Freight fraud driving truckers out of business, OOIDA’s Pugh tells Senate

Small-business truckers need protections from increasing instances of freight fraud, OOIDA Executive Vice President Lewie Pugh told a Senate subcommittee.

“Fraud is on the rise in trucking, as criminals have discovered many vulnerabilities within our industry,” Pugh wrote in his submitted testimony. “Stakeholders are doing all they can to protect themselves from criminals, but their capabilities are extremely limited. A small-business trucker lacks the resources to prevent scams originating overseas or the authority to ensure brokers comply with existing transparency regulations. There are systems and regulations in place that can help reverse the growing trend of fraud, but the federal government is struggling to provide the support shippers, motor carriers and brokers need.”

The Senate Surface Transportation, Freight, Pipelines and Safety subcommittee held a hearing on Thursday, Feb. 27 to examine the growing problem of cargo theft and freight fraud along the U.S. supply chain.

CargoNet and Overhaul reported large increases in cases of freight fraud in 2024, and the Transportation Intermediaries Association estimated that it costs the U.S. supply chain about $1 billion annually. Subcommittee Chairman Sen. Todd Young, R-Ind., cited statistics during the hearing that suggested the overall problem of cargo theft could cost as much as $35 billion each year.

Pugh testified to provide insight into how freight fraud negatively affects truckers and the overall industry. The Owner-Operator Independent Drivers Association represents approximately 150,000 small-business truckers.

“Unfortunately, small trucking businesses are both the most vulnerable to fraud and the least likely to be able to recover from an incident,” Pugh wrote. “Most commonly, motor carriers are held responsible for the loss of cargo due to fraud, with costs ranging from tens of thousands to hundreds of thousands of dollars per incident.”

He added that there have been several incidents of OOIDA members going out of business after one instance of freight fraud.

“That’s not hyperbole,” Pugh wrote. “While large carriers are better equipped to absorb the cost of fraud, it only takes a single occurrence to ruin a small trucking business.”

Types of freight fraud in trucking

Truckers fall victim to scams and freight fraud in a variety of ways.

As part of his testimony, Pugh said the most common scenario is when truckers are targeted by scammers posing as legitimate brokers.

“First, many small trucking businesses fall victim to double brokering,” Pugh wrote. “This is when criminals pose as motor carriers to acquire loads from brokers, then pose as brokers looking for truckers to complete hauls. When the freight is delivered, the legitimate broker issues a payment to the fraudulent actor, and the trucker who actually hauled the cargo is left high and dry.”

Other examples include theft of a broker’s identity, reroute schemes and theft of a motor carrier’s identity.

Adam Blanchard, CEO of Tanager Logistics and Double Diamond Transport, relayed an example of how his company was victimized.

“About a year ago, our American dream turned into a nightmare when some unscrupulous criminals stole our identity,” Blanchard said. “By capitalizing on our good name, they tarnished the reputation we spent over a decade to earn.”

Blanchard explained the criminals posed as Tanager Logistics through a fake email account and brokered loads to unsuspecting motor carriers who delivered the cargo while the scammers pocketed the money. In one example, criminals profited off a load of energy drinks worth more than $100,000, Blanchard said.

Pugh said the problem of freight fraud is exacerbated by a lack of response from the Federal Motor Carrier Safety Administration. Last year, the agency issued a report about illegal broker activity in the trucking industry. In the report, FMCSA said it lacked the data to determine if the fraud negatively affected safety and that it didn’t have the statutory authority to assess civil penalties for violations.

Sen. Gary Peters, D-Mich., asked Pugh to explain why freight fraud is a safety issue.

Pugh said these crimes can force small motor carriers, who already run on slim profit margins, to delay critical maintenance or repairs. Additionally, it can take safe truckers off the road altogether.

“It can get so bad that they end up having to close their business and sell the truck,” Pugh said. “And the real safety aspect of this is that most small-business owner-operators have 20-some years of experience or more. So you’re taking a well-experienced and well-trained trucker off the highway, who are the people we should be keeping – not losing.”

Possible solutions

Earlier this year, the Household Goods Shipping Consumer Protection Act was introduced in the House and Senate. The bipartisan bill would restore FMCSA’s authority to issue civil penalties against bad actors. The legislation also would require brokers, freight forwarders and carriers to provide a valid business address to FMCSA before acquiring operating authority.

The effort is supported by OOIDA, the American Trucking Associations and the Transportation Intermediaries Association.

“We encourage all senators, especially members of this subcommittee, to support this important legislation,” Pugh said.

OOIDA also is encouraging regulators to issue a final rule to strengthen existing broker transparency regulations. A proposal is open for public comment through March 20.

“As motor carriers are increasingly victimized by freight fraud, unpaid claims, dubious charges, unpaid loads, double-brokered loads and load-phishing schemes, the current lack of transparency has left them little to no means to defend themselves from fraud,” Pugh wrote.

Other suggestions included closing broker bond loopholes, improving and renaming the National Consumer Complaint Database and establishing a new registration system. LL