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New surety bond requirements for brokers, freight forwarders in effect

Written by Steve Gursten Posted October 9th, 2013

Requirements pursuant to the MAP-21 Act mandate an increase from $10,000 to $75,000 – the first increase in over 30 years

The Federal Motor Carrier Safety Administration (FMCSA) set new surety bond requirements for brokers and freight forwarders as of Oct. 1, 2013. However, as will be discussed, there is a 60-day grace period that immediately follows.

The surety requirements have been raised significantly —  for the first time since 1980. The old minimum was only $10,000. The new minimum established by the FMCSA is $75,000.

The mandated surety provisions were included in the Moving Ahead for Progress in the 21st Century Act (MAP-21 Act). Our truck accident attorneys have previously discussed this sweeping legislation on our blog. The Act was signed into law in July of 2012 by President Obama. The Map-21 Act has proven to be a powerful tool in the FMCSA’s struggle against unsafe bus and truck companies. For example, you may recall an earlier discussion about the government shutting down a dangerous bus company, Fung Wah, pursuant to powers in the Act. The shutdown came after the FMCSA uncovered the company’s nonchalant disregard for safety.

There are many good bond brokers operating out there. Unfortunately there are also some very bad ones. The new bond requirements for brokers and freight forwarders are targeting those bad brokers who have taken advantage of the low bond requirements and used it to their advantage to short change truck drivers on the freight charges they’re owed.

Todd Spencer, executive vice president for the Owner Operator Independent Drivers Association (OOIDA) praised the new bond requirements. Mr. Spencer pointed out that:

“… by increasing the bond amount, in addition to other changes, the bond companies will better scrutinize the brokers applying for bonds to assure themselves that the bond won’t be abused and that truckers using the broker will be paid.”

Due to the changes, all brokers and freight forwarders who engage in interstate brokerage or freight forwarding operations must now register with FMCSA reflecting the new minimum security amount of $75,000.

But it is not limited solely to brokers and freight forwarders. Those trucking companies who occasionally broker loads must also register. These trucking companies must register as both as motor carriers and as brokers, according to guidance recently issued by the FMCSA. Although October 1 was the deadline, the agency has provided for a 60-day grace period so that effected parties can make the necessary filings.

Fines for failure to comply with new surety bond requirements

Failure to comply with the new surety bond requirements yields a stiff fine. Right now, the maximum civil penalty for brokers and freight forwarders who engage in interstate operations and who do not register with FMCSA is set at $10,000.

Beyond that, the guidance issued by the FMCSA suggests that after 30 days of the effective date (i.e. November 1, 2013), the FMCSA will issue a written notice to those brokers and freight forwarders who are not yet in compliance. Those companies will then have another 30 days to become compliant. The guidance indicated that those brokers and freight forwarders who are required to register the $75,000 surety bond, yet fail to do so beyond the 60-day grace period, will have their operating authority revoked by the FMCSA.

MAP-21 also imposes some other requirements that affect the brokers and freight forwarders. Companies and trust fund institutions must electronically report to the FMCSA whenever surety bonds are canceled. Upon that happening, the agency is to immediately suspend the registration of the broker and post a notification on the FMCSA’s website.

What happens when truck companies do not register?

During the initial phasing in of this new initiative, the FMCSA will be accepting complaints about unregistered brokerage activities. Complaints may be documented through the agency’s National Consumer Complaint Database.

The agency also indicated that it will continue to develop “a comprehensive enforcement program” in an attempt to determine the number of unlicensed brokers within the motor carrier industry, and to quash them from the market.

As truck accident lawyer of nearly 20 years, I understand that the trucking industry is becoming increasingly unsafe. The entire transportation business is based upon an unsafe business model which perpetuates – and sometimes even rewards – truck companies and truck drivers for cutting corners on safety.

Bad brokers and freight forwarders who rip off truck drivers by taking advantage of the current low $10,000 bond requirement only add fuel to the fire. These bad companies who are dishonest and short change truckers leave these truck drivers to their own devices to make up for the money they have lost. Sometimes, this translates into truckers driving in excess of the hours of service, speeding, or practicing other unsafe acts, in order to make up the profits that were lost to these bad brokers and freight forwarders.

Myself, and the other truck accident lawyers at the Roundtable praise the FMCSA for implementing this new requirement and raising the surety bond minimum for brokers and freight forwarders. Hopefully, this increased bond will help eliminate those bad brokers who manipulate the system. Ideally, this new provision will remove one of the factors which could lead a truck driver or trucking company to cut corners on safety to increase profits.

And beyond that — it’s just fair! No trucker should be deprived of money that he or she has honestly earned through hard work, and operating safely.

Steven Gursten Photo

About Steve Gursten

Attorney Steven Gursten is president of the Motor Vehicle Trial Lawyers Association and past president of the American Association for Justice Trucking Litigation Group. He has been named a Michigan Lawyers Weekly "Leader in the Law" for his efforts to prevent truck accidents and promote national truck safety. Steve was also a Michigan Lawyers Weekly "Lawyer of the Year" for a record settlement in a truck accident case. He has received the top reported truck accident jury verdict and top reported truck accident settlement in Michigan for multiple years, according to published year-end compilations of all jury verdicts and personal injury settlements by Michigan Lawyers Weekly. He has been named a "Top 50 Super Lawyer," by SuperLawyers, is listed in Best Lawyers in America, and has been awarded an AV-rating by Martindale-Hubbell, which is the highest rating for legal ability and ethics. Steve speaks to lawyers throughout the country on truck accident litigation. He is a founding member of the Truck Accident Attorneys Roundtable, head of Michigan Auto Law, and has dedicated his legal career to making our roads safer.