Senate bill takes aim at alleged abuses by freight brokers

Measure would tighten government oversight over intermediaries, raise penalties for regulatory violations.

By Mark B. Solomon

Legislation was introduced in the Senate on June 15 to crack down on allegedly fraudulent behavior by truck brokers and other intermediaries against smaller trucking concerns, notably one-person owner-operators.

The bill, the Motor Carrier Protection Act of 2010, was introduced by Sens. Olympia J. Snowe (R-Maine) and Amy Klobuchar (D-Minn.). The legislation would make it more expensive for brokers, freight forwarders, and other intermediaries to operate, and would deal harshly with third-parties engaging in illegal practices.

The bill increases the bond placed by brokers to $100,000 from $10,000 and for the first time, imposes bonding requirements on freight forwarders. The legislation also sets stricter government requirements for entities seeking broker and forwarder authority, and levies tough penalties—such as unlimited liability for freight charges—for such violations as conducting brokerage activities without a bond or license.

In addition, brokers and forwarders would be required to renew their operating authority on an annual basis and would lose their authority if they failed to do so. The bill also sets strict regulations on bond companies and the way bonds are administered. It also requires truckers to have a brokers or forwarders license or bond before they can tender freight to another carrier for compensation. In a statement, the senators said the bill provides smaller trucking firms with the tools to retaliate against corrupt practices by brokers. Currently, these companies have little or no legal recourse to fraudulent actions by intermediaries, the lawmakers said.

"All too often, motor vehicle operators fall victim to the deceitful behavior of fly-by-night brokers and freight forwarders who engage in preposterous criminal activities, such as financial fraud," said Sen. Snowe, a member of the Subcommittee on Surface Transportation and Merchant Marine Infrastructure, Safety, and Security, which has jurisdiction over the legislation.

"Many truckers are small, independent businesses that fraudulent freight forwarders and corrupt brokers too often easily prey upon," said Sen. Klobuchar. "This legislation ensures trucking operators have the tools and protections necessary to prevent fraud, and also modernizes and strengthens federal oversight of this industry."

Perhaps the biggest problem for smaller truckers is not getting paid in a timely manner for freight they receive from brokers, or in some cases not being paid at all. Over the last five years, about one-quarter of all owner-operators have had trouble collecting payments from brokers or other intermediaries, according to a survey by the Owner-Operator Independent Drivers Association (OOIDA), the trade group representing owner-operators.

"People grossly misrepresent [themselves], and sometimes they are selling nothing but hot air. We all pay a price for that. Truckers pay up front, and it has cost too many their livelihoods and their businesses," said Todd Spencer, executive vice president of OOIDA.

Officials of the Transportation Intermediaries Association, which represents many of the nation's intermediaries, were unavailable for comment at press time.

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