So, a customer goes to a business to purchase a product. The business refuses to sell. The customer asks why. The business says, however politely, “Because we don’t approve of you.”
And the business gets in trouble, right florists, wedding hall operators and cake-bakers of America?
Actually, we’ll see about that. Google announced Wednesday it no longer would allow online or payday lenders to advertise on its websites. Online loans join firearms, explosives and illicit drugs as products the search engine giant refuses to tout. Facebook also bans selling ads to online lenders, but Yahoo and other providers still do.
It’s a problem for the industry if it can’t advertise on Google. It is by far the world’s largest search engine and the largest such collection of knowledge ever assembled. In the United States, Google controls between 65 and 70 percent of search traffic, more than 75 percent of paid search advertising and 95 percent of mobile searches. The company generated $30 billion on such ads last year, and the top-positioned response to any query draws 90 percent of all search-induced clicks on the Internet.
Moreover, it is both the online lenders themselves and middle men who find customers for the lenders for a fee who use Google advertising. Customers can still approach storefront locations, but online loans are the fastest-growing segment of the industry and now account for about 40 percent of the $40 billion per year Americans borrow from these firms each year.
It is interesting the ads banned by Google. Guns and payday loans both were targeted in what is known as Operation Choke Point, in which President Obama so abused regulatory powers to harass out-of-favor industries that Sens. Mike Lee, R-Utah, and Ted Cruz, R-Texas, had to introduce legislation to curb regulatory abuse.
There’s a slight hitch for Google. Lee calls the firm “a monopoly gatekeeper” of Internet information, and regulatory agencies are starting to look into what that means.
For one thing, Google is invested in Lending Club and LendUp, potential competitors to the online lenders it has planned to ban. If Google takes this action for competitive reasons, it could run afoul of the Federal Trade Commission.
In fact, Politico reported on May 11 that commission officials “are asking questions again about whether Google has abused its dominance in the Internet search market, a sign that the agency may be taking steps to reopen an investigation it closed more than three years ago.”
Senior antitrust officials at the FTC have discussed the matter in recent months with representatives of a major U.S. company that objects to Google's practices, according to sources with the company. The investigation is in its early stages, but the fact the FTC looked into this in 2013, declined to move forward but is now looking again should serve as a wakeup call for the firm.
Let’s hope it does. Two-thirds of Americans could not handle it if their car suddenly needed a $1,000 repair. Commercial banks long since have abandoned making loans of this type, so much so the Obama administration actually has toyed with the idea of creating incentives to get them back involved or allowing the government to offer small-dollar loans through the Postal Service.
Online lenders are like any other businesses – most identify customer needs and meet them with targeted services at fair prices. In many cases, their customers have nowhere else to turn. The horror stories get all the press, but the fact is 91 percent of payday loans are repaid, and more than 80 percent are repaid according to their original terms.
Sadly, according to the Washington Post, Google had taken some steps to limit payday loans, but it decided to go all the way at the behest of civil liberties and consumer advocacy groups, including the Leadership Conference on Civil and Human Rights. “This new policy addresses many of the longstanding concerns shared by the entire civil rights community about predatory payday lending,” Wade Henderson, the group’s president, was quoted as saying.
It’s smart of Wade Henderson to know when it’s appropriate for everyone else to take out a loan. It’s nice of him to urge Google to make it harder for people to find lenders.
But whatever he or anyone else thinks of payday or online lenders, the fact is they operate legal, indeed highly regulated, businesses. The authorities know exactly what they do and how they do it. And they know these businesses serve a need in their communities. They keep people from missing mortgage or car payments. They help people get the car fixed and get back to work.
Not wealthy people. Working-class people. The people Google and Wade Henderson think they’re helping.