SPECIAL REPORT: OOIDA Calls for Higher Broker Bond

| 1/30/2004

The Owner-Operator Independent Drivers Association (OOIDA) has filed a petition with the Department of Transportation requesting that the bond required of transportation brokers be raised from $10,000 to between $300,000 and $500,000.

According to OOIDA President Jim Johnston, "The $10,000 bond comes nowhere close to covering the amount of unpaid liabilities incurred by many brokers today. OOIDA and its members have learned time and time again of individual brokers each failing to pay tens of thousands of dollars, if not hundreds of thousands of dollars, in transportation charges to dozens of motor carriers."

The broker bond is required to ensure the fiscal integrity of transportation brokers. The broker bond was set at its current $10,000 limit in 1977. At that time, there were only 70 registered brokers. Today there are more than 15,000 brokers.

Johnston continued, "With over 15,000 registered brokers, it is difficult, if not impossible, for the average trucker to know whether any particular broker is fiscally sound. The broker industry does not police itself, and the Federal Motor Carrier Safety Administration does not actively pursue delinquent brokers."

The law requires the secretary of transportation to register a transportation broker only if it provides proof of a bond or some other form of security at a level determined by the secretary.

"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." Johnston said. "The secretary 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."

In its petition, OOIDA outlines several ways the public is harmed by illegal broker practices, harm that would largely be avoided by an appropriate bond amount:

  • Small business owners are cheated out of lawful transportation charges, and their ability to conduct business is impaired. Nonpayment for one load can erase the profits a trucker makes for an entire month, if not put them out of business completely.
  • Shippers can be forced to pay twice for the transportation service if a broker does not pay the motor carrier. Brokers often act as an agent for the shipper. As such, the shipper is ultimately responsible for paying the motor carrier. Shippers have been sued and required to pay carriers for their services, even if they already paid a broker for the same service.
  • Bond companies bring legal actions to resolve multiple claims above the bond amount. Claimants must incur legal expenses to pursue their claim. The bond company can deduct their legal expenses out of the bond amount. The public is less, or not at all, protected by the bond as a result.
  • Brokers who default on their liabilities rarely face any consequences and are largely free to continue their illegal behavior. OOIDA routinely receives complaints from its members regarding certain brokers who continue to arrange transportation even though their bond is exhausted and the FMCSA Web site indicates their authority has been revoked. Others simply set up a new brokerage operation in a different location with a different name, purchase a new bond and are back in business despite owing tens of thousands of dollars in their previous incarnation.

Based on information received from bonding companies, OOIDA thinks 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 bond should be finalized by the secretary based on the data provided by the public during the rule making process.

OOIDA expects many small-business truckers, shippers and legitimate brokers will support the petition. Carriers will experience fewer losses. Shippers will be exposed less often to double liability on a single load. Brokers who faithfully pay carriers will no longer face unfair competition from brokers who use their ill-gotten profits to undercut their competitors in the marketplace.

"OOIDA welcomes the support of individuals, companies and all business associations whose members will benefit by this update to the regulations," said Johnston.