In a recent House subcommittee hearing, Rep. Mike Bost, R-Ill., addressed the issue of broker fraud within the trucking industry.
During the Highways and Transit Subcommittee hearing on Dec. 13, Bost, drawing attention to the estimated annual cost of broker fraud amounting to $800 million for the trucking sector, urged the Federal Motor Carrier Safety Administration (FMCSA) to tackle the problem.
“We have people who are out there that are claiming to be brokers,” Bost said. “The truck drivers are out there trying to find loads or their companies are trying to find loads for them, and they use this broker. The broker all of a sudden comes in … and they broker the load. Now by the time that driver then gets back in and … is ready to be paid … that particular company is no longer in existence, or you can no longer find them.”
With FMCSA Administrator Robin Hutcheson present at the hearing, Bost, who brings a trucking background to the discussion, highlighted the severe impact of broker fraud, particularly on small motor carriers.
“Is there anything that your agency is doing … as far as the fraud that is occurring out there? We’re losing a tremendous amount of smaller companies and owner-operators,” he said. “Because it’s one thing if a great big company takes a $2,000 loss or $5,000 loss, but the smaller companies can’t take that.”
Hutcheson responded by acknowledging the agency's shared concerns and outlined steps being taken. She noted the issuance of a financial responsibility rule, which increases the security limit for brokers and freight forwarders to $75,000.
However, she acknowledged the need for additional measures and emphasized ongoing efforts to enhance transparency in transactions through collaboration with industry stakeholders.
“We unequivocally share your concerns about the impact of fraud on the industry and, specifically, broker fraud,” Hutcheson said in a statement.
“We are taking steps. First and foremost, we issued a financial responsibility rule that will ensure its security limit for brokers and freight forwarders is increased to $75,000. We know that’s not enough. We are also taking steps to improve transparency in transactions. We’ve been listening to our stakeholders, working very closely with OOIDA, TIA and others.” Hutcheson added.
While the FMCSA's response indicated proactive measures, the Owner-Operator Independent Drivers Association (OOIDA) expressed the view that more needs to be done.
On Dec. 18, OOIDA filed a petition for reconsideration of the FMCSA's final rule on broker and freight forwarder financial responsibility.
OOIDA President Todd Spencer called for enhancements to ensure transparency when a broker's financial responsibility falls below $75,000, proposing a seven-day investigation period for surety providers or financial institutions to validate claims.
“The final rule should be enhanced to ensure transparency when a broker/freight forwarder’s financial responsibility falls below $75,000,” OOIDA wrote in the petition signed by President Todd Spencer.
“The agency should also stipulate a seven-day period for the surety provider or financial institution to investigate and determine the validity of the claim. These and other modifications will promote a fair working environment between brokers/freight forwarders and motor carriers that will best serve the public interest,” the OOIDA added.
This move follows OOIDA's previous petition in 2020, urging FMCSA to address broker transparency issues.
Despite the agency granting the petition earlier in the year, a proposal is not anticipated until late 2024, prompting OOIDA to emphasize the urgency of improving broker transparency regulations and enforcement to strengthen the economic health of the broker/motor carrier sector and reduce instances of fraud.
“Since the agency’s rulemaking announcement in March, instances of rampant broker abuse and fraud persist,” OOIDA wrote. “Motor carriers are victimized through unpaid claims, unpaid loads, double-brokered loads, or load-phishing schemes daily.
“If broker transparency regulations and enforcement can be improved, then disputes between motor carriers and sureties will be reduced, there will be less need for litigation, less need for FMCSA intervention and the economic health of the broker/motor carrier component of the transportation industry will be stronger.” OOIDA continued.