A report from Upturn, a technology-focused consulting firm, outlines why the use of ad targeting for this specific product is particularly harmful. The report details how an action as simple as searching the term “need money to pay bills” can start a dangerous cycle, in which information about an individual’s location, bank accounts, income, and financial health can be collected by lead generators and then dispersed through a more opaque process that can result in fraud, targeted high-priced loans, and harassment from multiple high-cost lenders. The report concludes that online payday lending is ridden with weak privacy policies and abuses of basic consumer protections.
Pretty much anyone who has used the Internet during the past several years has had an uncomfortable experience with targeted ads. A quick search can lead to constant sales pitches for tangentially related products on a myriad of sites. These ads—which companies target at the demographics most likely to buy their products—are generally just annoying, and somewhat creepy. But in some cases their use can be much more dubious. Google has decided that ads for payday loans constitute one of these pernicious uses.
That judgement is understandable since there’s been a growing sentiment that payday loans are more harmful than they are helpful. The loans are very short term, and carry interest rates that can skyrocket to well over 100 percent if users cannot pay on time and continually roll their loans over (which about 80 percent do, according to the CFPB). It’s also true that these rollovers come with additional fees. Already, the users of payday loans are predominantly low-income, minority households without college degrees or extensive financial education—one reason why payday storefronts are disproportionately located in poor communities of color. These are people who often can’t turn to friends or family for $200 to pay for groceries or a bill if they’re a little short this month.
But by many estimates, the damage done by online payday lenders is much worse. Combining these already-treacherous products with nebulous (and sometimes illegal) practices of lead generators can allow lenders to further target an already vulnerable group and charge them more for services. My colleague Rebecca Rosen once explained the specific danger of targeted ads in these instances: “Consumers are not perfectly rational, as the field of behavioral economics has demonstrated over and over. This leaves them vulnerable to persuasion to make decisions that are counter to their own self-interest,” she wrote. “When corporations purposely seek out a consumer's vulnerabilities and use them to direct her dollars back to them, that is a violation of that person's autonomy.”
This isn’t the first time that Google has waged war on advertisers it deems dangerous. In 2014, the company removed over 500 million ads and banned more than 200,000 advertisers from its search results, some of which were for high-cost, short-term loans. But that’s often not the end of the story. Keeping track of such companies and the growing number of ways they collect data and post ads is a continuous and exhaustive process, one that requires not only vigilance from companies like Google, but also from state leadership, lawmakers, and regulators. That makes the task of consumer protection an even harder one. In some states, payday loans are banned outright. Others are much more permissive, and policing the actions of lenders, lead generators, and their affiliates is daunting.