March 8, 2010
By Scott Lee Jordan, freelance writer and business owner
Centennial Bank of Ogden Utah held an "A" rating from the BBB at the time it was closed down by federal authorities on March 5, 2010.
Based on research completed by the Better Ethics Bureau, the BBB did not consider Centennial Bank's financial condition when it gave the troubled bank its second-highest rating.
It appears that the BBB rated Centennial as "A" primarily because the bank had been operating more than 7 years and had a favorable complaint record with the BBB.
The "A" rating of Centennial Bank in Ogden, Utah strongly indicates the BBB believes if a business has been around for a long time with little or no complaints it is also financially strong and operationally sound as well. The Centennial Bank fiasco shows once again how flawed this BBB reasoning is.
Closer scrutiny reveals the BBB's rating system actually has little to do with trustworthiness or reliability, and that the BBB is content to let the public find out for itself if a business is truly reliable or not.
Of course, Centennial's "A" casts doubt on all BBB ratings, high or low. Certainly, failing banks with A grades cheapen the value of any other high marks the BBB may publish.
Last week, the Better Ethics Bureau pointed out that the BBB gave passing marks to two other banks that were failing and were eventually closed by federal authorities.
If the BBB cannot get it right with something as important to the public as millions of dollars in life savings and bill paying money, how can it be trusted when it comes to auto mechanics, beauty salons or anything other business?
And its rating system isn't the BBB's only problem. Websites such as bbbRoundUp.com, www.BetterEthicsBureau.org, and www.MechanicsResponds.com, and a growing list of journalists, freelance writers, business owners and consumers are exposing a number of ethical and operational problems at the BBB, including its complaint handling system and lack of transparency.
The Better Ethics Bureau warns business owners and consumers alike to be wary of any BBB rating, and the BBB itself, until the BBB corrects these issues and proves to the public it is operating in a trustworthy manner.
Another consequence is that more and more business owners realize that being a member of the BBB may hurt a reputation more than help it. This is partly because the BBB gives A+ ratings only to businesses that pay membership fees, and the public is awakening to this pay-for-play scheme.
Looking ahead, the Better Ethics Bureau believes BBB board members could be named individually in lawsuits for faulty BBB ratings and other BBB deficiencies. As public discontent with the BBB increases, BBB board members will be exposed more and more to culpability issues. The Better Ethics Bureau cautions current and potential BBB board members accordingly. (See BoardSource.org, Richard T. Ingram: Ten Basic Responsibilities of Nonprofit Boards for an example list of non-profit board member responsibilities.
As for the depositors of the former Centennial Bank of Ogden, Utah, it looks like Zion National Bank will buy only the FDIC insured deposits, according to the Associated Press story linked below--very unfortunate, particularly if any depositors had relied on the BBB's advice to "Start With Trust".
Author's note: As of Monday, March 8, 2010, the Centennial Bank in Ogden, Utah, was still rated "A" by the BBB.
Associated Press (3/5/10), leva M. Augstums & Marcy Gordon: Banks Shuttered in Fla., Ill, Md., Utah
Copyright 2010, by Scott Lee Jordan. Please reprint without charge--just let me know at scott@gojordan.us.
Wallace S. Gibson, CPM * GIBSON MANAGEMENT GROUP, Ltd.
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I never knew the rating method used by BBB. Very interesting article!
Jane * I agree. This information sheds a light of light on BBB being involved in financial coverup
A financial coverup indeed - there has to be an investigation - and not by the people who are involved - duh!
Wallace - I realize your post is more about the BBB than Centennial Bank's failings. But, is there any information to evidence that the 'A' rating wasn't justified before the seizure of the bank?
I ask this becasue I know of at least one bank that failed solely because they invested too heavily in the stock of Fannie Mae and Freddie Mac - stock that was, at the time, considered among the safest to own. Once the government took over the GSEs, the stock became worthless.
In support of your argument about the BBB, I have been on the receiving end of their sales tactics. I might have to agree with you notwithstanding the bank rating.
Patrick * follow Jordan's links....I wrote about these banks failing a few days ago and 2 bank could not get buyers * I think this is one.
I have NEVER been a fan of the BBB * I do not respond to BBB complaints and they know that!!!
Wallace,
Someone has to seriously look at the way banks are rated.
Wallace, I don't give much credence to the BBB.
The BBB is truly a pay for play scheme. And to Patrick, the evidence is in the false financials they put out. overvalued assets, underperforming off the books entities, etc.... We aren't "qualified" to make observations about Fannie and Freddie, but we all could see it coming. I guess none of these banks could see that a lender(they are one) would lose heavily if the loans weren't insured. If the loans were of A quality, why sell to the entities in the first place? Because of quick profit and they were insured
Many blog posts here give credence to the BBB's endorsement of a mortgage program,etc. Agents need to NOT accept the BBB's endorsement for anything worth more than te paper it is written on....they have no investigative capability nor do they have the expertise or experience to do proper evaluations
This just proves that BBB is a scam company willing to whore itself to anyone willing to pay them $425. However if you choose not to play their little game, they will do their level best to destroy you through bullying tactics, smears and that crooked ratings system. Case in point, an evil Middle East terror group that takes great pleasure in beheading American "infidels" and car bombing market places gets an A- score, yet Starbucks and Prada (who chose not to play into BBB ploy) were dumped an "F" grade. Some thing smells here don't you think?