The Miami-based bureau, which is supposed to blow the whistle on incompetent and corrupt companies, was itself so inept that the national Council for Better Business Bureaus ended up firing its managers and taking over the troubled office. But not before the bureau racked up nearly $500,000 in debts and incalculable bad will among local consumers.
The implosion of the south Florida bureau, whose territory stretches as far north as Charlotte County, comes at a bad time for the 81-year-old watchdog group. Once the bedrock of business ethics, the Better Business Bureaus may be losing their franchise. On the one hand, they are having trouble persuading businesses to join while, on the other, consumers, particularly in fast-growing states like Florida, are calling in complaints in record numbers.
To be sure, they've lost some members to mergers, while others ended up on the corporate scrap heap. Competition from the chamber-run Better Business Councils, which offer similar services for less money, also has hurt membership rolls at Florida's six BBBs. But the problem seems more fundamental than any of that. Today's BBB is simply no longer as relevant to companies or to consumers as it once was.
Better Business Bureaus market legitimacy. Membership in a bureau means you have been operating for six months (a year for home improvement companies), have a clean regulatory record and formal procedures for handling customer complaints, among other things. Dues typically start at $200 a year and go up into the thousands for large companies.
The pitch has been that the familiar plastic membership signs attract customers seeking a guarantee of good and honest service. In the past, bigger companies, particularly banks and department stores, joined out of community spirit. But today's companies want proof that better business really translates into bigger business. "People are looking for the bottom line." says Ron Berry, who heads up bureau affairs for the national Council of BBBs.
Clearinghouse
The bureaus' value to consumers seems more obvious. Better Business Bureaus aim to be a clearinghouse for consumer complaints against local companies and charities. They also contract with automakers to mediate and arbitrate lemon law disputes with car buyers.
Still, Monte Belote, executive director of the Florida Consumer Action Network, a consumer lobby, finds that government-run agencies like the state's Division of Consumer Services are more effective because they have access to staff attorneys and have enforcement powers. The problem with the Better Business Bureaus, he says, is that consumers can't always be sure they're getting good information. Although they report to the national Council of BBBs in Arlington, Va., the country's 135 bureaus are independent, not-for-profit organizations that pretty much operate without supervision. "Each one is a totally different animal," Belote says. "There are a number that are very helpful and informative. We've also dealt with bureaus that are basically just trying to sell membership packages, where they bill you for $300 and you get a plastic sign. How is the consumer supposed to know the difference?"
There's no question, though, that the public continues to rely on Better Business Bureaus for help deciding with whom to do business. "We're not getting less calls, we're getting more," says Brodie White, whose Pensacola BBB was the country's fastest-growing bureau the last two years. "As many phone lines as we can install, they fill up."
Ron Stephens, president of the West Palm BBB, says that since he arrived in 1990, calls have tripled to about 640 a day while memberships have increased just 30% to 2,600. To help with the crushing demand, Stephens' bureau installed an automated phone system so consumers can access reports on local companies themselves, and it increased dues by 10% to bring in extra money.
Florida's other BBBs report similar situations. At the Orlando-based BBB, which serves 11 central Florida counties, membership dropped from 3,300 five years ago to 1,800 today, even as consumer inquiries have increased. "You have a growing base of nonpaying customers," says White. "You've got to get the business community behind you, but competition for those dollars is intense."
In south Florida, the defunct BBB's answer to this challenge apparently was to lower standards. Former staffers say the bureau accepted members who hadn't been in business the required six months and failed to expel members who had regulatory troubles. Consumer calls were ignored and complaint files not maintained as the staff was cut by almost half in recent months. Berry, of the national Council, says the bureau was hurt by Hurricane Andrew, which destroyed many South Dade member businesses. In addition, the bureau's use of telemarketing rather than personal visits to recruit new members resulted in unusually low renewal rates. Still, Berry says, the south Florida BBB's revenues - somewhere between $1 million and $1.4 million a year - should have been enough for basic services. The real problem, he speculates, was mismanagement and a lack of supervision by its board of directors. Board chairman James Haick, a Fort Myers stockbroker, declined comment, and BBB lawyer Mercer "Bud" Clarke didn't return phone calls.
Florida's other five BBBs swear they're fiscally and operationally sound, but the taint of a bankrupt south Florida affiliate doesn't do much for the organization's image and, worse, provides yet another reason for businesses not to join.
Seeking to reverse the recent trend, most bureaus are looking for new ways to make themselves more valuable to their members. Judy Pepper, president of the 11-county central Florida BBB in Orlando, says the bureau might offer group health insurance to members and is surveying its 1,800 members to gauge their wants. More importantly, Pepper is reminding businesses that they too need protection from the scams the bureau uncovers. "Too often we're seen as a consumer organization, but businesses are consumers too," Pepper says.
Perhaps the BBBs' likeliest opportunity lies online. The World Wide Web is one big unregulated market, and where there's capitalism there's fraud. A new program called BBBOnLine allows members of a local BBB to obtain a BBB seal of approval for their Internet advertising. Users who click on the seal will be transported to the BBB's home page and given confirmation of the company's bureau participation. "It's a great way for companies to gain credibility online," Berry says.
About 200 companies nationwide, including major retailers like JCPenney, have signed up for the program, which costs between $200 and $5,000 a year. The BBBs plan to use the revenues to upload its huge databases of company files to the Web so that consumers nationwide can access any company's record quickly and conveniently, regardless of its location. White, of the Pensacola BBB, predicts more such initiatives as the organization moves into the 21st century. "We expect to constantly take this business apart and examine it," he says. "We are no longer this mom-and-pop situation. These days, we're dealing in global arenas."