“Don’t be bad,” proclaimed Google’s two founders, Larry Page and Sergey Brin, in the manifesto they released just before their company went public in 2004. Avoiding evil suggested a pretty low bar , but the vow itself – along with the founders’ boast that “our business practices are above reproach” was an invitation to find examples to the contrary. There have been numerous appointments, including the announcement in 2012 that Google would track its customers’ Gmail missives, web searches and YouTube usage, which has had the effect of helping advertisers target potential customers. (A big title proclaimed, “Google’s Broken Promise: The End of ‘Don’t Be Evil.’ ”)
Google still scans emails and tracks web searches. This is, in fact, its business model: your Gmail account and your search cost nothing; you pay for it by letting people advertise you based on keywords used in searches and emails. Among the company’s most profitable advertisers over the years have been payday lenders, those businesses that provide short-term loans, often for a period of only two weeks, at extremely high interest rates, usually at people so desperate for quick money that they accept slanderous terms and so poor that they are unable to repay the loan when it is due. Borrowers end up paying endless interest on a loan that never goes away. The typical online lender charges an annual percentage interest rate of around six hundred and fifty percent, according to a 2014 study by Pew Charitable Trusts. This same study, titledOnline fraud and abuse: Harmful Practices in Internet Payday Loans,” found that one in three customers said they had caught a lender making an unauthorized withdrawal from their account. Not surprisingly, ninety percent of complaints about payday lenders to the Better Business Bureau were about online lenders.
Google’s co-dependent role in the rise of the online payday loan industry arguably puts it at complete odds with its lofty view of itself. And last week, Google tacitly acknowledged this when it announced it would no longer sell ads to payday lenders. “Financial services is an area that we are watching very closely because we want to protect users from misleading or harmful financial products,” said David Graff of Google. As Google’s director of global product policy, Graff announced what he described as “an update to our AdWords policy.” (The company already refuses to sell ads to peddlers of counterfeit goods, illegal drugs, weapons, and “products or services that enable dishonest behavior.”) People will still be able to use the Google search engine to find a lender. online payday if that is their intention. But starting July 13, the company will no longer sell search terms to a company making a loan within sixty days or less. In the United States, the company prohibits advertisements from any lender charging interest rates greater than thirty-six percent per annum, regardless of the term of the loan. “This change is designed to protect our users from deceptive or harmful financial products,” Graff wrote.
Graff did not address the role the company had played as a reliable lead generator for the world’s most aggressive online lenders, allowing them to buy search terms (“credit counselors”, for example , or “late payments”) to attract potential customers to their sites. . Google even got into the online troubleshooting business itself when, in 2012, the company’s venture capital arm, Google Ventures, bought part of LendUp. This startup had credibility in Silicon Valley – a co-founder had worked at Yahoo and Zynga, and its investors include two of the valley’s brightest venture capital firms, Kleiner Perkins Caufield & Byers and Andreessen Horowitz. He promised to disrupt the payday industry by putting borrowers with poor credit on a better path. And yet, according to the LendUp website, the annualized percentage rate on his two-week, two-hundred-dollar start-up loan is three hundred and ninety-six percent. This puts Google in the delicate position of refusing to do business with a company partly owned by Google Ventures, now called GV, which is part of Alphabet, the holding company created by Google in 2015 to contain its various subsidiaries. (Alphabet passed on the “don’t be mean” slogan in favor of “do the right thing.”)
Google’s decision to remove payday lender ads will cost the company money. Google makes money by charging for clicks on ads that appear when you search for a particular term. Gathering data for its 2014 report, Pew purchased data from several web analytics companies and found that payday loan terms cost between $4.91 and $12.77 per click. This means that an online lender was probably paying Google more than five dollars for each person who clicked on one of its ads. Sean Murray, the founder of a financial services news website called deBanked, said the ‘loans’ category – which includes payday loans but also car and home loans – is the second most popular search category. Google’s most profitable. “Payday loans were one of Google’s most expensive ad word searches,” said Nick Bourke, who leads Pew’s low-cost loans project. The only search term he remembers being more expensive than “payday loans” was “bankruptcy” – which online payday lenders also commonly shopped for in search of customers who might be desperate enough to agree to the terms of their loan. .
Google’s decision came weeks before the Consumer Financial Protection Bureau released new payday lender rules. This industry now makes about forty-five billion dollars in loans each year in the United States alone, with online lending accounting for nearly forty percent of lending volume and almost half of the $8.7 billion in costs. Richard Cordray, the director of the CFPB, left no doubt as to his position on the matter when, in March last year, his agency announced that it would consider stricter regulations “to put an end to the pitfalls of debt that plagues millions of consumers across the country.” Although Google does not offer loans, its position as a platform or middleman could make it vulnerable, according to DeBanked’s Sean Murray in a blog post. , Murray wrote on a suit brought by the CFPB against a lead generation firm. The bureau acknowledged that the company was only a middleman, but blamed it for not properly verifying the sites to which it sent potential customers. Google could be vulnerable to the same charge and may have been keen to get rid of payday lenders before new rules were released.
Consumer groups generally focused on the positive when reacting to Google’s announcement. Keith Corbett of the Center for Responsible Lending, for example, called Google’s announcement a “crucial development” for fairness in financial services. Yet perhaps the strongest endorsement of the significance of the search giant’s decision came from Lisa McGreevy, president and CEO of the Alliance of Online Lenders. “This unprecedented abuse of power by a monopoly player should worry lawmakers at the state and federal levels,” McGreevy said. “It’s disappointing that a site created to give users full access to information makes arbitrary choices about which ads users are allowed to see from legitimate businesses.” Evil, it seems, is in the eye of the beholder.