The Conflicted, Misleading, Incompetent Better Business Bureau

Grade inflation at the BBB!!!

Grade inflation at the BBB!!!

I don’t know who or what persuaded CNN to set its sights on the Better Business Bureau, but we should be glad it did. Its first revelation, which I knew about, was how the non-profit BBB is funded by the same businesses it purports to rank. Depending on the size of a business, the BBB demands membership fees ranging from hundreds of dollars to more than $10,000 a year. Members can also pay for plaques announcing their accreditation, BBB seals of approval for their company’s websites, and ads. This is not just a conflict of interest, but a classic one, as well as a system that creates an appearance of impropriety.

Joseph Ridout, a spokesperson for watchdog group Consumer Action, agreed that  this structure, where the BBB is “funded by the dues-paying businesses and not the consumers,” presents a “serious conflict of interest.” The BBB, however,told CNN that its membership dues have nothing to do with the ratings companies receive. Of course! And members of Congress don’t tend to vote the way their biggest donors want. Stop being so cynical!

CNN found other money-making schemes that suggest that the Better Business Bureau’s best business is its own, but that’s nothing compared to the real bombshell: CNN’s investigation found more than 100 businesses that had ratings of A- or higher despite having serious actions taken against them by government regulators in the past year. Some were scams and  have been shut down, others were required to pay multimillion dollar penalties, still others have had to pay damages in government lawsuits. Yet they had great ratings. CNN’s broadcast today featured some of the most egregious examples:

  • A mortgage broker charged by federal regulators with discriminating against minority borrowers.
  • A financial firm accused in an ongoing federal lawsuit of preying on seniors.
  • A medical testing company that settled charges of paying kickbacks to doctors.
  • A credit company that victimized service members with illegal debt collection lawsuits.
  • A vitamin maker that sold  supplements it said could treat symptoms of autism,until the government told them that there was no data backing up their claims.

These companies and others equally slimy sported the BBB’s highest A+ or slightly lower ratings when CNN started investigating the BBB’s rating system earlier this year. After CNN inquired about these strangely generous grades, the BBB lowered all but one.


Incredibly, BBB officials protested to CNN that high ratings weren’t as reliable or important to consumers as low ratings. Ah, well…wait, WHAT? So a crooked bunch of scam artists might get a high rating, but least we know the ones that don’t must be really horrible.

The only conclusion one can reach from the CNN expose is that the Better Business Bureau lacks integrity, competence and credibility, cannot be trusted, and thus is absolutely worthless.

10 thoughts on “The Conflicted, Misleading, Incompetent Better Business Bureau

  1. Maybe you’re better off using Yelp. Although the contractors do pay something to get listed higher in their list of businesses, the posted feedback from the public usually seems to be legitimate.

  2. This reminds me of how I first stumbled onto Jack’s website. I found it fishy the American Society of Civil Engineers was being cited as the authority on the condition of America’s infrastructure when they would be among the primary beneficiaries of the work required to improve that condition. Sure enough, Jack was on it.

  3. I am waiting for them to hire some of the excuses we have come to expect from politicians.

    “We only rate the quality of the service. We have no way of rating the quality of the products they sell.”

    “Although the company did pay kickbacks, those kickbacks were to ensure better service for their customers, thereby deserving an excellent BBB rating.”

    “Although the company may have turned away customers illegally, we only rated the service to the customers they accepted. In hindsight, that might have not been the best choice.”

    • The BBB is meant to be a group of peers that hold each other accountable. It is called the “Better Business” Bureau, rather than the “Consumer Advocate” Bureau for this reason. That the bureau appears to be failing its mission is very distressing.

      That BBB members pay dues should not, at least in its earliest incarnation, be a conflict of interest. Many professional organizations among individuals charge dues, and membership in such organizations is loosely translated into a mark of prestige and skill. These voluntary organizations have internal mechanisms, whereby they collect complaints against members, and give out penalties up to or including suspension or expulsion from the membership. They also collect nominations for various awards to highlight excellence in their fields. These awards may or may not be open to non-member recipients. Viewed through this lens, the BBB’s structure is quite ordinary.

      Its current incarnation, however, is problematic. It advertises itself as a consumer watch group, but has not fundamentally changed its membership structure. It relies primarily on consumer complaints filed with it in its ratings, but this leads to biases, as the businesses that exploit their customers do not necessarily serve the demographics that check and submit and complaints listed with the BBB.

      I was once in the market for a used car, and found a car for a good price, from a dealer with an A+ rating from the BBB. When I got to the dealer, I realized that it was in a poorer section of town, and seemed to serve an Hispanic clientele. The car turned out to be a piece of junk, sold for the price of junk. I do not know if that car was indicative of the overall quality of vehicle sold there (I suspect a reputable dealer would have junked it), but the company’s primary clients are not necessarily aware of the BBB, and thus the business’s rating might be inflated due to a lack of complaints. If the owners at a minimum stayed out of trouble with the law, the BBB has other mechanism to get information.

      The membership structure, dues paying members, reinforces this bias, however subtly. If a company pays its dues, and gets no complaints, it simply looks good in the eyes of the BBB agents. No shenanigans are necessary for such a business to get or keep a top rating.

      The danger lies in the details of organization’s charter. Up front, I know little, so will only speak in generalities. If the organization is cooperative, and members vote for officers, highly rated members would be obvious choices. This may include artificially high members. These officers, and/or board members, may then steer outreach efforts away from their customers, contributing to the ratings vacuum, and corrupting the organization.

      Why are voluntary bar associations, engineering associations, accounting accrediting organizations, etc, immune to this? They are not. These organizations carry prestige only because they have remained trustworthy, and the moment that trust is broken, they are useless. Perhaps the BBB placed itself in the latter.

      • I think you are right that charging a fee for membership doesn’t automatically make it a conflict of interest. Charging a variable fee, however, is different. If the BBB said, “If you want to be a BBB rated business, fill out this form and pay $50/year”, I would say that probably isn’t a conflict of interest. It isn’t the best model, but not terrible. The fee requires a lot of businesses to sign up and losing a big business is the same as losing a small business. As long as there are enough good businesses willing to sign up, you can stay in business even if every business with a complaint leaves. In fact, that would be the ideal scenario and would make mere membership in the BBB valuable for the good businesses who are members. When you start charging variable membership fees, however, the dynamic changes. Under the ‘one fee for all’ model, if GM leaves, you lose $50/year in revenue, same as if “Shady Steve’s Sausages and Septic Service” gets a bunch of complaints. If GM pays $50,000/year however, you may not be able to afford offending them.

        • When you start charging variable membership fees, however, the dynamic changes. Under the ‘one fee for all’ model, if GM leaves, you lose $50/year in revenue, same as if “Shady Steve’s Sausages and Septic Service” gets a bunch of complaints. If GM pays $50,000/year however, you may not be able to afford offending them.

          The way professional organizations get around this problem is that each member is independently a member, although many employers reimburse membership. Large companies get to look good, by employing thousands of members, and if one misbehaves, both the company and the organization can sever ties.

          The BBB has no such ability to split a large member company into pieces. However, the larger cost big company’s pay directly represents the additional resources the BBB must expend to evaluate and facilitate consumer resolutions. Mom and Pop’s milk stand might get one complaint a decade filed against it. GM might get hundreds a year.

          The issue with its member structure is that the BBB portrays itself as a consumer advocacy group, when it is really a business advocacy group. It provides services to its members to help them maintain better business relationships with their customers.

          If it were doing a competent and ethical job at advocating for its client members, this would not be a problem. However, it is failing both members and costumers by not honestly rating seedy members with poor ratings. Unlike an attorney, that must zealously represent even the seediest of clients, the BBB’s fiduciary duty is to associate its members with only the most ethical of other members. It is failing that duty.

  4. I once reported a missed service and dishonest fee from an Internet provider through the BBB. My choices ended up being to pay 20% of what they were asking and mark the complaint as resolved or leave the complaint open and deal with collections. Since my time and sanity are worth more than that I took the deal, but I have never trusted their ratings since then.

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