A Payday For Google’s Moral Posturing
Facebook has come under sharp criticism from conservatives following allegations from former contractors that employees censored right-leaning stories and media outlets from Facebook’s news feed. Not to be outdone, Google has decided to wear ideology on its sleeve and ban ads from certain legal businesses—and the company may actually profit, too.
Google announced last week that it will ban all advertisements for payday loans from its ad system starting in July. The move “is designed to protect our users from deceptive or harmful financial products,” according to Google. But that appears to be mere cover for more base motives.
While payday loans have received criticism from liberal activists for allegedly preying on the lower class, experts have found that this is anything but the case. The assistant vice president in the Federal Reserve Bank of New York and several academics recently noted, “Except for the ten to twelve million people who use them every year, just about everybody hates payday loans.” Their analysis found that many of the common criticisms are misleading or incorrect. For instance, while payday loans have an annualized percentage rate of 400 percent, the loans are not meant to be yearlong—they’re short-term. They also cite research finding that payday loans don’t, as alleged, target minorities. Payday loans are simply ways for (generally) low-income people to get money who don’t have the credit to get loans from traditional lenders.
If people who use payday loans appreciate the service, then what’s the big deal to Google? It turns out there’s a financial incentive to Google’s ban on payday ads: Google has invested in competing startups. Google Ventures (now known as “GV”) is the investment arm of Google. The firm led initial investment totaling $14 million into LendUp, a site that advertises itself as an “alternative” to payday loans. While the new Google policy against payday loans prohibits “ads for loans where repayment is due within 60 days of the date of issue,” LendUp offers 30-day loans where “good credit is not required.”
Google Ventures also backs On Deck, which offers business loans, while Google has backed Lending Club, which offers peer-to-peer lending. This information isn’t disclosed in Google’s announcement that it’s banning payday loan ads, even though it’s a clear potential ulterior motive.
Google isn’t the only opposition to payday lending that has skin the game. Much of the anti-payday criticism comes from a nonprofit called the Center for Responsible Lending. CRL has been a leading naysayer against payday loans in public and in pressuring federal regulators at the Consumer Protection Financial Bureau to crack down on payday loans.
CRL’s parent organization is the Self-Help Credit Union, which offers loans and other financial services and would benefit from payday loan elimination. CRL employees have left to go work at CFPB; the agency “worked hand-in-hand” with CRL in crating regulations, according to Politico. CRL is also funded by a number of banks and mainstream financial institutions that could benefit from elimination of payday loans.
No one would bat an eye if Google (or Facebook, or another company) cracked down on ads for illegal substances or activities like prostitution and drugs. But Google is discriminating against an entire financial sector that is offering a legal product that many Americans use to help with short-term financial issues.
Ironically, while Google is wringing its hands over small loans, the search engine company is continuing to facilitate illegal activity. Google the latest blockbuster movie and the word “torrent” and you’ll see a host of sites turn up offering illegal downloads. Sites that illegally stream content are readily available on Google’s search engine results.
Can Google police all of this? Probably not. Should it try? Debatable. But instead, Google is focusing its resources on blacklisting legal businesses and perpetuating misinformation about short-term loans for people who don’t have the credit to access money through traditional institutions.
Google has a corporate motto of “Do the right thing.” Based on Google’s new policy, its motto should come with an addition: “Unless we can make a buck.”
Jeffrey H. Joseph is a business professor at George Mason University and the George Washington University School of Business.