A broker battle

The COVID-19 pandemic has placed a spotlight on problems that have plagued the trucking industry for decades. One of the main problems that has risen to the surface is the lack of transaction transparency between brokers and motor carriers.

Per federal regulation 49 CFR 371.3, brokers must keep records of transactions with motor carriers. One subsection of that regulation gives each party to the transaction, including the carriers, the right to review the record. This provision allows truckers to see exactly what their cut is of the full rate that the shipper paid the broker.

OOIDA has documented that brokers are skirting these transparency regulations. In some cases, contracts with brokers waive the requirements set forth in 371.3 regulations. During the peak of the pandemic, truckers saw historically low freight rates.

Trucking industry gets president’s attention

Beginning in May, truckers rallied together to protest outside the White House. Protesters demanded transparency with broker transactions.

On May 1, OOIDA sent a bulletin to its more than 160,000 members, advising them to be leery of unscrupulous brokers, to avoid cheap freight, and to file a complaint regarding any issues with brokers.

A couple of days later, the protests caught the attention of President Donald Trump.

“I’m with the TRUCKERS all the way,” Trump posted on Twitter on May 3. “Thanks for the meeting at the White House with my representatives from the Administration. It is all going to work out well!”

OOIDA pushed forward in the fight for transparency by sending a letter to members of Congress on May 6. The letter addressed concerns from truckers regarding “feeble rates” and the “utter lack of transparency between brokers and motor carriers.”

OOIDA subsequently sent a Call to Action to its members regarding transparency with brokers. In its Call to Action, OOIDA reminded truckers that brokers are required by federal regulations to disclose documents to carriers, including the rated freight bill. OOIDA encouraged truckers to acquire the information to which they are entitled. The Association has drafted a letter drivers can fill out and use to ask a broker for those documents.

Brokers fight back

After taking blow after blow, TIA finally made an attempt to throw a jab. In mid-May, TIA warned its members of an increase in inquiries to review information.

TIA told its members in a letter how to respond to inquiries from owner-operators and small carriers regarding CFR 371.3. The broker association told its members to “be very courteous to the carriers” when explaining their policies. Nevertheless, the association instructed members to essentially threaten inquiring carriers with fewer loads.

“Please have your sales and other representatives be very courteous to the carriers, take time to explain that, if they do this, that you will be unable to load them with any shipper freight requiring confidentiality, and that represents ‘X’ percent of your available loads,” the letter states.

TIA also reached out to Senate Commerce and House Transportation Committee leaders. In a letter to committee leaders, TIA stated that “many (truckers) don’t have the time to understand market conditions,” a remark OOIDA considers condescending. OOIDA promptly dispelled any misinformation in a message sent to every Congress members’ office.

“This assertion is incredibly disrespectful to the men and women who operate small trucking businesses, and its inclusion in correspondence to congressional offices is extraordinarily arrogant,” Collin Long, OOIDA’s director of government affairs, states in the email. “The fact is, many truckers have focused on this issue precisely because they understand market conditions well enough to know that some brokers are taking advantage of them.”

Additionally, TIA attacked OOIDA’s efforts by misrepresenting its claims regarding broker transparency. TIA told lawmakers that OOIDA is “asking Congress to intervene and require brokers to make their margins public on every invoice.”

However, OOIDA never stated anything regarding making margins public. Rather, the Association wants to make sure there is compliance within the transparency regulations between brokers and carriers.

TIA also claims that its members can inform truckers of market conditions by pointing to rates on load boards and digital apps. However, OOIDA points out that brokers control the information on rates available on those platforms. OOIDA states that load boards do not replace the transparency provided within federal regulations.

OOIDA continued by referring to the letter TIA sent its members.

“Many brokers have made it clear they have no intention of fully complying with 371.3 anyway, which is why legislative and regulatory action is necessary,” Long said in the email.

OOIDA petitions to U.S. DOT

Finished with the squabble, OOIDA got the ball rolling for actual and meaningful changes. On May 19, the Association sent a petition to Transportation Secretary Elaine Chao and Jim Mullen, the Federal Motor Carrier Safety Administration acting administrator, regarding transparency with transactions between brokers and owner-operators. The petition proposes the following:

• Require brokers to automatically provide an electronic copy of each transaction record within 48 hours after the contractual service has been completed.
• Explicitly prohibit brokers from including any provision that requires a carrier to waive their rights to access the transaction records.

Regarding enforcement, OOIDA is also requesting the following to be added to the regulations:

(a) A broker shall keep a record of each transaction. For purposes of this section, brokers may keep master lists of consignors and the address and registration number of the carrier, rather than repeating this information for each transaction. The record shall show:

1. The name and address of the consignor;
2. The name, address, and registration number of the originating motor carrier;
3. The bill of lading or freight bill number;
4. The amount of compensation received by the broker for the brokerage service performed and the name of the payer;
5. A description of any nonbrokerage service performed in connection with each shipment or other activity, the amount of compensation received for the service, and the name of the payer; and
6. The amount of any freight charges collected by the broker and the date of payment to the carrier.

(b) Brokers shall keep the records required by this section for a period of three years.

(c) Each party to a brokered transaction has the right to review the record of the transaction required to be kept by these rules.

Furthermore, OOIDA wants FMCSA to levy and enforce a structured fine system for noncompliant brokers. Additionally, FMCSA must suspend or revoke the authority of unscrupulous brokers that consistently break the rules.

“OOIDA has long pushed for greater transparency in transactions with brokers,” the petition stated. “With rates on the decline, many truckers are concerned they’re the only ones feeling the pain – or at least feeling a disproportionate share of the pain. This will not change until federal regulators enhance and enforce the broker transparency regulations listed in 49 CFR §371.3. OOIDA strongly encourages FMCSA to promulgate and enforce measures that will prevent brokers from continuing to circumvent these requirements.”

Proposed changes will also prevent brokers from retaliating against carriers that request information.

Coalition applies for broker bond exemption

Amid OOIDA’s push for greater transparency, the Small Business in Transportation Coalition filed a request for exemption from the $75,000 broker bond requirement. On June 3, OOIDA submitted official comments in opposition to the application.

The group is seeking exemption from a regulation that requires all brokers and freight forwarders subject to FMCSA’s jurisdiction to maintain $75,000 in financial security. Established under the Moving Ahead for Progress in the 21st Century Act, that security must be in the form of a surety bond or trust fund.

In its comments, OOIDA points out that the broker bond provisions were enacted to help eliminate a system of loopholes and skirting regulations “that stiffs truckers out of what they are rightfully owed.”

Granting exemptions from the $75,000 broker bond requirement will undermine the intent authorized in MAP-21, OOIDA said.

“Any exemptions from the $75,000 bond requirement, codified in 49 U.S.C. 13906(b) and (c), would further encourage a longstanding practice of defrauding professional truck drivers and motor carriers,” OOIDA President and CEO Todd Spencer said in comments. “Under this practice, when legitimate claims aggregating in excess of the bond amount have been presented to the surety, the bond is still good and the broker can stay in business as long as the surety has not yet paid a single claim. In too many instances, a broker will let multiple claims on the $75,000 bond accrue, forcing truckers to settle for a fraction of what they should be paid. In other words, a broker can continue to contract with motor carriers even if they have no intention of paying them.”

However, the Small Business Transportation Coalition appears to be all by itself in the exemption request. Nearly every comment submitted opposed the request, including opposition from the Transportation Intermediaries Association. In fact, the bond requirement increase to $75,000 was a joint effort between TIA and OOIDA, a moment when the two organizations came together for a common goal.

“TIA and OOIDA recognized that the members of both organizations needed each other to survive and grow successful family businesses,” TIA stated in its comments. “The American Trucking Associations shared many of the same concerns about fraud in the marketplace as TIA and OOIDA, and the three leading organizations began working out compromises, which were later presented to Congress. One of those compromises was an increase in the financial responsibility requirements for brokers and forwarders to $75,000. Congress carefully considered the position of these three groups when it passed MAP-21.”

As of press time, FMCSA had not made a decision on the exemption application. LL