SPECIAL REPORT: Fraudulent broker practices targeted in new bill

By Jami Jones, senior editor | 6/24/2011

Friday, June 24, 2011 – The numbers tell it all. It doesn’t take long for unscrupulous and unlicensed brokers to rack up crippling amounts of unpaid freight bills.

Take for example a recent alert on Red Book Credit Services, a produce load board and reporting agency. The site lists $54.9 million owed by 1,477 broker firms. Internet Truck Stop had a similar scenario play out in a 2009 alert that had more than $5.5 million in nonpayment complaints in just a seven-month time span.

Nonpayment on brokered loads has put countless trucking companies out of business simply because many times the bonds carried by brokers are either not enough to cover the claims or are already gone, thanks to other claims, if they ever existed at all.

That is the very reason Rep. Frank Guinta, R-NH, along with Rep. Russ Carnahan, D-MO, introduced HR2357, the “Fighting Fraud in Transportation Act of 2011,” in the U.S. House on Friday, June 24.

“This law would put a stop to a system that allows ruthless brokers and scam artists to continue to operate unchecked,” says Todd Spencer, Executive Vice President of OOIDA. “Too often, we’ve seen deceitful brokers get away with collecting payments from shippers but cheating truckers out of what is rightfully theirs.”

The bill, first and foremost, requires brokers and freight forwarders to register with the Federal Motor Carrier Safety Administration and present proof of a $100,000 bond.

Perhaps more importantly, if the bill is passed into law, it would give FMCSA the ability to actually enforce on non-compliant brokers and those who broker freight without any authority whatsoever.

“In many instances, brokers provide a valuable service to truckers and the transportation industry. However, the current system is loose enough that it provides ample, fertile ground for fraud. This has gone on far too long. It needs to stop,” Spencer also said.

The “Fighting Fraud in Transportation Act” will:

  • Increase the broker surety bond requirement from $10,000 to $100,000 and expand that bond requirement to freight forwarders.
  • Increase requirements and disclosures for any person or company seeking to obtain broker or freight forwarder authority.
  • Establish significant penalties for violations of broker regulations, including unlimited liability for freight charges for conducting brokerage activities without a license or bond.
  • Establish strict guidelines for companies that provide brokers with surety bonds and on how they administer bonds.

Guinta and Carnahan worked closely with OOIDA, the Transportation Intermediaries Association, and the American Trucking Associations in writing up the legislation.

“We appreciate the leadership of Congressman Guinta and Congressman Carnahan in drafting this legislation and introducing it in the House,” Spencer said. “It’s something the industry has needed for a long time.”

He added that the next essential step in ensuring the success of the bill is for OOIDA members to call their own representatives in support of the bill and ask that they sign on as cosponsors.

Copyright © OOIDA