In early November, FMCSA stood up what amounts to a new flag on brokers/forwarders and motor carriers whose surety bonds/insurance have been marked for cancellation by the provider.
“The goal is to help the public who does business with these regulated entities know that an insurance company or financial institution that made the initial filing has submitted a pending cancellation of the entity’s policy in our system,” say reps from FMCSA’s Licensing and Insurance division. “The notice will remain in place until either the effective date of the updated filing has occurred, or that the authority has been revoked, due to the failure to comply with the insurance requirements.”
Transport Financial Services (TFS) President Marold Studesville notes the new flag will be helpful to carriers vetting fraudulent brokers who attempt to game the system to run up business within the 30-60-day window that can exist between the first claim on a broker’s bond and FMCSA’s ultimate revocation of the broker’s authority. The loophole was detailed in my February 2018 “Highway Robbery” feature in part about egregious fraud cases and more dishonesty in brokerage.
The red-flag language illustrated above only appears on the FMCSA Licensing and Insurance (L&I) detail page for the broker, but each broker/forwarder entity’s page on Safer.gov, a common look-up place for shippers and carriers vetting brokers, also directs users to L&I with a link for an insurance check, as seen in the Safer.gov page for the broker above as of last week:
Studesville views the new link and flag, where appropriate, as something of a technological stop sign for both carriers and shippers on the road to a decision to take freight from, or give freight to, a broker. If used appropriately, it will help “stop dishonest brokers,” he says, which he’s been pushing for since a brokerage customer’s carrier service providers ran up more than a million in claims on a TFS trust last year, well after notice of cancellation as the broker failed.
As regular readers will know, FMCSA has initiated an Advance Notice of Proposed Rulemaking whose subject is, partially, the potential closing of the time-lag loophole — acting on the “immediate suspension” authority over brokers required by 2012 legislation — described above. Pending any real change, the tech fix stands to significantly “diminish claims,” Studesville contends.
Studesville notes his surety might be a bit more aggressive than some, however, as he has acted quickly in the past to cancel brokers in the event of valid claims, even to the point of acting to put in a notice of impending cancellation when a carrier’s claim is received and the broker fails to respond to TFS’ queries about the issue. “I want to be sure the carriers are paid,” he says. “If you don’t answer back to [TFS queries in the event of a claim], say if you just don’t want to pay that carrier, and you don’t answer my contact, as far as I’m concerned, you’re a dishonest broker.”
If his surety notice of cancellation can’t result in an immediate suspension because of “the need for rulemaking,” as FMCSA has noted, “that is a catch-22,” he says, a “stretch of highway 100 miles long” with no stop signs against a fradulent broker doing business with no intent to pay. Studesville hopes carriers will take heed of the insurance-status flags it comes across and place calls to the brokers and/or bond providers in question for the reason before doing any business with them. Over time, he believes, as such becomes common practice and word of the change spreads, it should result in fewer bad actors in the industry taking advantage of the acknowledged loophole that puts a delay on authority suspensions.