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What To Know About the Better Business Bureau and Financial Products

How credible are the ratings?

When you're spending a lot of money on financial items like car loans, investment brokerages, or financial advisers, it's wise to perform some background research on the organization. You don't want to wind up having a negative experience—especially not with a substantial amount of cash on the line.

There are a multitude of places you can evaluate companies: online evaluations by independent publications or by customers, or—better yet—official authorities such as the Financial Industry Regulatory Authority (FINRA)’s BrokerCheck and the Consumer Financial Protection Bureau’s complaint database. The Better Business Bureau (BBB) is a popular alternative, too, although it's better to utilize it in tandem with other research tools. That's because it's not fully infallible, and to understand why, you need to grasp the fundamentals of how it functions.

What Is the Better Business Bureau?

Despite its official-sounding name, the BBB isn't a government body. It's a nonprofit organization that runs regional offices across the United States, Canada, and Mexico. It was formed in 1912 to enhance trust between customers and companies, charities, and brands.

It achieves this via five key methods:

Rating system: If adequate public information is available for a firm, the BBB will grade it to help buyers determine how trustworthy it is.

Review system: If you've done business with the firm, you can write a review for others to see how it went, good or poor. 

Accreditation: It provides a procedure for firms to be "accredited," which indicates they’ve gone through some additional hoops to show they’re trustworthy and may represent themselves as such. 

Complaint process: It provides a complaint-resolution procedure to attempt to convince firms to react to consumer concerns, even if it's not in the customer’s favor. 

Reporting scams or fraudulent advertisements: The BBB also provides a mechanism to report any frauds you observe or any "questionable or deceptive" commercials. 

It's crucial to emphasize that dealing with the BBB—either as a consumer or a business—is totally optional. Businesses don't have to join in these procedures at all if they don't want to.

Furthermore, because the BBB isn't a regulatory body, you'll still need to report poor marketing, frauds, or other damaging or unlawful conduct to the correct government agencies that can investigate these things and take serious action against them.

How BBB Ratings Work

Contrary to common assumption, the BBB ratings don't measure how excellent a firm is. Instead, they score how likely a firm is to react to its clients, on a scale of A+ to F. Theoretically, the firm may have many disgruntled customers and yet have a decent BBB rating.

The BBB focuses on publicly accessible information and complaints that it's received about the company to award a rating. You could find "NR" or "No Rating" for certain establishments. NR signifies, among other criteria, there's not enough data yet for the BBB to assess it, or that its rating is presently under evaluation.
Customer reviews do not contribute into a business's BBB rating.

Here's the secret sauce for what the BBB is looking at when it issues a rating:

Complaint history: How many complaints a company has received, given its size, and if those concerns were addressed expediently and "in good faith," even if the client isn't happy. 

Type of business: Businesses that breach the law or “raise marketplace concerns” are fined. 

Time in business: How long a company has existed, if such data is available. If not, the BBB takes the date the company’s BBB file was established as the date it began. 

Transparent corporate practices: Does the firm clearly offer all the relevant information about its goods and ownership, and does it utilize a legitimate address? 

Failing to meet BBB commitments: If a firm commits to respect BBB standards but doesn’t, its rating will plummet. 

Government actions and licensing: If a firm needs license and doesn't have it, or if it's had government measures taken against it, it'll be fined. 

Bad advertising: If a firm uses the BBB mark in commercials without the BBB’s permission or if it publishes false or misleading promotions, it'll be fined. 

The BBB awards each company score on a 100-point scale in 13 areas relating to the aforementioned criteria. From there, the BBB will award a letter-grade final score that you see on the business’s online BBB page.

What Does BBB Accreditation Mean?

One of the ways the BBB gets its money is by charging companies to be "accredited." If the firm is certified, it may use the BBB’s accreditation badge and clients may consider the company as more trustworthy.

To obtain authorized, a firm needs to apply and pay a fee. If authorized, a firm must satisfy the following standards to preserve its accreditation:
  • Maintain at least a "B" rating with the BBB
  • Advertise honestly
  • Tell the truth Be transparent 
  • Honor promises
  • Be responsive 
  • Safeguard privacy
  • Embody integrity

A company does not have to be accredited to get a BBB rating.

Filing a Complaint

Besides giving ratings, the BBB also works as a mediator between companies and customers who have complaints with them. If you wish to make a complaint against a firm with the bureau, you may do so on the BBB website or by mailing a letter to the bureau.

Accredited firms are expected to react to customer complaints within 14 days after they’re received (which may be two days after they’re lodged). If the firm doesn’t react, the BBB sends a second notification to the company. It also lets you know when the firm replies, or if it doesn’t answer at all. Complaints are normally closed within around 30 days from the filing date.

Of course, just because a corporation answers doesn’t guarantee you’ll find it acceptable. In such instance, the BBB might seek a second answer from the firm. It may also propose mediation or arbitration.

Once a complaint is closed, it will be given one of these statuses:
  • Resolved
  • Answered
  • Unresolved
  • Unanswered
  • Unpursuable

Dispute resolution options differ by location, so the agency suggests getting in contact with your local BBB office for specifics.

Benefits and Criticisms of BBB Ratings

There's a reason you've undoubtedly heard of the BBB before. Millions of individuals have used it throughout the years as a tool to help assess whether a company is worth doing business with. Here are some of the advantages of adding BBB ratings to your toolbox:

Extensive: The BBB maintains ratings of more than 5.4 million companies. 

Can offer customers power: The BBB doesn't oblige company owners to react to complaints, but having the BBB on your side can give you a little more strength than if you complain without anybody supporting you. 

Helps you out untrustworthy businesses: If a company has a terrible BBB rating, you can be quite certain it's not worth your patronage. That's particularly true if it has a habit of low reviews on other sites.

On the other hand, the BBB isn't without its skeptics. Here are some possible drawbacks:

Conflicts of interest: Since the BBB is charging companies for accreditation, it has a strong interest in making sure the firm is accepted. In 2010, ABC News investigated and stated that the BBB informed companies the only option to improve a bad score was to pay for a membership. 

Around the same time, then-Connecticut Attorney General Richard Blumenthal issued a letter to the BBB urging it to discontinue the “pay-for-play” technique and on Nov. 18, 2020, Blumenthal said the BBB agreed. “Pay-to-play—or its perception—is unacceptable and unconscionable, as the BBB has rightly recognized,” Blumenthal stated in a news statement. “Cash can no longer inflate BBB ratings, as happened under the old system.

Not 100% reliable: Businesses who don't pay for certification aren't as rigorously monitored, thus this may enable some significant items like government regulatory activities pass under the radar.

Using BBB Ratings To Evaluate Financial Service Companies

BBB ratings may be important tools, but they're not supposed to be the only source you check when you decide on a financial product. Take the ratings with a grain of salt. If a company is certified, be careful that if there was a little conflict of interest there, that may slant ratings upward. If a company doesn't have much information about it, it doesn't indicate it's neutral; it may be a wonderful business or a bad business.

Instead, the BBB itself urges you to utilize BBB ratings in combination with other research methods. Your best chance is to simply google the firm and look at other ratings and reviews that crop up—especially those that are credible and not prone to manipulation by companies being evaluated or their competitors—to build together a thorough picture of the company.

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