A small experiment intended to draw borrowers to the site drew hundreds of clicks from Google each day from people looking for cheap payday loans. Lenders approached NerdWallet with an offer to pay it $60 in commission on a $200 loan, knowing that many borrowers end up repeatedly rolling their loans over into new loans and paying effective annual interest rates well into the three figures.
“I asked them whether they would take the $60 and give that discount to the borrower, but they wouldn’t,” Zhang said. “Their business model is based on repeat customers, so if someone repays their loan, they don’t make money.”
Eventually, NerdWallet settled on a pro bono effort whereby it would earn no commission and send consumers only to nonprofit lenders with lower interest rates or to governmental organizations that offer short-term assistance. It began with links to 44 entities in California and Texas. The company plans to add more over time.
While NerdWallet will make no money in the short term from its payday-lending redirection, it is well aware that people in financial trouble now could be customers next year.
“If we do this well, we can rehabilitate people in a tough spot,” Zhang said. “In six months, when she needs a credit card or wants to start investing, she’ll come back. That’s the best type of bet that we can make.”