I have long been a proponent of the $10,000 surety bond limit for regulated transportation brokers. My conviction was that the market-place could and would police itself. Market-place economics with less government involvement. That was my motto!
Well, I was dead wrong. My friends at the Owner Operators Independent Drivers Association have long argued for a much higher surety bond, $100,000 plus. OOIDA believes that a brokerage company should have at minimum the same investment as the start-up cost of an owner-operator. I agree with them now and here is my thinking:
The transportation industry is not totally deregulated. Carriers and brokers need authority issued by the FMCSA in order to operate. Authority is easy to get. But unfortunately ethics, business sense and working capital are not part of the requirements.
As a result we are getting a number of transportation brokers who simply should not be in the industry. To say the least many are undercapitalized. As a result, they are unable to pay freight bills efficiently so that motor carriers can cover their weekly fuel, payroll and maintenance expense. Carriers should not have to float transportation brokers. It should be the other way around. Brokers don’t transport freight. Motor carriers do. For the sake of commerce, the rules need to be slanted for the survival of the motor carrier.
A higher surety bond would require a minimum of fiscal responsibility for all transportation brokers. It should be $100,000 and indexed to go up at least 5% per year.
Let’s take it one step further. Transportation brokers should be required to pay interstate freight bills in 21 days or less. Remember, most carriers’ expenses are payable within 7 days.
It’s time to beef-up the minimum federal requirements for transportation brokers.
Current requirements only serve to protect the crooked operators, while the legitimate brokers are left holding the bag. The laws regarding this issue are silly, outdated and irresponsible. Let’s change them so they will actually do some good. Or let’s get government out of the picture. Either way, we will know where we stand.
–Bill Ryan, President of RTS Credit
January 9, 2008 at 4:55 pm |
I can not agree with you more. The minimum for the surety bond for the Transportation brokers should be $100,000 or MORE, because even with that figure it would be a lot of unpaid freight bills.
I agree with you, Transportation brokers should be required to pay interstate freight bills in 21 days or less, most of them use the services of a factoring company for their receivables and they still use the Trucking companies as banks.
Good article!
January 24, 2008 at 11:38 am |
My firm handles account receivables for many motor carriers. Many of our Clients are owed a lot more than the $10K bond or $10k trust fund amount. We are contacted all the time by carriers that even a $100k bond or trust wouldn’t be able to cover the broker’s debts.
What’s even worse, many so called brokers never obtain a registration with the FMCSA or even have a bond or trust fund account. They steal the shipping fees and the carrier never gets paid.
Articles like yours are helpful to the industry.
March 25, 2008 at 9:20 am |
Great article, alot of crooks in the trucking industry-and it’s not the o/o’s it’s the people paying them(or not) that’s crooked
February 23, 2009 at 7:57 am |
I feel the broker should pay in the 21 days, the bond should be at least $100,000. They affect so many people its not funny. They should not be allowed to move more freight (dollar wise)then their bond will cover either. They should also have to cover collection fees. They are the reason for the collections in the first place. The carrier shouldn’t have to eat it all, they’ve done what they are suppose to do. The carrier has money in the fuel and paying the driver. Why should the carrier have to be the only one on the loosing end!
April 7, 2009 at 3:06 pm |
I agree the Surety bond should be set at a higher amount but this is a hard to place bond to begin with. There is only a few companies out there that are willing to write them.
If the surety bond amount is raised it would probably put out 50% of the mom and pop companies