Cox defended the BBB accreditation and ratings systems, saying it was "not about generating money," said the A minus grade for Hamas was a mistake.
"[It's] an inaccurate statement that business people are able to buy A's," Cox said. "We have more than 500,000 non-accredited businesses who have A ratings," he added.
Yet, as part of the ABC News investigation, an ABC News producer with a camera was present as two small business owners in Los Angeles were told by Better Business Bureau tele-marketers that their grades of C could be raised to A plus if they paid $395 membership fees.
Terri Hartman, the manager of a Los Angeles antique fixtures store, Liz's Antique Hardware, was told only a payment could change her grade, based on one old complaint that had already been resolved.
"So, if I don't pay, even though the complaint has been resolved, I still have a C rating?"
Hartman then read off her credit card number and the next business day the C grade was replaced with an A plus, and the one complaint was wiped off the record.
In a second case, Carmen Tellez, the owner of a company that provides clowns for parties was also told she had to pay to fix her C- grade, based on a two-year old complaint that she says had already been resolved.
The C minus became an A plus the very next day after she provided her credit card number for the $395 charge.
"If I'm paying for a grade, then how are the customers supposed to really trust the Better Business Bureau?" she asked.
Cox said the examples provided by ABC News were violations of sales policy and not a standard way of doing business.
"The BBB is not operating fraudulently," Cox said.
In his demand letter to the BBB, Attorney General Blumenthal said, "I am deeply concerned that certain BBB practices threaten its reputation and effectiveness as a reliable resource for consumers."
BBB media relations manager Allison Southwick 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.