TIA Pushes for a Crackdown on Brokers that Fail to Provide Enough Bond Money

This story appears in the Sept. 6 print edition of Transport Topics.

The Transportation Intermediaries Association is pressing the Federal Motor Carrier Safety Administration to shut down more companies that fail to provide adequate funds to reimburse fleets when brokers fail to pay carriers.

The trade group’s move follows the FMCSA’s decision in July to revoke the authority of Oasis Capital Inc., La Mirada, Calif., because it failed to properly fund the $10,000 bond or trust fund that brokers must obtain to operate.

“We think it was the right decision,” TIA President Robert Voltmann told Transport Topics on Aug. 27. “There are other companies that are operating like Oasis. [FMCSA] should move on down the line against every company that doesn’t fully collect the trust fund. Those companies should be shut down.”

Oasis couldn’t be reached for comment.

Under federal law, brokers must post either a bond or a trust fund, and file it with the agency within 30 days of starting service.

FMCSA preceded its step of revoking authority by giving Oasis a notice in January that its trust fund privileges were being deactivated.

That ruling prompted a message from a company seeking reinstatement and a follow-up ruling that resulted in the revocation of authority granted to the company.

FMCSA said in a letter to TIA that Oasis failed to provide any proof that it complied with the filing requirement.

“If FMCSA doesn’t revoke authority for other companies that aren’t meeting the requirements, we will do that one at a time,” Voltmann said.

TIA last week asked the agency for clarification of an order sent to brokers that were listed as having an Oasis trust fund. In that letter, brokers were told they faced revocation of their authority if they didn’t provide proof of alternative arrangements for a bond or trust fund.

In the letters to brokers, which were provided to TT, FMCSA advised brokers that “letters of credit are not adequate evidence of financial responsibility.”

TIA counsel Richard Gluck in the Aug. 30 letter asked the agency to clarify whether some letters of credit are acceptable.

The trade group contends that an irrevocable letter of credit from a financial institution, either alone or in combination with cash, ought to be enough to satisfy the financial responsibility requirement.

FMCSA didn’t respond to a request for comment on the case or the trade group’s request.

Bonds for brokers have gained the attention of Congress as well.

A bill backed by TIA — as well as the Owner-Operator Independent Drivers Association — was filed in the Senate in mid-June by Sens. Amy Klobuchar (D-Minn.) and Olympia Snowe (R-Maine) (click here for previous story).

That measure would raise the bond requirement to $100,000, and tighten other financial responsibility requirements that are more than two decades old.

The bill hasn’t yet been scheduled for a hearing.