Senate Proposes New 100k Surity Bond For Freight Brokers!

[blizzard2014]

It looks like the Senate is about to impose more needless regulations on small businesses. The new bill S 3483 that is being proposed in Washington will require heavier liscensing on new and established freight brokers. It more than likely will put small brokers such as myself out of business because there are no surity companies out there who are going to underwrite a 100k bond - it is simply too risky!

The large broker firms and 3PL's are all chomping at the bit for this bill to pass because it is going to give them greater control over the market. This bill does not address shippers who go out of business leaving both brokers and carriers holding the bag. There are lots of shippers who go bankrupt, get out of their shipping debts, and then open back up under a different name and do the same thing all over again.

I am not gonna get into all of the details of the bill in this thread as I am at my brothers house and just putting this together on the fly. You guys can click onto the links that I will provide with this post and read all of the proposed regulations yourself. I do realize that this may not affect you as drivers, but this bill will most definitely affect your carrier in one way or the other. Also, Phil, if you have any comments or want to add to this thread in any way, please feel free to do so. Thank you all for taking the time to read this thread!

Here is the link to one of the articles I read. http://loadtraining.com/articles/hundred-thousand-dollar-broker-surety-bond-opinion

Here is a link to the PDF of the actual senate bill itself. http://loadtraining.com/wp-content/themes/loadtraining/assets/sb3483.pdf

 

[davekc]

I am never a fan of any new regulations. In this case I think you will see some (very small number) bail on their liabilities only to re-open under another name. I do think that will be a small number as they would still need the 100k bond to reformulate.Small brokers essentially will have to umbrella under larger carriers. Both good and bad could come from that.

 

[ATeam]

Also, Phil, if you have any comments or want to add to this thread in any way, please feel free to do so.

The broker bond topic did not come up in the Sylectus conference. While aware of the headlines about it, this not an issue I have been closely following.

 

[greg334]

This may be a good solution. Seeing that a lot of people in this industry scream about cheap rates so less brokers mean less layers that the freight has to go through.

 

[blizzard2014]

I beg to differ. Less smaller brokers means that the mega-brokers will take over and the rates will be dictated by the mega-brokers. That means that the rates will be lower than they are now because it's the bigger guys are the ones who are cutting the rates down!

 

[davekc]

I beg to differ. Less smaller brokers means that the mega-brokers will take over and the rates will be dictated by the mega-brokers. That means that the rates will be lower than they are now because it's the bigger guys are the ones who are cutting the rates down!

I have a little different prospective on this with regards to expediting. Less people handling the freight, doesn't chance the capacity equation. When brokering loads, I would say not 100 percent, but maybe 75, that I get a better rate from the larger carriers. Couple of those reasons are they are closer to the freight (less double brokering) and don't require the same cut because of their volume. I could be totally wrong, but this has been our experience so far.

 

[moose]

I beg the differ from the chicken & the Egg.
Less people handling the freight,
will not raise the rate,
but will lower shippers costs,
while paying same to the drivers.

again, this is Gov. works at it's worst.
again, as OOIDA said many times over,
the problem is not with the bond, the bond is just a quick fixer.
but with following individuals and Company's.
all the Gov. had to do is build a data base for brokerage & shippers to hold THEM accountable.
but instead they mess with cost of doing business, and rates.
this will never be good for the little guy.

getting closer to the point where they will tell us how much money we allow to charge for moving the freight.

 

[Mike99]

I dont think that thing will affect us. 90% of the loads is in big brokers hand who can afford the 100k bond. They give the loads to the carriers who give the loads for smaller carriers or owner operators. I dont think is a problem for Landstar ,Fedex, Panther the 100k. What I would do ,a bond for the carriers who subcontracts other carriers or owner operators. And I talking about companies like T&k, Whirlwind, Little truck ,LRT. This companies subcontract the loads to smaller carriers or o/o and they dont have any bond. For taking loads from NLM or Sylectus and subcontract the loads you dont have to be a broker.

 

[greg334]

Blizzard, one of the issues I have seen is the freight going through three or four layers of brokers who repost it on different load boards hoping for a bite. I have a lot of examples from LS's own board of this happening and while even NLM loads got posted on another load board, NLM and Sylectus seem to be one of the problems than the solution for the issue of brokers.

If there is a 100k bond, there will be a drop out of the fast cash group, those who do abuse the system, and with that I would think that we would see better rates because of the increased overall accountablity. I don't think many here have filed against a broker's bond for payment but if it happens, they will have a harder time with 100k.

 

[cableguymn]

I beg to differ. Less smaller brokers means that the mega-brokers will take over and the rates will be dictated by the mega-brokers. That means that the rates will be lower than they are now because it's the bigger guys are the ones who are cutting the rates down!

As long as there are drivers willing to haul cheap freight. There will be cheap freight. The problem with rates is not the company offering them. It's the people accepting the rate.

I do computer repair work during the day. It's sent out much like a load. The order goes out to 15-20 techs in the area.. First one to take it gets it. Of course the good paying ones go quickly. I've learned to be very quick.

The low paying ones sit.... and sit... then finely the buyer will up the price.. maybe someone will take it or it sits more.. they raise it..

This goes on and on till it's at an acceptable level. I tend to put in a counter offer right away. As long as the buyer lets it sit once they up the money to my counter offer it's automatically mine. If someone takes it at a lower rate I guess they like beans for dinner.

I prefer steak.

The problem with freight is there is always someone willing to take the cheap loads. Perhaps to get to a better area, fill out a truck, get home.. What ever the reason. They take them.

 

[blizzard2014]

This bill is going to put a lot hard working american's out of business. The only choice for smaller brokers who are put put of business by this bill is to take thier book of business to a larger carrier and give up 50 percent of the profit in order to keep their jobs as agents.

The shippers are going to have less brokers to call for quotes and are going to have to pay whatever rates the big 3PL's tell them they can get the freight moved for. Then the carriers are going to have to haul the loads for the rates that the big guys tell them they are going to get or just sit in a parking lot and get skipped over by some other carrier who decideS to run the load for the cheaper rates. This bill will also make it nearly impossible for smaller trucking companys to share loads without having a 100k bond.

It's going to put a lot of smaller trucking companies who get Loads directly from the shippers out of the brokering business and it will then force them to go through the mega-brokers to get loads. I really hope this legislation gets shot down. If not, then I hope you all are happy with the big companies controlling the entire freight market. Good luck with all that!

 

[PreacherRich]

This bill is going to put a lot hard working american's out of business. The only choice for smaller brokers who are put put of business by this bill is to take thier book of business to a larger carrier and give up 50 percent of the profit in order to keep their jobs as agents.

The shippers are going to have less brokers to call for quotes and are going to have to pay whatever rates the big 3PL's tell them they can get the freight moved for. Then the carriers are going to have to haul the loads for the rates that the big guys tell them they are going to get or just sit in a parking lot and get skipped over by some other carrier who decideS to run the load for the cheaper rates. This bill will also make it nearly impossible for smaller trucking companys to share loads without having a 100k bond.

It's going to put a lot of smaller trucking companies who get Loads directly from the shippers out of the brokering business and it will then force them to go through the mega-brokers to get loads. I really hope this legislation gets shot down. If not, then I hope you all are happy with the big companies controlling the entire freight market. Good luck with all that!

I think Mr. Nimmo makes a point that many are taking too lightly. The mega carriers have invested much into Washignton pacs and lobbiest. It seems that everything that is coming out of Washington it targeting the little guy and favoring the mega carrier, from hours of service, proposed increase in weight limits to increasing bond requirements.

When there is a need in the marketplace you will have a response from the insurance industry. A bond that is ten times higher doesn't mean the cost will be ten times higher, but it will be higher. Those costs will have to be offset and it seems those that are closest to the pavement take the brunt of that.

 

[zorry]

I don't see where a $100k bond is a big deal. It doesn't mean the broker has to have $100k. A bond is an insurance policy that insures performance. I bought a bond to insure to the county I would do certain improvements to a piece of land to obtain rezoning. I paid $500 per year for the bond. If I didn't do the work the county would have done it and billed the bonding company. Based on what I paid I would guess the $100k bond would be about $2200 per year. Would you want to load for anybody that couldn't invest $2200 a year in his business ?

 

[blizzard2014]

The price for the bond will be 5k and you will have to have collateral in order to get it. I had to go through a very stringent credit check to get my broker trust fund - the actual bond is even harder to get as a lot of insurance companies do not write bonds for high risk markets. Broker bonds are considered to be high risk and there are very few companies out there that are willing to underwrite a bond for 100k without collateral.

 

[zorry]

Back in the 80's we let a large customer get into us for $34,000. Plastic christmas trees. Short shipping season. They closed up and we never got a dime. $100 bond is not too much. If things go bad there can be hundreds filing claims. I'm sorry Blizzard. If you don't have the $5,000 you're undercapitalized.

 

[zorry]

Read Blizzard's post again. The bonding company want's collateral. Wouldn't you? So, if you don't have the collateral, or aren't willing to risk it, then you're undercapitalized. Put your house up as collateral and you'll probably pay me.

 

[Rocketman]

Read Blizzard's post again. The bonding company want's collateral. Wouldn't you? So, if you don't have the collateral, or aren't willing to risk it, then you're undercapitalized. Put your house up as collateral and you'll probably pay me.

Exactly. I understand Blizzard's position and believe me, I'm all about the little guy who can stick his neck out and put a plan together to do something on a larger scale.

The problem comes from the fact that in this business, the little guy that sticks his neck out and fails takes a lot of other little guys out with him.

There are plenty of stories floating around out there about the brokers that dont pay or are slow to pay. It's not much different really than the slow paying carrier thread we had a while back. The current regulations allow just about anyone to become a broker. Many of those people fail for any number of reasons (undercapitalized, poor customer selection, poor money management, etc, etc). The ones that do a good job of it and make it, I applaud. The ones who fail and dissapear owing tens, or even hundreds of thousands to the people who actually furnished the fuel and vehicle to haul the freight...those are the ones that are bringing this on.

There are outright scams out there to. People who setup fake businesses and defraud the carrier and the shipper, leaving town with the cash with no intention of ever being legal in any way. I know people who run their own authority and they tell me some scary stories of stuff they see on the load boards and the calls they get. Raising the bar to be in the business might help weed out some of the truly intentional scammers.

One flatbed O/O that I talk to a lot tells me he prefers to deal with the smaller brokers like Blizzard. He tells me that the ones who actually have their own customer base do tend to pay better with less hassle...if they pay. He says its tough to sort through to the good ones though when there are so many bad ones in the mix. He doesnt like this regulation and he is worried that he will lose some of his favored brokers. But, he is the first to say that they need to be weeded out somehow.

 

[Rocketman]

Something that I would think to be a better regulation than the one being proposed would be something along the lines of a variable bond. It would have provisions for the smaller broker to operate with a smaller bond, but the amount of freight they could move would be limited by the amount of bond they wish to carry. In my opinion, this should carry through to all sizes of brokers also. If your moving a million$ a quarter in freight, you need a bond that insures you'll be paying your bills.

The problem would be in policing it. I can only imagine the giant cluster our govt would make out of it not to mention all the loopholes and tax breaks that would wind up in the final regs by the time the lobbyist get through with it.

 

[ATeam]

This bill will also make it nearly impossible for smaller trucking companys to share loads without having a 100k bond.

I see it talked about above in general terms, but what exactly is required for a small broker to get a 100k bond? How does someone become a broker and how would a bond be obatined?

 

[jelliott]

OOIDA has really been the big push on capital hill to see this happen. Their goal being to protect small carriers and owner operators. I am no fan of increased regulation. But, for a small broker with a good credit history and solid financials I do not think this will have a big impact. Those with poor credit histories and are overextended with poor financials......different story.