Thousands of brokers lose authority — but is it due to bond increase? TIA says no

By James Jaillet on

truck-at-dockThe number of brokers registered with FMCSA may be dropping — coming on the heels of the enforcement date of the increase in the minimum surety bond required for brokers to carry — but some of the numbers being tossed out don’t represent what’s actually happening, said Chris Burroughs, who’s with the government affairs staff of the Transportation Intermediaries Association, a broker trade group.

Rather than a non-compliance issue, Burroughs said, the number of brokers losing their authority (more than 7,500 by noon Dec. 10) is also dropping because the Federal Motor Carrier Safety Administration database was out of date, he said. “We feel like there were a lot of people out there who had active authority but weren’t actively doing business and hadn’t been for some time,” he said. “The database had a lot of scrubbing to do.”

TIA, along with the American Trucking Associations and the Owner-Operator Independent Drivers Association, supported the increase, which was included in the MAP-21 highway funding act passed last year.

The increase to $75,000, Burroughs said, was something TIA, OOIDA and ATA sat down to work out, finding a compromise that worked for all three groups.

Even though the broker numbers are falling, he said, TIA “absolutely still support(s)” the increase, and the impact to the brokerage industry and the trucking industry will be “minimal, if nothing at all.”

Another broker trade group, the Association of Independent Property Brokers & Agents, is fighting the increase in court, and its president, James Lamb, has said up to 75 percent of current brokers could be forced out of the business by the bond increase. The increase will have a particularly harsh impact on small brokers, Lamb said.

Burroughs said 70 percent of TIA’s membership is made up of brokers with less than $2 million in annual revenue, and the effect on TIA’s membership has been minimal, he said.

James Jaillet

James Jaillet is the News Editor for CCJ and Overdrive. Reach him at jjaillet@randallreilly.com.

5 comments
JamesPLamb
JamesPLamb

In OOIDA's World, Two Middle Men are Better than One? I posted this broker bond related comment on another thread but its worth being posted here: Simply stated, this is a matter of classic supply and demand economics. The theory, here, is... if you reduce the supply of brokers and the demand for loads stays constant, then the rates offered to brokers by the remaining brokers will decrease because the truckers have less options and choice and are at the mercy of the mega brokerages. That's a tough pill to swallow for the trucker who doesn't like brokers to begin with but it's now the reality in his world. This is the same theory that causes you to pay $6 for a hot dog at a baseball game in New York or Miami. They can charge $6 because the vendor has a monopoly and there is no competition to keep them in check. Where else are you going to get a hot dog in the middle of the game. And where else are you going to get a load now that nearly 10,000 intermediaries or 40% of the industry are gone? The theory is being proven right now as in December, according to the Consumer Price Index, prices went up. And according to the TransCore DAT Trendlines stats, rates for truckers in December went down for all types: standard vans, reefers and flatbeds. Whether you know it or not yet, YOU are the secondary victim of the $75,000 if you are a trucker. But eventually, you will see the light. What has happened, here, is some formerly independent brokers that were making 100% of the transaction have gone to work for the bigger brokerages and now earn 60% of the commission. And whereas those same people could offer a trucker a high rate as the broker (with a 15% commission going to them), they are now selling the load at a lower rate as an agent so that the brokerage they work for can realize its ideal 22.5% commission rate. That means, for every $1,000 load, whereas this guy working in the brokerage industry used to walk away with say $150 in commission as an independent broker and $850 went to the truck; now, the brokerage takes $225, the trucker gets $775. And the guy doing the brokering (now an agent of a mega brokerage) gets $135. In fact, he is now actually motivated to try and place the load at a rate even lower so that he can get back to his original $150. All you have done in this equation is add a second middle man. Now instead of there being just a broker, there is now both a broker and an agent dipping into the trucker's pocket. GREAT JOB, OOIDA! It sounds like some of you truckers and carriers just have a problem with the existence of non-asset based intermediaries and you need to get over it already for your own sake. Trucking and freight transportation arrangement as tracked by the Department of Labor are uniquely different businesses. And when it comes to those $11.4 billion companies operating out there, you will never get rid of the middle man. But you might just make him more powerful at your own expense. If that is your goal then sit back and do nothing this weekend and try and let the status quo be. Which brings us full circle back to what I told OOIDA in 2010: "Be careful what you wish for... because you just might get it." I can't wait for Todd Spencer to start getting all those calls when truckers realize they cut off their nose to spite their face and shot themselves in the foot with this $75,000 bond. And we will be more than happy to help them understand what an unwise move this truly was. Last Call for Comments in Support of the AIPBA Broker Bond Exemption Application before your Rates Go Down Even Further, Truckers! There is still time to fix this and put the big and elitist brokers in their place. But you have to act fast. You truckers have just one business day left to get your comments in to support the AIPBA exemption application to help reverse this before its too late. www.exemptionapplication.com And when you write your comment in support, tell FMCSA that you are a trucker or carrier and that you have not been fooled by TIA and the mega brokers. Because you are smarter than that.

 

Insurance Man
Insurance Man

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JamesPLamb
JamesPLamb

DISPELLING THE MYTH THAT THESE WERE REALLY BROKERS WHO WERE ALREADY INACTIVE & OUT OF BUSINESS... Some articles published by trucking media lead the industry to believe that the 8200 brokers revoked in December are due to an "outdated database" or some kind of purging of companies that were already out of business or inactive.  This is incorrect. It appears that TIA is the source that is disseminating this misinformation to mitigate the damage we believe it has done to the industry.  I have read how "TIA 'absolutely still support(s)' the increase, and the impact to the  brokerage industry and the trucking industry will be 'minimal, if  nothing at all.'” The truth is each and every one of the 8,200 brokers shut down had active authority,  which means they were paying significant money to keep their original  bond in place and their broker's license active so they could conduct  business. This just goes to prove that the TIA is out of touch with the  brokerage industry. Just look at the 1,900 brokers that have signed our petition http://www.petitiononline.com/100KBOND/petition.html.

 

As for 'funded' versus alleged 'underfunded' brokers,  factoring companies fund most small brokers so we believe Burroughs and TIA know very well there is really no such thing as a significant cohort of "underfunded brokers." TIA simply targets small brokers as opposed to the big brokers that pay TIA $14,400 per year in dues. We find it  amazing that TIA considers 8,200 brokers shut down (so far) as "minimal" to "nothing at all". We believe  the DOJ which has stated our antitrust complaint against certain trade  groups is currently "under review" will teach TIA a lesson on America's Antitrust laws.

 

CONTEXT OF REVOCATIONS: A review of the FMCSA Daily Register for the past 52  weeks would show that in an average week about 56 new applicants get a  broker's license; Keep in mind, though, this is after MAP 21 was passed, which now requires a $75K bond for new (and existing) brokers and  clarifies in the law that carriers who arrange transportation need to  get a brokers license. About the same number exit for various reasons so the amount of brokers for the past year-- until now-- has been  sustainable at about 21,500, give or take a few hundred (FMCSA reported  as a result of our FOIA request that as of Jan 1 2013 there were 21,795  active brokers and they reported in their final technical amendment rule 21,565 active brokers as of Oct. 1, 2013). When we factor in that many of the new "brokers" are actually carriers  complying with the need to secure a secondary license, it is clear we  were already losing traditional non asset based small brokers by  attrition and there is overall a decrease this past year in new start up business applicants. So in terms of the context, then, 8,200  brokers killed off all in a 10 day period is very significant.