Task Force Continues to Examine Truck Purchase Agreements
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After several months of meetings, members of a specially appointed Truck Leasing Task Force have concluded that many lease-purchase agreements aren’t written in a manner that gives owner-operators a realistic chance to own their trucks.
But at the task force’s most recent meeting on July 18, members seemed stumped when regulators tasked them to provide information about the characteristics of equitable lease-purchase agreements.
Some members responded that they haven’t seen, or even heard of, agreements that did not put an owner-operator at financial risk of never owning a truck.
“I guess my question would be have we received any leasing arrangements that the submitters claim are equitable?” asked task force member Paul Cullen, an attorney with The Cullen Law Firm. “Do we have any evidence?
Cullen
“I would like our report at the end to be very clear that we have made every effort we could to invite such evidence.”
Task force member Jim Jefferson, supervisor for regulatory compliance for the Owner-Operator Independent Drivers Association, concurred.
“What is equitable? What does that mean? We look up the definition, dealing fairly and equally with all concerned,” he said. “Everything that we discussed thus far shows that we haven’t seen one of those.”
Jefferson added: “In my line of work, I have not talked to anybody that has successfully completed a lease-purchase agreement. And I’ve been here for nine years. I’ve looked at a lot of agreements, and I’ve talked to a lot of people.”
“Too often, the driver who does not end up owning a truck is described as being lazy or not running the truck properly,” said task force member Tamara Brock of Brock Logistics. “This is not the main reason. The main reason they are not successful is because the playing field is not level. It’s not set up to be successful.”
Viscelli
Task force member Steve Viscelli is an economic sociologist at the University of Pennsylvania who studies labor markets, energy efficiency and public policy related to trucking. He said he has reviewed everything from driver pay stubs to other types of data from companies and talked to hundreds of drivers, many of whom were involved in lease purchases for the past 20 or so years.
“I have not met a driver who has told me lease-purchase allowed him to start my company,” Viscelli said. “I have met drivers who said, I learned a lot of lessons from being a lease-purchase operator, most of them over what I didn’t want to do — and then went on to do things on my own.”
Potential Problems
- The absence of comprehensible disclosures makes it hard for drivers to understand the material risks, costs and condition of the lease.
- Contract provisions appear to make it easy to claim default or for the financing company to potentially cause a default.
- Expansive remedy provisions may require sizable payment to the financing company upon a default.
- Contracts may allow the financing company to recover money through escrow accounts and personal guarantees.
- The driver may be induced to relinquish the truck when he or she realizes they cannot make payments, paving the way for the financing company to lease the truck again.
Source: Ryan Kelly, U.S. Consumer Financial Protection Bureau
In a presentation to the task force, Ryan Kelly, risk-monitoring program manager at the U.S. Consumer Financial Protection Bureau — an independent federal agency assisting the task force — gave an update on CFPB’s preliminary research. It included a drill-down on examples of such lease-purchase agreements.
Emma Oppenheim, a senior fellow for the CFPB’s Workers Initiative, said the group’s technical analysis was based on a request for information. Oppenheim said 46 responses were received.
“Almost all of them came from truck drivers and advocates, as well as one from a financial company to a large motor carrier, and one from a trade group for motor carriers,” she said.
Task force members include labor organizers, motor carriers, consumer protection groups, owner-operators, attorneys and educators. The group has been tasked by Congress to examine the terms, conditions and equitability of common truck leasing arrangements, particularly as they impact owner-operators and trucking businesses subject to such agreements.
Ultimately, the group will forward its recommendations to Congress and the secretaries of Labor and Transportation.
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