Staying ahead of the game
Looking at failure rates for new businesses in the trucking industry doesn’t paint the rosiest of pictures.
According to data from the OOIDA Foundation, 25% of new businesses in the transportation and warehousing sector will fail within the first year.
For the lucky ones that make it over that first-year hump, another 35% of those will fail within two years. By year five, about 60% will be forced out of business.
Suffice to say, the margin for error for owner-operators is razor thin. Knowing how to spot and avoid the pitfalls of the industry is crucial to the success of all trucking businesses.
One of the biggest hazards to avoid is broker fraud, which has seen a dramatic spike over the past few years. To help truckers, the OOIDA Foundation has made a series of short videos explaining the dos – and more importantly, the don’ts – of dealing with brokers.
“It’s tight margins,” said Andrew King, a research analyst with the OOIDA Foundation. “You really have to protect yourself, make sure everything’s in order, so that something like this doesn’t put you under.”
The Foundation advises that due to the lack of enforcement when it comes to double-brokering, your best bet is to protect yourself from it ever happening in the first place. While the videos may be brief – about four minutes each – they contain a wealth of information designed to protect carriers from falling victim to broker fraud.
The four-part series includes videos on:
Why to watch
According to the Foundation, “conservative estimates” report double brokering affects $500 million to $700 million worth of freight every year. The first video teaches what double brokering is and why it’s so detrimental to carriers. It also shares the ins and outs of a double-brokering scheme, as well as how to spot one before it becomes an issue.
“Right now, we’re seeing a huge increase in broker fraud. There’s just so many issues, whether using a load board or whatever, there’s so much fraud going on out there,” King said. “We want our members to kind of see what’s going on, see how to protect themselves and just give them information and knowledge.”
The second video in the series focuses on avoiding broker fraud by showing owner-operators what should and shouldn’t be in a broker-carrier agreement. Most importantly, the video teaches what goes into an agreement to protect the carrier.
One reason for the influx in broker fraud, according to the Foundation, is the vast number of brokers – a total that has increased 45% since 2019. While the growth of the broker pool may increase options, it also provides fraudulent brokers a chance to sneak in the door.
The third video teaches how to verify a broker’s authenticity before signing any agreement. Most carriers know to check a broker’s credentials on the federal SAFER website but may not know exactly what to look for. The video contains a helpful step-by-step guide on how to use the site – along with red flags to identify – to thoroughly vet a broker.
To round out the series, the final video focuses on phishing and smishing – two ways that scammers target truckers and gain access to their personal information, including DOT, MC and EIN numbers.
The OOIDA Foundation’s mission is to “fight for the rights of all truckers through research and education.” In addition to ongoing research, the Foundation also provides truckers with educational opportunities like the annual Truck To Success course and with current industry trends through its Monthly Trucking Market Update.
The fight against broker fraud
The methods employed by these fraudsters are ever-changing, but the negative results for carriers remain unchanged. A recent scam used to target and hijack DOT numbers is just one example.
In July, the Federal Motor Carrier Safety Administration began requiring carriers completing a manual MCS-150 update to also submit a copy of their commercial driver’s license in order for the agency to confirm the owner of the DOT number.
This “temporary adjustment” to FMCSA’s procedure opened the door for scammers, with fraudulent brokers from load boards requesting a copy of a carrier’s CDL before accepting the load. Once in hand, the scammer then uses the copy of the CDL to change the MCS-150 information, hijacking the DOT number.
Once they have this control, the scammers book fraudulent loads or double broker under a stolen DOT number – leaving the affected carrier to deal with the liability. King said that keeping up with these tactics is critical to preventing fraud.
“If you’re not paying attention to what’s going on … then you’re a little bit more susceptible to (falling) into this trap,” he added. “And who knows? You might already be being taken advantage of right now, and you didn’t know it.”
The issue of broker fraud within the industry appears to be nearing a tipping point, with cries for reform at the federal level.
In 2020, the Owner-Operator Independent Drivers Association formally petitioned FMCSA to take action in regard to the lack of broker transparency – specifically asking the agency to enforce current regulations requiring brokers to keep records of each transaction with a carrier and that each party to the transaction have a right to view these records.
That petition was granted earlier this year, with the agency targeting June 2023 for proposed rulemaking to address the issue. However, in September the agency walked that back, and it now looks like it could be closer to 2025 before a proposal is unveiled.
On top of the slow creep toward broker transparency, FMCSA also is working on a final rule regarding broker and freight forwarder financial responsibility. The agency expects that to be made available in March 2024. LL