Channel 19

Todd Dills

Small brokers reload on $75K bond

| August 23, 2012

The Association of Independent Property Brokers and Agents, founded by former DOT officer James Lamb and which I’ve written about in the context of the issue the organization was founded to fight — the boost from $10,000 to $75,000 in minimum surety bond requirements for brokers that was in the highway bill package passed in June — is calling that measure “inconsistent with the Federal Transportation Policy set forth in 49 USC § 13101″ of the U.S. Code, which assures the federal government doesn’t get involved statutorily in promoting one mode of transportation over the other and ensures equal opportunity to operators in transportation.

I know we’ve been through this debate before, and Congress ultimately felt they had authority to include the bond in the highway bill, but I’m interested in hearing from those among who broker some loads throughout the year as part of your trucking business. Have you looked into what would you’d need to go through to obtain a $75,000 surety? Will it be feasible for you to do so? Following find code language AIBPA included in a press release delivered this week to media:

…it is the policy of the United States Government to oversee the modes of transportation and — (1) in overseeing those modes — (A) to recognize and preserve the inherent advantage of each mode of transportation; (B) to promote safe, adequate, economical, and efficient transportation; (C) to encourage sound economic conditions in transportation, including sound economic conditions among carriers; (D) to encourage the establishment and maintenance of reasonable rates for transportation, without unreasonable discrimination or unfair or destructive competitive practices; (E) to cooperate with each State and the officials of each State on transportation matters; and (F) to encourage fair wages and working conditions in the transportation industry; and (2) in overseeing transportation by motor carrier, to promote competitive and efficient transportation services in order to—(A) encourage fair competition, and reasonable rates for transportation by motor carriers of property; (B) promote efficiency in the motor carrier transportation system and to require fair and expeditious decisions when required; (C) meet the needs of shippers, receivers, passengers, and consumers; (D) allow a variety of quality and price options to meet changing market demands and the diverse requirements of the shipping and traveling public; (E) allow the most productive use of equipment and energy resources; (F) enable efficient and well-managed carriers to earn adequate profits, attract capital, and maintain fair wages and working conditions; (G) provide and maintain service to small communities and small shippers and intrastate bus services; (H) provide and maintain commuter bus operations; (I) improve and maintain a sound, safe, and competitive privately owned motor carrier system; (J) promote greater participation by minorities in the motor carrier system; (K) promote intermodal transportation.

According to the AIBPA President Lamb, the bond “does virtually everything the law promises Americans their government will not do,” adding: “This is what happens when politicians in Congress allow high paid lobbyists to slip an anti-competitive provision into major highway legislation as an amendment at the 11th hour without debating the impact such changes will have on the industry and consumers. We believe this legislation, drafted by the Transportation Intermediaries Association (TIA), was specifically written with the intent to eliminate small brokers from the market so that big brokers can take control of the market, form oligopolies, charge shippers and consumers more, and pay owner-operators less.”

Tell me what you think here in the comments or get in touch direct via Twitter.

  • clickron

    I’m neutral about this issue, but it was done totally wrong. Would you make a carrier with 1 truck pay for insurance on 10? While a carrier with 1,000 trucks only had to pay for insurance on 10? It should have been based on a percentage of payables. One large broker who relies on the auto or airline industry, where bankruptcy is common, could take out a lot of carriers at once.

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

    Lot of folks agree with you, for sure. Take a look back through some of my older stories on the bond for ideas relative to that view. One of the problems with graduating the rate seems to be accurate filing for freight volumes/value handled, though that could probably be done — OOIDA, who supports the $75K bond (and originally wanted it to be higher), certainly, however, thinks the problem is with small brokers generaly, not large ones.

  • http://twitter.com/lundken lundken

    Why do you give Mr. Lamb any press without checking the facts! He has an organization that competes with TIA so he bashes them every chance he gets. I am on the TIA board and can verify that Mr. Lamb does not know what he is talking about. Most of the membrship of TIA is small brokers. They are not trying to do anything to hurt small brokers. TIA fought very hard to keep the bond from being $500,000 which was te first proposal from OOIDA and ATA. people need the facts and not to listen to a rock thrower like Mr. Lamb. A bit of balance would help calm things down.

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

    Can you be in touch?: tdills [at] rrpub.com.

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

    Blowing the Whistle on the OOIDA TIA Broker Bond Deal:
    On
    July 2nd, 2012, OOIDA Business Services Manager Karen Johnston’s
    letter to Transport Topics regarding “higher broker bonds” (http://www.ttnews.com/articles/lettertemplate2.aspx?storyid=29635&t=Letter-Higher-Broker-Bonds)
    was published. Johnston’s letter targeted Pacific Financial Association
    President Daniel Larson’s June 18th 2012 opinion (http://www.ttnews.com/articles/basetemplate.aspx?storyid=29546&t=Opinion-Higher-Bonds-Still-Not-the-Answer)
    that had criticized the TIA’s recent flip-flop on the broker bond issue.

    By way of background, in 2004, OOIDA asked FMCSA to promulgate a property
    broker bond between $350,000 and $500,000. Initially, TIA President Robert
    Voltmann opposed their request and said in Transport Topics (http://www.ttnews.com/articles/basetemplate.aspx?storyid=11447):
    “Fraud exists in both the brokerage and the motor carrier industries, and
    increasing the bond will have no effect on fraudulent operators.” Then,
    TIA started selling $100,000 bonds to property brokers. In early 2010, TIA and
    OOIDA announced to the industry they had (magically) “compromised” on
    a $100,000 bond amount to “fight fraud.”

    Apparently, there is a good reason OOIDA has come to the defense of the TIA.
    The AIPBA has received new information that reveals, as we suspected, the deal
    that OOIDA & TIA struck was not about “fighting fraud” as the two
    groups purported but was actually about selling financial security, which is a
    revenue stream for both organizations. What Ms. Johnston neglected to mention in
    her letter is that prior to the OOIDA-TIA deal, the quality of the insurance
    OOIDA sold in terms of their “rating” was looked down upon by TIA.
    However, once OOIDA agreed to accept TIA’s $100,000 bond, we understand TIA
    gave OOIDA their nod on OOIDA’s insurance rating. Without TIA’s acceptance,
    OOIDA was headed out of the insurance business. So, the real purposes of
    raising the broker bond were apparently to make all brokers have to buy a bond
    at an amount conveniently already offered by the TIA (and get rid of the
    smallest “underfunded” brokers who wouldn’t qualify)… and
    facilitate and retain OOIDA insurance sales to their owner-operator members. So,
    it appears the only thing “compromised,” here, was the integrity of
    the two trade groups and the bona fide interests of their respective
    memberships. Poor ATA was bamboozled into jumping on the bandwagon.

    What the two trade groups couldn’t possibly anticipate, however, was the
    formation of a new trade group for small brokers by a former DOT investigator.

    A new $75,000 bond will take effect in July 2013, which will cause tens of
    thousands of brokers and agents to lose their jobs because of the higher
    underwriting standards that will result from the bonding companies’ increased
    risk exposure. No longer will mom and pop trucking companies be able to qualify
    for a broker license to broker out excess freight. Once the big brokers control
    the market, shippers will pay more and owner-operators will now be paid less.
    The price we pay for goods as American consumers will now skyrocket out of
    control thanks to this TIA written legislation as we small business owners try
    to navigate the turbulent waters of economic recovery and keep our heads above
    water.

    Small business owners in this industry deserve much better. I encourage
    owner-operators and small and mid-sized carriers, brokers and forwarders to
    stand behind the AIPBA as we now seek to repeal this anti-competitive
    legislation, which conflicts with this nation’s long standing Federal
    Transportation Policy under 49 U.S.C. 13101, and work to promulgate a fair and
    balanced bond amount through the FMCSA:

    See our Press Release at http://aipba.vpweb.com/upload/aipbarepealrelease.pdf

    Sign our Petition at: http://www.petitiononline.com/100KBOND/petition.html

    Over 1,400 of you already have.

    JAMES LAMB, PRESIDENT

    http://www.AIPBA.ORG

    http://www.linkedin.com/groups/Association-Independent-Property-Brokers-Agents-4293910?gid=4293910&trk=hb_side_g

  • http://twitter.com/lundken lundken

    Once again—Mr. Lamb is throwing rocks without the facts. TIA does not accept or reject insurance nor do they dictate what their members accept or reject. This “conspiracy” exists only in the mind of the president of an organization (AIPBA) that is trying to build itself up by destroying the reputation of its competitor (TIA). Mr. Lamb has made my point much better than I could have. There are some good arguements against having a higher bond but Mr. Lamb does not make them—His main objective is to discredit TIA.

  • http://twitter.com/lundken lundken

    Clickron–I agree with you–It should vary based on payables—but there was no way to accomplish this. The government is not set up to monitor it and it creates a loophole for the bad operators to use to get around the system. There are many ther provisions in the act that help protect small carriers. Unfortunatley everyone seems to just react to the bond increase.

  • http://www.facebook.com/tommy.canada.79 Tommy Canada

    If it takes $500,000 for a bond good if that’s what it takes for
    a carrier to get his money the crooks are walking away with that kind of money
    when they decide to give up $10,000 and its legal to do. Where in the law books
    does it say a broker has to pay you? he just has to put of $10,000 no rules
    guidelines its crooked from the get go…it’s out of hand too needs something
    done asap.I got a brokerage and could do the same thing has been times where I
    could have walked away with over $100,000 and only lose my $10,000 bond the law
    said I can I see it happen everyday especially in the military freight

  • Todd Dills

    Lundken below is correct — various requirements of bond providers and such that will make it easier for carriers to see who might be in trouble. . . I wrote about some of it here:
    http://www.overdriveonline.com/beefing-up-the-bond/ Keep in mind the story at that link was written before the proposal was dropped from $100,000 to $75,000 on the bond portion of it. Lot of others agree with you on the graduated levels, though, for sure. I see the point of how difficult it would actually be to monitor it that way.

  • http://twitter.com/gobizduck Biz Duck

    Just to let everyone know, there’s a freight broker database download available for free at http://truckingplanet.com/brokerdownload.htm

  • http://twitter.com/gobizduck Biz Duck

    Instead of 24,000 freight brokers to choose from, you’ll 800 C.H. Robinsons who have honed cheap freight rates down to a science, “take it or leave it, there’s 10 guys behind you who will do it” mentality, This can’t be a good thing. I know lots of small brokers who’ve been around for 20 years who pay about $200 more per load and pay on time.

  • Mike Simon

    It costs more than $10,000 to start, and maintain a trucking company. If brokers have good credit, it shouldn’t be a problem coming up with the additional credit…

  • MsRottn

    I can only speak from the view here in the auto transport Industry. In the past 20 years of auto transport I have seen a population explosion of brokers, some are outright crooks, others pay fair wages and have longevity and then you have others start out great and then then disappear into thin air and their bonding company won’t take our claim for 30 day. By that time, the bond is exhausted and we won’t even see pennies on the dollar.
    Years ago we would not even put the key in the ignition for less than $1 per mile. Meanwhile we have gone from $1.29 pg at the pump to over $4 pg and the freight is paying between .29 & .41 per mile. (Is this that “new math” I’ve been hearing about?)
    Brokers in the auto transport industry should have a $100,000 Bond,They should have to take a certification course, have a background check and receive a Federal Brokers License.
    If they want to complain about the cost, maybe they would prefer to pay out what the truckers do for IFTA, Heavy Road Use Tax, Insurance, Paying drivers. etc….. The amount of brokers (hopefully) will drop off. Let’s weed out the bad apples and bring back prices that ensure that we ALL make money.
    Thanks for giving me this chance to share my own little view!

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