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FMCSA seeks comment on proposal to eliminate ‘bad-actor’ brokers

Agency now considering opposing petitions from TIA and OOIDA

Petitions by TIA, OOIDA battle at FMCSA. (Photo: Jim Allen/FreightWaves)

Federal regulators are now considering opposing petitions on rulemakings affecting how brokers conduct business in the latest development of a regulatory battle between brokers and independent owner-operators.

The Federal Motor Carrier Safety Administration (FMCSA) will publish on Wednesday a request for comment on the Transportation Intermediaries Association (TIA) petition to overturn a rule that allows parties involved in a brokered transaction to review records related to the transaction — a regulation created as trucking was being deregulated in 1980. TIA is also asking FMCSA to close a “dangerous loophole” that it claims allows unlicensed brokers to operate.

The revisions, according to TIA, “will improve safety for all entities within the transportation marketplace by removing bad actors from the marketplace and eliminating an administrative burden from the agency to enforce outdated and unnecessary regulations.”

TIA’s request contrasts with petitions filed earlier this year from the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC) asking that FMCSA propose a rulemaking that offers more transparency and strengthens the rule in question – 49 CFR 371.3(c) – as opposed to eliminating it.

“Prior to this becoming a recent hot-button issue, with truck protests outside the White House during the COVID-19 pandemic, there has not been one single complaint made to the Department of Transportation’s National Consumer Complaint Database for a violation of a broker not disclosing their commission” under the regulation, TIA stated in its petition request.

“Moreover, motor carrier transportation on the spot market is one of the most transparent marketplaces in the world. Load boards, the internet and rate quotes in person-to-person communications within the industry provide the rate transparency that was intended by 49 CFR 371.3 when commissions paid by carriers to brokers were common. Motor carriers have sufficient access to current market rates without inspecting brokers’ shipment records to find out what the brokers’ gross margins are on a load-by-load basis.”

TIA wants FMCSA to also provide guidance on what constitutes a “dispatch service,” which the association asserts is essentially unlicensed brokers.

“The dispatch service is paid a commission by the motor carrier for their services, not the model that generally applies to brokers, where the shipper pays the broker for their service and the broker pays the motor carrier,” TIA stated. “We believe there are many illegal dispatch services that are operating illegally as unlicensed brokers. FMCSA should prohibit these companies from offering such a service without a license.”

A 60-day comment period will begin after the petition is posted in the Federal Register.

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  1. Tom Crowley

    Broker Transparency…. It about MORE than just the haul rate!
    It’s about the detention time that most carriers don’t get compensated for. It’s about the claims that a carrier is forced to pay without any real proof of claim. It’s about the penalty and fines that a broker claims the carrier incurred for being late or, in some cases, early for an appointment at shippers or receivers.
    How many times has a carrier reported to a broker that they were detained for an extended period of time and the broker says something to the effect of…? “I will see what I can get for you” or “This customer doesn’t pay for detention.” How do you really know?
    The claims issues are a huge factor that can quite literally make or break a small carrier. Yet many broker carrier agreements disallow the claims process detailed in Part 370 of the FMCSR and contractually require that a carrier must take the word of the broker on any alleged overage, short & damaged (OS&D) claims. Without the ability to investigate the claim or mitigate the damages a carrier is at the mercy of the brokerage and the shipper. Many broker carrier contracts clearly state that the carrier is not to contact the broker’s customer for any reason. The contracts also say that the carrier agrees to accept the broker’s word that the shipper or receiver added a penalty, a late fee, or reduced the haul rate. The carrier has no recourse, absolutely none. Add in the cross-collateralization clause and the carrier can find themselves unable to collect the monies generated from past loads they carried for that broker that hasn’t been paid yet. This brings up major issues between a carrier and its factoring company that most likely has already advanced the carrier a majority of the funds.
    This is all part of the broker transparency issue, and the rate is just the tip of the iceberg. Carriers need to speak up!
    A contract should be negotiated. These contracts are take it or leave it. There are no negotiations. The contracts are heavily slanted in the broker’s favor and place all the liability on the carrier. The carrier’s cargo insurance won’t even cover all the excessive liability the carrier contractually assumes.
    Many, if not most small carriers don’t read and/or understand the contractual obligations they are taking on.
    When you consider that the FED’s haven’t enforced most of the regulations governing the brokers or the claims process, it has allowed the brokers to morph the contracts between the carriers and the brokers into forced agreements that leave the carriers with massive liabilities all without the ability to limit their risk. Under the ICC’s required tariffs a carrier could reduce their liability and offer a reduced rate, but currently the carrier must assume all the liability while the brokers reap all the benefits leaving the carriers at a massive disadvantage.
    Many of today’s brokers use the carriers as an expendable commodity to be taken advantage of and tossed away, knowing that there are new carriers entering the market place every day for the brokers to exploit and then toss away.

    The TIA has a “Code of Ethics” they claim all TIA members are to adhere too posted on their website.

    I must question the ethics of a entity that is seeking to deny and/or remove the transparency that would keep every party honest. Take notice the “code” calls for… To conduct business professionally, with truth, fairness, and responsibility to all customers, suppliers, associations, and TIA.

    Abridged copy, full copy attached.

    TIA Code of Ethics
    As a condition of membership, all TIA members are required to sign and adhere to the TIA Code of Ethics.
    1. A member shall deal fairly with customers, colleagues, fellow members, and the general
    2. A member shall conduct his or her professional life in accordance with the interests of TIA,
    the third party transportation services industry, and the general transportation public.
    3. A member shall adhere to honesty and integrity and to generally accepted principles of
    professional conduct.
    4. A member shall not engage in any practice, which tends to corrupt, the integrity of TIA, the
    third party transportation services industry or process of government.
    5. A member shall make proper, just, and prompt payment for all contractual obligations.
    6. A member shall abide by all lawful agreements to which he or she is a party, including all
    agreements with shippers, carriers and other transportation intermediaries.
    7. A member shall compete vigorously – but not unfairly – with other members.
    8. If a member has evidence that another member has been guilty of unethical, illegal or unfair
    practices, including those in violation of this Code, the member shall present information
    promptly to TIA.

  2. Douglas Riesberg

    If the load doesn’t cover your costs and provide a margin, don’t haul it. Know your costs, and you will survive. It’s none of your business what the broker is getting paid by the actual customer. You have no idea what costs were involved in securing the business and you don’t have any knowledge about the various value added services the broker may be providing that ultimately drives the pricing decision to make the deal work for all parties involved. If you want the business without the 3rd party involved, go get it yourself. If you don’t like the rate because it doesn’t cover your costs, understand your costs better and make better rate negotiating decisions. Also, avoid agreeing to percentage-based pay deals with brokers. You won’t need to worry about the rate to the customer this way. Last, it isn’t hard to identify brokers who have a history of treating carriers unfairly before you accept a load. There are plenty of resources readily available. Don’t do business with them.

    There would not be a huge direct cost to providing rate information to the carriers. That argument holds absolutely no water. Brokers keep this information on every load anyway. With a little simple programming, most brokers would be able to provide the information if it was required. But that isn’t the point. They shouldn’t be forced to disclose their margins on any load, ever. No business gives away internal margin or customer information. Shippers don’t share this. Carrier’s don’t share this either. Why should brokers? All brokers have loads which provide good margins and some loads lose money. If brokers were forced to share this information with carriers, it would not add much to the cost of transacting business. However, brokers would have unreasonable exposure when carriers target their higher margin business. Free customer lists with margin information; you know some carriers would try to go to the shippers directly. Treat carriers better when they experience unforeseen extra costs. Do your job and have the conversation with the shipper to get extra money for the carrier when it is justified. Treating carriers poorly is what is driving some of this nonsense.

    If you think it is in your best interest to go along with the transparency logic, think again. Many brokers will leave the market if their ability to make money is diminished. It simply wouldn’t be worth the time and effort. They provide value otherwise they wouldn’t exist. Do you really want less service providers and reduced access to capacity options in this market? With rate information made available for carriers to review, you can bet your broker will have a much more difficult time getting competitive rates for you. Managing costs in this environment is hard enough. Showing your cards before future negotiations won’t make the outcome better. The pandemic placed extreme pressure on shippers to secure rate decreases to levels that were beyond unreasonable. You know who you are. Now you wonder why some brokers and carriers don’t want to allocate resources to your business. The ramifications of extreme rate cutting were quickly realized and it caused this transparency argument to gain traction. Yes, there were some brokers who decided to expand margin by paying carriers less when they saw the opportunity even though the rate to the shipper didn’t change. However, the vast majority carrier pay reductions started with the shipper, not the broker.

    Bottom line, we all need to be honest with ourselves. This isn’t about transparency or the costs associated with providing transparency. It’s about making better decisions and minding our own business. There is a mountain of evidence that proves more government involvement to make things fair will not get a desired result for anybody.

  3. Trevor Lowder

    It’s interesting to hear all of this talk about a government regulated profit cap for private businesses…As soon as anyone proposed that for a carrier the sky would fall. You either support Capitalism and adapt, or you do not (be sure to post it on your FB page). Welcome to 2020’s “Good for THEE but not for ME” crowd. Begging the government to take opportunity away, huh? Interesting. As a carrier, we have a bottom line. We adapt and roll on. I’m sure if Uncle Sam waved a magic wand and erased all of the brokers, you’d become a millionaire overnight, right? How long until the biggest carriers close you out due to performance issues and no shows? It can’t happen to you? Instead of some opportunity from brokers, we would statistically get zero opportunity when all of the largest carriers monopolize the shipping opportunities. As far as dispatching services go, they are nothing like brokers. Small trucking companies can hire these folks to bridge the gap in technology handicaps and communication while out on the road. Your outrage for “Dispatching Services” is most likely a lack of understanding. As a trucking company you reserve the right to hire anyone, legally, to help you manage your business. Hundreds of thousands of truckers choose to “just be truckers” and don’t enjoy sweating the details. You would deny them, help? Why? My grandpa always said to keep my fool mouth shut and think things through. It’s good advice. We hate the bad brokers and love the good ones. We support American Entrepreneurship. People are people. Be the change you seek in the world, don’t beg the government to be the Moral Authority for this or any other industry.

  4. David Adams

    I’d like to know how we have access to know what brokers gross charge to move a load is , they post low ball prices and then pay more when it doesn’t move , and if several brokers have the same loads prices will all be different .
    Like everything else gov run , fmsca is full of BS .
    Brokers suck

Comments are closed.

John Gallagher

Based in Washington, D.C., John specializes in regulation and legislation affecting all sectors of freight transportation. He has covered rail, trucking and maritime issues since 1993 for a variety of publications based in the U.S. and the U.K. John began business reporting in 1993 at Broadcasting & Cable Magazine. He graduated from Florida State University majoring in English and business.