Google had just announced it had banned the morally questionable payday loan sector from its advertising platforms. However, it’s been revealed that Google’s parent company, Alphabet, has been a repeat investor in a payday loan lender.
Wall Street Journal first reported GV, the venture-capital investment arm of Google’s parent company, Alphabet, has provided capital for every equity round for the online lender LendUp since before its launch in 2012 and has done since.
Who Are Lendup
LendUp charges rates that amount to a 400% APR. It promotes itself using slogans such as “up to $250 for 30 days”, “good credit not required”, and “instant decision”. The company uses the same conduct of the many other available payday loan businesses that make the same high-rate loans for people who are trying t make it to the next paycheck. Yet LendUp promotes itself as a “payday loan alternative”
Rather than out of a storefront, the company operates digitally, and has been the subject of enthusiastic profiles throughout the tech media. Eyebrows have been raised at some of its tactics such as its use of social media to determine creditworthiness.
Recently Google added payday lenders alongside guns, tobacco and explosives to its “dangerous products” category, a major blow to the $46bn industry.
Lenders like LendUp have been accused of entrapping people in circles of debt, by giving out small loans with extremely high interest rates. Google’s ban, which will go into effect on 13 July, also will apply to ads for loans where repayment is due within 60 days of the date of issue and loans with an APR (annual percentage rate) of 36% or higher.
Announcement Sends Shockwaves
The ban was announced in a blogpost by Google’s director of global product policy, David Graf wrote: “This change is designed to protect our users from deceptive or harmful financial products …” “According to Wade Henderson, president and CEO of The Leadership Conference on Civil and Human Rights, ‘This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending. These companies have long used slick advertising and aggressive marketing to trap consumers into outrageously high interest loans – often those least able to afford it.’”
The Journal reported that LendUp’s Sasha Orloff, LendUp’s chief executive had been concerned by Google’s choice to ban payday lenders from its advertising services. “We do worry about how this will play out and think it paints with too broad a brush,” she told the publication.