Truck Leasing Task Force calls lease-purchase programs ‘irredeemable tools of fraud’

The Truck Leasing Task Force appears to be swinging for the fences as to what should be done to protect truckers from predatory lease-purchase agreements.

According to the task force’s draft report, it will recommend truck lease-purchase agreements – when a motor carrier controls the work, compensation and debts of the driver – be eliminated. The task force has estimated that these agreements end in default 90% or more of the time and that hundreds of thousands of truck drivers have been negatively affected.

The Truck Leasing Task Force unveiled its draft recommendations during a virtual meeting on Tuesday, Dec. 3.

“Congress should ban commercial motor vehicle lease-purchase agreements as irredeemable tools of fraud and driver oppression that threaten a safe national transportation system and diminish the number of truck drivers attracted to and who stay in the trucking industry,” the Truck Leasing Task Force’s draft report stated. “Such a prohibition would be the most efficient and effective remedy to stop the damage created by lease-purchase programs.”

Knowing that the complete elimination of these programs is a big ask, the task force included a backup plan of recommendations on how to protect drivers if truck lease-purchase agreements are allowed to continue.

Those recommendations involve Congressional oversight, action from the Federal Motor Carrier Safety Administration, enforcement from the Department of Labor and Consumer Financial Protection Bureau, mandatory disclosures, training grants and the involvement of state and local law enforcement.

The specific recommendations to Congress include appropriating sufficient funds and authority to FMCSA, the Department of Labor, the Federal Trade Commission and the Consumer Financial Protection Bureau to oversee truck-leasing programs. In addition, the recommendations ask Congress to hold hearings on lease-purchase practices and to enact whistleblower protection legislation for drivers reporting lease-purchase programs.

The list of 14 recommendations for FMCSA includes requiring motor carriers and their affiliates offering lease-purchase programs to keep accurate records of the success or failure of such agreements.

Other recommendations involve the Department of Labor taking enforcement action against motor carriers involved in lease-purchase agreements who misclassify truck drivers as owner-operators, as well as requiring disclosures of what drivers should expect for take-home pay under these agreements.

It is worth noting that the task force’s report does not concern truck-leasing or -financing businesses that are independent of motor carriers and that operate under traditional underwriting and commercial terms. The task force’s recommendations do not pertain to these third-party lease-purchase programs.

The complete report – with all of the recommendations – should be released to the public soon.

How we got here

The Truck Leasing Task Force, which held its first meeting in July 2023, was created by Congress as a way to combat the problem of predatory lease-purchase agreements in the trucking industry.

Although the purported goal of these programs is for the driver to own the truck at the end of the contract, the reality is that truckers rarely make it to the finish line. In addition, there have been reports of drivers owing money to the carrier at the end of a pay period. And despite the programs being referred to as lease-purchase, the drivers accrue no equity in the truck as they make payments.

“If a model fails 90% of the time, it’s designed to fail,” the Consumer Financial Protection Bureau’s Ryan Kelly said at a previous task force meeting. “It’s not an accident. That failure rate is unheard of.”

Throughout the duration of the task force, numerous drivers shared their experiences involving predatory lease-purchase programs.

“I hear horror stories from people all of the time who get caught up in this and lose everything they had,” said Jim Jefferson, a task force member and compliance supervisor for the Owner-Operator Independent Drivers Association.

The task force used its findings over the past year-and-a-half to draft its recommendations.

Presentations

The Tuesday, Dec. 3 meeting included presentations from OOIDA President Todd Spencer and the Consumer Financial Protection Bureau.

Spencer provided a brief history of trucking from the owner-operator perspective and outlined many of the inequities that truck drivers have had to endure over the years.

Among those, of course, are predatory lease-purchase agreements.

“Many people who are attracted to trucking, you believe that as long as I’m willing to work hard, I’m going to be successful,” Spencer said. “But you don’t know what you don’t know, and there always have been people willing to take advantage of those situations.”

Spencer also noted that the financial pressures created by these programs can create highway safety risks by encouraging drivers to log more miles than they should or by delaying necessary truck maintenance.

The Consumer Financial Protection Bureau also provided an update to its analysis of lease-purchase programs in the trucking industry.

Kelly said that the programs are inequitable and that they resemble buy-here-pay-here arrangements at car dealerships.

“It’s a similar business model,” Kelly said. “Loan churning, expensive credit, predicting a default. They get the car back quickly and sell it to someone else. If the consumer doesn’t pay, they never expect to lose the car. When the consumer inevitably defaults, they retrieve the car quickly and do it again to the next person. It appears to us that truck leases are doing the same thing.” LL