Broker proposal falls short, OOIDA says

The Owner-Operator Independent Drivers Association says a proposal regarding broker financial responsibility falls short and urged FMCSA to make improvements before issuing a final rule.

In January, the Federal Motor Carrier Safety Administration published a notice of proposed rulemaking about modifications to broker and freight forwarder financial responsibility requirements. Prompted by 2012’s Moving Ahead for Progress in the 21st Century Act, FMCSA previously implemented a requirement to increase the financial security amount for brokers to $75,000.

FMCSA proposed regulations involving assets readily available, immediate suspension of broker/freight forwarder operating authority, surety or trust responsibility in cases of insolvency, enforcement authority and entities eligible to provide trust funds.

OOIDA said an update to the broker security regulations is welcome but that FMCSA’s proposal doesn’t go far enough.

“The final rule must be strengthened to ensure that FMCSA, along with industry stakeholders, can readily identify when available financial security falls below $75,000,” OOIDA wrote in formal comments signed by President Todd Spencer. “The notice of proposed rulemaking falls short of providing the necessary transparency and accountability from brokers and freight forwarders to absolutely know if and when there has been a drawdown on the bond below $75,000.”

Without these changes, OOIDA said the current issues that allow a bond to be in effect until a claim is actually paid on the bond will persist.

“Under this unofficial policy, even if legitimate claims aggregating in excess of the bond amount have been presented to the surety and as long as the surety has not yet paid a single claim, the bond is still good and the broker can stay in business,” OOIDA wrote. “Any final rule must finally end this practice.”

As part of its comments, OOIDA included a list of broker bond interpleaders filed in federal court that have shown the total amounts of the claims to be far in excess of the bond amount.

FMCSA will accept comments regarding broker financial responsibility requirements through April 6. Comments can be made by clicking here, or by going to the Regulations.gov website and entering Docket No. FMCSA-2016-0102. The agency also will be hosting a public listening session regarding broker issues on March 31 at the Mid-America Trucking Show in Louisville, Ky.

Broker transparency

OOIDA also continues its push for FMCSA to enforce broker transparency regulations. The Association petitioned the agency in 2020 over the issue and is still waiting for a response.

OOIDA’s petition asks the agency to:

Require brokers to automatically provide an electronic copy of each transaction record within 48 hours after the contractual service has been completed.

Prohibit brokers from including any provision that requires a carrier to waive their rights to access the transaction records.

Regulation CFR 371.3 already requires that brokers keep records of each transaction with a carrier and that each party to the transaction has a right to view these records.

FMCSA opened OOIDA’s petition for comments in August 2020. Later that year, FMCSA held a listening session regarding broker issues. Then in November 2020, the Transportation Intermediaries Association petitioned the agency to eliminate the transparency requirements. In all, nearly 1,500 comments were filed to the broker transparency-related dockets.

The agency is expected to respond to the petitions this year.

“Small-business truckers have long expressed frustration that regulations designed to provide transparency are routinely evaded by brokers or simply not enforced by FMCSA, and the need for better broker transparency remains urgent,” OOIDA wrote in its recent comments.

“If broker transparency regulations can be improved in conjunction with implementing an effecting broker and freight forwarder financial responsibility final rulemaking, 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. Most importantly, the small-business motor carriers who rely upon brokers will be spared from such financial loss from both brokers and ineffective bounds or trusts.” LL