Google Bans Payday Loans From Its App Store

Summary

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WSJ Your Money Briefing – Podcast Summary

Episode: Google Bans Payday Loans From Its App Store
Date: October 14, 2019
Host: J.R. Whalen
Guest: Yuka Hayashi, Wall Street Journal Reporter

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Episode Overview

This episode of WSJ Your Money Briefing discusses Google's decision to ban payday loan apps offering high-interest loans from its Android app store. Host J.R. Whalen and WSJ reporter Yuka Hayashi break down why Google took this step, its potential impact on both consumers and lenders, and the larger implications for how big tech companies can shape access to controversial-yet-legal products.

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Key Discussion Points & Insights

1. Google's Ban: Rationale and Scope

• Implementation:
  • Google instituted the ban in August 2019, targeting density loan apps with high interest rates ([02:50]).
• Reasoning:
  • Google aims “to protect consumers from what they call deceptive and exploitative loan terms” ([03:09], Yuka Hayashi).
• Specifics:
  • The policy targets apps “that charge interest rates of 36% or higher” ([03:09], Hayashi).
  • “Imposing a rate cap of 36% effectively shuts out payday lenders from the market” ([03:35], Hayashi).

2. History of Google's Policies Against Payday Lending

• In 2016, Google previously banned advertising of payday loans from its browser ([04:07], Hayashi).
• These moves have drawn criticism from the lending industry.

3. Payday Loan User Base & Android Demographics

• There’s significant overlap between payday loan borrowers and Android phone users.
• Key Stat:
  • “Less than a third of consumers from households making $25,000 or less use Apple phones... over 50% of those consumers use Android phones” ([04:28], Hayashi).
  • Conversely, in households making $250,000 or more, “2 in 3 people use Apple phones, and less than 1 in 3... use Android phones” ([04:28], Hayashi).

4. Industry and Consumer Group Responses

• Consumer advocates: Generally praise Google's decision as a consumer protection measure ([05:18]).
• Online Lenders Alliance:
  • See the move as unfair to “perfectly legal businesses and their products.”
  • Warn that it could “endanger consumers by sending them to illegal loans that could charge much higher interest rates or fraudulent products” ([05:25], Hayashi).

5. High Interest Rates in Payday Loans

• Many payday loans charge astronomical rates:
  • “A number of payday loans charge interest rates that could exceed 3, 400%” ([05:57], Hayashi).

6. Broader Issue: The Role of Big Tech in Regulating Access

• Raises a debate about whether large tech firms should influence legal but controversial markets.
• Examples:
  • Walmart and Dick’s Sporting Goods restricting gun sales.
  • Big banks limiting business with private prison operators ([06:21], Hayashi).

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Notable Quotes & Memorable Moments

• On Google's intent:

  • “Google says that they wanted to protect consumers from what they call deceptive and exploitative loan terms.”
    — Yuka Hayashi ([03:09])

• On the effective ban:

  • “Imposing a rate cap of 36% effectively shuts out payday lenders from the market.”
    — Yuka Hayashi ([03:35])

• On Android demographics:

  • “Over 50% of [households making $25,000 or less] use Android phones... 2 in 3 [high-income] people use Apple phones.”
    — Yuka Hayashi ([04:28])

• On potential unintended consequences:

  • “The action could endanger consumers by sending them to illegal loans that could charge much higher interest rates or fraudulent products.”
    — Yuka Hayashi ([05:25])

• On how high payday loan rates can go:

  • “A number of payday loans charge interest rates that could exceed 3, 400%.”
    — Yuka Hayashi ([05:57])

• On tech companies shaping access:

  • “This action comes at a time when there’s... a lot of debate over the role of companies that have very large market shares and have the ability to influence customers' shopping behaviors.”
    — Yuka Hayashi ([06:21])

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Timeline of Important Segments

• 02:50 – Introduction to the Google ban and its details
• 03:09 – Google's stated reasoning and mechanics of the ban
• 03:35 – The effective shutout for payday lenders
• 04:07 – Google's prior actions against payday loan advertising
• 04:28 – Demographic analysis of Android vs. Apple users among payday loan borrowers
• 05:25 – Industry pushback and warnings about unintended consequences
• 05:57 – How high payday loan interest rates really go
• 06:21 – Broader issues: tech giants’ roles in regulating legal, controversial products

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Summary Takeaway

Google's move to ban high-interest payday loan apps from its Play Store is a major development in the intersection of tech, finance, and consumer protection. While seen as a protective measure for vulnerable borrowers—who disproportionately use Android devices—it raises questions about the power of private companies to police access to legal, if controversial, products.

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Transcript

[Narrator]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. [e-mail] WashingtonWise.

[Charlie Turner]

Here's your money briefing. I'm Charlie Turner at the Wall Street Journal in New York. Google is banning payday loan apps from its app store. J.R. whelan will talk about this in a moment with Wall Street Journal reporter Yuka Hayashi. First, here are some top money stories. Travelers looking for deals on flights this holiday season may be out of luck Major airlines are still dealing with the fallout from the grounding of the Boeing 737 Max airplanes, and that means fewer plan planes. The FAA grounded the 737 Max after it was implicated in two separate crashes, and the agency still hasn't said when it expects the planes to fly again. Many airlines have opted to remove 737 Max planes from their schedules through early 2020 and have now had to rebook passengers on other flights or cancel some trips entirely. This may put pressure on airlines to raise prices this holiday traveling season as they operate at reduced capacity with increased demand, experts say. Book early, be flexible with dates, or choose a carrier that Doesn' have the 737 Max in their fleet. It looks like gold is the new black when it comes to debit cards. The Royal Mint, which makes UK bank coins, launched its first debit card for the ultra rich. Made of 18 karat solid gold, the card itself costs over $23,000. Demand for precious metal cards has been growing in popularity. In August, Apple launched a titanium credit card. However, some people took to Twitter to express outrage about the cost of the card and the excess they say it represents. What would Jesus buy? The Wall Street Journal says biblically responsible investing is booming as investment managers who are losing assets to index funds strive to find new niches. Whereas many socially responsible investors favor companies that recruit LGBT workers or donate to Planned Parenthood and the like, biblically responsible investors shun companies that profit from or support abortion, pornography, gambling or LGBT people. The latest sign of the rise of faith based investing was the launch of the Inspire International ESG Exchange Traded Fund on September 30th. Its ticker symbol WWJD, short for the popular expression what Would Jesus Do?

[J.R. Whalen]

Google has banned high interest consumer loan services from its app store and and that limits payday lenders access to its customers using Android phones. Wall Street Journal reporter Yuka Hayashi joins us with details. So, Yuka, Google actually instituted this ban in August. Why did they ban the payday lenders from its app store?

[Yuka Hayashi]

Well, Google says that they wanted to protect consumers from what they call deceptive and exploitative loan terms. What Google is doing is to ban apps from their app store that consumer loans that charge interest rates of 36% or higher.

[J.R. Whalen]

So they've set that line as a threshold of 36%.

[Yuka Hayashi]

Yes, that's right. There are consumer loans that charge less than 36%. But in order for what we have viewed as payday lenders to survive, the interest rates must be much, much higher than 36%. So imposing a rate cap of 36% effectively shuts out payday lenders from the market.

[J.R. Whalen]

Now, this isn't Google's first action against payday loan companies, right?

[Yuka Hayashi]

That's right. In 2016, Google came out and said that they are going to ban advertising for payday loans from their browser. And at that time, they also drew some criticism from the loan industry.

[J.R. Whalen]

What is the relationship between the use of Android phones and who payday loan companies typically target?

[Yuka Hayashi]

So there is a lot of overlap between borrowers of payday loans and users of Android phones. According to research from a data research company called comScore, less than a third of consumers from households making $25,000 or less use Apple phones, where because over 50% of those consumers use Android phones. And if you look at the other end of the spectrum and look at consumers from households making $250,000 or more, basically 2 in 3 people use Apple phones, and less than 1 in 3 consumers use Android phones.

[J.R. Whalen]

Consumer advocates praised Google. But the online lenders alliance that represents large lenders, they had a very different view.

[Yuka Hayashi]

Yes, that's they see Google's action as unfair. They say that they punish perfectly legal businesses and their products. And also they feel that the action could endanger consumers by sending them to illegal loans that could charge much higher interest rates or fraudulent products.

[J.R. Whalen]

So the feeling is that they could send them to places that charge more than, in some cases, 30, 35%.

[Yuka Hayashi]

That's right. And actually, a number of payday loans charge interest rates that could exceed 3, 400%. A number of them charge extremely high interest rates.

[J.R. Whalen]

You know, Google banning these payday loan apps raises a broader issue about large corporations influencing markets for products that are controversial, but they're legal.

[Yuka Hayashi]

That's right. This action comes at a time when there's a lot of debate over the role of companies that have very large market shares and have the ability to influence customers shopping behaviors. One example is retailers like Walmart and Dick's Sporting Goods restricting the sale of firearms. Another example is large banks like bank of America and Morgan Stanley limiting doing business with companies that run private prisons and detention centers.

[J.R. Whalen]

All right, that's Wall Street Journal reporter Yuka Hayashi joining us from our Washington bureau. Yuka, thanks for coming on the show.

[Yuka Hayashi]

Thanks for having me.

[J.R. Whalen]

And that's your money briefing. I'm JR Whalen in New York for the Wall Street Journal.

[Narrator]

This episode is brought to you by Charles Schwab. Decisions made in Washington can affect your portfolio every day, but what policy changes should investors be watching? Washington Wise is an original podcast from Charles Schwab that unpacks the stories making news in Washington right now and how they may affect your finances and portfolio. [e-mail] WashingtonWise.