Channel 19

Todd Dills

Brokers: Highway bill unlikely prior to election; more on the bond issue

| April 20, 2012

 

 

(Photo Missouri Department of Transportation)

 

 

With news of President Barack Obama’s threat to veto any highway reauthorization or extension bill that comes to his desk with authorization of the Keystone XL Pipeline included, as it is in the House version that passed the Rules committee earlier in the week, came my conversation with James Lamb, head of the Association of Independent Property Brokers and Agents, earlier this week. Lamb said that according to his sources the Hill, given the general political stalemate over these issues, another temporary extension (or two) of current funding priorities and levels, regardless of the battles over the pipeline, is likely. “They won’t do it before the election,” he said.

I was speaking with Lamb about language in the most recent attempts at a multiyear bill in the House and Senate that would raise the minimum bond required of registered transportation brokers from $10,000 to $100,000, a move favored by an unlikely alliance of the Owner-Operator Independent Drivers Association and the Transportation Intermediaries Association. For more background on the bond issue, read this post about the various and sundry ways open to operators and responsible actors throughout the industry to fight fraud wherever it rears its head in the industry.

However, in Lamb’s view, and he is joined by many smaller brokerages and some owner-operators, the problem is that fraud is not necessarily the primary problem the surety bond requirement exists to address. “When I look at what’s going on right now,” says Lamb, “this specious misrepresentation of the term fraud, it upsets me.”

The first bill proposed — in 2010, in the Senate, which gave Lamb impetus to launch the AIPBA to fight the bill’s passage — to raise the broker bond limit to $100,000 was called the Motor Carrier Protection Act of 2010. When that didn’t get very far in Congressional proceedings, however, what followed it in 2011 was the Fighting Fraud in Transportation Act (both bills would have done much the same thing, raising the broker bond limit).

The problems in most instances of carrier claims on brokers’ surety bonds, however, has to do not with “people who intend to deceive,” as Lamb would define a truly fraudulent broker, but rather with simple late or no payment, often a consequence of “business failure – it’s not an intent to deceive. There are other ways to protect people from that rather than raising the bond so high that it discourages” free and open competition in the industry.

Lamb favors regulatory adjustment over Congressional overstepping on this issue, he says, possibly with a rise in the bond level to $25,000 to adjust for inflation and establishment of requirement for brokers to maintain varying levels, according to volume of brokered freight, of cash in a “fiduciary trust account,” he says. “Money is collected from the broker and it has to go into an escrow account – they can’t touch that money because it goes to carriers.”

Among brokers who allocate their operating and reserve monies in this manner already, says Lamb, “what brokers do when they’re starting to go down is they use that money. This idea is that they couldn’t touch the money – if we can incorporate that idea with the $25,000 amount it would stil be a level playing field” for smaller brokerages with their large competitors.

My question today: What do you think? OOIDA has been pursuing raising the bond requirement for brokers since way back in 2004, often advocating levels as high as $500,000. Surety companies are telling some small brokerage operations that they’d require cash collateral in many instances to even write a $100,000 bond for their business — that’d be like putting down a $100,000 cash deposit you couldn’t touch on the possibility your business might not make it.

Any thoughts on the issue are greatly appreciated — I’ll certainly be writing more about it in the near future.

  • Marty Marsh

    Mr Lamb,you are another con artist,you shouldn’t even have a say in this.No broker should have a say in this for that matter.If you leave it up to the theives what’s going to be done,then there never will be any changes.
    The problem is that all of the money for the load goes to the broker,if the broker is honest then there is no problem.So you have to put something in place that makes them honest,even if they are the biggest crook in the business.
    Because of all the dishonesty,I would like to see brokering loads done away with,because these brokers always get their cut and they couldn’t care less about the truck.
    This is very simple,pay the damn truck and we wouldn’t be here to begin with.

  • Robert Martens

    The idea that raising the bond rate to push out the supposed dishonest broker is a blanket regulation to justify to the big agencies and carriers that this solves fraud problems. Raising the rate only targets agents that do not have the capital to pay the bond. While it may catch some bad agents, I’ve had just as much trouble with large firms as I have had with small. I also know some good small agencies that would be forced out of buisness by an increase in the bond. There needs to be some system that addresses non-payment issues and ghost loads by agents that could target or identify and hold them accountable.

  • http://overdriveonline.com/channel19 Todd Dills

    Robert, Marty, thanks for both of your thoughts on this. In terms of “ghost loads” and other fraudulent schemes, is there a particular regulatory solution that would be best? I wonder if it all comes down to vigorous prosecution and high penalties, in the end. . .

  • Pingback: OOIDA on bond increase: Large brokers not the problem | Overdrive - Owner Operators Trucking Magazine

  • RodeoDad

    The escrow account sounds like a good idea.

    Raise the bond and all we are going to get is more agents. Then the surviving brokers and the agents will BOTH take a cut out of the freight before it is ever moved. The carrier gets double dipped.