How-to: File against a broker’s bond

| March 08, 2013

Broker bond filing poll results

Federal rules pertaining to broker surety filings are in flux following congressional action last year that raised the minimum bond from $10,000 to $75,000. Still, basic procedures for filing are expected to remain.

The most high-profile filing incidents involve brokerages in trouble. If a broker is late on payment, odds are you’re not the only party who’s thinking about filing. If the broker closes and the broker’s bond limit doesn’t cover all debts, claims are paid on a “pro rata” basis – a percentage of what each carrier is owed.

“It doesn’t take long to burn up a 10K bond,” noted Overdrive reader Mike Philips on our Facebook page in January.

Types of bonds
BMC-84: A surety bond commonly issued by an insurance company.
BMC-85: A trust fund agreement issued typically by a financial institution.Both instruments satisfy the federal bonding requirement of brokerages, and providers approach claims payments in similar ways. However, BMC-85 issuers on occasion market themselves to brokers as a better service; the Pacific Financial Association’s website touts its BMC-85 instruments as superior to BMC-84 sureties given the “control that you have as a broker. When a claim is presented against a trust, you are notified immediately. If you can provide a valid reason why the claim should not be paid, it won’t. When bonding companies receive a claim, they will make the decision for you.”

In cases of broker business failure, getting your claim in early may not be particularly helpful. Federal Services Corp., which handles claims against financial institutions authorized as trust providers for brokers by the Federal Motor Carrier Safety Administration, notes it doesn’t file claims on a “first come, first served” basis. Rather, “while this practice may be followed by some of our competitors,” the company says, “it just encourages premature claim filings – sometimes even before loads are delivered!” [Exclamation point theirs.]

FSC notes that in 95 percent of claims it receives, “the broker pays the claimant after being informed a claim has been filed against their trust.” This avoids what it describes as a time-consuming process of mailing out documents for the carrier to complete and return, detailed below.

How to file
Determine when it’s time to file. After a broker has not paid within a reasonable or contracted time, you can file. Contracts often state 30, 60 or 90 days after delivery.

Find the broker’s surety provider.

  • Visit li-public.fmcsa.dot.gov, FMCSA’s public licensing and insurance information site. Click through the disclaimer page and choose “Carrier Search” from the pull-down menu at top right.
  • Supply as much information about the broker as you can by using the fields for DOT number, legal name, DBA name, base state and docket filing number. Brokers typically will have an “MC” prefix. “FF” refers to freight forwarders, which last year’s MAP-21 legislation for the first time also put under the requirement for a bond. Click search. (If you didn’t already know the broker’s MC number, save it for future reference.)
  • When the broker you’re filing against comes up, click the “HTML” button to view licensing information on the web page or “Report” to download a pdf. On the pdf, the surety provider is listed under “Active/Pending Insurance” near the bottom. If you’re viewing the HTML report, click the “Active/Pending Insurance” hyperlink for the surety provider’s information.
Have this information ready to file: Broker’s legal name and MC number, as well as your own and relevant contact information; amount owed to you; load date (or oldest load date if more than one); commodity hauled.

Have this information ready to file: Broker’s legal name and MC number, as well as your own and relevant contact information; amount owed to you; load date (or oldest load date if more than one); commodity hauled.

Contact the surety provider.

  • You may need to do further searching to find phone or website information for the provider. Several pulls of broker licensing reports showed neither phone or online points of contact for the listed surety provider. A simple Google search for company name and location, in most cases, will bring up the provider’s website and contact phone numbers.
  • When you make contact, follow the provider’s claims process. Some companies, such as the Pacific Financial Association, will send you to a web page to fill out a preliminary form. Most sureties, however, will handle this step via a telephone call to their office. From there, documents will be mailed to you to fill out and return.
  • If luck’s on your side, you’ll get paid by the broker after notification of the claim from the provider. If not, follow the provider’s claims process to the end and hope the bond or trust isn’t exhausted by similar claims if the broker’s business is failing. If some broker groups’ efforts to derail the new $75,000 minimum bond requirement are unsuccessful, at the least you’ll have a better chance of getting more money in such cases fairly soon. MAP-21 directed FMCSA to establish the new requirements of brokers, freight forwarders and surety providers by Oct. 1.
  • Centex

    You really have to hold a ” Professional Business owners” hand and walk him thru a a very simple process? I’m a broker and small fleet owner and perhaps the fact that you need to walk people thru this process is a sign that more restictions need to be put on who can obtain carrier authority.

  • hurricane

    i got takin on a load in 2009 for hauling pumpkins and it says ther exempt how can i get my money company is out of arkansas

  • superior

    The shipper can be held liable for payment even if they have already paid broker. No party is “exempt” from from bonding requirements.

  • http://www.facebook.com/channel19todd Todd Dills

    We’ve got a very diverse level of readership, Centex, simply put. Lot of company drivers, lots of leased guys who’ve not been in a position to deal with brokers but who may be thinking about getting carrier authority — as economy continues to come back slowly, more and more are doing so. Seemed like a good time to run through the process. How would you restrict obtaining carrier authority exactly?

  • http://www.facebook.com/channel19todd Todd Dills

    Superior above has a good point (see above). Here’s a post from last year about case that underpins ultimate shipper liability for payment: http://www.overdriveonline.com/letter-shippers-ultimately-responsible-for-payments/

    Have you taken the matter up with the shipper? (Is the broker still in business?)

  • http://www.facebook.com/pande.transportation Pande Transportation

    yes I think we need someone out there who we can hire to due this work for us I know a lot of o/o who would pay for this services and not have to spend time to fight brokers like Emily Glassmeyer at Total Quality logistics and how load boards let them keep posting there loads so they can keep taking money from hard working o/o

  • jj mcclure

    it’s no harder then submitting your info

  • http://www.facebook.com/james.p.lamb James P. Lamb

    Todd, great article on the claims procedure. I am interested to learn more about how the 48% stat cited above was determined. It appears this is over a driver’s entire lifetime and includes claims inquiries where the owner operator got paid after filing the claim. It may also include bogus claims, which are filed from unscrupulous carriers from time-to-time.
    The stats we have received from Pacific Financial– which holds financial security instruments for about 25% of the entire brokerage industry– show that only between one and two percent of all licensed carriers get one single bona fide problem claim each per year (that is, claims in which a mere phone call to the broker upon Pacific receiving the claims inquiry did not result in the carrier/independent owner-operator getting paid).
    Notwithstanding our belief that the $75,000 bond would prevent owner-operators who hold broker licenses from brokering out excess freight and the resulting decrease in freight rates that will result once all the existing and would-be small brokers disappear because they can’t furnish $75,000 cash collateral (the remaining mega brokers will pay less because owner-operators will now have less brokers to choose from), it would appear that the 48% does not accurately reflect these facts and makes the situation look a lot worse than it actually is.

    James Lamb
    AIPBA.org President

  • Quality Transport

    $75K is at best only a step in the right direction. We have transported transport cars only for many years. The changes to our business have not always been for the best. Especially when it has come to brokers.

    On average each car we transport is about $600. On ten cars that’s $6000 per load. We give every broker ample opportunity to make good on their bill. If we wait more than 30 days to file imagine how many cars a broker can dispatch before the house of cards comes crashing down on them. $75k still does not cover what is out there.

    Many brokers bring this on themselves. In an effort to secure business from large companies they offer not only prices but terms that are unrealistic. They then expect to pay us in 30 days. We are your transport company not your finance company. You make a brokerage fee because you are the bank NOT us. If you agree to wait 30 days to be paid you, as a broker, need to be prepared to pay truckers within ten days and YOU finance your client. If you did this you would be much less likely to finance your customers on your money instead of ours. I can’t tell the gas station we will pay for fuel when the broker pays us.

    Often you get the check and you are so far behind paying the check does not cover who you owe let alone your expenses and profit. It comes down to money management and most brokers are very poor at it.

    Make you clients pay in a reasonable time and pay us the same. We deal with companies like Ready Auto Transport, Cars Arrive (owned by ADESA) and United Road. All pay via Comcheck or direct deposit same day or next. Brokers can take a lesson from these big companies. This is why the little broker is getting squeezed out. Fast pay gets the business.

    Finally in our business we need to make cars dealers post a broker bond. For some reason they are allowed to broker cars without a bond. If they stick us we have no recourse.

    Comments from all on this appreciated.

    Leonard Norwich
    Quality Transport & Leasing, Inc.

  • Quality Transport

    We are well aware the according to regs the “Shipper” is responsible for payment regardless of the broker. Try calling up a dealership (or worse a private individual) you transported a vehicle for through a broker and tell them even though you paid a broker you must pay us. They will never agree to pay twice. You must then file with your local magistrate for $85 and get a judgment. Good luck trying on your own to figure out how to transfer (and get a court to accept) a judgment from another state and then get it executed. All to collect $300 or $400. They know you will never do that and they just blow you off. You are out the money.

  • Quality Transport

    On a more constructive note this is what we have found works best:

    Contact the broker FIRST. Keep in mind they may be waiting to get paid from their client. Squeaky wheel gets the grease. Call every week and refax your invoice once a week.

    When you have reached your limit GO ALL OUT !

    We contact the shipper and explain they are on the hook to pay us. We tell then to call the broker.

    We contact the receiving end and tell them the same thing.

    We call the bonding company and ask them to call the broker immediately. We also ask if there are other claims pending so we know if he is slow or really in trouble.

    We call the posting place where the load was listed letting them know to contact the broker telling them they are not going to accept new postings.

    Finally we got from our local magistrate a blank but “official copy” of the paperwork used to file in court. We fill it all out and include our Demand for Payment” Notice as required and send it to the broker certified.

    We have failed to collect four time in 12 years. Of the four we filed broker claims on we were paid by the bond company twice. The remaining two we got judgments and collected on one. The only one we got stuck for was in North Dakota from a deal who already paid the broker. He had $500K filed on his $10 bond.

  • Quality Transport

    Always remember if the load is not COD you are being asked to give someone credit. If you have never done business with the company ask for a COD, Comcheck or direct deposit. Tell them you are asking me for credit I need a reference I can verify…and verify it. Try getting a credit Card number as a “guarantee”. They don’t have to know you cannot accept a credit card payment. Give the perception of doing your due diligence and they will respect you. Seldom does everyone get stuck for nonpayment. Most people try to pay and make it so you are the one most likely for them to pay.

  • centex

    Perhaps a bond, 75000.00? Then if they ran afoul with FMCSA and get fined there would be funds to pay the fine and if they accept a load from a broker and then bail on it without loading it the broker would have recourse on them for the loss revenue that the broker endured.

  • http://www.facebook.com/channel19todd Todd Dills

    FYI, the 48 percent is a number from polling we did — a few hundred respondents all told, due to the nature of hte question it’s likely going to be made up primarily of independents/small fleets, not our leased owner-operators/company driver readers.

  • http://www.facebook.com/channel19todd Todd Dills

    Novel idea, though I doubt carriers would be happy to see it, of course. Do you foresee difficulty maintaining the 75K for the brokerage portion of your business if it’s ultimately put in place later this year? Here’s my email for future correspondence if you prefer: tdills@randallreilly.com.

  • http://www.facebook.com/james.p.lamb James P. Lamb

    Todd,

    The AIPBA believes the BEST solution is for the industry to police itself. We think owner- operators and brokers should view each other as partners rather than adversaries and we are working to change the way truckers and brokers deal with and view each other.

    We therefore invite owner-operators to join the AIPBA (they can join for FREE on Linked In as ‘Honorary Members’ to get connected –see http://www.linkedin.com/groups/Association-Independent-Property-Brokers-Agents-4293910?gid=4293910&trk=hb_side_g –but they must be associate dues-paying members –see http://aipba.vpweb.com/Carriers—Owner-Operators.html to use our services.

    We offer this dispute resolution service to help resolve disputes, including payment related issues and we are serious about holding our members accountable under our Code of Ethics: http://aipba.vpweb.com/Complaint-Dispute-Resolution.html.

    One of the best things an owner-operator can do to help protect himself (or herself for you WIT members) in addition to checking the broker’s license, bond activity and credit profile is to find out if the broker is a member of the AIPBA and has taken our ethics pledge.

    James Lamb, president
    http://www.AIPBA.org

  • martymarsh

    Also, put their name in RipOffReport.

  • http://www.facebook.com/james.p.lamb James P. Lamb

    Should AIPBA seek a
    law to raise carriers’ liability insurance to adjust for inflation to
    prevent vicarious liability suits against brokers (current $750k was set 28 yrs ago http://www.smalllinks.com/15ZP)?

    VOTE HERE:

    http://www.linkedin.com/groups/Should-AIPBA-seek-law-raise-4293910.S.223902651?qid=a3274243-ace6-42de-abf7-ec7329b7b3ec&goback=.gmp_4293910

  • Tom

    Nah, carriers would hate that. They like spending OTHER people’s money instead of being responsible for their own credit decisions.

    Bonding is a bailout, just like the banks.

  • Tom

    We’ve worked together, fyi.

    Before you accept a load is the payment terms on it? If not, why would you accept it? If they are, why did you accept it.

    I don’t hide anything. I know many carriers who hate capitalism for other people would like to eliminate brokers, yet I somehow still have business? Why is that? Must be luck.

    Why am I paying a bill so I can insure YOUR CREDIT DECISIONS. Why doesn’t every shipper have to get bonded then?

    I run a small business. Sorry that offends you. Just like the crying many folks do about rates… then don’t take the loads.

    But many of the people who support the fascist scheme of bonding increase also would have the government set rates.

    And many of those… whine about democrats. Pretty funny.

  • Tom

    Now THAT is a great point.

    Somehow, if I arrange transport I’m required to pay into the fascist bonding collectivist anti-capitalist scheme.

    But if a load board arranges the arranging… well that’s just passing information.

    If I hire a driver and he goes out and kills someone, according to some pretty idiotic case law (thanks Robinson, that’s what we all needed) I can be sued. Sued for a truck I don’t own hauling a commodity I never touched killing someone in an accident I wasn’t a part of.

    Load board that load was on… well they didn’t even need any license, never mind have any liability.

    Suck a crock.

    But at least when a carrier double brokers a load against regulation and contract there is now a $10,000 fine that FMCSA won’t try to collect.

  • Jesse Carter

    i would be very grateful if some body can tell the procedure that I can file a complaint against the brokers

    Company Name: Ontimefly Inc

  • Todd Dills

    Jesse, are you trying to get paid? Surety filing is detailed in the story. Look up their surety provider and go from there…

  • Lackawanna

    So……what to do when the surety provider won’t pick up the phone, respond to e-mails, and/or acknowledge your claim?? Then what??

  • Jerry

    “…FSC notes that in 95 percent of claims it receives, “the broker pays the claimant after being informed a claim has been filed against their trust…” This is not true. FSC needs to follow up with the original complainant. I believe, FSC made that interpretation due to claimant did not followup with the filing of the paperwork. After the initial on-line claim was filed. Myself, after filing a claim. I was instructed by the Group, the brokers bond had claims greater than the amount of the broker bond. I did not follow up with sending in claims paperwork because I did not want to lose a grounds for a civil suit. By a civil attorney stating, you agreed to a settlement. I want all money due.

  • Jerry

    A broker, is not waiting to be paid. A broker signs a contract for services and agrees to make payment. NO where, will the broker/carrier agreement or the rate agreement will have a stipulation…broker pays, only when broker is paid.
    (Reckless Business Model; The Carrier’s Safety is eroded by saying, the broker will pay, after the broker is paid.)

  • Jerry

    The Bond increase, is to mitigate the erosion of Carrier Safety.

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