Better Business Bureau: An Overview and How Its Ratings Work

The Better Business Bureau is a nonprofit organization founded in 1912, with a mission to advance marketplace trust. Operating primarily in the United States, Canada, and parts of Mexico, the BBB consists of a network of local, independent chapters—over 100 in total—coordinated under the Council of Better Business Bureaus (CBBB). Each chapter serves a specific geographic region, ensuring localized support for consumers and businesses.

The BBB’s core functions include:

• Providing Business Reviews and Ratings: The BBB evaluates businesses based on various criteria, assigning letter grades (A+ to F) to reflect their trustworthiness and performance.
• Mediating Consumer Complaints: It acts as a neutral third party to resolve disputes between customers and businesses.
• Promoting Ethical Standards: The BBB encourages businesses to adhere to its Code of Business Practices, which emphasizes integrity, transparency, and responsiveness.
• Educating Consumers: Through reports, alerts, and resources, the BBB helps consumers make informed decisions and avoid scams.

Unlike government agencies, the BBB is not a regulatory body. It lacks legal authority to enforce laws or penalize businesses. Instead, its influence stems from its reputation and the voluntary participation of businesses seeking credibility.

The BBB’s Historical Context

The BBB emerged during a time of rapid industrialization in the early 20th century, when unregulated markets often left consumers vulnerable to fraud and unethical practices. Its predecessor, the National Vigilance Committee, was formed to combat false advertising. By 1912, this evolved into the BBB, with a broader focus on fostering trust across industries.

Over the decades, the BBB adapted to changing economic landscapes. In the 1920s, it tackled misleading advertising in print media. By the late 20th century, it addressed challenges posed by telemarketing and early internet scams. Today, the BBB monitors digital marketplaces, cryptocurrency fraud, and online reviews, remaining relevant in an era of e-commerce and globalized trade.

How the BBB Operates

The BBB operates as a decentralized network. Local BBB chapters are funded primarily through membership fees paid by accredited businesses, supplemented by grants and donations. Accreditation is a voluntary process where businesses apply to align with BBB standards, paying fees based on their size and region. Non-accredited businesses are still reviewed and rated, but accreditation signals a higher commitment to BBB principles.

The organization’s revenue model has sparked debate. Critics argue that accreditation fees create a “pay-to-play” perception, where businesses may feel pressured to join to improve their ratings. The BBB counters that fees support its operations and that ratings are based on objective criteria, not payment status.

The BBB Rating System: An Overview

The BBB’s rating system is one of its most visible tools, providing consumers with a quick snapshot of a business’s reliability. Ratings range from A+ (highest) to F (lowest) and are displayed prominently on BBB business profiles. These grades aim to reflect a business’s track record in ethical practices, customer service, and complaint resolution.

Ratings are not static; they are updated regularly based on new information, such as consumer complaints or changes in business practices. Both accredited and non-accredited businesses receive ratings, though accreditation can influence certain scoring factors.

How Ratings Are Calculated

The BBB uses a 100-point scoring system, translated into letter grades, to evaluate businesses. The score is determined by 13 factors, grouped into categories like complaint history, business practices, and transparency. Below is a breakdown of the key components:

1. Complaint Volume and Resolution (Up to 40 Points)
   The number of complaints filed against a business, relative to its size, significantly impacts its score. More complaints can lower the score, especially if unresolved. The BBB assesses:
   • Volume: How many complaints were filed in the past three years.
   • Resolution: Whether complaints were addressed promptly and satisfactorily.
   • Response: If the business responded to complaints, even if not fully resolved.
   For example, a business with few complaints that resolves them quickly will score higher than one with numerous unresolved issues.
2. Type of Business (Up to 10 Points)
   Certain industries, like multi-level marketing or telemarketing, may face deductions due to inherent risks or frequent consumer issues. The BBB evaluates whether a business’s operations align with ethical standards.
3. Time in Business (Up to 5 Points)
   Longer-operating businesses may earn points for stability, though newer businesses aren’t heavily penalized if other factors are strong.
4. Transparent Business Practices (Up to 10 Points)
   Transparency includes clear disclosure of contact information, ownership, and policies. Failure to provide this—common with online-only businesses—can lower scores.
5. Failure to Honor Commitments (Up to -20 Points)
   If a business breaches BBB agreements (e.g., arbitration promises), it faces significant deductions.
6. Government Actions (Up to -20 Points)
   Legal actions, such as lawsuits or regulatory penalties, can negatively impact ratings, reflecting potential systemic issues.
7. Advertising Issues (Up to -10 Points)
   Misleading or false advertising, as reported by consumers or identified by the BBB, results in deductions.
8. Accreditation Status (Bonus Points)
   Accredited businesses may receive up to 15 bonus points for adhering to BBB standards, though non-accredited businesses can still earn high ratings.

Once calculated, the score translates to a letter grade:

• 97-100: A+
• 94-96.99: A
• 90-93.99: A-
• 87-89.99: B+
• And so on, down to F for scores below 60.

Additional Rating Symbols

Beyond letter grades, the BBB uses symbols to convey specific statuses:

• NR (Not Rated): Applied to businesses with insufficient information, often new or low-profile companies.
• Suspended or Revoked Accreditation: Accredited businesses failing to meet standards may lose their status, reflected in profiles.
• Closed: Indicates a business is no longer operating.

The Role of Consumer Complaints

Consumer complaints are central to the BBB’s rating system and operations. Anyone can file a complaint online, detailing issues like poor service, billing disputes, or unfulfilled contracts. The BBB forwards these to the business, giving them a chance to respond—typically within 30 days.

The complaint process is designed to be neutral:

• Mediation: The BBB facilitates dialogue, suggesting solutions but not mandating outcomes.
• Resolution Tracking: Resolved complaints (where the consumer is satisfied) reflect positively, while unresolved or ignored complaints harm ratings.
• Public Records: Complaints are summarized on business profiles, offering transparency to other consumers.

In 2024, the BBB processed millions of complaints, with common issues involving retail, home improvement, and online services. Complaint data also informs scam alerts, helping the BBB warn consumers about emerging fraud trends.

Accreditation vs. Ratings

A common misconception is that BBB accreditation guarantees a high rating or that non-accredited businesses are untrustworthy. In reality:

• Accreditation is a paid, voluntary commitment to BBB standards, involving vetting and ongoing compliance.
• Ratings are independent evaluations based on performance metrics, applied to all businesses.

Accredited businesses often score higher due to their responsiveness and adherence to standards, but non-accredited businesses can achieve A+ ratings through exemplary practices. Conversely, accredited businesses can receive low ratings if complaints pile up or ethical lapses occur.

Criticisms of the BBB

Despite its prominence, the BBB faces criticism, particularly regarding its funding and impartiality:

• Pay-to-Play Concerns: Critics argue that accreditation fees create a conflict of interest, as businesses paying the BBB might expect favorable treatment. A 2010 ABC News investigation highlighted cases where accredited businesses retained high ratings despite complaints, fueling this narrative.
• Inconsistent Standards: Some businesses report varying experiences across BBB chapters, suggesting uneven application of rules.
• Limited Scope: The BBB’s focus on complaints means businesses with few reported issues may score well, even if their practices are questionable elsewhere.
• Consumer Misunderstanding: Many consumers assume BBB ratings are comprehensive endorsements, not realizing they reflect specific metrics.

The BBB responds by emphasizing its transparent methodology and nonprofit status, noting that accreditation is optional and ratings are data-driven. It also highlights its role in resolving disputes, which benefits consumers regardless of business status.

The BBB’s Impact on Businesses and Consumers

For businesses, a strong BBB rating can enhance credibility, attract customers, and signal trustworthiness. Accredited businesses often display the BBB logo on websites and marketing materials, leveraging its brand recognition. However, low ratings or unresolved complaints can deter customers, especially in competitive industries.

For consumers, the BBB offers a free, accessible resource to research businesses, file complaints, and resolve disputes without legal costs. Its profiles aggregate data—ratings, complaints, and reviews—that help individuals make informed choices. The BBB’s scam tracker, launched in recent years, further empowers consumers by flagging fraudulent schemes in real time.

The BBB in the Digital Age

The rise of e-commerce and social media has reshaped the BBB’s role. Online businesses, often lacking physical addresses, pose challenges for verification and complaint resolution. The BBB has adapted by:

• Expanding digital profiles to include online-only businesses.
• Monitoring social media for consumer feedback and scam reports.
• Partnering with tech platforms to combat fraud, such as fake reviews or phishing schemes.

In 2025, the BBB continues to evolve, with initiatives like enhanced AI-driven scam detection and partnerships with cybersecurity firms to protect consumers in digital marketplaces.

Conclusion

The Better Business Bureau remains a cornerstone of consumer trust, balancing its nonprofit mission with the complexities of a modern economy. Its rating system, while not perfect, provides a structured way to assess businesses based on complaints, transparency, and ethical conduct. For consumers, the BBB is a valuable tool for research and recourse; for businesses, it’s an opportunity to build credibility and resolve disputes.