New Broker Surety Bond Requirements In Effect Today

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New Broker Surety Bond Requirements In Effect Today

The Federal Motor Carrier Safety Administration (FMCSA) has been very hard at work this past year. Just yesterday we discussed how their delve into sleep apnea resulted in a unanimously passed bill from the House which, if they want to take action on sleep apnea among truckers, forces them to do so under firm regulations and not simply guidelines.
Prior to that they enforced the new HOS regulations- and we all know how that sat with the trucking industry.

Well today, it’s time for the brokers in the trucking industry to get their taste of the FMCSA. However, this time their policy changing and rulemaking actually works to benefit the truckers, so it seems.

Today, on Oct. 1, the new surety bond requirements are put into effect for brokers and freight forwarders. Whereas before only a $10,000 minimum bond was required, it is now a $75,000 minimum requirement.

What is a surety bond?

For those that have no idea what this means, we’ll take some time to explain here. For the past three decades, if you wanted to be a broker in the trucking industry you had to pay a minimum bond requirement of $10,000. This figure was in place even before 1980, so it’s arguably dated. With such a low payment it was much easier for “bad brokers” to meet the bond requirement and still stiff truckers for the work they did for them.

You see, the surety bond in the auto transport industry is put in place to protect truck drivers from fraudulent brokers. There are many cases where brokers will enlist the service of a trucker- to ship a vehicle for a customer- but will fail to pay them once the shipment is complete. We like to call these brokers “bad brokers.” The $10,000 surety bond the broker is required to pay is supposed to act as a safety net for truckers stiffed by these bad brokers.

Unfortunately, in these days $10,000 is not nearly enough. On top of that, $10,000 is the maximum amount the bond company is required to pay out to the stiffed trucker. Often times, attorney fees alone cost that much.

How Do New Requirements Help?

The hope is that, by increasing the bond requirement, the bond companies will be much more selective and will scrutinize those applying for bonds much more. By doing so, they can be more sure that the brokers requesting the bond- and paying a minimum of $75,000- will not abuse it and will treat the truckers right by paying them what is owed.

Furthermore, all brokers and freight forwarders who engage in interstate brokerage- meaning all auto transport companies brokering out their services- must register with the FMCSA. In order to register, they must have already met their minimum bond payment of $75,000. If they fail to register with the FMSCA (perhaps because they want to avoid the bond payment and have no intentions of paying their truckers) they will be met with a $10,000 fine/civil penalty.

It sounds like a big change, and it is. However, it seems to be put in place to safeguard our nations truckers, and no good broker can argue with that. Thankfully, the FMCSA is implementing a 60-day phase-in period starting today, Oct. 1. This gives the industry a good amount of time to get their things together and apply for their new bond.

Starting Nov. 1, the brokers and freight forwarders that have not yet met the new $75,000 bond minimum will receive mail notifications from the FMCSA. From there they have 30 days to pay the bond before the FMCSA revokes their registration.