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Thread: $100,000 Broker Bond

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    Default $100,000 Broker Bond

    Well, it seems that the senate passed part of the new Transportation bill which has a provision that will require broker bonds to be increased from $10,000 to $100,000. OOIDA has lobbied hard to make this a reality. Frankly, I don't see the need for brokers to have a higher bond. It will limit competition, put many smaller brokers out of business and prohibit new brokers from entering the industry. This is a very, very bad idea. I have gotten some of my best rates from smaller brokers over the years. Bonds usually require those using them to pay 10% of the face value of the bond annually. In order to qualify for the bond you may also need to put up the total amount of the bond in personal or corporate assets. That will be next to impossible for smaller brokers. This bill is likely to have unintended consequences for the industry. Any time you attempt to limit competition it can't be good. One reason OOIDA has been so active in pushing this legislation is due to a number of members not doing their homework on new brokers. Any time that I do business with a new broker I always take the time to check them out. I suspect that those who want this legislation the most are the ones who don't want to take the time to check out those with whom they want to do business. All businesses will suffer some losses if you survive in business long enough. If you are careful about whom you extend credit then you should not have a lot of problems with bad receivables. I am curious as to how others feel about the broker bond being increased.

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    The change is going to have both good and bad affects. Is it going to put some brokerages out of business, yes it will, especially the ones that have a poor credit situation. As you are probably aware GMAN that bond is to allow the other parties to file a claim against the brokerage if there are problems - damage, etc.

    There are checks and balances that all of the parties are supposed to do and if everybody does what they are supposed to do then a lot of these problems would be averted.

    There were a number of brokerages, large and small that wanted it raised to $25,000.

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    The bond has been used for carriers to file against should the broker fail to pay them in a timely manner. This discussion has been going on for the last several years. It may get some of the bad brokers out of the business, but with the increased cost of doing business, you can expect brokers to want to keep more of the rate to offset their higher costs of doing business. With less competition you can expect lower rates. Those who want this legislation really should not be in business. If they took the time to check out brokers before extending them credit then this would be a non issue. The big brokers love this since it will limit their competition.

    There are also other provisions to this legislation. Brokers will be required to renew their authority every 5 years and must complete a certain amount of training. Again, this will increase their cost of doing business. I am not sure what type of training that they expect the brokers to complete, but they seem to prefer to set the rules and then fill in the details later. Just look at the coil certification in Alabama. The test is a joke, but they will find the driver $5,000 and carrier $10,000 if you pick up or deliver coils in the state and don't have the original certificate with you.

    What some have probably also not considered is that carriers and those with their own authority may also need to renew their authority at some point and have some sort of training. We don't have a perfect system, but it is working pretty well without any more government interference.

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    Yeah..... the landscape is covered with the carcasses of those that benefited from government's good intentions. OOIDA is a class act. While they always tout about being for independence, but they sure lobby the snot out of the government to pile on the regulations when it fits their view of an ideal world. Gman has the landscape figured out. This is just going to increase cost to the brokers, who will in turn, take a larger cut out of the rate.

    I continue to be amazed and the number of eunuchs in this country. They can't stand up for themselves and man up. They have to go whimpering with their tales tucked between their legs and have Uncle Sam come to their rescue. Problem is, their problem is never solved, government gets involved in everything, and we all lose in the end.
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    Quote Originally Posted by dle View Post
    The change is going to have both good and bad affects. Is it going to put some brokerages out of business, yes it will, especially the ones that have a poor credit situation. As you are probably aware GMAN that bond is to allow the other parties to file a claim against the brokerage if there are problems - damage, etc.

    There are checks and balances that all of the parties are supposed to do and if everybody does what they are supposed to do then a lot of these problems would be averted.

    There were a number of brokerages, large and small that wanted it raised to $25,000.

    The language of the bill will allow the fmcsa to raise the broker bond every 5 years without approval of congress. On one site it had the brokers having to renew their authority every year, not every 5 years. Some things could still change by the time they have a vote. This is a very slippery slope. There is also a lot of paperwork that every broker must file each year in order to keep their authority active. The increased bond is being pushed by the larger brokerage firms. I can't imagine smaller brokers wanting to have to tie up more money than they are today. I have spoken with a couple of larger brokers concerning this legislation. They are almost giddy with excitement. What they can't do for themselves, they will get the government to do for them with the huge bond increases.

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    Once it becomes law, all of the federal agencies will write all of their regulations based on their interpretations of what the law means. That is when, I'm afraid, will be the time when we find out the true affect on the industry and the economy. Long time ago I heard someone say that for every 5 lines of law, there are 15 lines of regulations = talk about garbage in = garbage out cubed.

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    http://www.independentpropertybrokers.org/

    There is a link on the site to go to sign an online petition. Don't know if it would do any good, but here's a direct link.

    Petition Online

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    I signed the petition. I will also call and/or write my congressman. It is too late to speak with my senators. It would have been nice to have had some advanced notice of this being included in this bill. I have no doubt that the reason they want to keep this quiet is that they want to slip it under the radar and most people won't know anything about it until it is too late. Insanity seems to be taking over this country.

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    With decent financials, a $100k bond with TIA only requires a recoverable cash deposit of $10k and then an annual fee of $1,850 per year. I’m but a lowly single truck carrier and I could easily afford to pay for a $100k bond under those terms.

    I’m not fond of the increased bond requirement. We never pull a load for a new customer without checking their credit on at least two separate services and we’ve never been burned outright. There’s been TONUs that went unpaid, but we’ve always been paid for every load we’ve hauled.

    I’m not so sure that increasing the bond requirement will necessarily translate to lower rates for carriers. Rates are dependent largely on freight volume vs transportation capacity. The brokers can simply pass these small additional costs on to the shippers, who are already way underpaying for freight. What it should definitely do is get rid of the con artists or at least force them to find new techniques.
    "The Breakfast of Champions isn't cereal, it's the competition!" - "Success is how high you bounce when you hit bottom." - "An appeaser is one who feeds a crocodile, hoping it will eat him last."

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    You won't eliminate fraud in this industry by increasing the broker bond. It will lower the number of brokers who can afford to get into the business. Many of the smaller brokers will probably not be able to pay the additional premium. When I checked into getting a surety bond last year I was told that I would need to put up the equivalent value in personal or corporate assets in order to secure the bond. Before that time I didn't think that you needed to put up any sort of collateral. Not every broker will have $100,000 in assets to pledge in order to secure the bond.

    I think that those who really want to bond to be increased to protect them should find a company driving job. There is no reason that any carrier should have a large number of bad receivables. If they do then they probably didn't take the time to check out those whom they have been doing business.

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    Pure and simple, it is just a ploy to knock out the competition, while giving the appearance of being beneficial.
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    You are correct, copperhead, about it being about knocking out the competition. Yet, there are many owner operators who are touting the increased bond. They seem to expect that it will protect them from their lack of business accumen. I don't mean to knock anyone who has lost money by doing business with a bad broker, but if you take the time to check out brokers or shippers before taking a load then you are not very likely to get taken. I have spoken to many who probably have never even thought about checking credit of a broker before doing business with them. I wonder what they think those references are for that they usually include with their contracts? I have really been surprised that OOIDA has become so involved. It is my understanding that they have had a number of members who have lost money on bad brokers. From my standpoint, it isn't the bad brokers but the owner operator who took the load without checking credit who is to blame. No matter how well you check references or credit you can still lose money, but it will be much rarer.

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    It all goes back to what the responsibilities are of all the parties.

    The paying customer is supposed to check the broker to see if they are properly licensed - they have their authorization and bond amount. They should also check on what their credit status is.

    The broker is supposed to check on the customer's credit status. Then once the carrier is found then the broker has to investigate whether or not carrier is properly licensed as well as their credit status.

    The carrier is supposed to check on the broker's authorization and credit status.

    Checking on the credit status involves checking all of the references, checking the other services that provide that information.

    Couple of monkey wrenches - Double Brokering, Checking to see if their authorities are genuine, checking to see if their insurance information is genuine.

    I wonder how many people know how to check to see if a broker's authority is valid? I've seen several brokerages continue to do their brokering even though they have been revoked.

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    You don't need a bond to file against to get your money from a broker who hasn't paid you. You can go through small claims court, get a judgment and then go get your money. The $100,000 bond must be collateralized. That will eliminate many smaller brokers from the industry. That is part of the problem that I have with this bill. Most brokers will pay those with whom they do business. This bill punishes all brokers, regardless of their past history. I wonder how many small brokers have $100,000 sitting around that they can put up for collateral for this type of bond? Underwriters want to see cash that they can go after should the broker default. We all want to be paid for our effort. I can't help but wonder if this could escalate to the point where we only have a handful of mega brokers. As someone else mentioned, the way the bill is written, the bond can be increased to eliminate even more brokers and without congressional approval. I see this as a very dangerous piece of legislation where competitors can get rid of their competition by buying congress. This really does little to further protect mismanaged carriers.

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    GMAN, out of curiousity are you aware of any way to get numbers on how many broker's bonds have had claims against them, how much and how frequently?

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    Quote Originally Posted by dle View Post
    GMAN, out of curiousity are you aware of any way to get numbers on how many broker's bonds have had claims against them, how much and how frequently?

    I don't know if those figures are available. I believe that you can see if an individual broker has had his bond filed against, but I don't know if figures are available for all brokers as a group. OOIDA may have some numbers, but those would probably be for those whom members have filed against. Their trade association might have figures, but they may not be willing to share the numbers with you. My guess would be that there are few who have ever had their bond filed on. I think that if it were widespread then you would have heard much more about it

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    Licensing & Insurance Carrier Search is the website so you can check the legal status of a brokerage.

    I was hoping it would show something about claims, but it doesn't.

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