Urgent Issues
Battle coming over broker bonds
FMCSA agrees to OOIDA petition; will seek comments on higher broker bonds

By Jami Jones
Land Line staff

Brokers who have made a good living ripping off truckers on their skimpy $10,000 bonds may very well have seen the end of their run.

The Federal Motor Carrier Safety Administration has announced that at the urging of the Owner-Operator Independent Drivers Association, the agency has agreed to start the process that could fix the woeful inadequacy of the current $10,000 bond requirement.

In January 2004, OOIDA petitioned the U.S. Department of Transportation to start a rulemaking to raise the amount of the required property broker surety bond or trust fund to at least $300,000 and as high as $500,000.

“Obviously, when brokers run up debts of $100,000 or more with truckers, the $10,000 bond does not come close to providing the type of protection intended by Congress,” said OOIDA President and CEO Jim Johnston. “The Secretary of Transportation has the specific authority to set the bond at an appropriate level, and we are asking him to increase the bond amount so that it fulfills its statutory purpose.”

FMCSA Administrator Annette Sandberg told OOIDA on Jan. 3 that FMCSA had reviewed the association’s request and she had accepted the agency’s recommendation to open an advance notice of proposed rulemaking.

“Issuance of an ANPRM will allow the public to comment on the general need for changing the broker financial responsibility requirements and what level of increase would be appropriate,” Sandberg said.

The bonds are required to ensure the fiscal integrity of brokers. The broker bond was set at its current $10,000 limit in 1977 – the same year you could buy a new car for less than $5,000 and put a gallon of gas into it for 62 cents. At that time, there were only 70 registered brokers. Today there are more than 15,000 brokers.

“With more than 15,000 registered brokers, it is difficult, if not impossible, for the average trucker to know whether any particular broker is financially sound,” said Johnston. “The broker industry does not police itself, and the FMCSA does not actively pursue delinquent brokers.”

There are several ways that crooked brokers can take advantage of the inadequate $10,000 bond amount, according to OOIDA officials.

One way is that by the time all of the claims on a broker’s bond are filed, there could very well be literally hundreds of claims totaling hundreds of thousands of dollars – all vying for a piece of the measly $10,000 bond pie.

Another is that the bonding companies that insure the broker’s bond may simply offer to pay pennies on the dollar for a claim. And while a trucker may have filed a $50,000 claim, he may be lucky to walk away with much, if anything at all.

And if a broker runs up an insurmountable number of claims, bonding companies can dump the problem on the courts by lumping all the claimants together as defendants and letting the court decide which one or ones should get the money – minus attorney fees and such.

That doesn’t even touch the fact that a trucker can easily lose up to a month’s income or worse yet be forced to shut down because the bond amount isn’t enough.

Based on information received from bonding companies, OOIDA officials believe that a bond of at least $300,000 to $500,000 would be necessary to cover the amounts of unpaid transportation charges incurred by brokers today. The exact amount of the potential increased bond would be set based on data provided by the public during the rulemaking process.

Johnston is expecting heavy opposition from the brokerage industry, but hopes that the honest brokers will get behind the measure.

“While we still have a lot of work ahead of us, both in making the case for this much-needed change and in countering the strong opposition expected from many in the brokerage industry,” Johnston said, “this decision will finally start that process moving.”

We are hopeful that those honest brokers who do conduct their business ethically will join us in this effort to build in the necessary protections against those who give the entire broker industry a bad name.”

According to Sandberg, the FMCSA hopes to publish the advance notice of proposed rulemaking in the near future.