into consideration was also worked out by TransUnion. Apart from traditional financial data the new model creates a score also based on the checking account histories and home address permanence.
  • Besides, about 100 companies are now in the process of testing the new model.

The Consumer Financial Protection Bureau makes an effort at making lending more affordable to everyone and the entire process all the more responsible.

If you have any inquiries about credit scores, here are some useful resources:

  • Free copy of your credit report can be obtained once a year from the three aforementioned credit bureaus at annualcreditreport.com.
  • You can also request your credit score information from your credit card company and your lender as many of them now can grant free access to scores (for a month).
  • If you are willing to comment on the CFPB proposal, you can make it online at regulations.gov till May 19.
  • If you want to read more information on the subject, make a request with the bureau

Arizona Discusses New High-Interest Loan Option

 

As of 2008 state legislation payday lending in Arizona is considered prohibited. However, new proposal has recently been discussed in the Senate and it is the one that suggests some sort of the high-interest credit variation to get back to the state.


Surely, the subject of instant payday loans has always been very tricky (across the entire state). In Arizona proponents of such high-interest loans have tried their luck some time now and failed due to various reasons; however, this year they seem to have been able to gain at least some share of success.

The proposal bears the name of “Consumer Access Line of Credit”, made by Sen. Debbie Lesko to House Bill 2496.

  • It presupposes the offering of a small cash loan option with a maximum APR of 164% and a maximum loan amount of $2,500.
  • This equals to 0.45% a day of interest for a short-term loan.
  • The amendment also suggests that all lenders should run a compulsory check of their perspective customers through a statewide database in order to make sure that the entire amount of a loan does not exceed $2,500.
  • Thus, credit history check will be required.
  • The loan term offered is one year.
  • Repayment plans and freezing of interest rates for struggling borrowers are also required.

The proposal has got a number of opponents as well as proponents.

Democrats call it predatory lenders coming back to Arizona,and they are also backed by Republicans as well.

The old argument is about the nature of online payday loans, as the initial prohibitive measures were meant to protect customers from getting into debt due to high interest rates. However, many people with bad credit history were left with basically no option for any emergency cash instead.

In this respect the proposal lobbyists appeal to the fact that all borrowers should have the choice, the right and access to fast payday loans options with no regards to the state of their credit standing. They should also have an option to improve their credit by making timely payments.


Proponents see payday loans as a more attractive and also more beneficial offer for borrowers than car title and pawn shop loans.

Opponents, however, see it as a threat for low-income residents and they are willing to stand their point.


In 2008 payday loans were prohibited in the state as 60% of voters were against high-interest lending in the state. At the present moment the panel voted 6-4 and the proposal is going for consideration to the full Senate. So, we’ll see.

Google Ads Ban – How’s It Going?

 

Heated discussions around the topic of Google Ads payday loan ban only seemed to stop for some time when recent news has provided more food for reflection.


The company announced its intentions earlier this May and on July 20 the actual ban came went into effect. It was expected that the company is likely to lose some feasible share of its revenue as a result of such an action; however, it does not seem to be the case.

Besides, and what is more intriguing – payday loan companies’ ads go on appearing in Google results. For everyone who followed the entire case, the questions “how?” and “why?” are rather obvious.


Well, the answer is simple – payday loan companies managed to go around the rule and find a loophole; as they frequently do.


Google should be justified for making some effort – one of the company’s conditions for approving a payday loan ad has been compliance with the following terms:

  • indicated interest rates should equal or be lower than 36%;
  • repayment term should not be less than 60 days – for the ads to be displayed.

And it looked like certain doors closed; but actually, they just closed a little. Change the messaging – get approved by Google Ads editors. It is actually pretty simple for the majority of the companies who use online advertising.

As most of these companies do not actually represent direct lenders and neither grant loans nor charge for them, they stand a bit further on this ladder of lending process and can state literally anything about their rates. Such companies generate leads for direct lending companies and, thus, their ads comply with Google payday loan ads policy – rates do not exceed 36% and repayment period equals or is longer than 60 days – in accordance with their description.

Apart form the fine print that states something of the sort:

  • Your actual rate depends … and will be agreed upon by you and the lender.”
  • the lender can provide a different APR than our range.

These tiny sentences provide good example of how one can evade seemingly explicit rules – another example that payday lending companies have many tools for getting around official policy.


There are plenty of such ads to be seen in Google search – looks like everyone from the industry decided to abide by the regulations that he Consumer Financial Protection Bureau’s has been trying to implement for a certain period of time with doubtful success in some cases.

Only they did not; all the fine print with small lines of text make it clear yet another time and again – the real rates can be different.

One of the drawbacks of such manipulations is that it has become even harder for customers to make a choice when it comes to a company. Or, rather, they are much likely to follow seemingly appropriate Google ads that in reality can appear to be so; or not.

The bottom line is that the more action is taken in the direction of payday loan more restrictive regulations, the more the aforementioned industry is likely to find ways to go around these regulations. All the more, Google can ban ads as much as it likes – it is, however, unable to create a very serious shift in the industry that at the present moment uses every tool in its power to oppose the Consumer Financial Protection Bureau’s recently proposed rule.

What happens in reality that although a certain number of alternatives to small cash loans seem to start appearing, the National Association of Federal Credit Unions is among them (with their reaction to the CFPB rule).


However, as it has been said before – and not once – these are meager steps compared with the needs they are supposed to cover. And we are also talking about the industry with a serious lobbying power – the one that has ability to adapt, assimilate and change with regards to new (restrictive) policies – and have all the practices preserved and intact. It’s only left to watch the development of this confrontation.