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29
Feb

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Pro­fes­sional truck dri­vers are no strangers to fraud­u­lent busi­ness prac­tices within the truck­ing indus­try.  From the indus­try self-made dri­ver short­age to the truck­ing com­pany lease pur­chase decep­tion, America’s long-haul truck dri­vers have very few true advo­cates on their side.  With that said, motor car­ri­ers can also fall prey to the many scams that exist within this indus­try, with one of the largest being from fly-by-night freight brokers.

Freight bro­kers have long been a point of sore dis­cus­sion within truck­ing due to many motor car­ri­ers and owner oper­a­tors fail­ing to receive pay­ment for their ser­vices.  In order to oper­ate as a freight bro­ker, a bond is required by the FMCSA in order to legally oper­ate as a trans­porta­tion bro­ker.  Freight bro­kers match ship­pers with truck­ing com­pa­nies which in turn, trans­port the goods.  Once com­pleted, the motor car­rier receives pay­ment for their ser­vices from the bro­ker.  The only prob­lem is, that many times, the car­rier is never paid due to the bro­ker hav­ing actu­ally been a fraud­u­lent busi­ness.  A very large num­ber of truck­ing com­pa­nies and owner oper­a­tors have gone out of busi­ness due to uncol­lected pay­ments from bro­kered loads.

A surety bond is a “promise” to pay the com­pany or owner oper­a­tor a cer­tain amount of monies for their ser­vices.  If the bro­ker fails to pay, the hauler can then file a claim against the broker’s surety bond in order to receive com­pen­sa­tion.  Cur­rently bro­kers are required to have a $10,000 surety bond but when the bro­ker turns out to be a fraud­u­lent or fly-by-night scam busi­ness, the hauler is left empty-handed.

Because of this seri­ous prob­lem among truck­ing freight bro­kers, a new bill was intro­duced in June, 2011 known as the Fight­ing Fraud in Trans­porta­tion Act of 2011.  The bill pro­poses to raise the amount of the surety bond from $10,000 to $100,000 with the rea­son­ing being that the increase would com­bat against fraud­u­lent bro­ker busi­nesses such as shady freight bro­kers and on-line load board scams.  The “think­ing” behind the bill is if a want-to-be trans­porta­tion bro­ker can not afford the $100,000 surety bond, then they must be a scam.  This rea­son­ing would prove to be the foun­da­tion for many smaller, good, hon­est and legit­i­mate freight bro­kers to close their doors and go out of business.

Although the $100,000 surety bond would not have to be secured in full, nor­mally 10% would be and the rest would be financed through monthly pay­ments.  Cur­rently, to finance the $10,000 surety bond would cost the bro­ker about $250 per month in pay­ments.  Should the bond be raised to $100,000 then the would-be-broker would have to come up with $10,000 down and finance the remain­der at approx­i­mately $2,500 per month.  For a smaller bro­ker who’s aver­age car­rier pay is $750, the finan­cial strain becomes enormous.

There are already gov­ern­men­tal laws in place to fight against such fraud­u­lent busi­ness scams within the truck­ing indus­try, but the prob­lem is that the laws are not being enforced.  Their solu­tion to this prob­lem is to cre­ate more gov­ern­ment reg­u­la­tion for an indus­try that is already over-regulated.  There is no doubt that these scam freight bro­kers cost the indus­try bil­lions of dol­lars per year, but plac­ing fur­ther finan­cial hard­ships on those bro­kers who do oper­ate a trust­wor­thy busi­ness is sim­ply bad legislation.

Dan Metully of Transport Watch

Dan Metully of Trans­port Watch

Dan Metully, founder of Trans­port Watch, a com­pany fight­ing fraud in the trans­porta­tion indus­try as well as pro­mot­ing legit­i­mate truck­ing busi­nesses, and owner of Truck Freight, Inc., believes that the $100,000 surety bond require­ment could pos­si­bly put some bad bro­kers out of busi­ness, but depend­ing on how the pro­posed bond is imple­mented, would put a “great many more good ones out of busi­ness as well.”

He explains:

“We are a small bro­ker­age, cur­rently employ­ing the ser­vices of seven inde­pen­dent agents. These agents depend on the rela­tion­ships that have been estab­lished over time between our bro­ker­age and their cus­tomers and car­ri­ers. All this hav­ing been said, if some­one told me tomor­row that I’d have to come up with an addi­tional $90,000.00 to sat­isfy a bond­ing require­ment, I believe you could imag­ine how this could poten­tially present me with an acutely insur­mount­able prob­lem. Would it be proper to pos­si­bly put me out of busi­ness based sim­ply on the fact that my bro­ker­age is not large? By whose mea­sure does my orga­ni­za­tion hold less value in the indus­try? Should car­ri­ers be required to run a cer­tain num­ber of trucks in order to be allowed to be con­sid­ered viable?”

Big­ger is not always bet­ter and in the case of adding more reg­u­la­tions to an all-ready over-regulated indus­try, the smaller bro­ker­age firm which is oper­at­ing in an eth­i­cal and moral stan­dard, stands to lose their busi­ness because of other defraud­ers within the truck­ing industry.

Mr. Metully adds: 

“At the end of the day, I believe that good com­mu­ni­ca­tion can solve most things, but again, we all need to be will­ing to stand and be counted. We all need to be a part of the solu­tion. Most of all, we all need to under­stand that if we do what we can to pro­tect each other as par­tic­i­pants, we’ll also pro­tect our­selves. The gov­ern­ment will do as it pleases in regards to bond­ing require­ments, but please be will­ing to see the dam­age that this leg­is­la­tion might cause. Be mind­ful of those hon­est peo­ple that will be effected by an overly aggres­sive approach.”

© 2012, Allen Smith. All rights reserved.


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