Personal loan apps which require repayment in full within 60 days from the date of issuance will not be allowed on the Google Play Store, according to its new developer policy. Additionally, apps for personal loans must disclose the following information in the app metadata:
- Minimum and maximum period for repayment.
- Maximum Annual Percentage Rate (APR), which includes interest rate plus fees and other costs for a year, or similar other rate calculated consistently with local law.
- A representative example of the total cost of the loan, including all applicable fees.
The policy also mandates that an individual can borrow money from one individual, organization, or entity to only on a nonrecurring basis; also, these loans cannot be used for financing the purchase of a fixed asset or for education.
Payday apps with an Annual Percentage Rate (APR) higher than 36% will also not be allowed on the platform in the United States. Apart from that, apps for personal loans in the United States must display their maximum APR, calculated consistently with the Truth in Lending Act (TILA). This policy applies to apps which offer loans directly, lead generators, and those who connect consumers with third-party lenders. Google Play Store also doesn’t allow apps that “expose users to deceptive or harmful financial products and services”.
Problems with payday loans apps
Payday loans are typically granted to low-income borrowers with bad credit, serving as a quick way to access much-needed cash in a pinch, however, with major strings attached. Predatory lenders place extremely high interest rates on these loans, which generally results in people racking up enormous amounts of debt.
This gets magnified when people can get short-term loans by using an app on their smartphone. Take the example of Earnin app, whose pitch seems quite straightforward: it allows people to access money they’ve already earned before payday; and in exchange, asks users to “tip” about 10 percent of the cash they receive.
However, critics of the app say that the company is effectively acting as a payday lender — providing small short-term loans at the equivalent of a high interest rate — while avoiding conventional lending regulations. Moreover, according to a New York Post investigation, users of Earnin who didn’t leave a tip appeared to have their credit restricted. Also, some of the the suggested tips equate to a 730% APR — nearly 30 times higher than New York’s 25% cap.
Google had banned payday loan apps ads on its search engine in 2016
Google had banned advertisements for payday loans on its search engine back in 2016. “Research has shown that these loans can result in unaffordable payment and high default rates for users,” Google’s product policy director, David Graff had written at the time.
Also, banning predatory payday loan apps from the Play Store might not be enough
While Google’s policy initiative seems like a step in the right direction, it might not be enough for stopping people from downloading these apps. By the very nature of Android, developers can choose to make available their app (.apk) on the internet, and users can download it directly from there, bypassing every policy that bounds developers on the Play Store.
It is also possible to have more than one app store on Android devices. Developers can make their app available on alternative app stores like Samsung Galaxy Apps and Opera’s App store.