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 :smt087 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.

 

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!

 

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??