When the news broke in October that Google had announced its crackdown on scam ads from debt settlement, debt management and credit repair services, I took notice. These services have long had a bad reputation in the financial services business — sometimes deservedly and sometimes not — and the fact that the world’s leading search engine has taken this stand could mark a real shift in how they’re marketed and ultimately, viewed by the public at large.
First things first: What, exactly, do the new rules entail? Recently, Google announced it would ban all ads for credit repair services and severely restrict those from debt settlement and management companies. According to Google, it will allow “ads promoting debt services only if the advertiser and provider of these services is an approved non-profit budget and credit counseling agency, as defined by 11 U.S. Code § 111.” They will also need to be certified by Google before placing ads.
So, while we applaud Google’s move to keep advertisers accountable, the new policy also begs a lot of questions. (Full disclosure: I’m the CEO of Resolve, a company that helps people get out of debt, though as a Public Benefit Corporation, we reject the practices and philosophies that have led to so much scrutiny of debt services businesses.)
How did we get here?
The short answer is that the proliferation of bad actors in the debt services industry began years ago. Yet lately, as U.S. consumer debt has skyrocketed, there’s been an uptick in stories in major media outlets about the risks when working with debt settlement companies. Notably, the Wall Street Journal reported that companies like these “seek out heavily indebted consumers with a promise to help them get out from under it. But regulators say these debt-settlement programs can leave customers worse off, facing high fees, damaged credit scores and unexpected income-tax bills.”
And just this summer, the Consumer Financial Protection Bureau (CFPB) settled a lawsuit with another debt settlement company accused of violating the Telemarketing Sales Rule and the Consumer Financial Protection Act of 2010. Basically, the CFPB said the company deliberately misled consumers about its fees and ability to negotiate with certain creditors. The suit settled — with that particular company agreeing to pay $25 million, though they did not admit any guilt.
Meanwhile, a UK-based nonprofit called StepChange Debt Charity has been working behind the scenes on a campaign to out debt settlement advertisers impersonating reputable debt charities in their Google ads. These advertisers are “clone firms” masquerading as nonprofits, but they’re actually companies that sell leads to the highest bidding debt settlement companies. And the leads are, you guessed it, people who are in financial distress and desperate for help from just about anyone — even those offering empty promises and even potentially misleading information.
So far this year, StepChange reported 83 instances of this kind of potentially deceptive advertising (on top of the 46 instances they reported in 2018). All of those ads were removed, but that didn’t stop many of the offenders from making simple adjustments to their ads to get in under the radar. Google’s new policy should make that much more difficult.
What happens next?
While the dust settles on this announcement (Google recently updated its financial products and services ad policy), my guess is that many in the industry are scrambling to come up with new strategies to get around the policy. As an example, consider what payday lenders did after Google banned ads for U.S. loans with annual percentage rates above 36% in 2016. The lenders reportedly found loopholes, of course, such as posting ads that linked to an altered version of the company’s homepage, which didn’t mention the high APRs.
Will unethical debt settlement and debt management companies create shell nonprofits in order to get around the rules? Will other digital channels follow Google’s lead? It’s worth noting that the financial services industry has one of the highest CPCs (cost per clicks) and CPAs (cost per actions) of any industry. It remains to be seen if other channels can put the interests of their users before the demands of their shareholders.