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June 21, 2010 5:45 AM, EDT

Senators Introduce Bill Targeting Fraud Within the Freight Brokerage Business

By Sean McNally, Senior Reporter

This story appears in the June 21 print edition of Transport Topics.

A pair of U.S. senators introduced legislation last week aimed at curbing fraud by unscrupulous freight brokers.

Sens. Olympia Snowe (R-Maine) and Amy Klobuchar (D-Minn.) on June 15 introduced the Motor Carrier Protection Act, which, according to a release, “would update the current requirements and provide motor vehicle operators with the tools they need to protect themselves and their company from abuse.”

“All too often, motor vehicle operators fall victim to the deceitful behavior of fly-by-night brokers and freight forwarders who engage in preposterous criminal activities such as financial fraud,” Snowe said in a statement. “By updating current regulations, this legislation will give trucking operators peace of mind that they will, indeed, receive payment for a job well done.”

The bill’s introduction was hailed by several trucking representatives.

“If passed, this law would put a stop to a system that allows rogue brokers and scam artists to operate unchecked,” Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, said in a statement. “Too often, we’ve seen bad brokers get away with collecting payment from shippers but leaving truckers holding the bag.”

Robert Voltmann, president of the Transportation Intermediaries Association, told Transport Topics that TIA and OOIDA have been pushing for this legislation since their contentious 2007 battle of a previous broker regulation bill to address fraud in the industry. That bill was never passed.

“That’s what this bill is about. It’s not about regulation or re-regulation,” Voltmann said of the current proposed legislation. “It’s really about resetting the very minimal economic regulation that was put in place 20 years ago so that the legitimate companies in the industry can function and grow.”

In a joint statement, Snowe and Klobuchar said the bill would:

Increase the broker bond to $100,000 from $10,000 and apply the bond requirements to freight forwarders.

Establish stricter requirements for entities seeking broker or forwarder authority.

Stiffen penalties for a number of violations of broker regulations.

Establish an annual registration requirement to renew broker or forwarder operating authority, and to require the Federal Motor Carrier Safety Administration to revoke operating authority if it is not renewed annually.

Establish strict regulations on bond providers and the manner in which bonds are administered.

Clarify that carriers must have a broker’s or forwarder’s license and bond in order to put freight on another carrier for compensation.

Require separate registration numbers per authority, and whatever authority is used in a transaction must be stated in writing.

Klobuchar said the bill “ensures trucking operators have the tools and protections necessary to prevent fraud, and also modernizes and strengthens federal oversight of this industry.”

“Many truckers are small, independent businesses that fraudulent freight forwarders and corrupt brokers too often easily prey upon,” she said.