A must-read investigative report on Better Business Bureau ratings

What does a Better Business Bureau rating mean? Not much, according to a expose from CNNMoney posted yesterday.

The article gives the following examples of businesses that sported an A+ rating on BBB:

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. And a vitamin maker that allegedly misled parents with claims that its supplements could treat symptoms of autism.

Although many consumers think of BBB as the go-to site for consumer information and complaints about businesses, CNNMoney portrays a very different type of site, in which the ratings and degree of scrutiny a business are not related to their performance:

Through its investigation into the organization and its practices, CNNMoney found that the BBB's rating system is seriously flawed — resulting in grades that appear to be arbitrary and change erratically.

And it's not just paying members that receive high ratings even though they are facing government actions — non-member businesses were also on CNNMoney's list. But the BBB claims to keep a closer eye on its paying members, holding them to a higher standard.

In many cases, more weight is placed on companies addressing complaints through the BBB's own system than any other factor — even government lawsuits alleging practices that directly violate the BBB's principles of membership like misleading advertising.

Meanwhile, consumer lawsuits aren't factored into grades at all, no matter how many there are against a single company.

And when it comes to government actions, the BBB sometimes deems a penalty so minor that a company can still maintain its A rating.

So is the BBB simply misleading consumers about the ratings it produces? Not at all, responds the BBB — the problem is that consumers misunderstand its purpose.

While many people view the BBB as a consumer watchdog or even a government agency, the BBB itself says this is a misconception. Instead, it views itself as a mediator between frustrated consumers and the companies they do business with, receiving nearly 1 million complaints each year from consumers hoping to achieve resolutions like refunds and repairs.

The BBB's defense of its procedures and CNNMoney's examples of incongruous-seeming ratings are worth examining in detail as consumers make up their minds about how much to trust BBB ratings and where to take their complaints with businesses. As the article contends, "millions of American consumers are counting on [BBB ratings] to be reliable and reputations of businesses all over the country are depending on them. Last year alone, company ratings were viewed on the BBB website more than 165 million times — a 25% jump from 2013" — so this is a question that matters a lot, both to businesses and consumers.

The whole piece is a must-read, here.

0 thoughts on “A must-read investigative report on Better Business Bureau ratings

  1. Steve Rhode says:

    This situation is not new. Since my first interactions with the BBB in 1994, there have been chronic problems and inconsistencies. Even as a consumer advocate and investigative reporter I once had to ask the BBB who I report the BBB to.
    There are plenty of companies I have written about who have government actions or serious complaints that have maintained high ratings. I’ve even informed the local BBB of consumer complaints and articles on my site to clue them in to what is going on only to be met with silence.
    But at the end of the day the situation comes down to this, in my opinion. While the BBB is clearly imperfect, there is a tremendous absence of any national resource to give consumers some idea about any company. The CFPB has taken a step forward with the open complaint database but consumers don’t do a lot of research and rely on a simple grade to make a determination. And the volume of complaints is not an indication about the quality of the company. If a company is big, they will have more complaints than a small company while the ratio of complaints to transactions is the same with both.
    So in the absence of something better the BBB, with all it’s foibles, is the best thing we’ve got.

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