Friday, May 20, 2016

"Google Bans Payday Ads, but Also Backs a Payday Lender" (GOOG; EVIL)

From the Wall Street Journal:

LendUp specializes in short-term, small-dollar loans with annual percentage rates generally in the triple digits
Google announced this month it would ban payday-loan ads. One wrinkle: It is an investor in a payday lender.

GV, the venture-capital investment arm of Google’s parent company, Alphabet Inc., has been investing in online lender LendUp since before the startup launched in 2012. The company provided capital for every equity round LendUp has since done.

Last week, Google announced it was banning payday-loan ads from its site in response to growing consumer-advocate concerns about the lending practice. The Consumer Financial Protection Bureau is expected to release proposed rules for the payday-loan industry this spring that could wipe out a large share of that industry.

The CFPB defines payday loans as short-term loans, generally for $500 or less, that are typically due within 45 days. San Francisco-based LendUp offers those types of products, but says it is an alternative to payday lenders for several reasons including that it doesn’t charge early-payment penalties or roll over loans when borrowers don’t pay them back, practices common in the industry.​
Even so, the company acknowledges it will be affected by Google’s ad ban.

“We do worry about how this will play out and think it paints with too broad a brush,” said Sasha Orloff, LendUp’s chief executive. LendUp, the moniker used by Flurish Inc., said the Google ad ban could make it harder for the company to market its loans and that the firm will have to change its strategy for attracting new customers.

LendUp is among the most well-funded lenders in recent years, having raised $150 million in debt and equity earlier this year despite a broad pullback in new money for financial-technology startups. Its other backers include Andreessen Horowitz, Kleiner Perkins Caufield & Byers and QED Investors.

The Silicon-Valley-backed firm specializes in mostly high-cost loans geared to borrowers who can’t get financing from banks. LendUp offers borrowers short-term, small-dollar loans with annual percentage rates generally in the triple digits that can run higher than 600%. Borrowers’ repayment periods can be seven to 45 days, depending in part on their state.

The lender wasn’t involved in Google’s decision, which takes effect July 13. The ad ban also affects traditional payday lenders including tribal lenders tied to Native American reservations that can skirt state laws and are frequent advertisers on Google....MORE