Lazy Man and Money

Lazy Man’s Scam Scale

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When I was writing about why you shouldn’t trust the Better Business Bureau (BBB), I got an interesting comment from Contrarian about something else consumers should know: city specific magazines hire sales people to contact companies directly and sell their “Best of” rankings for a price.

I didn’t know that was true, and I don’t have any evidence to back it up, but Contrarian has been spot on with his analysis on any of things in the past. More important than that though, it simply makes sense. There are a lot of consumers that use those those “Best of” rankings to make their purchasing decision. It wouldn’t surprise me if Boston magazine realized that space in its Best of Boston was a valuable commodity and tried to capitalize on it as such. I’m not saying that they do that and again, I have no evidence, but I’m just saying that it isn’t just plausible, it seems probable to me.

Similar to that though, I heard two separate people who don’t know each either, tell me of businesses that have gotten what seems to amount to extortion from Yelp. They said that their bad reviews were at the top of the page and that for a fee (perhaps combined with an advertisement, I can’t remember), the company would feature some of the better reviews ahead. One person told me that they her friend wrote a $3000 check on the spot. The other business owner declined. One of the stories is at least a few years old now and I can’t say that Yelp as a publicly traded still works that way. Yelp’s site today says the default sort doesn’t take into account advertising.

I took Contrarian’s Best of [City X] example and applied it to the advertisements that you see in the airplane magazines for the best steakhouses and best doctors. It’s very clear to me that they are advertisements, they even have the advertisement size box on the page instead of a full article written by someone reputable. Rational Therapeutics has an article about being approached to be featured in such an advertisement. This is an obvious advertisement to me, even though the magazines claim to vet the paying doctors and steakhouses, but Energi Gal mentions that she falls for it occasionally and as a very successful pharmacist she’s pretty bright.

My argument was that this the airplane magazine/best steakhouse scam was pretty easy to spot and the BBB being untrustworthy was not. Then Contrarian suggested that MLM is a pretty obvious scam. I personally don’t believe it is quite obvious. If it were, I wouldn’t have 6,000 comments on my MonaVie article with people claiming that the fruit juice cured every medical condition under the sun. If it were such an obvious scam, you’d think there wouldn’t be 15 million Americans caught up in it.

This gave me an idea: we need to have a scam scale. I’m thinking something along the Mohs scale of mineral hardness, but it would clearly be more subjective and less objective. Maybe I could make it scientific by allowing people to vote. I get the feeling that it wouldn’t work, because people with a vested interest in MLM say that it isn’t a scam at all.

In developing this scam scale idea, I determined there are two main factors going into the scam:

  1. How devious / cleaverly disguised the scam is…
  2. … and how much the scam is going to harm you

While I’m personally very interested in the more devious scams, I have to admit that if they aren’t going to hurt you, they aren’t that bad. For example, if you go to one of steakhouses listed in the airline magazine as one of the best, you are most likely to still get a decent steak for your money. On the other end of the spectrum, if you gave your life savings to Bernie Madoff to invest, you may find that you lost it all. That’s a pretty harmful scam. (It’s devious too, since most people had no way of really knowing he was running a pyramid scheme.)

With that in mind, I’ve decided to rate a scam on a scale of 1 to 10 in deviousness and harmfulness. I take the deviousness score and add it to twice the harmfulness score and divide by three. This gives extra weight to the scams that are more harmful. I took a few of things that I consider scams and put a subjective ranking to them and put them in a nice table sorted by Scam Score:

Lazy Man Scam Scale
ScamDeviousnessHarmfulnessScam Score
X-Ray Specs111.0
Airplane Magazine/Best Steakhouses3.511.8
Male Enhancement Pills232.7
Best of [City X]612.7
Better Business Bureau723.7
Visalus787.7
One247.57.87.7
Jusuru7.58.28.0
Bidding Fee Auction8.588.2
MonaVie88.28.1
Bernie Madoff9.59.59.5

I put the old-fashion X-Ray specs that kids bought in the 1950’s as very small scam. I hope few adults actually thought they were getting glasses that could see through things. In the worst case you were out a few dollars and moved on with your life. I view male enhancement pills in the mold, I hope most adults know better than to expect them to work, but at least you aren’t typically out too much money. I thought the Best of [City X] is a little more devious, because it isn’t obvious to the consumer that sales reps may or may not have sold off the position for best BBQ restaurant in town.

You’ll see that in the 7.5 – 9 range, I have various multi-level marketing companies. I think they are particularly devious as they often pitch themselves as legit business opportunities when over 99% of people lose money in them and their products are often claimed to be of a higher quality than they are. Some of them like ViSalus will give people an incentive to take out a big BMW lease in their own name and then stick them with that burden if their sales drop… a very devious scam in my view. MonaVie is particularly devious in trying to convince consumers that two ounces of their juice is equal to eating 13 fruits and vegetables – I can’t tell you how many distributors fall for that.

All these MLMs are fairly harmful because month after month you lose money buying overpriced product in hopes of business opportunity that isn’t there. In the case of MonaVie, it is $1600 a year in just juice… and this doesn’t factor in other costs of running the business which can run 5 times that. In the case of MonaVie some people actually stop taking their medication, which is harmful in more than just a monetary sense.

Now it’s your turn. What other scams should I include on the scale? Do you agree with my ratings or not? Finally, feel free to point me to scam scale that already exists. That’s par for the course as most of my good ideas are already implemented elsewhere.

Why You Shouldn’t Trust the Better Business Bureau (BBB)

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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.