How did Conn’s maintain A+ rating with local BBB?

By DEE DIXON

May 30, 2009
Posted: May 31, 2009, 1:51 PM CDT

Trust.

It is a tenet of the Better Business Bureau’s code of business practices.But the trust consumers have in the bureau’s rating system came into question last week when it was reported that the Southeast Texas chapter of the BBB had maintained an A+ rating for Beaumont-based Conn’s Inc. despite receiving more than 2,000 complaints against the company in the past 36 months.

The Southeast Texas BBB also failed to follow the lead of the Greater Houston BBB last month when that chapter suspended Conn’s membership because of an excessive pattern of complaints.

It wasn’t until Attorney General Greg Abbott announced Thursday that he had filed a lawsuit against Conn’s for deceptive trade practices that the Southeast Texas BBB finally changed the company’s rating. Not to a failing grade, but simply a “no rating” pending further review.

Unlike what many consumers may think, the BBB is not affiliated with government. It is a membership group that requires dues from businesses and rates them higher if they join. It is organized into regional bureaus that operate independently, yet are supposed to follow the same standards.

Southeast Texas BBB officials defended their decision to maintain the high rating for hometown business Conn’s, while acknowledging that they’ve also fielded complaints over the rating.

“A lot of people are upset because of their (Conn’s) A+ rating,” Jay Sheppard, BBB of Southeast Texas dispute resolution director, said in an interview with The Enterprise prior to the attorney general’s lawsuit.

Michael Clayton, president of the Southeast Texas BBB, was forceful in defending the rating.

“They have been able to maintain a high rating because they have been responsive to every complaint we have brought to them. We have worked with them on a day-to-day basis,” Clayton said Friday.

In mid-May, the Enterprise reviewed complaints lodged against Conn’s in the past 36 months. At the time, the company had 1,986 complaints and by month’s end there were 2,024, according to the BBB Web site.

Conn’s complaint history has since been removed from the BBB’s Web site.

“Conn’s does have a lot of complaints. When you put it in the context of how many customers they have and revenue they have – a billion (dollars) – you need to be aware of how many actual customers they have and the amount of products they sell,” said Sheppard, adding Conn’s is diligent about responding to complaints and maintaining communication with the bureau to resolve problems.

Before the attorney general’s announcement, Conn’s officials acknowledged problems with customer service and said they were working to resolve those issues.

The BBB and Conn’s

The Greater Houston BBB flagged Conn’s because of the volume of complaints about call center waits ranging from 30 minutes to several hours and how it handled service calls, Deana Turner, a Houston BBB spokeswoman said in an interview with The Enterprise two weeks ago.

She said Conn’s officials began meeting with them in March. Improvements were noted at the call center, but problems continued with service calls, Turner said.

The company has brought back two managers who retired from its Houston and Beaumont offices and increased the number of technicians and workers at its call center, Bill Nylin, the company’s vice chairman said in an interview before Abbott’s lawsuit was announced.

That Conn’s received more than 1,100 complaints in 12 months was a remarkable number for a firm that has been a member of the BBB since 1963, Turner said.

The way complaints are handled, they are only captured by the Houston chapter briefly before they are forwarded to the Beaumont bureau, which is the bureau designated to handle Conn’s complaints.

Once the calls started to increase, the Houston chapter started maintaining its own files for complaints generated in the Houston area.

Clayton said that when the Houston bureau raised the proverbial red flag, they were operating outside of their jurisdiction because the Southeast Texas bureau handles Conn’s complaints.

“Houston has its right to its opinion, but Houston is not the headquarters,” Clayton said. “They are not charged with the responsibility.”

Dan Parsons, the president of the Greater Houston BBB, disagrees.

“They fall under our purview with respect to their membership … We saw Houston consumers and heard Houston consumers and the Attorney General’s Office approached us in January and said they were moving on the investigation,” Parsons said. “They tried to get our local complaints and we said we don’t have them they are in Beaumont. We had to do what we had to for our membership here.”

Clayton did concede that the number of complaints that Conn’s received over the past 12 months was alarming.

And in response, local bureau officials who are dedicated to handling Conn’s complaints began meeting with company representatives on a regular basis in March.

The rating system

As far as Conn’s rating in Southeast Texas, Clayton said it is based on a complex mathematical formula calculated by a computer.

When asked why the Conn’s rating was changed immediately following the announcement of the attorney general’s lawsuit, Clayton said: “Our policy is when government action has been alleged, as was (Thursday), we put them on no report, which means it is up for update and that is why the grade changed.”

Conn’s, which has about 1,000 employees at its 75 stores, is not the largest corporation in Southeast Texas from an employee standpoint.

Where they are top dog locally is with 1.3 million customers annually.

“By far they have the largest customer base of any business in Southeast Texas,” said Clayton, who added that the complaint to customer ratio is infinitesimal and the larger a company the more complaints.

However, retailer Target, which has been an accredited member of the BBB since 1980 and maintains an A+ rating, is nearly 50 times as large as Conn’s in terms of customers and had 25 percent fewer complaints filed with the BBB in the past 36 months. That company has 50 million customers and 30,000 employees, said Lisa Jemtrud, Minnesota BBB director of outreach and industry services.

“All good companies can get complaints. It’s what you do with them that counts,” Jemtrud said in a telephone interview Friday.

Just as Conn’s complaints are handled by its home BBB, Minneapolis-based Target’s complaints are handled at the Minnesota BBB.

Earlier this year, BBBs nationwide changed the rating system from satisfactory/unsatisfactory to one that uses A to F grades.

But unlike the academic version, the BBB grades are not solely based on performance.

Clayton said the new rating system enables consumers “to make a better determination about the businesses and products.”

The first bureau to test the rating system was the Southland BBB in California back in 2002. But once it started, several California companies complained that their ratings were lowered if they didn’t become a member of the BBB and pay dues, according to a May 1, 2009, Orange County Register article.

A scan of Beaumont-area appliance store reliability reports on the BBB Web site showed that Vidor-based Sydney’s Appliances Sales and Repair, which isn’t a BBB accredited business or member, received a rating of F for failing to respond to one complaint filed with the BBB last year.

Holly Sturrock, who owns the store, doesn’t agree with the grade.

“I think it’s unfair to have an F for one complaint in three years,” Sturrock said. “I think it should be a B.

Becoming accredited

When the BBB changed the rating scale it also changed how it identified members, referring to them now as accredited businesses.

The Enterprise, which pays $700 in annual dues to the Southeast Texas BBB, has an A+ rating and has been a member since 1985. In the past three years, 14 complaints have been filed with the BBB against the newspaper. They all were resolved.

A business can join by applying or being invited, but it must maintain a grade of at least a B.