How Better Business Bureaus Work

Better Business Bureaus handle consumer complaints. See mo­re business and corporation pictures.
©iStockphotoPeter Finney

­You go down to the local hom­e and garden store to buy a new lawnmower and the salesman talks you into a four-wheel-drive riding mower with a money-back guarantee. When the blade falls off a month later, you take the faulty mower back and ask for a refund. The salesman says you must have heard him wrong. The store doesn't offer money-back guarantees. "Maybe you should get a new hearing aid," he jokes. Should you call the Better Business Bureau (BBB)?

When asked whom they would contact if they had a problem with a major purchase, 40 percent of Americans said the Better Business Bureau [source: Marable]. In fact, more American consumers are familiar with the BBB, a private nonprofit organization, than with government regulatory agencies like the Federal Trade Commission -- 81 percent to 61 percent [source: Parmar].

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For more than 75 years, Better Business Bureaus have kept tabs on the trustworthiness of businesses and charities. Consumers consult BBB reliability reports, now completely online, a whopping 54 million times a year [source: Western Pennsylvania Better Business Bureau]. And nearly a million American and Canadian consumers file complaints through their local BBB annually to get help when things didn't go quite right in a goods or services transaction -- like the scenario with the shoddy lawnmower.

­BBBs trace their roots to a wave of false advertising scandals in the United States at the turn of the 20th century. Advertising agencies, trying to clear the name of their profession, established local vigilance committees, self-governing trade organizations charged with identifying a­nd correcting misleading ads. In 1912, advertisers formed the first national vigilance committee, which later changed its name to National Better Business Bureau [source: Wansley].

Today there are 128 regional Better Business Bureaus in the United States and Canada. A total of 400,000 North American businesses are accredited by the BBB, proudly displaying the BBB torch insignia in their windows [source: Council of Better Business Bureaus].

Let's find out how a business becomes a member of BBB, how the bureau handles consumer complaints and some of the biggest complaints against the BBB itself.

 

The Role of the BBB

If you have questions about a charity that you want to support, you can research BBBs Wise Giving guide.
If you have questions about a charity that you want to support, you can research BBBs Wise Giving guide.
Pete Gardner/Digital Vision/Getty Images

­­­­The 128 Better Business Bureaus (BBBs) in the United States and Canada represent unbiased sources of information on the trustworthiness of local businesses and charities. The bureaus collect information on more than 3 million North American organizations --private, public, nonprofit, online and offline -- and publish the data in reliability reports on businesses and BBB Wise Giving guides on charities.

The role of the BBB isn't to judge the quality of a company's products or services, nor is it to recommend certain companies over others. In this way, it's the opposite of a chamber of commerce, which exists to promote local businesses and lobby government for pro-business legislation.

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The primary job of the BBB is to make information available to consumers about businesses in their communities. Potential customers can find out which companies respond quickly and satisfactorily to consumer complaints, which companies have a history of ignoring or mistreating customers, and which businesses have received BBB accreditation.

BBB accreditation is the same as being a member of the local BBB. For a company to be accredited by its local BBB, it needs to comply with the bureau's ethics standards for advertising, consumer privacy protection, and overall honesty and integrity. An accredited company also must pay annual dues, which range from $200 to $10,000 a year depending on the size and nature of the organization [source: Parmar]. BBBs are financially supported almost entirely by member dues and corporate partnerships.

Better Business Bureaus collect information on all businesses -- whether they're accredited or not. BBBs also process consumer complaints against both accredited and nonaccredited companies. If a consumer is unsatisfied with how he was treated by a local business, he can either go online or call his local bureau and file a complaint. The BBB will forward the complaint to the business and initiate the resolution process. Better Business Bureaus claim to resolve 70 percent of consumer complaints.

The value and effectiveness of BBBs is based on trust, transparency and neutrality. In 75 years of service, Better Business Bureaus have built a brand name synonymous with trust. Seventy percent of consumers say they would be more likely to buy from a BBB-accredited business, and 84 percent of consumers believe that such accreditation means that a company meets high standards of trustworthiness [source: Council of Better Business Bureaus].

Better Business Bureaus claim to treat all parties equally in complaint investigations and disputes, regardless of whether they are dues-paying members, nonaccredited businesses or consumers. This neutrality, they say, is what makes them such effective arbitrators.

As we'll discuss in more detail later, some critics of Better Business Bureaus claim that it's impossible for BBBs to remain neutral because they're financially supported by accredited businesses and corporate partners. In other words, how can you serve both the consumer and the business owners equally if your existence depends on those same business owners?

Keep reading to find out exactly how businesses become accredited members of a Better Business Bureau.

Membership in Better Business Bureaus

A BBB representative may conduct a site visit to a business that's applying for membership.
A BBB representative may conduct a site visit to a business that's applying for membership.
Andersen Ross/Photodisc/Getty Images

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­Membership in a local Better Business Bureau (BBB) is the same as being accredited by a BBB. In 2007, the Council of Better Business Bureaus (CBBB) officially changed the title of "member" to "BBB accredited business" [source: BBB of Central New England, Inc.]. It's important to note that just because a business isn't accredited doesn't mean that it was rejected by a BBB. Application for accreditation is voluntary, and many business owners simply choose not to apply.

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To qualify for BBB accreditation, a business must fill out an application, pay membership dues and prove that it conforms with the local BBB accreditation standards. The National Council of Better Business Bureaus establishes minimum standards, but each local BBB can augment those standards with stricter policies.

To qualify for accreditation, a company must be in business in the local area for at least a year. There are exceptions for branch offices of companies that have been in business in the local area for more than a year, or for business owners who ran the same BBB-accredited business in another area.

As part of the application process, a company or charity must supply detailed information as to the nature and structure of its business. If the business requires a license to operate, then the company must prove that it has obtained all applicable state and federal licenses. The local BBB will ask for contact information and employment histories for all principal owners and officers and also for references like banks, other businesses and customers.

A representative of the local BBB might also visit the place of business to make sure that information in the application is correct. The representative might ask to see hard copies of licenses and examples of current advertising materials. Truth in advertising is still one of the central tenets of Better Business Bureaus, a carryover from their vigilance committee days, which we discussed earlier. The CBBB frequently updates a lengthy and detailed Code of Advertising to which all local BBB members must adhere.

BBB accreditation standards are different for businesses and charities. For businesses, the backbone of the BBB accreditation is the company's history of responding to consumer complaints. A company must show that it responds promptly to complaints as soon as they are received from the local BBB and that it does everything possible to resolve complaints according to good business practices [source: Council of Better Business Bureaus]. Many Better Business Bureaus also require accredited companies to agree to binding arbitration in cases where a complaint cannot be resolved through normal procedures.

BBB-accredited charities have to conform to a long set of rules and conditions stipulated by the BBB Wise Giving Alliance Standards for Charity Accountability. The fundamental principle of these standards is full disclosure to donors and prospective donors throughout the process of soliciting and spending charitable funds. The accountability standards specify, in great detail, how a BBB-accredited charity should be organized, how it should raise and spends its money and how it should measure its own effectiveness.

National businesses -- large organizations with offices or franchises in several states -- follow a different procedure for earning BBB accreditation. Rather than joining several local BBBs, national businesses are invited to become corporate partners of the Council of Better Business Bureaus. More than 200 national and global corporations like the 3M Company, HJ Heinz Company, Johnson & Johnson and others -- pay as much as $75,000 a year to be BBB corporate partners [source: Parmar and Council of Better Business Bureaus].

Any BBB accredited business, large or small, can lose its accreditation for failing to live up to BBB standards. In 2005, Cingular Wireless lost membership in an upstate New York BBB for failing to address 20 outstanding consumer complaints [source: Techdirt].

Keep reading to find out how consumers can find trustworthy businesses through their local BBB.

Research a Local Business through BBB

­A convenient way to research a business's reputation is through a Better Business Bureau.
­A convenient way to research a business's reputation is through a Better Business Bureau.
Andersen Wright/Digital Vison/iStockphoto

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­Better Business Bureaus (BBBs) make all of their r­eports available online. The easiest way to research the reputation of a local business is to visit the Web site of your local BBB. You can find that information by first going to BBB.org and entering your zip code. Once you reach your local BBB Web site, you can choose to research all businesses in your area or limit your search only to BBB-accredited businesses.

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There are several different ways to conduct your online research. You can search both accredited and nonaccredited businesses by name, phone number or Web site URL. There's also an option to search by type of business, limiting your results to businesses within a five- to 100-mile radius of your zip code. On most BBB websites, there's an option to limit search results to charities or to BBB-accredited businesses only.

By default, all local BBB searches include headquarters listings for national businesses and charities represented in your area. So if you search for Wal-Mart Stores Inc. in the Western Pennsylvania BBB search engine, you'll get a listing for the Arkansas headquarters of the superstore chain. And if you search for the American Red Cross, you'll get the charity's headquarters in Washington, D.C.

Once you find the business or charity you're looking for, you'll be presented with either a reliability report or a Wise Giving guide.

Reliability reports are for all businesses, whether they're BBB accredited, nonaccredited, for-profit, nonprofit, online or offline. A reliability report contains the following information:

  • The status and length of the business's BBB accreditation
  • A BBB rating (not all BBBs have the same rating system or criteria)
  • Contact information and business profile
  • Brief information about products and services
  • Licensing information, if applicable
  • Customer complaint history, including the total number of complaints, complaints broken down by type, and how many have been resolved
  • Any government action against the company
  • Any advertising reviews initiated by the BBB

As we mentioned above, not all local Better Business Bureaus use the same rating system or rating criteria. The most common systems classify a business as satisfactory, unsatisfactory or "no rating." A satisfactory rating means that all consumer complaints have been resolved in a manner that satisfies the customer. An unsatisfactory rating means that the company has a history and pattern of unresolved complaints [source: Calgary BBB]. A "no rating" mark could mean that there's not enough information on the company, but it's not always clear whether that's the case.

In an effort to make the rating system more transparent to consumers, several Better Business Bureaus have started to use a different system based on letters (AAA to F, or A+ to F). The Los Angeles BBB explains that a rating of AAA means the BBB has no reason to doubt the integrity of the business, while a rating of D or F means that consumers should be extremely cautious when doing business with the organization [source: Better Business Bureau of The Southland, Inc.]. Ratings are based on a composite of information in the reliability report with an emphasis on responsiveness to complaints and adherence to BBB standards [source: Mulkins].

Wise Giving guides don't include ratings but do indicate whether a charity is accredited by a BBB. Wise Giving guides compare each charity's behavior with the BBB's 20 Standards for Charity Accountability. If a charity doesn't meet one or more standards, the Wise Giving guides will indicate which standards it failed to comply with and why. Wise Giving guides also include detailed funding and spending information for each charity.

If you prefer your reports on paper, then you can always call your local BBB and request a hard copy.

Now let's talk about filing a complaint with a BBB.

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File a Complaint with a BBB

­If you're dissatisfied with a business transaction, whether the company is accredited with the Better Business Bureau (BBB) or not, you can file a complaint through your local BBB. The BBB recommends that a consumer try to resolve his or her complaint directly with the local business before filing a complaint. But if that fails, the BBB promises to do its best to help both sides come to a quick and fair resolution. BBBs claim to resolve 70 percent of the complaints they receive.

Better Business Bureaus are most effective at resolving a complaint when it falls into one of the following categories:

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  • Misleading or false advertising
  • Deceptive sales practices
  • Failure to deliver goods or services
  • Failure to honor a warrantee or guarantee
  • Billing problems
  • Misuse of personal information
  • Failure to follow through with oral or written promises

[source: The Better Business Bureau of The Southland, Inc.]

Better Business Bureaus won't get involved in certain kinds of disputes, particularly those involving legal issues. Some complaints that Better Business Bureaus generally refuse to process are:

  • Employment practices
  • Discrimination or violation of Constitutional rights
  • The quality of health care or legal services
  • Debt collection
  • Cases that had previously involved litigation 

[source: Council of Better Business Bureaus] ­

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When a Better Business Bureau receives a consumer complaint, it may decide the complaint is unfair or excessive and refuse to forward it to the company. It also may close a complaint if it decides that a business has done its best to resolve an issue, even though the consumer remains unsatisfied.

A Better Business Bureau is a private entity, not a government agency. Therefore it has no legal power to force anyone to comply with its complaint resolution process. The only reason a company responds to a Better Business Bureau is to maintain a good reliability report. If a business doesn't appreciate the value of these reports, it may choose to ignore the complaint altogether.

­You can file a complaint with your local BBB over the phone or in writing, but the recommended way is to use the online complaint system. Every local BBB Web site has an online complaint form. When filling out the online complaint form, you'll be asked for information about yourself and details about your grievance -- BBBs don't accept anonymous complaints.

If the complaint meets BBB guidelines, it will be forwarded to the business within one to five days. Each BBB has its own timeline, but generally the business is given a fixed time period to respond, and the consumer is notified of the response. The consumer then has 10 days to make a rebuttal. If not, the case is closed.

For particularly complex complaints, Better Business Bureaus offer dispute resolution services -- for a fee -- that can include mediation and binding third-party arbitration.­

Better Business Bureaus offer a separate complaint system for car warranty and lemon law disputes called "BBB Auto Line." Certain car manufacturers have signed up for the program, which enables the BBB to act as a mediator to facilitate speedy resolutions of warranty disputes. If an agreement can't be reached through a mediated conference call, then the BBB will arrange for an informal settlement hearing.

Finally, let's look at some of the biggest complaints against BBBs themselves.

Criticism of Better Business Bureaus

Some people complain that all it takes to close a BBB case is issuing a customer a gift certificate -- even if the customer wants to pursue the matter.
Some people complain that all it takes to close a BBB case is issuing a customer a gift certificate -- even if the customer wants to pursue the matter.
Tetra Images/Getty Images

­­Better Business Bureaus (BBBs) insist that their value depends on their neutrality and fairness to all parties. There are some critics of BBBs, however, who claim that it's impossible for BBBs to remain neutral since they're financially supported by BBB-accredited businesses. Skeptics question whether BBBs can serve consumers and nonaccredited businesses equally and ask, "Isn't the very idea of being membership-supported a conflict of interest?"

Smart Money magazine ran an exposé of the U.S. Council of Better Business Bureaus in which it details the private organization's "too cozy" relationship with some of the businesses it claims to monitor. According to the article, the 112 U.S. BBBs collected $131 million in dues in 2007, comprising 90 percent of their total revenue [source: Parmar]. Perhaps more surprising is that 90 percent of BBB board members are corporate executives from industries that generate large numbers of BBB complaints [source: Garrett].

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These board members and other corporate partners have voting rights on BBB programs. They sponsor awards shows recognizing what they call "advanced marketplace trust" in big-name companies like Kraft Foods -- a corporate sponsor -- and eBay -- an accredited business [source: Parmar]. What's more, the BBB recently published a book about how to start your own eBay business [source: Council of Better Business Bureaus].

The Smart Money article uncovered another interesting fact that has been hidden from consumers. Corporations like Verizon Wireless and Cingular pay the BBB upward of $50,000 for access to customized consumer complaint information [source: Parmar]. The article cited a California consumer who was befuddled by the extremely detailed and thorough questions on the complaint form regarding her cell phone service. Verizon and Cingular pay the BBB to include extra questions so they can collect detailed customer-satisfaction reports.

Some business owners who have chosen not to apply for BBB accreditation claim that BBB reliability reports are biased toward accredited businesses. According to a study by a Marquette University marketing professor, also mentioned in the Smart Money article, BBBs reported that twice as many accredited auto dealers and three times as many accredited movers made a "good faith effort" to resolve complaints than their non-accredited colleagues [source: Parmar]. The BBB's response is that companies who apply for BBB accreditation simply aspire to higher standards.

Another standard complaint with Better Business Bureaus is that complaints are sometimes closed even when the consumer is greatly dissatisfied with the company's response. If the bureau decides that the company has made a reasonable effort to resolve the complaint -- something as simple as sending the unhappy customer a gift certificate -- then the matter is closed, even if the consumer wants to keep fighting [source: Parmar].

What's more, the very nature of the work of Better Business Bureaus -- monitoring the ethical business practices of 3 million organizations -- makes businesses easy targets for disgruntled customers. Sites like RipoffReport.com include hundreds of testimonials from consumers and business owners concerning the allegedly unfair treatment they received at the hands of BBB employees or representatives. Some consumers claim that the BBB is too slow to post information on companies that are under criminal investigation. Some business owners claim that the BBB doesn't spend as much time investigating complaints against non-accredited business. The list goes on.

And what you may not know is that disgruntled consumers can't complain to the BBB about the BBB. The Better Business Bureau isn't a member of the Better Business Bureau.

For lots more information about the power struggle between consumers and businesses, follow the great links on the next page.

­­Related HowStuffWorks Articles

More Great Links

­Sources

  • ­Calgary Better Business Bureau. "Reliability Reports"­http://calgary.bbb.org/WWWRoot/SitePage.aspx?site=154&id=54b303e2-7689-48cf-bbd5-0192e18f9de9
  • ­Central and Western Massachusetts Better Business Bureau. "BBB to Change its Business Ratings to Letter-Grade S­cale." October 14, 2008http://central-westernma.bbb.org/WWWRoot/SitePage.aspx?site=167&id=b8f764f5-6cab-4abc-84d3-750954ae28c9&art=7409
  • Council of Better Business Bureaus. http://welcome.bbb.org/
  • ­Garrett, Dennis E. Nonprofit and Voluntary Sector Quarterly. "The Debate Regarding the Better Business Bureau's Commitment to Neutrality: An Analysis of Local Better Business Bureau Boards of Directors." 2007http://nvs.sagepub.com/cgi/content/abstract/36/1/22
  • Longino, Carlo. Techdirt. "Cingular Gets Kicked Out of the BBB." September 12, 2005http://www.techdirt.com/articles/20050913/article_lite.php?sid=20050912/1121233
  • Los Angeles Better Business Bureau. "Rating Explanation"http://www.la.bbb.org/RatingExplanation.aspx?CompanyID=100038852
  • Marable, Leslie M. Money Magazine. "Better Business Bureaus are a Bust." October 1, 1995http://money.cnn.com/magazines/moneymag/moneymag_archive/1995/10/01/206587/index.htm­
  • McLoone, Sharon. Small Business on washingtonpost.com. "How Do I… Get  a Better Business Bureau Seal of Approval?" July 24, 2007.http://blog.washingtonpost.com/small-business/2007/07/how_do_iget_a_better_business.html
  • Mulkins, Phil. Tulsa World. "Tulsa BBB dumps pass/fail system." October 29, 2008http://www.tulsaworld.com/news/article.aspx?articleID=20081029_15_E4_Bteuie395895
  • Parmar, Neil. Smart Money. "Is the BBB Too Cozy with the Firms it Monitors?" September 24, 2008 http://business.time.com/2013/03/19/why-the-better-business-bureau-should-give-itself-a-bad-grade/
  • Ripoff Report. "Better Business Burea BBB & CBBB." February 22, 2000.http://www.ripoffreport.com/reports/0/001/ripoff0001343.htm
  • Ripoff Report. "Report: BBB of Metropolitan Dallas." June 17, 2008­http://www.ripoffreport.com/reports/0/341/RipOff0341063.htm
  • ­U.S. Better Business Bureau. "BBB Fast Facts"http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=13e5456d-6caf-408c-9188-8a6df5b282b8
  • U.S. Better Business Bureau. "Minimum Accreditation Standards"http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=1e01ed6a-0620-4adb-ac5b-04abd7fe1ecf
  • U.S. Better Business Bureau. "Roster of Corporate Partners"http://us.bbb.org/WWWRoot/SitePage.aspx?site=113&id=0fefb054-9b94-45fb-aad0-b13799dba29d&side=253d4e86-3515-4123-87f2-b702f2c9bb1e
  • ­Wansley, B. Charles. Boston Better Business Bureau. "History and Traditions"http://boston.bbb.org/WWWRoot/SitePage.aspx?site=27&id=05f925bd-5c43-4327-8484-a3f011b74492
  • Western Pennsylvania Better Business Bureau. "US and Canada BBBs Sorted by Complaint 2007"http://westernpennsylvania.bbb.org/WWWRoot/storage/0/Shared%20Documents/ComplaintStats/stat2007/US_Canada_by_Complaint_2007.pdf