Brookstone Law out of Newport Beach, California has just filed suit against the Better Business Bureau of the Southland and the parent Council of Better Business Bureaus.
One can only suppose this is over the F rating the BBB gives Brookstone Law. According to the BBB, Brookstone Law was an accredited member but their accredidation was revoked on May 23, 2012. The BBB says, “This business’s accreditation in the BBB was revoked by the BBB’s Board of Directors due to its failure to adhere to the BBB requirement that an accredited business must maintain at least a B rating with this Bureau, and refrain from involvement in activities that would reflect unfavorably on, or otherwise affect, the public image of the Bureau or its accredited businesses. Specifically, we are concerned that the firm is involved in mass joinder lawsuits.” – Source
The suit announced on Christmas Eve says the complaint filed against the BBB was a Mass-Joinder Lawsuit. Take That BBB!!!
Although looking at the documents filed on December 19, 2012 I’m not sure how this is a mass joinder suit since the only plaintiff named is Brookstone Law. Maybe they will try to recruit others into the case for a fee.
According to the Brookstone announcement Vito Torchi, Jr. says, “Based upon our research, we are actively working to represent those who normally cannot afford expert legal counsel and reaching out to those who have been contacted directly about increasing letter ratings.”
The BBB says the F rating Brookstone Law received was based on:
- Length of time business has been operating
- BBB Accreditation was revoked because business failed to honor its accreditation agreement with BBB
- 14 complaint(s) filed against business
- 2 complaint(s) filed against business that were not resolved
- 3 serious complaint(s) filed against business
- Overall complaint history with BBB
The BBB further states:
Complainants allege misrepresentation concerning their ability to provide services, failure to fulfill services, and inability to obtain refunds of fees paid in advance. Typically, complainants allege paying upfront fees to join a mass joiner lawsuit against lenders through the firm; however additional fees for services are not disclosed. Additionally, complainants allege they are unable to reach the company regarding their cases or to obtain refunds. The company responds to complaints by issuing refunds, denying allegations of misrepresentation claiming clients are informed of all fees and services prior to agreeing to retain the firm, and by claiming fees paid upfront are for preliminary services including an analysis of the consumer’s loan agreements to see if the consumer qualified for relief services.
If it is Brookstone’s intention to recruit and charge for other unhappy businesses to join this suit against the BBB, it’s probably a brilliant commercial move for them. There are lots of companies that are unhappy about their ratings and feel victimized by the BBB.
Personally I have some issues with the BBB and the way it handled membership from personal experience in 1994. But that was then.
Despite of the failings of the BBB, which probably should have a national appeals process or arbitration process for grading objections, they serve a roll that no government organization does as a national accumulator and reporter of consumer issues. They certainly are not perfect but then again, name a better organization that provides the same service that is.
From the Brookstone Law Complaint
You can read the full complaint filed, here.
Brookstone says they are confused as to why they received the BBB letter grade that they did, “Defendants have intentionally and without reason assigned Brookstone a biased and inconsistent letter grade, which appears as an “F”. Defendants have published this rating on their BBB On Line system, which is available to the public.”
If it is true that accredited members are only those that pay for membership fees, that would be a disappointing for those that rely on the BBB for fair feedback and ratings. It certainly would appear to be unfair to consumers since many good companies do not pay to belong to the BBB.
The suit alleges, “Under the letter-grade rating system devised by Defendants but not disclosed to the public, ratings are based, in part, on payment of fees. Businesses that agree to pay membership fees are awarded extra rating points unavailable to non-members. Defendants refer to businesses that pay membership fees as an “accredited” business. “A+” ratings are only awarded to accredited businesses, that is, businesses that pay membership fees, and “F” ratings are issued to punish businesses that do not pay for accreditation.”
The suit alleges that in 2010 Connecticut Attorney General Richard Blumenthal publicly raised concerns about the letter grading system. That is in fact true.
From CTWatchdog.com on the 2010 on the Connecticut Attorney General Richard Blumenthal Objections
Connecticut Attorney General Richard Blumenthal is threatening the Better Business Bureau with legal action unless it changes its controversial marketing program which gives accredited businesses better grades in return for annual payments.
According to sources, Blumenthal’s investigation into the bureau’s letter grade system has convinced him what many consumer advocates – including myself – have been saying, that it’s a marketing system designed to pressure businesses to pay to become accredited members.
Blumenthal Friday sent a letter to the national council of the BBB (the full letter is published below) giving the bureau two weeks to responding to his concerns.
The Attorney General’s position is that the bureaus either stop using the A+ to F grade system on their web sites to rate businesses or to make it crystal clear to consumers that it rewards businesses that pay to be accredited by automatically giving then higher ratings.
Now only accredited members can receive A+ ratings and some businesses can receive A- ratings even without a track record or even a legitimate address just by paying a fee. Normally a new business that doesn’t join the bureau can only receive a B or a B- rating or receives no rating.
“The optimum solution is that the BBB de-couple its ratings entirely from the payment of dues. At a minimum, it should immediately and completely disclose the fee portion of its rating system to consumers who rely on the BBB’s evaluation of businesses. In particular, the BBB should disclose in the main rating page the fact and amount of any accreditation fee, and that businesses are awarded four additional rating points for payment and accreditation. Furthermore, the BBB should state the most recent date when information and ratings about a business were reviewed and updated,” Blumenthal wrote in his letter.
You can read the rest of their story here.
Let’s get back to the complaint itself.
“Brookstone is not engaged in any activities that violate ethical limits in advertising or that fails to provide legal services in an ethical manner.
Brookstone has well over 1,900 current clients, not including hundreds, if not more, satisfied former clients.
According to the BBB’s website Brookstone has only 14 complaints over the past 3 years. Brookstone has had zero government actions taken against it and no actions against its advertising.
However, numerous BBB accredited business, which pay hundreds or thousands of dollars per year to Defendants, have over 40,000 complaints filed against them, yet enjoy an A+ rating. These same BBB accredited businesses have been the subject of numerous governmental actions as well as had actions taken against them for their deceptive advertising tactics.”
The suit claims the following allegations against the BBB:
- Unlawful, unfair and deceptive business practices
- Intentional interference with prospective economic advantage
- Negligent interference with prospective economic advantage
- Trade libel
So Where Does This Leave Companies and Consumers?
In the past I have been both critical and applauded the actions of Brookstone Law. But in this particular action I’m very interested to see how this case resolves itself in the courts.
If a direct tie can be made to letter grades issues by the BBB on a national level and a requirement to pay a membership fee, then that would be a black eye for the BBB and I would have to agree with the then Connecticut Attorney General Richard Blumenthal when he said:
“The optimum solution is that the BBB de-couple its ratings entirely from the payment of dues. At a minimum, it should immediately and completely disclose the fee portion of its rating system to consumers who rely on the BBB’s evaluation of businesses. In particular, the BBB should disclose in the main rating page the fact and amount of any accreditation fee, and that businesses are awarded four additional rating points for payment and accreditation. Furthermore, the BBB should state the most recent date when information and ratings about a business were reviewed and updated.”
From a previous case filed against the BBB in California, more information about “pay to play” allegations was made public.
“The ABC News investigation also showed how two small Los Angeles businesses, with an ABC News producer and camera present, were told by BBB telemarketers that their C grades could be raised to an A+ if they paid to join the BBB. Terri Hartman, the manager of Liz’s Antique Hardware, says she was told only a payment could change her grade, which was based on one old complaint that had already been resolved. After Hartman paid the $565 membership fee the next business day, her C grade was replaced with an A+ and the one complaint was wiped off the record.”
It seems clear that more transparency should be made available by all BBB chapters to place the actual formula of how each grade was generated on the BBB rating page for each company. That move alone would help all parties weigh the grade given.
A black eye for the BBB over this alleged “pay to play” system and this case filed would be extremely harmful for consumers that rely on the BBB to make decisions about a company based on the BBB report and rating issued.
The BBB remains the only national organization that issues such ratings and reports. But other national groups like RipOffReport.com or ConsumerAffairs.com also have a payment component to them as well. In their case it’s a pay to hide system where unfavorable complaints submitted can be mitigated. See my past article Are Companies Held Hostage Online by ConsumerAffairs.com and Others? What is Fair?
What do you think? Are pay for good ratings or pay to hide complaints fair to consumers? Post your comments below.
Letter from Connecticut Attorney General Richard Blumenthal to BBB
Alan L. Cohen
Vice President and General Counsel Council of Better Business Bureaus
4200 Wilson Blvd
Arlington, VA 22203-1838
Dear Attorney Cohen:
The Better Business Bureau has a long and laudable history of consumer advocacy, and has partnered with my office on many occasions to fight scams and bad business practices. Unfortunately, I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers. In particular, the BBB’s current rating system is based, in part, on the payment of inadequately disclosed accreditation fees. This financial influence is potentially harmful and misleading to consumers. I am also concerned that the BBB has granted good-business awards based on inadequate research and judging criteria. In one instance, the BBB awarded its Connecticut’s BBB Torch Award to a company that soon after filed for bankruptcy and was criminally prosecuted.
I appreciate that you and your colleagues have met with my staff and engaged in serious discussions toward resolving my concerns, but much more needs to be done. I repeat my call for the BBB to de-couple enrollment fees from ratings. At a minimum, the BBB must disclose to consumers that its ratings system is influenced by fees.
My investigation of the BBB began in March 2009, after the 2008 BBB Torch Award Program (TAP) recipient, Custom Basements of Connecticut (“CBC”), defaulted on customer obligations and filed for bankruptcy. The investigation initially focused on the criteria and judging process for the TAP award. My investigation later expanded to the BBB’s new letter grade, or “alpha,” rating system that replaced its previous method of rating businesses “Satisfactory” or “Unsatisfactory” based on the number and resolution of consumer complaints.
I am concerned that the new alpha rating system skews ratings results in favor of BBB dues-paying businesses. The BBB allocates these businesses four extra niting points unavailable to non-members. In Connecticut, these dues apparently can range from almost four hundred dollars to five thousand dollars or more depending on the size of the business.
I find no reasonable basis for tying rating points to a membership fee — in essence, creating what could be viewed as a “pay-to-play” system, rather than a transparent and equitable “rating” system. I understand that the BBB’s position is that the additional four points are awarded to a business in recognizing that it contractually commits to follow the BBB’s guidelines for resolving consumer complaints and adherence to the BBB’s code of ethical standards.
The BBB could better accomplish its goals by de-coupling ratings from dues payments -allowing businesses the option of committing to follow the BBB guidelines and ethical standards and awarding the four points irrespective of their dues-paying status. When businesses violate the guidelines or standards, the BBB could revoke the four points and alter other grading categories as appropriate.
The optimum solution is that the BBB de-couple its ratings entirely from the payment of dues. At a minimum, it should immediately and completely disclose the fee portion of its rating system to consumers who rely on the BBB’s evaluation of businesses. In particular, the BBB should disclose in the main rating page the fact and amount of any accreditation fee, and that businesses are awarded four additional rating points for payment and accreditation. Furthermore, the BBB should state the most recent date when information and ratings about a business were reviewed and updated.
Separate and apart from these issues, I remain concerned that the term “rating” inaccurately describes the BBB grading system. There are clear, practical and logistical limits to the BBB’s ability to accurately and fairly implement a full ratings system for businesses. Extensive resources are necessary to verify the self-reported information that the BBB receives from businesses. This information includes compliance with state and federal licensing and registration requirements, outstanding lawsuits, time in business and financial stability. My understanding is that the BBB does not have the resources to verify all self-reported business information. The BBB must disclose in a clear and prominent manner this and any other factual limitations on its rating system. Failure to do so may be misleading to consumers and adversely impact those good businesses who are not rated by the BBB — a result that is bad for both consumers and businesses.
Furthermore, I understand that the BBB has established a separate rating system for charitable organizations. I am similarly concerned about this rating system and would appreciate any information you can provide my office concerning rating factors for non-profits and charities, fees charged to these charities and whether they also receive points for paying dues. My office has a significant statutory responsibility to protect the integrity of public charities.
I thank the Connecticut BBB for its efforts to address my concerns regarding the TAP. Specifically, my investigation questioned the reliability of the self-nominating process in which the TAP judges failed to keep minutes of their meetings, require information concerning financial stability, maintain memoranda or notes regarding verification of application information, and used only the documents and information provided by the nominees to make their decisions. Furthermore, the judges did not contact third parties, such as customers or other businesses or government agencies, to verify the accuracy of any of the information contained in the applications.
I am pleased to learn that the Connecticut BBB has altered the TAP, first by adding two new criteria requiring applicants to supply: (1) information demonstrating that the business is meeting its financial obligations, including but not limited to a current credit report, annual certified financial audit, and/or current Dun & Bradstreet report; and (2) three references that BBB will contact to discuss the business’ reputation in the industry, community and with customers.
I understand that further changes to the TAP will include verification of applicant information through third-party sources, including court records and government agencies. Additionally, judges now conduct on-site visits for all finalists. If no applicant ultimately meets the TAP criteria for the award, no award will be given that year. While the changes made to the TAP so far are good first steps, all the promised changes should be implemented by next year’s TAP.
The Council of Better Business Bureaus should promulgate a uniform, reliable set of standards governing business awards. My hope is that the Connecticut BBB — after implementing my recommendations — will serve as a model for BBB councils throughout the United States
My office has discussed these issues with you for more than a year. I have appreciated your cooperation and hope that it will continue, but the time has come for real and decisive action. I urge you to act now to address serious and significant continuing shortcomings in the alpha rating system and the torch and other awards.
I look forward to your response to this letter with a plan to address these concerns no later than 15 days from receipt. The plan should include effective steps to reform the alpha system including de-coupling pay from ratings and, at a minimum, full and fair disclosure to consumers.
Very truly yours,