For years, the Better Business Bureau was perceived as a great source for consumers to learn about reliable companies. Unfortunately that’s no longer true and I now I question whether it ever was true. Until recently, I thought they were a government-run organization. After all the FBI, is a “Bureau” (Federal Bureau of Investigation), right? However, as Wikipedia says, “Although it has ‘Bureau’ in its title, the Better Business Bureau is not affiliated with federal, state, or local government, and has no direct affiliation with any consumer protection government authority. The BBB, as a privately held corporation, has no governmental authority over businesses.”

The BBB is not to be confused with the FTC, the government’s consumer protection agency. The BBB is a private nonprofit organization, much like Mozilla, who makes my favorite web browser, Mozilla Firefox. In some ways, the very name “Better Business Bureau” invokes a false sense of trust as most people wouldn’t confuse Mozilla with being a government-run organization.

The BBB may be best thought of as a collection of franchises, in the same way that collection of McDonalds restaurants that comprises McDonalds corporation. You can buy a hamburger at McDonalds, but there can be differences between stores. They are owned separately from the global corporation, which is different than Wal-Mart stores, which are all owned by the global corporation. The BBB is like McDonalds with 100+ franchises that are primary funded through its members. (This is an important point that we’ll come back to).

In 2009, the BBB switched its grading system from satisfactory/unsatisfactory to a letter grade: A+ through F. There were 16 factors that a company could be rated on a 17th factor, accreditation that could earn a company four extra points if they paid a yearly fee.

An ABC News investigation in November, 2010 found a number of problems with the new system:

• The BBB gave an A- to a fictional company – ABC News found that “A group of Los Angeles business owners paid $425 to the Better Business Bureau and were able to obtain an A minus grade for a non-existent company called Hamas, named after the Middle East terror group” and that “the BBB also awarded an A minus rating to a non-existent sushi restaurant in Santa Ana, California.”
• Paying Members get A+ ratings – ABC News also found that a a white supremacist website called Stormfront received an A+. Two companies were able to upgrade their C- grades to A+ overnight by submitting their credit card numbers
• You must pay for the A+ rating – The only way to get the A+ rating was to get the four extra point for paying the yearly fee. This supposedly has changed and non-accredited businesses can get an A+ rating, but it’s unclear whether paying for accreditation boost your grade in point system (aside from the cases where merchants were able to simply buy their way from a C- to an A+ score.

This lead to Connecticut Attorney General Richard Blumenthal saying, “Right now, this rating system is really unworthy of consumer trust or confidence.” He sent an official demand letter asking the BBB to discontinue the ratings system because it is “potentially harmful and misleading.” The BBB has changed it’s grading system.

I should also mention that previous to the ABC News investigation, the Los Angeles Times reported that accredited business seem to receive favorable grades

The paying for accreditation where it impacts grades is particularly problematic, since the BBB’s funding comes from these fees. The system is completely untrustworthy if a business can pay a fee of around $400 a year and receive an A+ rating. I found this out when MonaVie, an MLM scam/pyramid scheme that I exposed awhile back went from a C- to an A+ in the span of about a month: Did MonaVie Pay For a Better Grade from the Better Business Bureau?

It is this experience that has me writing about the BBB today. When MonaVie got that A+ rating from the BBB, MonaVie and/or its distributors flocked to Wikipedia to trumpet how it was now a reputable company. They ignored the fact that it was a D- recently (the BBB doesn’t give a chart of grades over time, so this was easy for MonaVie to ignore). I should have probably written about the BBB then, but I wasn’t aware of the full extent of the problem.

A couple of days ago this came up in my exposing of Youngevity, yet another scammy MLM company. It didn’t matter that the “doctor” responsible for pushing the vitamins was a veterinarian pitching himself as a medical doctor or that he was making outrageous claims about people in China living to reach their 250th birthday. It didn’t matter than I could show people who to buy nearly equivalent products for a quarter of the price on Amazon. A Youngevity-proponent ignored these facts and left a comment that I must be wrong because Youngevity had an A+ rating with the BBB.

Ugh…

I guess I can’t expect consumers to have done the research on the BBB and find out that it isn’t the reputable rating agency that we all would like it to be. This concerns me greatly because there are a number of people who would have bought into the Youngevity scam on the basis of its BBB rating being reputable. Thousands of dollars later, perhaps they’d find my article and my response to the commenter and realize that they got scammed by both Youngevity and in trusting the BBB.

In the end, I think that Clark Howard has good advice for consumers about the BBB:

“Here’s what you need to know: I want you to use the BBB as a veto, not as a green light. If an organization has a bad rating, that alerts you to potential danger. But just because they don’t have a bad record, that’s not the seal of approval.

It’s the same thing with a CARFAX report. A bad CARFAX is a veto, not a green light to buy, that’s why you need a mechanic to inspect any used car purchase.”

In the case of MonaVie, Youngevity, ViSalus or many other MLM companies, I try to be that mechanic to inspect the company, since it is fairly easy for them to spend the $400 a year to remove that veto.

Fortunately for me, I’m not listed with the BBB, because after this article, I’d find out first hand that by criticizing the Better Business Bureau, they’ll likely pull my accreditation.

Update: It appears that that CNN Money has exposed the BBB as well. It has a great story about companies guilty of fraud that earned the highest rankings in BBB. They even have a nice little app here. They also explain how the BBB makes nearly $200 million a year in revenue – mostly by selling businesses on the need to be members, plaques, and other things that sound like Mafia-style protection money.