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Lease-purchase
Are you paying too much for fuel purchased with your company- provided fuel card?
This is the sixth in a series of exclusive articles describing how owner-operators can spot illegal motor carrier leasing practices

By Joe Black, The Cullen Law Firm, PLLC

Does your carrier make a profit on your biggest operating expense — your cost of fuel? If the answer is yes, your carrier is almost certainly violating your rights under Section 376. 

Questions about your lease or your carrier’s practices?
Editor’s Note: If you have any questions about these regulations, about the legality of your lease, or the legality of your motor carrier’s practices, send your questions, a copy of your lease and a copy of any other pertinent documents to: Donna Ryun, OOIDA, PO Box 1000, Grain Valley, MO 64029. E-mail: dryun@ooida.com. All communications will be held in the strictest confidence. The most frequently asked questions will be published (no names mentioned) in future issues of Land Line, along with answers.

Carriers cannot violate the truth-in-leasing regulations with impunity. The leasing regulations specifically forbid a carrier from providing regulated transportation services in equipment it does not own unless that equipment is covered by a lease that complies with these regulations. Federal courts have the authority to enjoin carrier operations (i.e. stop them cold) until valid leases are executed. OOIDA has obtained one such injunction and is eager to seek injunctions against additional carriers in order to put an end to bad leases.

As you have learned from the I-376 series of articles, there are many ways motor carriers try to skim money from owner-operators. Is it any surprise, therefore, some of them profit from your use of a fuel card?

Many motor carriers require their owner-operators and drivers to use a company-provided fuel card. Other carriers make them optional for their drivers, but convenience makes them hard to pass up. In addition to being used to acquire fuel, fuel cards provide cash advances to drivers while out on the road, keep track of fuel purchases for fuel tax reporting, and serve many other legitimate purposes. Carriers drive into illegitimate territory, however, when they begin to make a profit on your use of a fuel card. Owner-operators fall prey to this scheme because there is no way of knowing it is going on unless you ask for verification on the chargebacks to your compensation.

When you use a fuel card, who is buying the fuel? You or your carrier? 
When using a fuel card at a truckstop, many owner-operators mistakenly believe they are purchasing fuel for themselves. In reality, your carrier is purchasing fuel for you. The carrier actually pays either the truckstop or the fuel card company for the fuel and then imposes a chargeback on your settlement sheet. Often the carrier has worked out a significant discount with the truckstop. The driver is charged back the pump price or something close to it and the carrier puts some or all the discount in its pocket. The 376 regulations require, however, that a carrier disclose what it pays before charging it back to you. You are entitled to know the details of the transaction, but few leases recite the driver’s rights on this subject.

How the truth-in-leasing regulations apply 
The same regulation that prohibits illegal chargebacks applies to fuel card transactions. Subsection 376.12(h) of Title 49 of the Code of Federal Regulations requires a carrier’s lease to

‘clearly specify all items that may be initially paid for by the . . . carrier, but ultimately deducted from the lessor’s compensation at the time of settlement, together with a recitation as to how the amount of each item is to be computed. The lessor shall be afforded copies of those documents which are necessary to determine the validity of the charge.’

Under this rule, carriers must disclose in their leases how the price of a chargeback will be calculated before it makes a deduction from your compensation. The purpose of these regulations is to prevent carriers from profiting on markups on your costs without telling you. 

With fuel cards, carriers can make a deal with the fuel card company or truckstop to pay less for things you acquire with a fuel card than the prices you see rung up at the truckstop register. The carrier does not deduct from your compensation the lower price it pays the fuel card company. It deducts the price rung up in front of you at the truckstop. If the carrier fails to disclose in your lease the basis for the actual amount it pays, it violates the regulations. Fuel purchases are the most frequent target of such schemes.

The undisclosed fuel discount 
Fuel cards allow motor carriers to obtain and keep track of discounts on the cost of fuel. If your carrier obtains discounts on fuel acquired with a fuel card and does not pass them on to you, it is making a profit on your cost of doing business in violation of the regulations. Even if you appear to be getting a discount on the fuel you acquire using a fuel card, your carrier may be getting an even deeper discount than it passes on to you. The carrier makes a profit by deducting from your compensation the amount you saw at the truckstop, or something close to it. 

For example, your carrier gives you a fuel card and tells you that if you use the card to purchase fuel, you will get a 5-cent per gallon discount. Your lease says deductions will be made on your settlement sheets for purchases you make using the fuel card. You acquire 100 gallons and see a charge of $130 placed on your card. In the meantime, without your knowledge, your carrier has made a deal with the fuel card company or truckstop that gives it a 10-cent discount on the fuel acquired using the fuel card. Your carrier will pay $120 for the fuel. It will, however, deduct $125, the price you saw at the pump less a 5-cent discount, from your compensation. The carrier pockets $5 from you without you knowing it or being able to detect it. Not only does this seem unfair, it is a violation of the regulations.

Comdata programs
One of the principal fuel card programs is run by Comdata. Motor carriers who use the Comdata card can get two types of discounts on fuel purchases. Comdata refers to them as “select” rebates and “focus” discounts. It is important to know how these two plans work in order to assert your rights. Under the leasing rules you have the right to verify that the amount deducted from your compensation is the amount the carrier paid. If you can determine whether the carrier has negotiated a select rebate or a focus discount, you can determine whether the paperwork it gives you is sufficient to verify the deduction made from your compensation.

Select rebates
Select rebates on fuel purchases are negotiated by Comdata with independent truckstops and small chains. Select rebates typically range from 1 to 4 cents per gallon off the retail price. Generally, when these types of rebates are involved, Comdata pays the truckstop for the fuel and then bills the carrier. The carrier pays Comdata the price of fuel, less the rebate. Comdata refers to this as “retail less discount.”

Focus discounts
The focus discount on fuel purchases is negotiated by the carrier directly with the large truckstop chains. These negotiated discounts range from less than 4 cents to more than 20 cents per gallon. They are negotiated as cost-plus contracts. That is, they are based on the wholesale cost of the fuel plus a profit for the service station. They vary among truckstop chains and even among truckstops within the same chain. The size of the discount is based on the amount of fuel that a carrier’s trucks are likely to buy. Therefore, the larger the carrier, the larger the discount is likely to be. 

In the focus discount transactions, Comdata cards are used to facilitate and document the acquisition of fuel by the owner-operator. Comdata is compensated only for its role as facilitator and bookkeeper. Comdata provides electronic records of fuel acquired by owner-operators to both the motor carriers and the truckstops. 

If you request paperwork from your carrier to verify the validity of the deductions they are making from your compensation, you may need to request their paperwork from Comdata, the truckstop chain, or both to get a true picture of the cost behind any particular deduction.

Are transaction fees legal? 
Another area in which your carrier may be overcharging you for the use of the fuel card is the transaction fee charged by the fuel card company. For example, under Comdata’s standard contract with motor carriers, Comdata charges the carrier a flat 81 cents for transactions related to the use of the card. These include fuel purchases and cash advances funded by Comdata. In some circumstances, where the transaction is not funded by Comdata, the carrier is charged only 40 cents. However, we have noted carriers often charge the owner-operator in excess of these amounts. Again, under the 376 regulations the motor carrier is not permitted to profit on the transaction cost charged by the fuel card company. You should not be charged more than your carrier’s actual costs.

What are your rights? 
The carrier is required to disclose in its owner-operator lease the amount it advances for you that it will deduct from your compensation. If the carrier gets a discount on fuel card purchases, it is required to tell you exactly what that discount is. Otherwise the carrier will be charging back for sums not advanced by it. It is not enough, as some carriers do, to disclose the fact that a discount exists but not disclose its amount or true amount. If the lease is silent on such chargebacks, or does not specify the amount of the chargeback sufficiently, you should get the entire price discount as a credit on your settlement sheets. You have the right to the paperwork that tells you the actual amount that the carrier has advanced on your behalf and are entitled to demand the full discount your carrier is making on your fuel purchases.

In Next Issue
Can you really finance a truck through a carrier and work for that carrier with “no money down” and “no experienced needed”? More motor carriers these days seem to be offering truck lease-purchase programs with very few initial requirements. 

What is the real deal behind these programs? What is the chance of you “finishing” one of these programs and getting a truck title in your hand with your name on it? The leasing regulations can help you evaluate lease-purchase programs, and this will be the subject of the next installment of I-376.

Aug/Sept Digital Edition