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Todd Dills

More on broker bond increase, highway bill

| June 26, 2012

Given the June 30 hard deadline for the highway reauthorization negotiations ongoing between House and Senate, it’s likely that any highway bill that successfully emerges, whether longer term or another six-month-or-more extension of current priorities, is more or less already finished.

Regardless, following my last post on the issues of the EOBR mandate and broker surety bond minimum increase included in the Senate’s MAP-21 two-year reauthorization, James Lamb, president of the Association of Independent Property Brokers and Agents, offered up an edited version of a letter he wrote to the Transport Topics newspaper as a response to criticisms of his group’s opposition to the proposed bond increase.

As I’ve written about here and in this month’s magazine, Lamb favors an increase to $25,000 to adjust for inflation from $10,000, rather than the increase to $100,000 that was proposed in the Senate bill.

Another opponent of the bond increase, James Sanders, a consultant to surety provider Pacific Financial, also wrote, disputing OOIDA Executive Vice President Todd Spencer’s argument for the increase, part of which proceeds from his contention that, as I wrote last week, “the problem with serial late payments or nonpayment from brokers is not one associated with large bokerages.”

That, said Sanders, “is utterly misleading. In the first place, given the verifiable fact that the freight brokerage industry, as with real estate brokers, is largely skewed towards self-employed individuals (such as myself), the ‘large brokerages’ referred to comprise fewer that 1 percent of the total of more that 20,000 such transportation intermediaries holding FMCSA licenses, a significant statistic in such regards.”

Secondly, Sanders noted, “when such ‘large brokerages’ do blow up, they do so spectacularly. Such was the case with Enron’s freight brokerage unit, for which a $100,000 surety instrument wouldn’t have been much more useful that the $10,000 BMC-85 filing they’d secured through Chase Bank in Boston. In the event, a $20 million bond just might have been enough….”

Thoughts? Tell me.

The full text of Lamb’s letter follows:

Recently, Transportation Intermediaries Association President Robert Voltmann was quoted in Transport Topics regarding the people involved with the campaign to defeat the proposed $100,000 brokers bond. His remarks were published in an article headlined “Provision in Senate’s Transportation Legislation Would Raise Broker Surety Bond to $100,000.” 

The article first quoted James Sanders, a consultant to Pacific Financial Association Inc., a company the article said “.provides bonds for about 25 percent of brokers in the United States.”  Sanders called the bond’s proposed increase to $100,000 from $10,000 “preposterous” and said it was intentionally designed to put small brokers out of business by requiring them to obtain surety that no bond company would actually give them because small brokers rarely have the necessary collateral. 

The article then quoted Voltmann’s rejection of Sanders’ position: “These are specious arguments by fear mongers, and they’re being spread by the people who this legislation is designed to stop — the cheats, the churners and the thieves.” The article further quoted Voltmann saying the only brokers the legislation might put out of business would be the ones trying to cheat the system.

On the contrary, the 1,173 people who stand with the Association of Independent Property Brokers & Agents, the true voice of the small and mid-sized broker to Washington, are good, honest, hardworking people who are, in fact, afraid that TIA is about to put them out of business. With respect to “fearmongering,” it is the TIA who is playing the role of “Chicken Little.” 

Even after 79 percent of TIA’s own members polled in 2010 told TIA they would prefer anything other than a $100,000 bond, Voltmann is still spending $250,000 per quarter on lobbying and purporting that this is all about fraud. However, according to Pacific Financial, there is an average of only one actionable claim per year for each 100 possible motor carrier claimants. As a former DOT Investigator, I can confidently state the sky is not falling, Mr. Voltmann. There is no need for new, anti-competitive laws to make the big brokers richer at the expense of small brokers and carriers, owner-operators, shippers and consumers. If this passes, shippers and consumers will pay more… and the big brokers will pay truckers less.

Voltmann and TIA know very well that a $100,000 bond would be a barrier to small business because Voltmann said so himself in Transport Topics back in 2004:

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  • Stay Informed

    They should set the Broker limits by the percentage of monthly business. The more you’re brokering the more your Bond costs. This way a company might have a chance of recovering some money if the broker goes under. $25, 000 isn’t enough and people will still get screwed.

  • Phil Gates

    Both the House and the Senate need to debate this bill on it’s own. Not attached to anything else. The way the TIA was able to sneak this in to the Highway Bill is nothing but shit ass politics.

  • Steve Fiddler

    What your looking at the American dream of starting a company and you be the owner going away. All the TIA wants is small brokers going away and the big boys control the market. The oil industry is a perfect example of the big boys controlling the game and it has work great for our trucking industry. In a 10 year period fuel has gone from $1.50 gallon to $5.00 and right now at 3.65. Making a truckers cost for 250 mile fuel is at 38% of the cost. Competition is good. The bonds need to be adjusted according to inflation. Just dont knock the brokers out of the game.

  • Deborah McCoy

    The date is Saturday, 6/30/12 – our congress has approved the Transportation Bill which will increase our surety bond to $75,000. I don’t know how we’ll find the money to be able to continue doing business. I’m sure many of my fellow freight brokers are wondering the same thing. I’m very disappointed in our congress and in the TIA.

  • Rod Lucas

    I think that these freight brokers are so great! They really do a good job for you and can get you good quality transportation of shipments.

  • Phillius Thomas

    Always ask an experienced freight broker agent first before this. They are very helpful in clarification.