Monday, November 22, 2010

Is the Better Business Bureau Operating a Pay to Play Scam?

I recently handled an arbitration for a homeowner who was horribly mistreated by a local service company. As a result of their mishandling the cleaning of her house after a water leak in her kitchen, all of the flooring and drywall in the home had to be replaced. The company refused to pay for the damage they caused, so we filed a claim with the Better Business Bureau ("BBB") to arbitrate the dispute, just as her contract with the company required.

The good news? The arbitration was free. The bad news? The arbitration resulted in her getting only a fraction of her damages paid by this company. I guess you get what you pay for.

In fact, that seems to be the way the BBB does business these days, according to this disturbing report from ABC News.

The report reveals evidence that the grade a company gets from the BBB depends on whether the business is an accredited member of the BBB; in other words, your grade depends on whether you pay a fee to the BBB. Those who pay get higher grades. Those who do not pay will find, according to the report, that it is nearly impossible to improve a poor BBB grade.

Wolfgang Puck, the celebrated chef whose well-reviewed restaurant has been in business for 28 years, has an "F" rating from the BBB. He says in the story that he was told the only way to improve his rating is to pay a fee to the BBB, which he refuses to do. Good for him.

In another example, a business with a "C" grade and one old complaint called to see what it could do to raise its grade. The business paid a fee of several hundred dollars to the BBB, as instructed, and the very next day the BBB rating changed to an A and the old complaint had been removed. Doesn't seem terribly objective, does it?

In my case, the company that damaged my client's home maintains a top rating with the BBB despite numerous complaints filed by customers, indicating that the BBB must be basing their ratings on something other than actual customer experiences. Perhaps a pay to play scheme is really what drives the BBB rankings?

The report also reveals that many of the top employees of the BBB -- which is supposed to be a non-profit corporation -- are paid in excess of $100,000, with some making more than $400,000. Where does all that money come from? You got it: paid memberships from businesses. The report reveals that the BBB even gave an "A" rating to some fake businesses set up with the names of terrorist organizations -- right after they paid their membership fees.

Interestingly, within a few months of the arbitration case I handled with the BBB, they called me to see if I wanted my firm to become an "accredited" member of the BBB at a cost in excess of $400. I declined.

The saddest part of this story is the fact that consumers and homeowners need to have a reliable, objective way to get information about which businesses are honest and capable. Many people have relied on the BBB for exactly that over the years, but this report ought to have you rethinking that approach. You can draw your own conclusions. I've already drawn mine.


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