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Todd Dills

OOIDA on bond increase: Large brokers not the problem

| April 27, 2012

I spoke to Owner-Operator Independent Drivers Association Executive Vice President Todd Spencer about the broker minimum bond increase issue earlier this week. The conversation followed posts to the blog looking at opposition to the measure (to raise it from $10,000 to $100,000) from small brokerages and their advocates, who have been reaching out to owner-operators hoping for a little small-business camaraderie. They paint the bond-increase proposal as an attempt by large brokerages and the biggest freight middleman’s organization, the Transportation Intermediaries Association, to force them out of business.

Spencer, however, doesn’t see it that way at all, believing responsible brokers regardless of size will be able to find a financial services company to write a higher bond without the full cash collateral some surety providers are telling them they’ll need, should the minimum be raised. Raising the bond “would be a benefit to far more [businesses] than it will ever be a deterrent,” he says. “It doesn’t ensure that a bad broker will never be around, but the crooks have had free reign for decades. The legitimate businesspeople shouldn’t have to compete with the crooks.” A higher bond could work to discourage entry into the business by said crooks.

Today, it’s all too common, Spencer says, for brokers to offer shippers “too-good-to-be-true rates,” at once offering truckers much the same, often with “no intention to pay the truckers at all.” Spencer references a recent conversation with a shipper in which he asked why they were using brokers. The shipper’s answer was all about the rates offered – the shipper couldn’t get rates so low working directly with carriers.

The bond minimum level, Spencer says, should be high enough to ensure an appropriate level of broker financial security. He asks,Is it unreasonable to expect a service provider — a regulated, authorized entity in the motor carrier industry — to have at least the financial security to ensure $100,000 worth of payments to motor carriers?”

Echoing ideas from some other operators, Landstar Ranger-leased, formerly independent owner-operator Gordon Alkire told me recently that he favors graduated minimum bond levels. “I understand why OOIDA wants to increase it, and I applaud it,” he says. But levels “should be based on your earnings — if you make $500,000 yearly and you use a lot of trucks, you need to have a bond to cover a lot of trucks.” No so for a truck driver’s wife who may broker a couple loads a week.

Spencer says OOIDA has considered such graduated levels. Ultimately the association sees the serial late payment and/or underpayment or nonpayment problems that independents have been experiencing for years as part and parcel of the world of smaller brokers. “This isn’t a problem that exists with large brokers,” Spencer says. “I doubt there’s a large broker that’s ever had their bond tapped. There’s simply no point in designing something that’s broader than it needs to be to address the issue.”

What do you think? Keep the ideas coming.

For more on the bond issue, stay tuned for reporting in the magazine. If you missed my prior posts, find them linked below with some related reporting.

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  1. […] a sort of “inside consultant,” he says, to Pacific Financial (I spoke to him regarding the broker bond increase issues I’ve written about here recently). He tells it specific to Monteagle, Tenn., where he’s originally from, but you could […]