Truck Leasing Task Force questions worth of lease-purchase model
January 25, 2024
The Federal Motor Carrier Safety Administration’s Truck Leasing Task Force held its third meeting on Jan. 18.
At each meeting, the task force has heard examples of predatory lease-purchase agreements that end with the driver losing the truck and owing the motor carrier money.
The Truck Leasing Task Force was created to prevent predatory lease-purchase agreements in the trucking industry. In these agreements, a carrier leases a truck to a driver but still possesses control for the majority of the operation. In some cases, the truck driver owes money to the carrier at the end of a pay period.
These horror stories keep returning at least one task force member to the same question.
Is the lease-purchase model worth saving?
Paul Cullen Jr., a task force member and attorney for Cullen Law Firm, thinks the committee should seriously consider recommending to FMCSA that arrangements where the carrier holds the loan over the driver come to an end.
“I keep on the table, ‘Why we should try to save this model?’ I think it’s an important question for us to analyze,” Cullen said. “Why should it be saved? I think we should keep that on the table for our potential recommendation at the end.”
Proponents for fixing the model rather than removing it focus on maintaining the “entrepreneurial spirit” that gives people a chance to turn hard work into a successful business. However, many of the task force members noted that the success stories are rare and questioned why the model has to involve the motor carrier being the same entity that controls the financing.
“When it comes to lease-purchase programs, why do carriers have to own the debt?” Cullen asked. “Why do the carriers have to have a financial interest and hold the loan? What is different about a carrier and their ability to provide the loan? That’s really the difference here. That’s the root of most of the evil we’re talking about … The immediate answer is because the carrier can control all of the finances of the driver in that relationship and therefore push all of the risk onto the driver.”
Steve Rush, a task force member representing carriers, pondered whether lease-purchase arrangements would be so popular if it meant that the motor carrier was creating a competitor.
“Why are we having these problems, and why is lease-purchasing becoming so prevalent in this industry?” Rush asked. “If you had a business with five trucks, 50 trucks or 500 trucks and you thought you were going to help someone become a competitor of yours, would you do that?”
Steve Viscelli, a task force member who is an economic sociologist at the University of Pennsylvania, said the incentive is clear among the worst carriers.
“The instances we’re most concerned about is often a misclassified employee who is simply being paid less for their labor,” Viscelli said. “There’s no business benefit there. There’s no equity. There’s no profit.”
Joshua Krause, a task force member representing OTR Leasing, offered some concern about what could happen to freight rates if the lease-purchase model ended.
“What happens when we pay drivers for the work they’re doing?” Cullen asked. “I’m not so concerned whether that raises the cost of others for the basic fairness of those people being paid for their work.”
The Truck Leasing Task Force, which was created through a provision in the 2021 Infrastructure Investment and Jobs Act, has now held three meetings. Although not finalized, the task force discussed having its next meeting at the Mid-America Trucking Show this March in Louisville, Ky. LL