The good and the bad of the BBB

By Peter Lewis
Seattle Times consumer-affairs reporter

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The BBB generally gets good marks from law-enforcement authorities and consumer advocates as a research tool to check out companies. Sometimes it scores, sometimes it stumbles. Here are examples on both sides.

On the plus side

• The BBB has been a useful source for law-enforcement agencies investigating dubious businesses. Through the first eight months of this year, for example, the local BBB received half a dozen civil investigative demands — a kind of administrative subpoena — from the Washington state Attorney General's Office and the Federal Trade Commission.

Jack Zurlini, a Spokane-based assistant state attorney general in the office's consumer-protection division, considers the BBB a valuable partner.

Last year, for example, the BBB serving Eastern Washington, North Idaho and Montana (www.thelocalbbb.com) tipped his office to a business called JEM Industries. The company had been chased out of Idaho under a different name and started promising too-good-to-be-true financing deals for real estate, furniture and cars in the Spokane area, he said.

The company tried to induce some BBB-member businesses to participate, but they contacted the BBB, which in turn contacted Zurlini's office. The company was eventually shut down in the Spokane area.

Zurlini and bureau boss Jan Quintrall said they try to have lunch at least once a month to keep each other updated.

• The BBB works to ensure that advertising is truthful through self-regulatory programs such as the Children's Advertising Review Unit (CARU), a division of the Council of Better Business Bureaus (CBBB) that evaluates Web sites and advertising directed at children.

The Federal Trade Commission (FTC) earlier this year fined a company called UMG Recordings $400,000 for knowingly collecting personal information from children without first getting parental consent.

The FTC acted after it received a referral from the BBB, which came when UMG declined to cooperate with the BBB's request to change its practices. According to the FTC, UMG Recordings operates hundreds of general-audience Web sites that advertise and promote music labels and recording artists, many of whom are popular with children.
 
• The BBB Wise Giving Alliance, a charitable affiliate of the CBBB, analyzes charities against a set of standards, including how much they spend on programs vs. fund-raising; conflicts of interest; donor-privacy protection; and solicitation methods. Reports on nearly 500 organizations tell if the charities meet those standards. They are available for free at www.give.org/reports/index.asp.

On the minus side

• According to BBB standards, when a government agency takes action against a company that reflects on marketplace conduct — such as cheating consumers — that is supposed to show up in the company's report to consumers.

If such an action is taken against a member, it often is grounds for expulsion.

But the Better Business Bureau of New Jersey (www.trenton.bbb.org) made no mention of such an action taken against a local household-moving company, "A Supreme Movers" of Fairlawn, N.J., months after the Federal Motor Carrier Safety Administration (FMCSA) assessed a fine of nearly $33,000 last summer.

Among other things, the penalty was assessed for failing to properly weigh shipments and for failing to provide consumers with a pamphlet informing them of their rights.

Betty Merkel, manager of the New Jersey BBB, said her staff was unaware of the FMCSA's existence until a reporter brought it to her attention. Her BBB has since added the disciplinary information to the report. As of last week the company remained a member in good standing.

• Some bureaus have been shut down because they failed to adhere to standards.

Earlier this year, for example, the CBBB expelled the Augusta, Ga., BBB because it repeatedly failed to comply with a majority of the 23 operating standards, including maintaining adequate membership, developing revenue and complaint-handling programs.

Perhaps the most egregious case occurred in 1991, when the head of the South Florida BBB was convicted of accepting a bribe to give favorable references to three companies offering oil-and-gas-leasing investments. The FTC filed a related civil action against the bureau and the CBBB for failing to adequately supervise the South Florida bureau's conduct. The bureau and the council paid $4.5 million to settle related claims.

• The Orange County Register two years ago reported that telemarketers with the Southern California BBB (www.bbbsouthland.org) were using dubious tactics to attract new members. The story quoted a businessman who said the bureau's representatives were promising to clean up complaint records in exchange for joining.

Bill Mitchell, the bureau's president, conceded there were problems with his telemarketing staff but denied clean records were for sale, according to the report

• Nearly 20 years ago, the Better Business Bureau of Oregon and Western Washington (www.thebbb.org) spun off a charitable organization called the BBB Foundation to provide education, information and resources on marketplace issues.

According to the BBB's "Wise Giving Guide," one of the standards it applies to help potential donors evaluate charities is the percentage of donations that go to charitable purposes. A rule of thumb is that a charity should spend "at least 65 percent of its total expenses on program activities," the BBB says.

By that measure, the BBB's foundation fails to meet its own standards, based on its tax returns. According to its most recent tax return, only 33 percent of the $32,457 it spent last year went to program services, with the balance going in roughly equal parts to cover management costs, and for fund-raising.

Francine Sullivan, the local BBB's comptroller, said the foundation has been "almost dormant" in recent years, and it incurred more costs for overhead and fund-raising because the bureau has been working harder to "resurrect" it.

Peter Lewis: 206-464-2217 or plewis@seattletimes.com