Google Payday Loan Ban Snags Google Ventures-Backed Start-Up

Here's a peculiar predicament. Google doesn't like payday lenders—you know, companies that charge people very high interest rates for fairly short-term loans. Google even went so far as to ban these "deceptive or harmful financial products" from its advertising systems going forward.

"We will no longer allow ads for loans where repayment is due within 60 days of the date of issue. In the U.S., we are also banning ads for loans with an APR of 36 percent or higher. When reviewing our policies, research has shown that these loans can result in unaffordable payment and high default rates for users so we will be updating our policies globally to reflect that," Google said in a blog post.

The twist? Google Ventures, which, like Google, is under parent company Alphabet, has actually been a long-time investor in LendUp—a start-up that offers short-term loans with high interest rates to those who can't otherwise secure financing from an alternate source (like a bank). As the Wall Street Journal notes, LendUp's loans typically have triple-digit annual percentage rates, with some even going as high as 600 percent depending on the loan and duration.

In a blog post, LendUp CEO Sasha Orloff acknowledges that ads for his company will be banned by Google. But that's not necessarily a bad thing—for now.

"Does it feel good to be lumped in with the industry? Well, not exactly. But the marketing of these products has to change to better protect consumers from deceptive practices, illegal products, and identity theft. If effectively enforced, Google's ban will push the payday loan marketing competition away from ads and toward natural search, where safer alternatives with quality content can shine," Orloff writes. "Obviously, I think that's good for LendUp?—?and good for Americans who are locked out of the banking system. We're proud of our work, and we're very happy to take the fight to a more reputable arena."

Google's ban, which goes into effect July 13, doesn't apply to Google's search results, just its advertising. LendUp will also be able to advertise some of its services, like long-term financing, without issue; short-term loans with high interest rates are out, though.

LendUp didn't have any say in Google's decision, nor did Google consult with Google Ventures prior to enacting its ban. As the Journal notes, Google did speak with a variety of industry officials when formulating its plan. And while Google's move might frustrate LendUp, it doesn't appear to have caused any (significantly) bad blood between the two entities.

"But the truth is even though we were surprised by the announcement and would have taken a different approach, LendUp and Google agree on a fundamental fact: The current payday loan industry is bad for Americans. Google is applying pressure from the outside, and we applaud them. Meanwhile, LendUp is trying to change the system from the inside, and we have evidence that our technology can create better products for the same customers," Orloff writes.

This article originally appeared on PCMag.com.