The ban, which will come into force globally from 13 July, will cover loans that can be due within 60 days and, in the US, loans that carry an annual interest rate of 36% or higher.
In a blog post, Google’s director of public policy, David Graff, wrote: “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.
“This change is designed to protect our users from deceptive or harmful financial products.”
The ban will not cover mortgages, car loans, student loans, commercial loans or credit cards, said Graff, adding: “We’ll continue to review the effectiveness of this policy, but our hope is that fewer people will be exposed to misleading or harmful products.”
In a quote accompanying the announcement, Wade Henderson, the president and chief executive of the Leadership Conference on Civil and Human Rights, said: “This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending.
“These companies have long used slick advertising and aggressive marketing to trap consumers into outrageously high-interest loans – often those least able to afford it.”
Payday loans have come under scrutiny in recent years after an explosion in short-term lending following the 2008 financial crash. Problems experienced by some people in meeting payments have provoked concerns both in the UK and the US.
In 2014, tighter regulation was imposed on the industry in the UK, subjecting the market to regulation by the Financial Conduct Authority.
Russell Hamblin-Boone, the chief executive of the Consumer Finance Association, which represents payday lenders, said the move by Google would affect people’s freedom of choice.
“UK consumers enjoy a vibrant, highly competitive credit market and we will be interested to read the evidence that Google uses to justify overruling open market advertising of a legal, regulated industry to deny people freedom of choice,” he said.
“Short-term loans are a legal source of credit used by millions of people across the UK and the industry is highly regulated with a cap on the total cost of credit. Under such intense scrutiny the rogue firms have been driven out of the market and reputable lenders will only lend to people who can afford to borrow.”
This article was written by Jasper Jackson, for theguardian.com on Wednesday 11th May 2016 18.16 Europe/Londonguardian.co.uk © Guardian News and Media Limited 2010