Close the skill gap with the Financial Modeling & Valuation Analyst (FMVA)™ Certification >> Enroll today and save!

Better Business Bureau (BBB)

A private non-profit organization that seeks to improve the trust between consumers and businesses

What is the Better Business Bureau (BBB)?

The Better Business Bureau (BBB) is a private non-profit organization that seeks to improve the trust between consumers and businesses. It comprises more than 100 independently incorporated BBB organizations in the United States, Canada and Mexico, and all the organizations report to the governing council.

 

Better Business Bureau

 

The BBB is not affiliated with any government agency, and it is supported by about 400,000 business operating in North America. In return, the organization allows accredited businesses to use its trademarked logo in its promotional materials. Accredited companies are viewed as legitimate and reputable businesses that engage in fair business practices.

Consumers also get free business reviews for over four million businesses operating in North America and are allowed to file complaints against businesses where they face unsolved complaints. BBB reports that it receives more than 885,000 consumer complaints annually, out of which 75% are resolved.

 

Services Offered by the Better Business Bureau

BBB offers the following two main services to consumers:

 

#1 Dispute resolution

The organization acts as a neutral party when providing dispute resolution services to consumers and businesses. The dispute resolution procedures are designed by the Council of the BBB and passed on to the local BBB organizations for implementation. When a customer files a dispute in the organization against another business, BBB contacts the business in question and offers to mediate the dispute between the parties.

Businesses are not required to be accredited members of BBB to use the mediation service. BBB resolves the disputes through either mediation or zero or low-cost arbitration. The organization does not resolve disputes that are being handled in a court of law since courts offer an alternative platform for arbitration.

 

#2 Database of businesses

Apart from offering dispute resolution, BBB also maintains a database of businesses in North America. Both businesses and consumers can access the database free-of-charge. Some of the information stored in the database includes basic business information such as services/products offered, the identity of the owner(s), business address, the number of complaints filed against the company, and consumers’ views about the business.

The businesses are also assigned a rating, from A+ to F, that is assigned based on various parameters such as how the business handles complaints, duration of resolving conflicts, number of complaints, etc.

 

BBB Rating System and Accreditation

BBB uses a school-style A+ to F rating system since January 2009, after abandoning its earlier system that rated companies as either satisfactory or unsatisfactory. The ratings are based on 16 factors that are posted alongside each business review on the BBB business database. At the start, BBB assigned a 17th factor for accredited businesses that paid a fee to the organization. The company later dropped the 17th factor after drawing criticisms for favoring paid members.

 

Better Business Bureau (BBB)

 

For a company to apply for BBB accreditation, it must’ve been operational for at least one year. It must also be transparent in its practices, with no unresolved complaints, follows the BBB advertising codes and be licensed to conduct business in its respective industry. Accredited businesses are required to pay yearly fees and additional fees for plaques and using the BBB logo on its marketing materials.

 

History of the Better Business Bureau

The concept of BBB came about due to the quackery and false advertisements that were prominent in the early 1900s. Said practices were the subject of various court cases such as the United States vs. Forty Barrels and Twenty Kegs of Coca-Cola that were instituted by the government against several US companies. The growing advertising industry found itself at crossroads with the government for engaging in practices that did not benefit the consumers.

When the Pure Food and Drug Act was enacted, Samuel Dobbs, the then Coca-Cola sales manager, became the President of the Associated Advertising Clubs of America in 1909. The Associated Advertising Clubs of America was later renamed to the American Advertising Federation. He gave public speeches on the subject, and he continually advocated for complete truth in advertisement.

In August 1911, Dobbs was involved in the adoption of the “Ten Commandments of Advertising,” which was developed by advertising firms and individual businesses. Later in November that year, the publisher of Printer’s Ink, John Irving Romer, suggested the formation of Vigilance Committees that would be responsible for eliminating abuses and establishing standards and codes for the advertising industry. In 1912, George W. Coleman established the National Vigilance Committee to support regional and national advertising efforts.

The group went through several rounds of renaming and merging before finally becoming the Better Business Bureau as it is known today. The group renamed itself the National Better Business Bureau of the Associated Advertising Clubs of the World in 1921. It later merged with a separate but similar entity known as the National Association of Better Business Bureau in 1946, forming what was known as the Association of Better Business Bureaus, Inc. Finally, the Council of Better Business Bureau, or CBB, was formed in 1970 as a means of governing all of the related entities as one organization.

 

Related Readings

CFI is the official provider of the global Financial Modeling & Valuation Analyst (FMVA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Ethical vs. Legal Standards in Finance
  • GAAP
  • IFRS Standards
  • Internal Controls

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!