No more Google ads for payday loans: consumer protection or censorship?

As government regulators seek to further restrict the contentious practices of certain payday lenders, Google wasn't interested in waiting.  

The search giant will ban payday loans from its ad system starting in July, it announced Wednesday.  

The act has drawn praise from consumer protection, civil liberty and privacy advocates because payday loans are said to prey on low-income borrowers, who can become entangled in a vicious web of missed payments, with interest rates that can be more than 700 percent.

But, the lending industry, in its backfire against the announcement, has raised a question: Should Google, or any search engine or social media website, suppress content?  

The Community Financial Services Association of America (CFSA), a trade association for the payday lending industry, has called the move "discriminatory and a form of censorship."

"The Internet is meant to express the free flow of ideas and enhance commerce," a spokesperson for the CFSA told WIRED. "Google is making a blanket assessment about the payday lending industry rather than discerning the good actors from the bad actors. This is unfair towards those that are legal, licensed lenders and uphold best business practices, including members of CFSA." 

Google said it will ban certain types of payday loans, particularly ones that must be repaid within 60 days or with interest rates of 36 percent or higher, according to the announcement from David Graff, Google's director of product policy. It will become effective July 13. Although lenders will no longer to be able to advertise on the search engine, users will still be able to search for them.  

This is far from the first time Google has restricted content from its ad system or search engine. It has prohibited ads for illicit activities such as the sale of guns, explosives, and drugs, and limited activities that are sexually explicit or graphic in nature, as The Washington Post reports. In 2015 alone, Google disabled more than 780 millions ads, including ones for weight loss scams, phishing and unwanted software. But Google's most recent policy will be the first time it will globally ban ads for a "broad category of financial products," according to the Post.  

"Ads for financial services are a particular area of vigilance given how core they are to people's livelihood and well being," wrote Graff. "When ads are good, they connect people to interesting, useful brands, businesses and products. Unfortunately, not all ads are."  

Payday loans are short-term loans, often due on a borrower's next payday, according to the Consumer Financial Protection Bureau. The loans are frequently for $500 or less. Although they offer fast cash to low-income earners, they can come at a price, mainly high interest rates. The average yearly interest rate of lump-sum loans was 650 percent, the Pew Charitable Trust found in 2012, while online installment loans, which are paid back in smaller increments, can have interest rates of 300 percent to more than 700 percent.

Internet payday loans often automatically withdraw from a borrower's account, which, if the account is overdrawn, can slam a borrower with bank penalties. The average bank penalties borrowers receive from online payday loans is $185, according to the Consumer Financial Protection Bureau (CFPB).  

The CFPB, which was created by President Obama in response to the recession, is expected to release further regulations to restrict the industry later this year. State legislatures have targeted some practices, but the industry has frequently managed to find work-arounds, as the Associated Press reported. 

Opponents to government intervention, however, have said the limits amount to paternalism. 

"Americans don't need their money managed by paternalist politicians," Tim Miller, writing at the time as a spokesperson for the Center for Consumer Freedom, a nonprofit promoting personal responsibility and consumer choices, said in a 2008 opinion article for The Christian Science Monitor.  

"Government should instead trust that, when given personal freedom and the maximum amount of options, consumers can decide how to responsibly use their money themselves," he wrote.