By many accounts, it appears that the economy is bouncing back. This is good news for the trucking industry. As consumer spending rises, so does the need for trucks to transport the goods needed to replenish inventories. At the same time, this need opens the door for new companies to enter the freight brokerage industry.
Historically, the freight brokerage industry has been one of the top new business ventures because of its low start-up and operating costs. In theory, anyone with experience in the industry and access to a computer can connect shippers with carriers looking for a load. Not everyone has the same motives for starting their business, however.
When a carrier accepts a load from a broker, it’s with the understanding that the broker will pay them upon receipt of the carriers’ bills of lading. There are some brokers, however, who collect payment from the shipper and never pay the carrier. In other instances, the broker is not paid by the shipper at all and ends up filing for bankruptcy. The broker willingly pays the low fees associated with filing for bankruptcy or takes the hit of losing its surety bond instead of fulfilling its financial obligations. In the end, the carrier loses out.
Currently, there are very few requirements or government regulations that exist in the freight brokerage industry. The carrier has few opportunities to pursue any legal action as a way to recover its losses. However, in mid-June, two senators from Main and Minnesota introduced “The Motor Carrier Protection Act” to address this issue.
The bill is designed to protect small trucking companies and owner-operators from fraudulent freight brokers by adding new regulations to the industry. As outlined in a recent article by Transport Topics, if passed, the bill would:
-
Increase the broker surety bond to $100,000 from $10,000 and apply the requirements to freight forwarders.
-
Establish stricter requirements for companies seeking broker or forwarder authority and stiffer penalties for those who violate the regulations.
-
Require that brokers or forwarders renew their authority annually.
-
Clarify that carriers who arrange freight for another carrier for compensation must have the appropriate broker authority and surety bond, in addition to their motor carrier operating authority.
Total Quality Logistics wants our carrier network to know, in general, we support any action that makes it more difficult for criminals to cause harm in our industry. We too have been the victim of many scams in the past and understand how carriers feel. We value the drivers we work with and pledge to continue using the lessons we’ve learned to protect you in the future.
More importantly, we want to reassure our carrier network of TQL’s financial stability and commitment. We already have a $100,000 surety bond. We do not automatically change our payment terms in the event we are not paid by the shipper. And, we have earned the highest credit ratings possible from Dun & Bradstreet, Blue Book, Red Book and the Transportation Intermediaries Association.
Finally, because we realize that you don’t work with TQL on every load you or your drivers haul, we want to remind you of a few important ways you can protect yourself and your company when working with other brokers.
