What To Know About the Better Business Bureau and Financial Products

When you spend a lot of money on financial products like car loans, investment brokers, or financial advisers, it's a good idea to do a background check. You don't want to have a bad experience, especially with a lot of money at stake.

There are many places you can look for businesses: online reviews from targeted publishers or consumers or, better yet, official agencies such as BrokerCheck (FINRA) of the Financial Industry Regulatory Authority and the complaint database of the Financial Protection Authority of the United States. Consumer. The Better Business Bureau (BBB) ​​is also a popular option, but it is best used in combination with other research tools. That's because it's not completely fail-safe, and to understand why, you need to know the basics of how it works.

What is the Better Business Bureau?

Although its name sounds official, BBB is not a government agency. It is a non-profit group that operates regional offices in the United States, Canada, and Mexico. It was founded in 1912 to increase trust between consumers and businesses, charities and brands.

It does this through five main methods:

• Rating System: If there is enough public information about a business, BBB will rate it to help consumers assess how trustworthy it is.
• Rating system - If you have done business with the company, you can leave a rating for others to see how they did, well or poorly.
• Accreditation - Provides a process for companies to be 'accredited', which means that they have gone through some additional hurdles to prove that they are trustworthy and can market themselves as such.
• Complaints Process: Offers a complaint resolution process to try to get companies to respond to customer complaints, even if it is not in the customer's favor.
• Report Scams or Fake Ads: BBB also offers a way to report any scams you see or any "questionable or misleading" ads.

It is important to note that working with the BBB, either as a consumer or as a business, is completely voluntary. Companies do not need to participate in these processes if they do not want to.

Also, since BBB is not a regulatory agency, you will still have to report erroneous advertisements, scams, or other harmful or illegal activities to the appropriate government channels who can investigate these things and take real action against them.

How BBB Ratings Work

Contrary to popular belief, BBB ratings do not measure how good a business is. Instead, they measure the probability that a business will respond to its customers, on a scale from A + to F. Theoretically, the business could have many dissatisfied customers and still get a good BBB rating.

BBB relies on publicly available information and complaints received about the business to assign a rating. You may see "NR" or "Unclassified" for some companies. NR means, among other factors, that there is not enough data for BBB to evaluate it, or that its rating is currently under review.

Customer ratings do not influence a company's BBB rating.

Here's the secret ingredient to what BBB looks for when assigning a rating:

• Complaint history: how many complaints a business has received, given its size, and whether these complaints were resolved quickly and "in good faith", even if the customer is not satisfied.
• Type of business: companies that break the law or "pose market problems" are penalized.
• Time in business: how long has a business existed, if this information is available. Otherwise, BBB uses the date the company's BBB file was created as the start date.
• Transparent business practices: Does the company clearly provide all important information about its products and properties and use a real address?
• Breach of BBB Commitments - If a company agrees to uphold BBB standards but fails to do so, its rating will be lowered.
• Government actions and licenses: If a company requires a license and does not have it, or if government actions have been taken against it, it will be sanctioned.
• Bad Publicity: If a business uses the BBB logo on advertisements without BBB's permission or makes false or misleading advertisements, it will be penalized.

BBB assigns each business score on a 100 point scale in 13 areas related to the categories above. Thereafter, BBB will issue a final letter score that you will see on the company's online BBB profile.

What does BBB accreditation mean?

One of the ways BBB makes money is by charging companies to be "accredited." If the company is accredited, you can use the BBB accreditation logo and customers can see the company as more trustworthy.

To obtain accreditation, a business must submit an application and pay a fee. If approved, a company must meet the following conditions to maintain its accreditation:

• Maintain at least a "B" rating with BBB
• Honestly announce
• Tell the truth
• Be transparent
• Promises of honor
• Be receptive
• Protect privacy
• Integrate integrity

Filing a Complaint

In addition to providing ratings, BBB also acts as an intermediary between businesses and consumers who have disputes with them. If you want to file a complaint about a business with the office, you can do so on the BBB website or by writing a letter to the office.

Accredited companies must respond to consumer complaints within 14 days of receipt (which can be two days after submission). If the business does not respond, BBB sends a second notice to the business. It also lets you know when the business responds or is not responding at all. Claims are normally closed within approximately 30 days from the filing date.

Of course, just because a company responds does not mean they will find it satisfactory. In that case, BBB may request a second response from the company. You can also recommend mediation or arbitration.

Once a complaint is closed, you will receive one of these statuses:

• Resolved
• Answered
• Unsolved
• Unanswered
• Impossible

Benefits and Reviews of BBB Ratings

There's a reason you've probably heard of BBB before. It has been used by millions of people over the years as a tool to help determine if a business is worth doing. Here are some of the benefits of adding BBB ratings to your toolbox:

• Extensive: BBB maintains ratings of more than 5.4 million companies.
  You can empower consumers: BBB doesn't require business owners to respond to complaints, but having BBB on your side can give you a bit more leverage than complaining with no one to back you up.
• Helps You With Untrusted Businesses: If a business has a poor BBB rating, you can be sure it doesn't deserve your patronage. This is especially true if there is a pattern of poor ratings on other sites.

On the other hand, the BBB is not without its criticism. Here are some possible downsides:

• Conflicts of Interest: Since BBB is charging companies for accreditation, it has every interest in making sure the company is approved. In 2010, ABC News investigated and claimed that BBB told companies that the only way to upgrade a low rating was to pay for a subscription.

At the same time, then-Connecticut Attorney General Richard Blumenthal wrote a letter to BBB asking it to stop the payment method for gambling and on November 18, 2020, Blumenthal announced that BBB had accepted. "Paying to play, or your perception of it, is unacceptable and unfair, as BBB correctly recognized," Blumenthal wrote in a press release. "Money can no longer inflate BBB ratings like it did in the old system."

• Not 100% Trustworthy - Companies that don't pay for accreditation aren't scrutinized that closely, so this can let some important things, like government regulatory actions, slip off the radar.

Using BBB Ratings to Evaluate Financial Services Companies

BBB ratings can be useful tools, but they are not designed to be the only source you use when deciding on a financial product. Consider the reviews carefully. If a company is accredited, keep in mind that if there is a minor conflict of interest, it may lead to higher ratings. If a company does not have much information about it, that does not mean that it is neutral; it can be a big problem or a bad deal.

Instead, the BBB itself advises you to use BBB ratings in conjunction with other research tools. Your best bet is to simply Google the company and look at other ratings and reviews that come up, especially those that are trustworthy, and not subject to manipulation by rated companies or their competitors, to get a complete picture of the company.

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