The Better Business Bureau (BBB) is an American private, 501(c)(6)nonprofit organization founded in 1912. BBB's self-described mission is to focus on advancing marketplace trust,[2] consisting of 92 independently incorporated local BBB organizations in the United States and Canada, coordinated under the International Association of Better Business Bureaus (IABBB) in Arlington, Virginia.[3]
The Better Business Bureau is not affiliated with any governmental agency. Businesses that affiliate with BBB and adhere to its standards do so through industry self-regulation. To avoid bias, BBB's policy is to refrain from recommending or endorsing any specific business, product or service[4] even though they still advocate for business interests.
The BBB rating system uses an A+ through F letter-grade scale. The grades represent BBB's degree of confidence that the business is operating in good faith and will resolve customer concerns filed with BBB. BBB's ratings are explained on its Ratings Overview page.
According to BBB, nearly 400,000 local businesses in North America were accredited as of July 2022.[5] BBB prospects successfully vetted businesses to become dues-paying 'accredited businesses' that pledge and continue to adhere to the BBB Code of Business Practices.[6] In return, BBB allows accredited businesses in good standing to use its trademarked logo in marketing materials.
History
The Better Business Bureau traces its roots to the U.S. government's 1906 lawsuit United States v. Forty Barrels and Twenty Kegs of Coca-Cola, which ignited widespread scrutiny of misleading advertising practices. In response to growing public concern, local "vigilance committees" began forming across the United States by 1912 to monitor and discourage unethical business behavior. These groups were largely driven by figures such as Samuel Candler Dobbs of the American Advertising Federation, who had been advocating for truth in advertising since at least 1911.[7][8] Its original mission was to investigate financial fraud relating to advertisements.[9]
The first local Better Business Bureau was formed in Minneapolis, Minnesota in 1914.[10] The National Vigilance Committee officially became the Better Business Bureau in 1916.[11] The Better Business Bureau's New York affiliate was officially incorporated in 1922.[9] In 1927, the organization announced the formation of an auxiliary committee to cooperate with the bureau in suppressing financial and mercantile fraud. It consisted of 27 businessmen in the financial, industrial, railroad, and legal industries.[12] A consumer department was formed as a separate division in 1939.[13]
By 1967, the New York City bureau was handling 260,000 inquiries and requests for service each year. Around this time, its 130 local bureaus began to focus less on fraud and more toward misleading or confusing advertising and complaints about service.[14] The Council of Better Business Bureaus was formed in 1970 to help the national organization coordinate between its many local offices. One of its first efforts was to improve the telephone systems at the local level.[15] By 1971, there were 150 autonomous bureaus around the country.[8]
In 1983, the New York bureau boasted 6,000 members, over 100 full and part-time staffers, and a $1.45 million annual budget as the largest affiliate in the country. It had five branches located in Newark, Paramus, White Plains, Wappingers Falls, and Farmingdale.[16] In 1987, the branch covering Los Angeles and Orange counties closed down. It was replaced six months later by the Southland bureau, a merger of the closed affiliate and the San Bernardino county office.[17] There were 180 local bureaus handling about 10.7 million inquiries in 1989.[18] In the 1991, some bureaus introduced a 900 number that would incur a cost for those wishing to log a complaint or inquire about a business.[18][19] In 1996, the BBB voted in favor of charging fees to the public for its services.[20] In the late 1990s, It also introduced BBBOnline, a subsidiary tasked with vetting internet-based businesses and their websites.[21] A privacy seal was made available for those who paid an annual fee and met certain criteria.[22]
In 2007, the Better Business Bureau introduced a new logo and the tagline “Start With Trust” in an effort to rebrand itself as a proactive, not just reactive, organization.[23] On August 16, 2011, the Council of Better Business Bureaus merged its U.S. and Canadian operations into a unified North American system. That consolidation was intended to streamline cross‑border complaint management, consumer access, and business accreditation infrastructure.[24] By 2013, the organization maintained a database of nearly five million businesses, including more than 400,000 accredited companies.[25]
Structure and funding
The Better Business Bureau (BBB) is part of a private, nonprofit federation operating across the United States and Canada. Local BBB organizations are independently incorporated, but overseen by the International Association of Better Business Bureaus (IABBB), which establishes standards and monitors compliance.[26]
Funding is almost entirely derived from voluntary membership dues paid by accredited businesses. Critics argue that this funding model creates a conflict of interest, as local boards and executive leadership often include business representatives—up to 90% in some jurisdictions.[27][circular reference][28]
Dispute resolution procedures
BBB serves as a consumer-facing mediator offering several types of alternative dispute resolution (ADR), including conciliation, mediation, informal dispute settlement, and both conditionally binding and binding arbitration.[29]
Upon filing, complaints are forwarded to the business within two business days, and businesses are requested to respond within 14 calendar days. A follow-up is issued if no response is received, and most cases are closed within approximately 30 days with statuses such as “resolved,” “answered,” “unanswered,” or “unresolved.”[30]
However, critics contend the process remains superficial—sometimes parties with unresolved grievances are offered gift certificates for case closure, raising questions about effectiveness. BBB lacks legal enforcement power; it provides mediation rather than judicial resolution.[31]
Rating system and accreditation
In 2009, BBB launched a letter-grade rating system (A+ to F), replacing the older Satisfactory/Unsatisfactory system. Ratings are computed based on factors such as complaint patterns, transparency, advertising reliability, time in business, and responsiveness to customers.[26][32]
Initially, accreditation status contributed four points toward higher ratings. After media exposés in 2010—especially allegations of businesses receiving higher grades immediately after paying fees—Connecticut’s Attorney General condemned the system as misleading. BBB removed accreditation from the points system and pledged reforms.[25][33][34]
Criticism
By the 1970s, the Better Business Bureau was being regularly criticized. Consumer advocates began to openly question the effectiveness of self-regulation.[35][36] Local bureaus, such as the one in Harlem, were criticized for failing to meet the needs of the population.[37] Affiliates were criticized by consumer activists for inconsistent service standards and unreliable logging of complaints. Some even accused the BBB of protecting the businesses that pay dues over consumers by ignoring complaints outright.[8][38]
In 1997, the organization's south Florida office was shut down because of poor management and high debt. Complaints about other Florida branches included misleading telemarketing calls.[19] In 1998, the organization introduced an online privacy seal of approval to promote the safety of customer data.[39] In 2002, the North Jersey office based in Parsippany was expelled from the organization for failing to meet certain standards.[40]
When the BBB introduced a new grading system in 2009, the organization received criticism because companies that paid for accreditation were consistently graded higher than their unaccredited counterparts.[32] Criticism peaked following a 2010 ABC News *20/20* investigation revealing that fabricated companies—including one named “Hamas”—received high ratings shortly after paying membership fees, suggesting pay-for-play dynamics.[41][42] Soon after, the organization announced it would stop giving better grades to paying members.[43][44] Complaints were also made about the disproportionate compensation for some executives at the nonprofit. The head executive at the Southland chapter, for instance, had a salary of over 400,000 per year, which was higher than the organization's national president.[45] He resigned in April 2011.[46]
In 2012, the International Association of Better Business Bureaus stripped trademark authorization from four Canadian chapters—Hamilton, Windsor, Montreal, and St. John's—citing failure to meet operational and reporting standards. These offices either rebranded or were absorbed into regional offices.[47]
In 2013, BBB’s largest affiliate—the Southland chapter—was expelled by its national council for failing to meet accreditation, reporting, and complaint-handling standards.[48][49] Critics assert the BBB lacks objective oversight, given its board composition and financial ties to accredited companies.[50][51]
A 2015 investigation by CNN found that some local bureaus used third-party call centers owned by former BBB executives to pressure businesses into paying for accreditation.[52]
In June 2024, the International Association of Better Business Bureaus expelled its Ottawa-based affiliate for "not meeting BBB standards."[53] A new BBB entity was created to replace the expelled bureau.[54]
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