One of the provisions of the MAP-21 Highway Funding Act mandated that the minimum broker surety bond be increased from $10,000 to $75,000. Despite many complaints and legal battles, the December 1st deadline came and the rule remained unchanged. As a result, in the past few weeks, there are over 7,500 fewer authorized brokers with active operating authority. In less than two weeks, over 35% of all freight brokers have closed their doors.
These numbers were provided by James Lamb, the president of the Association of Independent Property Brokers and Agents. Lamb also said that that number will most likely continue to rise until December 15th – 30 days after the last notices were sent out by the FMCSA.
According to Lamb, it is very unlikely that many of the brokers will end up reopening if the increase isn’t repealed – an outcome that the AIPBA is still fighting for in court. He also says that the number of brokers with revoked authorities could increase to as much as 75% over the course of the next year.
Another trade group, the Transportation Intermediates Association, has claimed that the increase in broker bonds has been less of a big broker vs. little broker issue and more of a funded vs. underfunded issue. He also suggested that even though broker numbers are falling, the impact on the industry as a whole would be minimal.
Since only the larger brokers have been able to afford the rate increases, Lamb warns that the lack of competition could easily result in much higher rates. On the other hand, Vice President of OOIDA Todd Spencer has gone on record saying that the bond increase may drive “bad brokers” out of business and prevent owner operators from being cheated.
Next Story: The Economy is Headed Up And So Is Driver Turnover
Why would they kill as much as 75% of an industry? Smells fishy …
Ray, I smell the same fish. Just doesn’t make sense.
Simple, greed.
I believe they are talking 75% of the broker industry businesses will disappear. Think about the Gvt deciding we truck O/O all shall increase our insurance limits 750%. If you are a small operator you may not have the capital to afford that increase thus you close your doors and find work with the big guys.
In my case I have a broker I trust, is honest and fair with me. She has always treated me right and informed me of the good and bad with each load that she knew about. Her office of 4 people is closing and I will need to find another broker. The big guys did not give me as good a rate and I had to fight for every penny they ended up paying me.
Rather than this bond increase which I feel directly impacts the small guy, I’d rather see enforcement and proper prosecution of the offenders and not wimpy sentences, but real hard time that is measured in YEARS! I am sure once the bad seeds in the broker world knew they would become some guys “wife” they would find another industry of hard workers to steal blind.
Remember in the business world, 1% here and 1% there adds up so if an unscruplus broker can find a “fee” or something extra to charge against my pay they will. Some fight like hell and others are just glad they got A check and leave that 1% feeling its not worth fighting for.
Gordon I’m sorry to hear about your situation and hate to see a good little man go down. However, you do all realize, you don’t need $75,000 to post $75,000 bond. It’s the same as having a million dollars to post a million dollar bail. This isn’t supposed to be a big deal for reputable brokers.
This is a great opportunity for you independents to get into brokerage!
I agree, I don’t know what’s all the fuss about $75,000 it’s not like they have to come up with it in cash. I believe this will weed out some bad brokers.
They should make the bond amount dependable on brokers freight volume.
Im sure most of us remember Eleets Brokerage out of Jacksonville Florida. They screwed carriers for over 10 millions. Guess what was their bond amount? Right, $10,000. So insurance split that $10,000 between thousands of carriers. We got $43 when they owed us over $10k.
Whoa there Paul. Now you are making way too much sense. Gooberment regulators don’t have much, if any, sense so what do you expect.
And yes bonds are relatively inexpensive…… to those that have good history. So me thinks some, not all, of those dropping out can’t get a bond due to their history.
UPDATE: THE MAP-21 INDUSTRY CRISIS…
DISPELLING THE MYTH THAT THESE MASSIVE BROKER LICENSE REVOCATIONS WERE REALLY BROKERS WHO WERE ALREADY INACTIVE & OUT OF BUSINESS… Some articles published by trucking media lead the industry to believe that the 8200 brokers revoked in December are due to an “outdated database” or some kind of purging of companies that were already out of business or inactive. This is incorrect. It appears that TIA is the source that is disseminating this misinformation to mitigate the damage we believe it has done to the industry. I have read how “TIA ‘absolutely still support(s)’ the increase, and the impact to the brokerage industry and the trucking industry will be ‘minimal, if nothing at all.’” The truth is each and every one of the 8,200 brokers shut down had active authority, which means they were paying significant money to keep their original bond in place and their broker’s license active so they could conduct business. This just goes to prove that the TIA is out of touch with the brokerage industry. Just look at the 1,900 brokers that have signed our petition http://www.petitiononline.com/….
As for ‘funded’ versus alleged ‘underfunded’ brokers, factoring companies fund most small brokers so we believe Burroughs and TIA know very well there is really no such thing as a significant cohort of “underfunded brokers.” TIA simply targets small brokers as opposed to the big brokers that pay TIA $14,400 per year in dues. We find it amazing that TIA considers 8,200 brokers shut down (so far) as “minimal” to “nothing at all”. We believe the DOJ which has stated our antitrust complaint against certain trade groups is currently “under review” will teach TIA a lesson on America’s Antitrust laws.
CONTEXT OF REVOCATIONS: A review of the FMCSA Daily Register for the past 52 weeks would show that in an average week about 56 new applicants get a broker’s license; Keep in mind, though, this is after MAP 21 was passed, which now requires a $75K bond for new (and existing) brokers and clarifies in the law that carriers who arrange transportation need to get a brokers license. About the same number exit for various reasons so the amount of brokers for the past year– until now– has been sustainable at about 21,500, give or take a few hundred (FMCSA reported as a result of our FOIA request that as of Jan 1 2013 there were 21,795 active brokers and they reported in their final technical amendment rule 21,565 active brokers as of Oct. 1, 2013). When we factor in that many of the new “brokers” are actually carriers complying with the need to secure a secondary license, it is clear we were already losing traditional non asset based small brokers by attrition and there is overall a decrease this past year in new start up business applicants. So in terms of the context, then, 8,200 brokers killed off all in a 10 day period is very significant.