A consumer watchdog group says that Google should donate the “tainted revenue” it received from businesses tied to a recent investigation involving multiple mortgage scams advertised online.
The news came after a government agency that investigates mortgage fraud related to the Troubled Asset Relief Program said on Wednesday that Google had suspended advertising relationships with more than 500 Internet advertisers tied to 85 online mortgage fraud schemes.
The schemes included asking homeowners for an up-front fee, telling homeowners to stop paying their mortgage, diverting mortgage payments, transferring property deeds and releasing other personal financial information.
Christy Romero, a TARP special inspector, commented on the web’s role in the scams. “The first place many homeowners turn for help in lowering their mortgage is the Internet through online search engines, and that’s precisely where they are being taken advantage of and targeted,” she said in a press release.
A spokesman for the Office of the Special Inspector General for the Troubled Asset Relief Program would not provide any additional information, saying that the broader investigation into the fraudulent mortgage scams is still ongoing.
A Google spokeswoman said, “Google is pleased to cooperate with TARP as we do with other government agencies. In collaboration with law enforcement, Google bans not just ads but also advertisers who seek to abuse our advertising system to take advantage of users.” Google would not provide any additional details on the investigation.
But Consumer Watchdog, a consumer advocacy group, was quick to accuse the search giant of turning a blind eye to the fraud.
“The company cannot be allowed to benefit from these ill-gotten gains. Google must donate the money to aid homeowners who were victimized because of its callous quest for profits,” said John M. Simpson, director of the group’s Privacy Project, in a press release on Wednesday.
Last February the group produced a report that said that Google was profiting from deceptive advertising to homeowners. The report, entitled “Liars and Loans: How Deceptive Advertisers Use Google,” counted 20 foreclosure rescue or mortgage modification companies advertising on Google search results pages between September 10 and September 30, 2010. “Google’s practiceâ€© ofâ€© sellingâ€© primeâ€© advertisingâ€© spaceâ€© toâ€© dubiousâ€© loanâ€modification â€©marketers â€©is â€©extensive,” said the report.
“One thing is clear,” Simpson told Digits yesterday, “These advertisers were able to have scams go on because Google allowed it to happen.”
Consumer Watchdog maintains Inside Google, a web site critical of some of the search giant’s actions. Last year the group attracted attention when it ran a Times Square JumboTron advertisement depicting then-CEO Eric Schmidt as an animated ice cream truck driver. “Remember, we put the ‘ogle’ in ‘Google’,” he tells children.
Simpson told Digits that the group is partly motivated in its Google criticism by the hope that influencing Google practices on matters such as online advertising and privacy will help sway the industry.
The Google spokeswoman would not comment on Consumer Watchdog charges, but in a statement added that Google has a “natural long-term financial incentive to make sure that the advertisements we serve are trustworthy so that users continue to use our services, and we aren’t afraid to take aggressive action to achieve that goal.” The Google spokeswoman pointed to two separate occasions, in 2009 and 2010, where the company sued rogue advertisers.
In August Google did agree to pay $500 million to settle a U.S. criminal probe into whether the company knew of and allowed Canadian pharmacies to run ads targeting U.S. consumers on Google search. It is illegal for foreign pharmacies to ship prescription drugs to customers in the U.S.
The investigation contended that Google knew it was violating U.S. law since at least 2003, but did not take action to ban the ads until 2009. Google has since instituted a policy to run ads from druggists with certification from U.S. state pharmacy regulators.
Yesterday’s announcement underscores the dangers online advertising fraud presents not only to consumers but to companies like Google which are increasingly dependent on the ad revenue. Last month, Google posted a 26% rise in third-quarter profit from the year previous, fueled by record spending in online advertising, the Wall Street Journal noted at the time.
Overall Internet ad revenues in the U.S. reached $14.9 billion in the first half of 2011, an increase of 23% from the first half of 2010 according to the Internet Advertising Bureau.
The Google spokeswoman told Digits that the company has strict policies covering the content of ads and the sites these ads take users to. The company also bans ads and advertisers that abuse its advertising system and it involves law enforcement when appropriate. “In addition, we educate users on the importance of online safety through educational series and resources because we take this issue very seriously,” she said.
Fraud involving online advertising is not just about bilking customers. Last week the U.S. charged seven people in a click fraud scheme that generated million of dollars from advertising brokers who thought they were paying for legal ad placements. The scheme also infected more than four million computers worldwide with malicious software.