Task Force Critical of Truck Lease-Purchase Deals
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A federal truck leasing task force commissioned to study the prevalence of predatory practices in truck lease-purchase agreements determined that truck drivers who fall victim to signing contracts with unscrupulous actors can find themselves struggling for decades under the weight of bad deals.
However, a trucking industry executive noted that equitably constructed agreements offer independent truckers a pathway to business ownership, and stressed that such arrangements should not be broadly dismissed as unfair to drivers.
The 51-page final report is the product of 18 months of study, research, testimony and discussion from the eight-member Truck Leasing Task Force, which was asked to examine the terms, conditions and equity of common truck leasing arrangements, particularly as they impact owner-operators and trucking businesses.
While task force members initially were leery about whether they could collect sufficient data to show widespread harm associated with such agreements, they ultimately came to a consensus on the potential harmful impacts for drivers.
Mehrens
“The negative impacts of inequitable lease-purchase programs affect individual drivers (especially new drivers), the trucking workforce, the health of the industry, and roadway safety,” the report said. “[Innumerable] drivers report serious financial, professional and psychological harms due to these programs.”
The lease-purchase programs subject to TLTF’s work were the arrangements “between a motor carrier (or an affiliated company) and a truck driver,” the report continued. “The truck driver obtains a truck through a financing arrangement with the motor carrier, then signs another agreement to work for the motor carrier, all with the promise that they will earn the income needed to meet the financial obligations under the truck financing agreement, including payments for the truck and most or all of the expenses and repairs associated with its operation.”
The report recommended that lease-purchase programs should going forward be subject to conditions that mitigate what researchers perceived as some motor carriers’ power imbalance over drivers, and ensure that drivers understand the possible outcomes of the contracts they are signing.
The panel was appointed by the Federal Motor Carrier Safety Administration at the direction of Congress, and its findings were reported to Congress and the secretaries of Labor and Transportation. Task force members included labor organizers, motor carriers, consumer protection groups, owner-operators, attorneys and educators.
The task force has come under fire for lacking input from motor carriers, who it was suggested could have offered perspective lacking in the report’s findings.
“The vast majority of what you heard sort of ranged from lawyers to Teamsters to academics,” said Nathan Mehrens, vice president of workforce policy for American Trucking Associations. “There was not a lot of industry representation on the task force. As a result, I think that explained a lot of what you see in the report.”
Mehrens added, “We have members that have really good success stories about the contracting model where lease-purchase agreements that really have enabled individuals to start with basically nothing and grow into fairly substantial businesses for themselves. I think in any industry you could probably find situations where there are contracts that didn’t work. But I would suggest that the broad brush the report paints of the industry as a whole is not entirely accurate.”
Mehrens noted that ATA recommended names of motor carrier members that could have contributed to the report.
The task force did have input from managers at the U.S. Consumer Financial Protection Bureau, which provided updates on its independent research into lease-purchase agreements.
The task force determined that there currently are no effective checks on these agreements or remedies for drivers harmed by them, with litigation being the sole avenue for relief. While the courts can provide some remedy for drivers, the report noted legal actions have not led to reform.
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Still, the report noted that some lease-purchase agreements do offer drivers the opportunities promised. “A few firms and the industry associations representing those firms argue that lease-purchase programs are a pathway for many truck drivers who lack capital and business experience to buy a truck and ultimately become a successful small-business owner,” the report stated.
It also noted that about 5% of the approximately 3.5 million commercial motor vehicle drivers operating in U.S. interstate commerce for active, registered carriers have been affected by legal challenges to inequitable lease-purchase agreements. But task force members estimated that the total number could be larger since many drivers simply exit the industry instead of following through on challenges.
ATA’s Mehrens added, “The independent contractor/owner-operator model in trucking has stood the test of time. It has been used since the industry’s inception and has empowered women, minorities and immigrants to pursue the American Dream. American Trucking Associations is committed to protecting individuals’ right to choose work arrangements that align with their unique needs and goals.”
