Google Ban Spares Credit Unions
Google’s decision to ban payday loan ads is unlikely to hurt credit unions offering alternatives to the controversial loans, experts said.
In fact, the ban could help credit unions and the people who need short-term loans, they noted.
“I would agree that it could have the indirect impact of elevating our products in the minds of our members and potential members by removing the distracting junk of the predatory stuff that gets advertised on the internet,” Hank Hubbard, president/CEO of the $33 million One Detroit Credit Union in Detroit, said.
“You can stop the advertising, but you can’t stop the need,” said Ben Morales, CEO for QCash, which markets a payday alternative loan program to credit unions.
On May 11, Google announced starting July 13, it will ban ads for loans for which repayment is due within 60 days of the issue date. In the U.S, the company will also ban 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,” Google Director for Global Product Policy David Graff said when the ban was announced.
The ban was announced weeks before the CFPB was expected to issue rules governing payday lending.
The Google ban won’t significantly or directly impact Hubbard’s credit union, he said.
“We didn’t advertise on Google, so if they determined that our products fit their ban, it wouldn’t matter,” he said.
Morales said credit unions using QCash won’t be affected either.
However, an executive at a large, non-credit union payday lender said the Google ban could be devastating to his industry.
“It impacts how we market ourselves and we’re going to have to change that strategy,” said Jamie Fulmer, a senior vice president at Advance America, one of the nation’s largest payday lenders and the subject of a great deal of criticism by consumer advocates. “I think it’s significant.”
The advertising ban does not mean that the need for short-term loans will disappear, Morales said.
“You can block access, but it’s not going to block demand,” he said. “The consumers are going to be looking.”
And Morales said he hopes those consumers will look to their credit union for help. Morales’ company and Hubbard’s credit union market their loans as payday loan alternatives.
One Detroit offers a program called MyPay Today, which allows members to borrow $500 at 18% APR and repay the loan in 60 days.
QCash offers credit unions a program that enables their members to apply for a loan, receive a response and see the funds deposited in their account in about one minute. The loans do not require a credit check; instead, approval is based on the member’s experience at the credit union and behavioral metrics.