35% of brokers have authority revoked in bond increase measure, broker group says

| December 10, 2013

dock

The number of freight brokers disappearing from the federal rolls has been increasing by the hundreds every day since Dec. 1, following the new requirement to carry a $75,000 bond, boosted from $10,000 by the MAP-21 highway funding act passed last year.

Today, 35 percent of brokers in business at the beginning of the month no longer have active authority, says James Lamb, president of the Association of Independent Property Brokers & Agents. 

Related

Beefing Up the Bond

Small brokers oppose proposed regs to increase the minimum bond to $100,000 and add other owner-operator protection.

As of noon, Dec. 10, 7,561 fewer authorized brokers were active than on Dec. 1, Lamb said, and that number will likely continue to rise until around Dec. 15 — 30 days after the last of the notices of investigation were sent to brokers by the Federal Motor Carrier Safety Administration. Overdrive reported last week on the decrease in brokers and AIPBA’s court fight against the bond increase. Click here to see it.

That number, however, could also include brokers who had their licenses revoked for reasons other than not complying with the bond increase, said Norita Taylor, spokesperson for the Owner-Operator Independent Drivers Association. She also said OOIDA hasn’t heard from any of its members about losing brokers. 

FMCSA published a notice in September 2012 saying it would revoke operating authority from brokers who did not comply with the bond increase by Dec. 1, even though the MAP-21 bill required brokers to comply with the increase by Oct. 1. 

Brokers are now required to carry a surety bond of $75,000 — up from the previously required $10,000. OOIDA supported the increase, saying it would better protect owner-operators who otherwise would not have been paid by over-extended brokers.

Taylor said the increase helps protect owner-operators from fraudulent brokers. “While most brokers provide a valuable service, the previous system left too much room for fraud where funds were collected from shippers but not paid to owner-operators.”

The American Trucking Associations and the Transportation Intermediaries Association also support the increase.

Because of the 60-day grace period and the time that brokers had to comply with the bond increase, Lamb says it’s “highly unlikely a significant amount” of the non-compliant brokers will be reinstated.

Related

Broker numbers fall following bond increase, broker group appealing mandate

A broker trade association is appealing a new regulation that changed their minimum bond requirement from $10,000 to $75,000, which it says already has shut ...

The group is also still fighting the increase in court, Lamb says. Click here to read more about that lawsuit in previous Overdrive reporting. 

Lamb says the next phase could push the number of brokers whose authority has been revoked as high as 75 percent. That phase, he said, would come after the “shaky” bonds some brokers purchased to remain compliant come up for renewal in a year.

He also said the industry would now be controlled by larger brokers, who will ask for higher rates, but will not pass those rates onto owner-operators. In fact, he said, they could restrict rates for owner-operators. 

In previous Overdrive reporting, though, OOIDA’s Todd Spencer echoed Taylor’s comments, saying the bond increase will help truckers who “have been cheated by bad brokers out of” money they’re owed for hauling a load. 

Overdrive covered the broker bond issue in an in-depth report last year, when the bond increase was tied to the highway funding act. Click here to read that story, which covers how it affects owner-operators and how it impacts brokers.

  • Financially Sound

    20,000 Brokers…now down to 14,000. Not all can be Big. Glad to see the herd of financially unsound Brokers have been culled!

  • James P. Lamb

    DISPELLING THE MYTH THAT THESE WERE REALLY BROKERS WHO WERE ALREADY INACTIVE & OUT OF BUSINESS… Some articles published by trucking media lead the industry to believe that the 8200 brokers revoked in December are due to an “outdated database” or some kind of purging of companies that were already out of business or inactive. This is incorrect. It appears that TIA is the source that is disseminating this misinformation to mitigate the damage we believe it has done to the industry. I have read how “TIA ‘absolutely still support(s)’ the increase, and the impact to the brokerage industry and the trucking industry will be ‘minimal, if nothing at all.’” The truth is each and every one of the 8,200 brokers shut down had active authority, which means they were paying significant money to keep their original bond in place and their broker’s license active so they could conduct business. This just goes to prove that the TIA is out of touch with the brokerage industry. Just look at the 1,900 brokers that have signed our petition http://www.petitiononline.com/100KBOND/petition.html.

    As for ‘funded’ versus alleged ‘underfunded’ brokers, factoring companies fund most small brokers so we believe Burroughs and TIA know very well there is really no such thing as a significant cohort of “underfunded brokers.” TIA simply targets small brokers as opposed to the big brokers that pay TIA $14,400 per year in dues. We find it amazing that TIA considers 8,200 brokers shut down (so far) as “minimal” to “nothing at all”. We believe the DOJ which has stated our antitrust complaint against certain trade groups is currently “under review” will teach TIA a lesson on America’s Antitrust laws.

    CONTEXT OF REVOCATIONS: A review of the FMCSA Daily Register for the past 52 weeks would show that in an average week about 56 new applicants get a broker’s license; Keep in mind, though, this is after MAP 21 was passed, which now requires a $75K bond for new (and existing) brokers and clarifies in the law that carriers who arrange transportation need to get a brokers license. About the same number exit for various reasons so the amount of brokers for the past year– until now– has been sustainable at about 21,500, give or take a few hundred (FMCSA reported as a result of our FOIA request that as of Jan 1 2013 there were 21,795 active brokers and they reported in their final technical amendment rule 21,565 active brokers as of Oct. 1, 2013). When we factor in that many of the new “brokers” are actually carriers complying with the need to secure a secondary license, it is clear we were already losing traditional non asset based small brokers by attrition and there is overall a decrease this past year in new start up business applicants. So in terms of the context, then, 8,200 brokers killed off all in a 10 day period is very significant.

    – See more at: http://www.ccjdigital.com/thousands-of-brokers-lose-authority-but-is-it-due-to-bond-increase-tia-says-no/#sthash.jj98RUB4.dpuf

  • Pingback: Increased Freight Broker Bond Forcing Brokers out of Business | Discover poetry and literature bubbling under the culture noise machine

  • Pingback: Increased Freight Broker Bond Forcing Brokers out of Business | Palsnews

  • Pingback: Increased Freight Broker Bond Forcing Brokers out of Business | Keeping up with Catching Flies Music

  • Jennifer Ralph

    Any brokers who were affected by these new regulations and would like to join us as a sub broker NOT AN AGENT (where you are covered under bond and insurance at 85 percent commission) email Gettingitmoving@gmail.com or call me 859-905-0578. TLO Logistics is an asset based financially secure corporation. .

OverdriveOnline.com strives to maintain an open forum for reader opinions. Click here to read our comment policy.