Google’s Payday Ad Ban Hurts Alphabet-Backed Online Lender

Google’s parent company Alphabet has put itself in quite the conundrum.

Earlier this month, Google announced its plans to ban payday lender ads, citing the number of controversies surrounding pitches by financial loan services, particularly payday loan companies, that have been viewed as deceptive.

Now, however, Google has found itself in a bit of an awkward position. It appears GV, which is the venture-capital investment arm of Google’s parent company Alphabet, has a vested interest in promoting an online lender. Why?

Because it is an investor in the online lender LendUp and has been before the company launched in 2012. And from the sounds of it, Google is a pretty major investor since it’s been involved in every equity round, according to The Wall Street Journal.

Google’s announcement showed that it had updated its AdWords policy to effectively ban advertisers from marketing a number of lending products starting July 13. This ban by Google includes loans that have repayment dates that hit within 60 days of being issued. It also includes loans with an APR of 36 percent or higher in order to avoid promoting loans considered predatory.

In the post, Google’s director of global product policy, David Graff, stressed that good ads have the potential to connect consumers to “interesting, useful brands, businesses and products.” But some ads, which could have deceptive or harmful messages or products attached to them, don’t align with the type of ads that Google wants to enable on its site. Google disabled more than 780 million ads for various reasons in 2015, which included everything from counterfeiting to phishing.

As for the Alphabet-backed company, it appears that LendUp remains among one of the more popular companies, funding wise, in the past few years. It raised $150 million in debt and equity in early 2016 amid the tough time for the FinTech sector to raise new funds.

But there may be one caveat that helps Google, and Alphabet, in this case. The company says that it is an alternative to payday loans since it doesn’t have the same fee structure as a traditional lender, which is why it categorizes itself as a multi-product company that offers a path out of payday. This company says it doesn’t charge the same type of deceptive penalties that other similar companies in the industry do. What it does share in common, however, is that it offers shorter-term smaller loans with APRs that can run high.

That’s where it may hit issues with Google’s new policy. LendUp has acknowledged that it will be impacted by the ban.

“We do worry about how this will play out and think it paints with too broad a brush,” Sasha Orloff, LendUp’s CEO told WSJ. He also said the company may have a harder time advertising its loan products as a result.

“Even though we were surprised by the announcement and would take a different approach, LendUp and Google agree on a fundamental fact: The current payday-loan industry is bad for Americans,” Orloff wrote in post expected to be posted on the company blog that was provided to WSJ. “Google is applying pressure from the outside, and we applaud them. LendUp is trying to change the system from the inside.”