FMCSA to crack down on brokers that don’t pay

The U.S. Federal Motor Carrier Safety Administration (FMCSA) will soon suspend the operating authorities of brokers that fail or refuse to pay carriers for legitimate services, or those who let available financial security fall below US$75,000.

Details of the rules emerged Thursday in a final rule titled Broker and Freight Forwarder Financial Responsibility, effective Jan. 16.

“Carriers will have more information to avoid contracting with unscrupulous brokers and could also receive payment for work completed, in a more timely manner, without use of interpleader proceedings,” the regulator said of the changes.

“The interpleader process can be costly and time-consuming for motor carriers, and generally results in motor carrier claims being paid pro rata, depending on the number of claims against the broker bond or trust fund.”

While most brokers uphold contracts, unscrupulous businesses “can create unnecessary financial hardship for unsuspecting motor carriers,” FMCSA said.

FMCSA will also limit the types of assets that can be maintained in broker or freight forwarder trusts to cash, irrevocable letters of credit issued by a federally insured depository institution, and treasury bonds. Assets in such trusts will be used in claims against those who fail to pay for services.

If available financial security falls below $75,000 and is not replenished within seven calendar days, broker and freight forwarder operating authority registrations will be immediately suspended. This “will help prevent those brokers and forwarders from accruing additional claims over time,” FMCSA said.

The administration is also clarifying when broker of freight forwarder is in financial failure or insolvency, adding civil penalties for surety and trust fund violations, and establishing a process to suspend sureties and trusts when regulations are violated.