Broker fraud devastating small trucking companies, lawmaker says

December 20, 2023

Mark Schremmer

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As part of a House subcommittee hearing last week, Rep. Mike Bost, R-Ill., shined a light on the problem of broker fraud in the trucking industry.

With FMCSA Administrator Robin Hutcheson among the witnesses at a Highways and Transit Subcommittee hearing on Dec. 13, Bost used the opportunity to encourage the agency to address the problem. Broker fraud is estimated to cost the trucking industry as much as $800 million annually.

“We have people who are out there that are claiming to be brokers,” Bost said. “The truck drivers are out there trying to find loads or their companies are trying to find loads for them, and they use this broker. The broker all of a sudden comes in … and they broker the load. Now by the time that driver then gets back in and … is ready to be paid … that particular company is no longer in existence, or you can no longer find them.”

Bost, who has a trucking background, said that broker fraud can be particularly devastating to small motor carriers.

“Is there anything that your agency is doing … as far as the fraud that is occurring out there? We’re losing a tremendous amount of smaller companies and owner-operators,” he said. “Because it’s one thing if a great big company takes a $2,000 loss or $5,000 loss, but the smaller companies can’t take that.”

The Federal Motor Carrier Safety Administration recently issued a final rule on broker financial responsibility and plans to address broker transparency in October 2024.

“We unequivocally share your concerns about the impact of fraud on the industry and, specifically, broker fraud,” Hutcheson said. “We are taking steps. First and foremost, we issued a financial responsibility rule that will ensure its security limit for brokers and freight forwarders is increased to $75,000. We know that’s not enough. We are also taking steps to improve transparency in transactions. We’ve been listening to our stakeholders, working very closely with OOIDA, TIA and others.”

The Owner-Operator Independent Drivers Association said that more needs to be done.

On Monday, Dec. 18, OOIDA filed a petition for reconsideration of the Federal Motor Carrier Safety Administration’s final rule on broker and freight forwarder financial responsibility.

“The final rule should be enhanced to ensure transparency when a broker/freight forwarder’s financial responsibility falls below $75,000,” OOIDA wrote in the petition signed by President Todd Spencer. “The agency should also stipulate a seven-day period for the surety provider or financial institution to investigate and determine the validity of the claim. These and other modifications will promote a fair working environment between brokers/freight forwarders and motor carriers that will best serve the public interest.”

OOIDA also petitioned FMCSA in 2020 to address the lack of broker transparency.

FMCSA granted that petition earlier this year but is not expected to issue a proposal until late 2024. The Association told FMCSA in August that there was no more time to waste.

“Since the agency’s rulemaking announcement in March, instances of rampant broker abuse and fraud persist,” OOIDA wrote. “Motor carriers are victimized through unpaid claims, unpaid loads, double-brokered loads or load-phishing schemes on a daily basis. If broker transparency regulations and enforcement can be improved, then disputes between motor carriers and sureties will be reduced, there will be less need for litigation, less need for FMCSA intervention and the economic health of the broker/motor carrier component of the transportation industry will be stronger.” LL