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  1. #1
    Light Load Member TX_Proud's Avatar
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    Filing a claim against a surety bond

    Looking for some experience and advice if you don't mind. We are a small fleet operator with 5 trucks. Within the past few days, information came to us from our factoring company that a broker we used last month has indicated "they are reorganizing management and cannot provide payment or payment information at this time." (red flag #1)

    I have called the surety company to determine if they have had any claims filed; they would not share that information with me. However, they did give me the name and phone number of the person to contact to file a claim. Of interest was that when I mentioned the name of the broker, she replied that she had just been talking with them yesterday about changes to their bond. NOTE: The actual surety company is NOT the same one provided with the contract we signed; that one was liquidated by the State of PA in 2001. (red flag #2)

    The factoring company has other clients with outstanding receivables for this broker worth $45K+; no payment activity in the last 45 days. (red flag #3)

    OK, so not trying to be paranoid here but we have never encountered this situation before. My instincts (uh...3 red flags...DUH!) tell me something doesn't smell right.

    As I see it, my options are as follows:
    1. Call the broker to see what they have to offer, cross my fingers, and prepare to buy back this invoice from the factoring company ($2,200).
    2. Call the shipper, explain the situation, provide them a copy of the rate agreement, notice from the factoring company, and ask that they pay us directly. BTW, nothing in the contract states I cannot seek compensation from their customers.
    3. Wait until the invoice is 30 days (per contract), then file with the surety company. Since that is still 20 days out and due to the volume of outstanding invoices this broker owes, waiting puts me at the bottom of the pile for filing a claim. (IMHO, I view the contract suspect due to the fact they provided me a copy of a surety bond that has obviously not been in effect for 5 years and therefore, I don't feel obligated to abide by any other terms of the contract).

    I appreciate your input on how you have handled similar situations.


  2. #2
    Trucker Forum STAFF Brickman's Avatar
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    I thought the whole reason behind using a factoring company was to avoid getting jacked like this. I guess not. Another reason I would never use one.

    Best of luck!

  3. #3
    Medium Load Member NightWind's Avatar
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    Quote Originally Posted by TX_Proud View Post
    Looking for some experience and advice if you don't mind. We are a small fleet operator with 5 trucks. Within the past few days, information came to us from our factoring company that a broker we used last month has indicated "they are reorganizing management and cannot provide payment or payment information at this time." (red flag #1)

    I have called the surety company to determine if they have had any claims filed; they would not share that information with me. However, they did give me the name and phone number of the person to contact to file a claim. Of interest was that when I mentioned the name of the broker, she replied that she had just been talking with them yesterday about changes to their bond. NOTE: The actual surety company is NOT the same one provided with the contract we signed; that one was liquidated by the State of PA in 2001. (red flag #2)

    The factoring company has other clients with outstanding receivables for this broker worth $45K+; no payment activity in the last 45 days. (red flag #3)

    OK, so not trying to be paranoid here but we have never encountered this situation before. My instincts (uh...3 red flags...DUH!) tell me something doesn't smell right.

    As I see it, my options are as follows:
    1. Call the broker to see what they have to offer, cross my fingers, and prepare to buy back this invoice from the factoring company ($2,200).
    2. Call the shipper, explain the situation, provide them a copy of the rate agreement, notice from the factoring company, and ask that they pay us directly. BTW, nothing in the contract states I cannot seek compensation from their customers.
    3. Wait until the invoice is 30 days (per contract), then file with the surety company. Since that is still 20 days out and due to the volume of outstanding invoices this broker owes, waiting puts me at the bottom of the pile for filing a claim. (IMHO, I view the contract suspect due to the fact they provided me a copy of a surety bond that has obviously not been in effect for 5 years and therefore, I don't feel obligated to abide by any other terms of the contract).

    I appreciate your input on how you have handled similar situations.
    Well I don't know the terms of your contract with the factoring company and I have had little dealings with them. I would dare to say that the factoring company should have checked the companies credit worthiness out before agreeing to factor the POD. I would do everything possible to assist in the collection of the funds by working with the factoring company.I would get my copy of the contract between your company and the factoring company out, rand RUN to my lawyer's office and have the firm read it and take his advice. I'd not hesitate on filing on the bond ASAP. I had a situation with a broker a few years back that told me the same thing and gave me some sob story about the shipper filing bankruptcy and not paying them hence they couldn't pay me. I contacted the bonding company, yes I ran all over the place to get the right address and information because 3 days after we pulled the load they changed bonding companies. I filed on the bond VIA Fed Ex.I would also file a complaint with the BBB in their state, the FMC and notify the shipper so that perhaps they won't pay the broker. Because by law the Shipper HAS no recourse but To pay you or the factoring company for the load, That is the law. They might appreciate the fact that you let them know so they don't pay for the load 2 twice. Providing that they were not the reason that the broker couldn't pay.

  4. #4
    Medium Load Member NightWind's Avatar
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    Quote Originally Posted by Camarogenius View Post
    Fist thing- Look at the shipping papers. If they say "pre-paid" then the shipper is paying for the load. If they say "collesct" then the reciever is paying for the load.
    Just to let you know that sometimes that is not true, most of the time it is but I have run into situations where there was a 3rd party involved and THEY were actually paying the freight bill. This happens some times with "Blind or double Blind" shipments. A major headache.

  5. #5
    Bobtail Member RoadRocket's Avatar
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    Who is the broker????????? i wanna make sure i dont haul a load for them!!

  6. #6
    Road Train Member
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    Quote Originally Posted by TX_Proud View Post
    Looking for some experience and advice if you don't mind. We are a small fleet operator with 5 trucks. Within the past few days, information came to us from our factoring company that a broker we used last month has indicated "they are reorganizing management and cannot provide payment or payment information at this time." (red flag #1)
    Has the factoring company paid you? If so, the burden is upon themselves to collect. It's not out of the question for you to assist in providing all that you have in regard to information submitted to you on them, but that's supposed to be all that you are supposed to do.

    I have called the surety company to determine if they have had any claims filed; they would not share that information with me. However, they did give me the name and phone number of the person to contact to file a claim. Of interest was that when I mentioned the name of the broker, she replied that she had just been talking with them yesterday about changes to their bond. NOTE: The actual surety company is NOT the same one provided with the contract we signed; that one was liquidated by the State of PA in 2001. (red flag #2)
    Not only is that a red flag, it's fraud. It's a legal point to go after them in court. However, it also is apparent that you did not check this broker out prior to doing business with them to verify their surety bond and credit standing.

    The factoring company has other clients with outstanding receivables for this broker worth $45K+; no payment activity in the last 45 days. (red flag #3)
    My bet is that there is a history prior to the previous 45 days for slow payments. A quick background check or a credit inquiry through Dun and Bradstreet might have precluded you taking that load.

    OK, so not trying to be paranoid here but we have never encountered this situation before. My instincts (uh...3 red flags...DUH!) tell me something doesn't smell right.
    I'd be willing to bet that a bankruptcy filing is in the works.

    As I see it, my options are as follows:
    1. Call the broker to see what they have to offer, cross my fingers, and prepare to buy back this invoice from the factoring company ($2,200).
    I'd absolutely be in touch with the broker, but from what you offer, I'd not hold my breath very long.

    I'm at the same time not very impressed with the factoring company that you use either. One of the services that they should provide, is to offer a screening of brokers and customers, so that this issue is not a problem.

    2. Call the shipper, explain the situation, provide them a copy of the rate agreement, notice from the factoring company, and ask that they pay us directly. BTW, nothing in the contract states I cannot seek compensation from their customers.
    I'd never worry about contractual language about contacting shippers. You hauled the load, and you deserve payment. You SHOULD contact the shipper, or the party involved that is to pay the broker if this is someone other than the shipper, and strong arm them for payment.

    Chances are, the shipper may have already paid the broker, which will make them less likely to assist you in your receiving payment, but I would make it clear to them that you fully intend on bringing them into a lawsuit for payment if the broker is not encouraged to cough up your share and quick.

    3. Wait until the invoice is 30 days (per contract), then file with the surety company. Since that is still 20 days out and due to the volume of outstanding invoices this broker owes, waiting puts me at the bottom of the pile for filing a claim.
    Wait the thirty days, and then turn it over to an Attorney. Quite honestly, I cannot understand why the factoring company is giving you grief this early in the game. Most will not get nervous until things go 60 days. In my opinion, this factoring company has royally screwed up, and has not done it's job in protecting it's customers.

    I used a factoring company near me during lean periods, and the one thing that I always did when dealing with new customers or a new broker, is to clear them through the factoring company prior to doing business with them. I also ran my own credit checks as well, just to make sure that nothing was missed.

    (IMHO, I view the contract suspect due to the fact they provided me a copy of a surety bond that has obviously not been in effect for 5 years and therefore, I don't feel obligated to abide by any other terms of the contract)
    This is more common than you would think. In a court of law, this would be considered fraud, but then I always requested full information on any company that I did business with, and checked them out carefully to verify that nothing is being falsified.

    I appreciate your input on how you have handled similar situations.
    Pray they don't bankrupt, but the writing is on the wall in my opinion. In the meantime, burn up those phone lines to the broker AND the party that contracted the freight to the broker. By Federal law, you are entitled to this information as to whom contracted the load to the broker for movement.

    If they did have a surety bond in place at the time you contracted this load, and after 30 days has reached it's mark, by all means file against that bond. This puts your claim on record, even if they go belly up. If you do this before others that are also holding invoices against this broker, you go in line as those claims are filed.

    Take this as a lesson in that you have to know who you are doing business with, and NEVER take people at their word. Verify the credit worthiness of all parties to a transaction, both before you begin doing business and routinely while doing business with them.

    It doesn't take much to set oneself up as a broker, but if that person is not honest or mishandles money, they can hurt a great deal of people in short order.

    I'd also consider seeking a better factoring agent. From what I am gathering, the one you have is not very good.

  7. #7
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    Quote Originally Posted by Camarogenius View Post
    Fist thing- Look at the shipping papers. If they say "pre-paid" then the shipper is paying for the load. If they say "collesct" then the reciever is paying for the load.
    While that is generally true, this is not a dependable method of determining the party that contracted the load to the broker. You'd be surprised at the number of bills-of-lading that omit to indicate this on them.

    Whenever I accepted a brokered load, I required the broker to submit to me, ALL information on all parties involved in a transaction, and this was supplied to me in the confirmation that they faxed to me. Any business that would not agree to provide this to me, did not see one of my trucks, and they went on my deadbeat list.

    Always keep in mind that honest businesses have no problem disclosing information to another. The laws have been changed in regard to fly-by-night brokers that run this little game of "protecting" their turf, and guard their information, mainly to thwart collecting efforts when they stiff others.

    373.3 of the Rules and Regulations specifies that all information regarding loads that are moved by the broker, must be kept on file for a period of three years, and must include all financial information as well. They are to include what they received from the paying party, and what was paid to the carrier.

    The carrier and all other parties, has a right to a review of that information for the same period of time.

  8. #8
    Light Load Member TX_Proud's Avatar
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    Thanks to all for the good feedback! I would have responded sooner, but I seemed to have forgotten my ID on this website...but I'm back now!

    So let me give an update first and then I will reply to some of the comments offered by others. I don't know if I can mention the name of the broker in this forum, so for now I will not. But we did receive via US Mail a "News Release" talking about their restructure and how positive they are on the future of their company. However, the outstanding invoice has still not been paid. (We WERE funded through the factoring company when we submitted the invoice back in December). I see now that this broker has now lost their broker privileges on Internet T/S and has over $37K in unpaid invoices and their bond has been cancelled. I spoke with the factoring company and was told the message they have received from the broker is that they will not even consider paying on outstanding invoices until they are at least 70 days old. So assuming they will pay at 70 days, I will owe the factoring company more than the initial 10% withheld at funding (which kicks in starting at day 60)

    In defense of the factoring company, they do screen any and all brokers that we want to do business with. We can check their system online which shows the payment history and credit worthiness prior to accepting a load. This broker was at 45 days at the time we booked the load and had a long history with the factoring company (FC). About one week after we submitted the invoice is when things took a turn. The broker was not returning phone calls or responding to the calls from the FC and when they did finally connect, there was the statement about reorganizing and no commitment on when any outstanding invoices would be paid. The FC immediately put the broker on their no load list.

    So, Turbo Trucker, you are correct.....I did not fully investigate this broker before booking the load. Lesson definitely learned! I have now gone back and found that even though they had their original broker authority issued in 1985, it has been revoked 3 times and is currently still active, although I would suspect it will be revoked again very shortly.

    And I also appreciate your insight on the disclosure points that the broker should be providing. I have found on occasion that the rate confirmation is somewhat sparse in its content and have had to make serveral calls to "fill in the blanks." Next time, I will have the broker fill in the blanks and resend hopefully avoiding any potential confusion on either party's part.

    Brickman, I fully appreciate your position on using (or not) factoring companies. With 5 trucks running and everyone wanting to get paid, not to mention the slow and
    *****C-H-E-A-P*****
    freight out there now, we have no other option to sustain the cash flow right now. I really prefer to only use the factoring company for some of our customers who pay at 30 days (or more in some cases) and not factor those that pay in 8-10 days, but our contract with the FC states that the rate they give us is predicated on a certain volume and it is an all-or-nothing deal.

    As a side note, when I was first alerted to a possible problem, the first thing I did was make certain I had everything I would need to be able to pursue this through any means necessary, and behold! I find I never did receive back the final executed signature on the contract from the broker. I have made numerous calls but have gotten nowhere. Well, they DID send me a contract, but it was for a different carrier with a similar name. Their A/P did return a voice message I left her and said they were working on getting payments made but could not offer anything definitive (she was actually quite cheerful in spite of the many calls I am sure she has been making). That was 2 weeks ago.

    I feel I lost ground because I operate with a different level of integrity (like I believe someone when they say they will do something.....thank you Turbo Trucker for pointing out my flawed belief . I opted to wait the 30 days as I agreed to in the contract. I did contact the shipper and she was receptive to perhaps paying us direct, but since the invoice was not technically past due, I decided not to pursue that at that time. Basically, I honored my side of the deal to the detriment of my company.

    So, tomorrow I file on the bond and I follow up with the shipper and hope they haven't paid the broket yet. I certainly learned a valuable lesson and won't make that mistake again!

  9. #9
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    I do hope you get what you are owed. It's sometimes a VERY tough battle. It appears you are on top of things....

  10. #10
    Light Load Member TX_Proud's Avatar
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    Alrighty then.....just received a phone call from the factoring company that the broker in question, Truckers Express Inc (TEI) has closed their doors for business (bankruptcy???) as of Feb 26, 2007. We now have to "buy back" the $2,200 outstanding invoice from the factoring company.

    I did file on the surety bond and the last tally I saw was over $84,000 in unpaid bills due; and that is just on those that made it known they were owned money.

    So, my next question is has anyone out there had experience with receiving a settlement from a bankruptcy proceeding? Where do you begin? My initial thought was OOIDA, but perhaps there is some lessons learned out there that you may want to share.

    Just wondering, can I get some good tires from them in lieu of a cash settlement??

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