Certain factors active in the trucking industry are using unethical practices to take advantage of owner-operator clients, said Jennifer Lickteig, president of TBS Factoring Service.
She spoke Friday at a special presentation of Overdrive’s Partners in Business program at the Great American Trucking Show in Dallas.
Lickteig said unscrupulous factors are “preying on your need of money and designing their business strategies around it.”
A common tactic is to offer initial low or zero percent interest rates, but with contract language authorizing high rates later. Another is to make low rates contingent on a practice that is hard to maintain, such as submitting monthly operating statements, so that most every client will fail and trigger exorbitant fees.
Other fees, such as for advances or late payments, are often too high or not clearly disclosed. A contract might contain vague language, such as “some fees may apply.” That amounts to a “blank check to your bank account,” Lickteig said.
She did not mention any other factors by name.
As protective measures, she recommended:
- Thoroughly read any factoring agreement, even if it’s extremely long. If it’s difficult to understand, seek a third party for help.
- Ask questions about anything not covered in the agreement or that is unclear.
- Ask the factor for references and ask other truckers if they have experiences with certain factors.
- Ask for a sample invoice to see if it’s clear and do the math to get a full understanding of what your costs will be. With a deceptive factor, “They don’t want to you to know how they calculate rates,” Lickteig said.
- Watch for red flags, such as being unwilling to provide certain information.
- Check a factor very closely if it is not a member of the International Factoring Association or the American Factoring Association.