how the $75K broker bond will affect an O/O

Until recently brokers had no exposure or liability when they moved a load. They use carriers that have insurance and they don't share in the risk. For the past few years several courts have ruled that brokers Do in fact share in liability to include dispatching drivers illegally and failure to vet the trucking companies to be sure they have insurance. The result is that now brokers have to have a higher bond (it went from $10,000.00 to $75,000.00) to insure that if there is a violation or accident as a result of some fault of the broker (or percentage of liability) they can cover the expense.
Some small brokers have gone out of business because of this but truth be told if they can't afford the bond (they have to secure the bond with a 10% security or basic good credit) they probably shouldn't be moving freight in the first place.
It will not affect Owner/Operators other than some brokers, not all, might try to recover the cost of the bond by paying lower rates. It's really not an issue in most cases.

 

I share the same opinion with G3....those that can pay and survive will attempt to recover the excess from the trucker through low rates or surcharges etc. I doubt they will mess with the shipper....trucker is an easier target.

Brokers and carrier mgmt share a lot of the same attitudes. They will eat first and have the most , before the driver.

Know your costs and simply don't pull it if it's too cheap. Let the broker buy a truck and driver it.......

JMO

 

As a broker I pay between 3-4.50$ per mile. Which keeps the good drivers coming back and the bad ones I simply don't use anymore. The new $75,000 bond is my salary for the year. I broker slightly over 1,100 loads per year. I also run 4 company trucks so 1,300 or so loads per year. I'm a small business owner with both companies. That 4.50$ per mile rate now has to go away to compensate for the new bond as well as, bumping down my profit. After the bond is fronted the rates will come back up. So it will affect some o/o but prob only for a year or so.

 

The bond will drive many smaller brokers out of business and create less competition. It would be foolish for anyone to not expect that brokers will want to recover the extra expenses and that will need to come out of the rates. Those who pushed for the higher bond should have foreseen this as a result of a broker dramatically increasing their overhead. Bonds are not free. You either pledge assets and pay an annual fee for the bond or put up the cash. Having a $75,000 bond is nothing to some of the biggest brokers. It is a huge amount to smaller brokers. This is a fixed cost that they cannot easily recover. It is an unnecessary cost that could easily be increased on a whim and further impede competition. If we are to continue to have the bonds, perhaps it would make more sense for the amount to be based upon the amount of business that the broker generates. That would mean that the larger brokers would need to post a much higher bond than the broker who is a one or two man operation.

 

I agree with you g/man. Problem is government still has not had any paperwork sent out. And they want everybody's money by nov1 or something. Seems like an extension is gonna happen but not sure yet. It never goes as smooth as they think.

 

WE actually got a notice last week from FMCSA saying they didn't have our bond. We secured it in July and sent it in so we had to send it again.
Just to clear up one misunderstanding (cause heaven knows there are a million on the internet) we secured our $75K bond based on our good credit history. We didn't have to put up any security or the usual 10% so the bond didn't cost us anything. We've been in business for a long time and have a Gold credit rating so we were lucky.

 

Gold credit here as well, and yes I had the same issue. Sent bond then 3 weeks later had to sent conformation again. We have not however received anything fromFMCSA. How long you been brokering? I started the company just under 17 yrs ago. It was a much different time.

 

Largecar we followed up with a phone call just to be sure. A lot of staff at FMCSA are on leave and they have been working short weeks anyway since the sequester. You might want to call but they are not there on Mondays and Fridays and not there at all now until they get called back.

We started brokering freight in 1988. I had a customer that had a hard time finding trucks to run the NE and I only had 8 trucks so I got my authority to help him out. He is still a customer, and good friend, and we have added customers over the years. We are small, only move 15-20 loads a day (some dedicated) but we like our size. We were considerably bigger a few years ago and had 4 field offices but we made a few life decisions, got rid of some cheap customers, and cut back.

We have a lot of loads in repetitive lanes so we have a solid carrier base. They call us every morning and pick loads for the next 2-5 days. We almost never use the internet load boards.

 

Yea that's good. My wife and I only move 9 loads a day. We only have 2 customers. But have had them both from the 70s. I have 4 trucks and 12 trailers as well. But like you said we like our size. It's amazing how the industry has change. Some things are much better. Some things are much worse. Nice meeting someone else that knows what's going on. Have a nice weekend.