In May, it became public knowledge that Google was updating its advertising policy, restricting AdWords campaigns for personal loans (i.e. anything with a repayment term of less than 60 days) and mandating additional disclosure of certain information. Given the current focus on broker commissions, could there be something else on the horizon?
On the surface, this appears true to form in regards to Google’s public policy and they are within their rights to set the policies for their platform. But does Google know better than the Australian government?
Where does the Commonwealth government stand?
The NCCP Act, which all brokers and lenders need to comply with, took four years of consultation and review before becoming law and it is now going through a mandated two-year review. These robust and consultative processes are designed to give balanced and sustainable outcomes for consumers and industry.
From this process, and since July 2013, the minimum terms for a small-amount loan (from a non-ADI) has been of 16 days. Plus, a small-amount credit contract (SACC) has price caps, debt spiral protections, additional disclosure requirements and mandated dispute resolution schemes which have been adopted by industry and have led to more transparent practices for consumers.
Despite this, Google feels that these protections were insufficient and that it was necessary to impose additional consumer protections (i.e. a Googlation) around loan terms and interest rate caps, despite there being no interest charged.
How and why these changes are being made?
In discussing these changes with Google, they insisted that consultation had been undertaken to assess the impact locally. However, the National Credit Providers Association that represents small-loan providers across Australia (disclosure: I am chairman of this body) must not have appeared in their search, as no contact was received. Ah, the irony.
Google assured us that the intent of the change is consumer-oriented, yet their venture capital arm Alphabet invests in a company called LendUp that offers short-term loans at high interest rates and competes with payday lenders in the US, so it’s hard to be totally convinced. Apparently the relevant LendUp ads will be blocked too, which is at least consistent.
What are the longer-term implications?
As the managing director of an online business, I am appreciative of what Google has enabled consumers and businesses to do online. However, I cannot help but look forward 10 years (around the same time that Google has been significantly involved in consumer online search) and see a growing tension between current authorities and these emerging centres of power.
With factors like Googlations coming from left field, it’s a timely reminder that diversification is critical, whether it be investments, products for customers or, in this case, customer acquisition channels.
Paul Walshe is the managing director of PL Broker, providing personal loans to everyday Australians and a dedicated service to brokers, and the chair of the National Credit Providers Association, where he is committed to establishing understanding and acceptance of the micro-lending industry in Australia.