Last week, the Better Business Bureau announced that it had officially expelled one of its local affiliates, the BBB of Southland, which served the greater Los Angeles area.
The expulsion stems back to a pay-to-play scandal unearthed in 2010 by the ABC News show 20/20. The investigation showed extortion-type practices applied to local businesses: Those that paid annual dues to the BBB were handed accreditation and A ratings, while those that didn’t play along were given subpar grades, even if they hadn’t received complaints. Most disturbingly, investigators were able to get accreditation and an A- grade for a fake, totally nonexistent business after paying a $425 fee to the local BBB. (The name of the dummy business was Hamas—yep, the same as the Middle Eastern terrorist organization.)
Katherine Hutt, a spokesperson for the Council of Better Business Bureaus, which oversees the 113 independently operated local BBBs around North America, characterized the Southland affiliate scandal as “an isolated situation.” Getting rid of the the rogue branch just proves that the BBB is “the leader in advancing marketplace trust between businesses and consumers,” said Carrie A. Hurt, president and CEO of the national Council of BBBs, in a press release. “We hold businesses to high standards for honesty, transparency, fairness and integrity, and we hold ourselves to those same standards.”
It’s certainly good that the Southland branch is no longer associated with the BBB. But the fact that it took more than two years to expel a branch that was basically engaged in open extortion is cause for concern. What’s more, a closer look at the BBB shows what appear to be built-in conflicts of interest throughout the organization. At the very least, the BBB certainly isn’t what many consumers think it is — some quasi-government combination of consumer advocate, watchdog, and complaint bureau. And even after jettisoning the bad apple in southern California, the BBB hardly seems fair and transparent.
What with the rise of online forums and user review sites like Yelp and Angie’s List, the services provided by the BBB would also seem to be increasingly irrelevant. But due to widespread concerns about the trustworthiness of online reviews, and the fact that the BBB clings to a reputation as some sort of “official” organization, consumers continue to reflexively turn to the BBB. The association announced that consumer inquiries had risen 20% from 2011 to 2012, and that the number of complaints made with the BBB by consumers against businesses rose 6%, to nearly one million. The numbers “demonstrate the trust that consumers place in us to give them good information, to steer them toward good businesses and away from bad ones, and to help them resolve problems when they arise,” said Hurt, who described the BBB brand as “more relevant than ever.”
Relevance aside, let’s clarify what the BBB is –and what it isn’t. In local Yellow Pages around the country, BBB affiliates are often listed under the category of “Government Offices.” Understandably, many consumers assume the BBB is an official government agency. But this isn’t the case. The BBB itself acknowledges the misperception on its blog, noting “We are not a government agency” as one of five facts consumers didn’t know about the BBB.
Another of these little-known facts about the BBB: “We are not a consumer watchdog.” While the BBB offers consumers many services—lists of popular scams to watch out for and such—the organization’s mission isn’t to have your back. From top to bottom, the BBB is funded by the annual dues paid by businesses it anoints with “accreditation,” which allows the companies to put those iconic BBB stamps of approval on their storefronts and websites. This fact raises obvious questions about an inherent conflict of interest: The organization’s customers are businesses, not taxpayers or consumers. How can the BBB serve as an honest broker between businesses and consumers when it is fully funded by one of these parties? Many argue that it cannot — that there’s a natural incentive to paint its paying clients in the best possible light.
Whether or not a business is accredited, it can be graded by the BBB. The grading system, ranging from A+ to F, is confusing at best, useless at worst. Business grades are determined by 16 factors, including how many complaints have been filed with the BBB against the business, and if and how the business responded. Notably, however, a business’s grade won’t necessarily be hurt if nothing much comes of a complaint and the customer is left unsatisfied. Rather, all that matters, grading-wise, is that the business responded and made a “good faith effort to resolve complaints,” according to the BBB. This means that a business could have a good grade even if it is the subject of lots of complaints, as long as the business dutifully responds — even in a pro forma way.
On the flip side, a business that is committed to handling complaints directly with customers in a substantive way, but does so outside the purview of the BBB, will get a poor grade because the BBB is not involved. So a company can have a B or C rating, or even an F, simply because it doesn’t play by the BBB’s rules, which include looping in the organization with complaint responses and providing the BBB with background information about the company.
The complaints system is also flawed because consumers usually can’t read the specifics of gripes from previous customers. It’s therefore impossible to get a sense of whether a complaint is legitimate, or if it’s coming from a crank who would probably never be satisfied. This reality is frustrating for businesses and consumers alike.
Sometimes, the grades make perfect sense. For example, a Detroit Free Press article recently highlighted a sketchy company that sells a product called WaxVac, which is advertised on TV, and which customers have complained about because of upsells on phone orders and excessive shipping fees ($38, all nonrefundable). The company has what seems like an appropriate D rating from the BBB.
But the system can also hand out grades in what seems to be a haphazard, unfair, or outright absurd fashion. In 2009, the Los Angeles Times’ David Lazarus did a random search of the BBB’s database of about 4 million North American companies. What he found was that the accredited businesses — even those that get numerous complaints — very often received higher grades than unaccredited companies with spotless complaint records.
Today, a Ben & Jerry’s in Maryland has had just one complaint in three years (resolved successfully), and yet it gets just a B rating, in part because “BBB does not have sufficient background information on this business.” Compare that to AT&T, which has received 22,474 complaints over the past three years at last check, yet gets the same B grade as the little Ben & Jerry’s shop.
In case you’re wondering, Bank of America gets an A (3,880 complaints in the last three years), Comcast gets a B- (13,231 complaints), General Motors gets an A+ (348 complaints), and, interestingly enough, the user review site Yelp also gets an A+ (816 complaints).
Even in cases where the grades generally seem fair, however, they probably don’t mean what you think. Unlike the reviews on Yelp or Angie’s, the BBB’s grades are not a reflection of customer experiences or the overall quality of a business. “We are not rating the products or services they provide,” said Hutt. Instead, business grades are mainly determined by “how they resolve customer complaints,” Hutt clarified.
But how often are complaints truly resolved? The BBB brags that it handled nearly one million complaints about businesses last year. How much time can BBB staffers devote to each of these grievances? Seconds? Perhaps a few minutes? There is more than one incentive to make complaints go away and not damage business grades. If a business’s grade drops too low, it will lose accreditation and the BBB will lose out on those annual fees.
A 2011 New York Times article pointed out examples of BBB complaints being closed—or not even registered—despite the fact that customers weren’t remotely happy with the behavior of the business at hand. When a complaint is deemed “closed” by the BBB, a consumer can elect for the BBB’s mediation services. But those services must be paid for by the consumer, resulting in a situation that, say, a customer must pay $70 in order to get $39 back on computer software that didn’t work as promised. This scenario works out well for businesses, which can maintain their good BBB grades and see their annual dues as money well spent:
It pays $550 a year in dues, and for that money, it puts between itself and its many unhappy customers a toll booth operated by no less an authority than the Better Business Bureau. And passage through this toll booth costs nearly twice as much as the product for which a refund is sought.
Because the BBB has no government affiliation whatsoever, it cannot shut down a business or force it to do much of anything. In Yelp reviews of the BBB, consumers and business owners alike call the organization “useless” time and again. Few businesses go public with criticism of the BBB because, among other reasons, there is a stipulation in BBB standards that lists the following as a reason a company can have its accreditation revoked: “Avoid involvement, by the business or its principals, in activities that reflect unfavorably on, or otherwise adversely affect the public image of BBB or its accredited businesses.”
In other words, complaining about the BBB can result in your business losing accreditation with the BBB. This is despite the fact that the BBB’s reason for existence is largely as a platform for lodging complaints. (Hutt says that the reason for this stipulation is to protect against the “BBB haters” who might pay for accreditation merely to bash the organization.)
So what is the BBB and its grading system useful for? The BBB is “not the best place to find out customers’ prior experiences,” according to Edgar Dworsky, who runs the consumer advocacy site ConsumerWorld.org. “You get a snapshot about a company’s reputation, boiled down to a letter grade, much like a credit score, but the detail is lacking.”
And is it worth complaining to the BBB about a business? Sure, so long as you keep your expectations low, says Dworsky. “My sense is that BBB complaints at many companies get special attention because of the implied threat of having a bad reputation/rating at the BBB,” Dworsky explained via e-mail. “Since it is so easy to complain online to the BBB, why not? Like chicken soup, it couldn’t hurt.”