How Better Business Bureaus Work

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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.

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.