In his demand letter to the BBB, the Connecticut attorney general said, "I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers."
Allison Southwick, media relations manager for the BBB, said that the BBB had worked with Attorneys General across the country, including Blumenthal, to fight fraud. "We disagree with his characterization that BBB does not adequately disclose the fact that Accredited Businesses financially support BBB," said Southwick. "However, we are always interested in hearing from our partners in consumer advocacy and are pleased to accept constructive feedback from his office and other consumer advocates."
"We have made good progress in working with his office on these issues, and anticipate that we will satisfactorily address his concerns," said Southwick.
The Better Business Bureau, a non-profit group that began 98 years ago, instituted its A plus through F grading system just two years ago, replacing a "satisfactory/unsatisfactory" ratings system.
One of the first to raise concerns about the new grading system was New York Congressman Anthony Weiner. Weiner was investigating complaints to his office about the popular precious metals dealer Goldine. Some customers had alleged they were ripped off after responding to Goldline's television ads, which appear in heavy circulation during conservative talk radio and television programs.
Goldline responded to Weiner's criticism in part by pointing to the stamp of approval the company had received from one of the nation's most respected consumer groups.
"We are proud to be rated A+ from the Better Business Bureau," Goldline VP Scott Carter said at a congressional hearing convened by Weiner in September.
Weiner told ABC News he considered Goldline's A plus grade to be suspect.
Weiner and other critics say they believe the BBB has used the new grading system as part of an extensive tele-marketing campaign to increase membership and revenue.
An ABC NEWS examination of filings with the federal government revealed that at least 25 of the Better Business Bureau's top officers had salaries in excess of $100,000.
The head of the Los Angeles Better Business Bureau, William Mitchell, was paid more than $400,000, according to the Better business Bureau.
"I think the Better Business Bureau changed course and lost its way by adopting a system of pay to play that maybe enhanced its revenues but also greatly diminished its credibility and honesty," said attorney general Blumenthal, who was elected to the United States Senate from Connecticut last week.
"It's very troubling and it could be illegal because the failure to disclose to consumers could well be deceptive and misleading," he added.
The ABC News investigation found numerous examples of well-known companies that are not members of the Better Business Bureau being branded with F grades, often apparently based on scant evidence or a small number of complaints.
The five-star Ritz Carlton Hotel in Boston was given a F rating after only two complaints.
"A million customers served, two complaints resulting in an F rating, seems to be somewhat unusual, to say the least, " hotel general manager Erwin Schinnerl told WCVB-TV in Boston.
Celebrity chef Wolfgang Puck told ABC News that parts of his food and restaurant empire have received an F grade because he refused to pay to join the Better Business Bureau.
"You know, if you become a member, you're sure to get an A, but if you don't pay, it's very difficult to get an A," said Puck, who has been a regular on the ABC News program "Good Morning America" since 1986.
"I think where you have to join an organization to get a good grade is wrong," Puck said.