In our previous post, we offered an alert notice regarding a bill that has been introduced in the Senate called the “Motor Carrier Protection Act of 2010” (Senate Bill 3483). As previously suggested, this bill would destroy the transportation industry as we know it if allowed to pass in its current form.

Our serious concerns about SB 3483 are numerous, and we suggest you consider the position stated on our web-site at www.pac-fin.com. Essentially, we don’t believe Pacific Financial should represent your protest in this matter because that might appear to be a conflict of interest for the nation’s leading provider of BMC-85 Property Broker’s Trust Fund Agreements.

By far the most effective way for you to take action and to present your point of view is to sign up with one or more of the non-profit broker associations now interested in this fight. By joining such groups, you will have far more clout than trying to go it alone. In fact, you should consider joining several member associations.

Last week we introduced you to the new Association of Independent Property Brokers & Agents (AIPBA). We are now encouraging you to join the Transportation Brokers Service Association (TBSA) as well. TBSA was established early in 2009 for the purpose of promoting better business practices for small to medium sized brokers. You may access TBSA’s web site at www.transfinservice.com.

TBSA opposes most of the regulatory changes proposed in the bill, including the proposed increase in the bonding requirement from $10,000 to $100,000. TBSA will continue to waive their membership fee for Pacific Financial brokers. Please find a copy of their membership application attached.

Thousands of hard working, honest brokers will be forced out of business resulting in a loss of hundreds of thousands of jobs if this bill becomes law. Please help us protect our Transportation Industry by joining our efforts and supporting the TBSA as well as the AIPBA.

While we continue to encourage all our brokers to join these and other service associations, our recommendations are not to be construed as endorsements of any one association’s entire agenda. Just as this bill was authored by entities with presumably different ideologies, there are many opinions as to the appropriate changes, if any, to broker regulation. Two things we can all agree on: this bill in its current form is detrimental to the industry, and Pacific Financial will remain the leader in Broker Surety Instruments regardless of the regulatory requirements.

Many of you are aware that a bill has been introduced in the Senate called the “Motor Carrier Protection Act of 2010.”  If allowed to pass in its current form, it would destroy the transportation industry as we know it.  A stated purpose is to protect trucking operators who are victims of ‘corrupt brokers.’  Should the government be responsible for protecting truckers at the expense of brokers?

A few of the key provisions of the bill:

Increases the broker bond/surety from $10,000 to $100,000.  Requires a minimum of $10,000 in cash.

Establishes a multitude of new regulations for brokers, freight forwarders and motor carriers.  In our view, the government should not be imposing excessive new fees and costs, especially as the industry is just beginning to show signs of life in this economic recession.

Thousands of hard working, honest brokers will be forced out of business resulting in a loss of hundreds of thousands of jobs.

We are working feverishly to update our website by gathering all the information you  will need to effectively fight passage of this bill in its current form. Expect to hear from us shortly on ways that you can act.

Rest assured that Pacific Financial Association, Inc. will remain the leader in Broker Surety Instruments regardless of the bonding requirement. We are committed to helping our customers succeed!

Thank you for your continued support of Pacific Financial Association, Inc., now in our 12th year of service.

Reprinted from: the July 4 print edition of Transport Topics.

By Eric Miller, Staff Reporter

An anti-fraud bill introduced in Congress would raise the freight broker surety requirement to $100,000 and mandate that motor carriers who broker freight loads obtain separate broker authority.

The Fighting Fraud in Transportation Act of 2011, introduced June 24 by Rep. Frank Guinta (R-N.H.) and Rep. Russ Carnahan (D-Mo.), is supported by American Trucking Associations, the Transportation Intermediaries Association and the Owner-Operator Independent Drivers Association — three trade groups that often don’t agree on transportation legislation.

Supporters said the legislation would go a long way toward keeping fraudulent brokers out of the business and help insure that truckers get paid for freight they haul.

Opponents claim the higher surety bond would discourage small brokers from entering or staying in the business.

The bill would also increase requirements and disclosures for any person or company seeking to obtain broker or freight forwarder authority, toughen penalties for violations of broker regulations, and establish strict guidelines for companies that provide brokers with surety bonds and on how they administer those bonds.

“This law would put a stop to a system that allows ruthless brokers and scam artists to continue to operate unchecked,” Todd Spencer, executive vice president of OOIDA. said in a statement. “Too often, we’ve seen deceitful brokers get away with collecting payments from shippers but cheating truckers out of what is rightfully theirs.”

A similar bill introduced in the Senate last year, the Motor Carrier Protection Act, failed to muster enough support to clear the Senate Commerce Committee (6-21-10, p. 4).

Robert Voltmann, TIA’s president and chief executive officer, said the three trade organizations had common ground in toughening up the broker requirements.

“The motor carriers are stung by companies that take freight, flip it to somebody else, and don’t pay,” Voltmann told Transport Topics. “We want the truck driver paid. We want the truck company paid.”

Voltmann refuted the notion that the bill would put small brokers out of business. “What it will squeeze out are underfunded or undercapitalized brokers,” Voltmann said. “A $100,000 bond to move DOD freight costs $1,500. If you can’t afford $1 ,500, what right do you have to collect someone else’s money? You shouldn’t start a brokerage
if you don’t have proper capitalization.”

But Daniel Larson, chief operating officer of Pacific Financial Association Inc., the nation’s largest provider of property broker surety instruments, said the bill would not reduce broker fraud and not be good for the transportation industry.

“Our statistical information indicates that a $100,000 bond is unnecessary and will force too many brokers out of business,” Larson told TT.

Larson said Pacific handles more than 10,000 claims a year, and most broker defaults would be “well handled” with a $20,000 bond.

Very few brokers get into the business with the intent of committing fraud, he said, and many payment problems are the result of a carrier who, for example, has a shipper that goes bankrupt, in turn causing the carrier to “get upside down.“

“Truckers think they’re going to get saved by these bonds,” Larson said. “History points out that you get saved by doing business with people that you know, you respect, or who you’ve properly vetted.”

The bill will require “just about every single motor carrier to get broker authority.” Larson added. “How many small truckers do you think can afford a $100,000 broker bond?”

ATA spokesman Sean McNally said a majority of ATA carriers have agreed that the positives in the bill outweigh the negatives and that ATA should support it.

“ATA strongly supports the legislation’s increase in the broker bond to $100,000,” McNally said. “That increase, along with the stricter regulatory oversight of brokers required by the bill, will go a long way to remedying the problem of motor carriers not getting paid by unscruplous brokers.”

But McNally conceded that other requirements of the bill, notably that motor carriers no longer can broker loadsunder their motor carrier authority, create concerns for some motor carriers.

“Unfortunately, ATA was not able to secure any modification of that language from the coalition supporting the bill,” McNally said.

David Owen, president of the National Association of Small Trucking Companies, called the legislation “a horrible way to go” and said it is designed to help “mega-brokers.”

Owen said the higher bond won’t stop fraud. Most small carriers that broker deals are honest and use their brokerage to be more efficient and retain contracts, he said.

“It’s horrible to have an industry where a few crooks can go out and intentionally rob trucking companies. I think that’s a shame,” Owen said. “But most carriers, it only happens to once. The next time, they check the guy out a little better.”