Increased US Surety bond

H

hockeylover

Member
Jul 5, 2010
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Hello Peeps

Today I was notified by my insurance company that the bond is being raised to $75.000 and yet they don't seem to know any details about the regulations or what it ,means to a small broker.

Anyone got any new info they can share on this.

Hockeylover
:o
 
The information that I have heard, so far, is that the insurance companies are doing an assessment of all the carriers/brokers to see who, and how many, will qualify for the new bond. Most company's will have to submit their financials and If an individual company's financials don't support the bond, the insurance company may not post it on their behalf.....so there MAY be some fallout as a result. I also believe they are doing an assessment of what the market will bear in respect to cost. I don't think any carriers have issued their new rates yet which I find interesting. As long as your financials support it you should be fine.
 
Thank you Pack Rat

Sounds like the regulation around it has not been set in stone as of yet. So confusing.

Thanks
 
As I understand it, it will be effective for August this year...but will have to wait and see!
 
It's really meant to drive the smaller marginal players out and to restrict the point of entry for such. Real brokerages that are 'in it to win it' are better capitalized than $75K, so I don't think you'll see anything shocking.

The way the industry is going, there is likely going to be a lot of M&As coming up and you'll end up with less players that are larger and more complex than the traditional model of freight brokerage.
 
theman said:
It's really meant to drive the smaller marginal players out and to restrict the point of entry for such. Real brokerages that are 'in it to win it' are better capitalized than $75K, so I don't think you'll see anything shocking.

The way the industry is going, there is likely going to be a lot of M&As coming up and you'll end up with less players that are larger and more complex than the traditional model of freight brokerage.
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That is really to bad because I find the 4 and 5 people Mom and Pop type shops are way better to deal with. The usually know what the answers are to the pertinent questions a carrier needs to know in order to properly rate them and make sure loads are done in a timely fashion.

I agree the 75k bond is a good thing just hope it does not drive out the smaller brokers with a couple customers that pay well and ontime.

The Mega brokers have there place but it sure can be frustrating dealing with there tracers and uh hum dispatchers that do not know a 5th wheel from a steering wheel.
 
I think the ones that have the good customers won't be driven out of business by it. $75K is not a ton of capitalization.
 
Rob said:
That is really to bad because I find the 4 and 5 people Mom and Pop type shops are way better to deal with. The usually know what the answers are to the pertinent questions a carrier needs to know in order to properly rate them and make sure loads are done in a timely fashion.

I agree the 75k bond is a good thing just hope it does not drive out the smaller brokers with a couple customers that pay well and ontime.

The Mega brokers have there place but it sure can be frustrating dealing with there tracers and uh hum dispatchers that do not know a 5th wheel from a steering wheel.
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Well stated Rob!!!
 
TIA is pushing that any carrier that brokers freight needs to get the bond as well. We are a carrier, but we do broker our own freight. So this affects us all, not just the brokers. Received this from TIA today (see below). Our insurance company won't provide a rate on this increased bond yet, they feel it could still be a long time away.

There is no enforcement by any form of government on the bond now, so I don't see how this is going to change anything? Again, it falls on the carrier to make sure that the broker has a bond before doing work with them (make sure it is up to date periodically too). From my experience nobody (or almost nobody) asks for the bond so what is the point? It punishes the legit brokers and carriers alike by increasing their cost. The brokers that operate out of their basement with no insurance, bond, or capital continue booking freight with no added cost driving down the rates for all. Just my 2 cents, which is now rounded down and is worth absolutely nothing thanks to the government.


Urge Congress to Stop Double-Brokering
We need the entire membership to contact their United States Members of Congress in an effort to halt an attempt by motor carrier associations to create a carve out for them to continue to illegally broker freight without proper licensing and bonding requirements.

By way of background, on July 6, 2012, President Obama signed into law the Moving Ahead for Progress in the 21st Century Act or MAP-21. MAP-21 included language that clarified to FMCSA that motor carriers do in fact need separate brokerage authority and financial requirements to broker freight. The language specifically states that in order for a motor carrier to transfer freight to an additional carrier or interchange, the originating carrier must physically transport the cargo at some point during the movement and must maintain liability for the cargo and payment to the interchanged carrier. In TIA’s efforts to strengthen the brokerage industry and have a level playing field, we compromised with ATA and OOIDA to have the broker bond increased from $10,000 to $75,000, only to the extent that all entities arranging freight for compensation must have in place a $75,000 broker bond. Additionally, TIA advocated strongly for this compromise in part because of the growing concern of double brokering amongst our membership.

TIA supports legal interlining and trip leasing, but will continue to fight against other groups attempting to create loopholes for their membership to continue the practice of illegal brokering. For example, we hear that small carriers often will accept 15 truckloads from a broker or shipper, but only have 10 trucks available and will “sub-contract” the remaining loads out for compensation to five other carriers. This is not interlining or subcontracting, this is a perfect example of double brokering or illegal brokering. Section 371.2 of the Code of Federal Regulations (CFR) clearly defines a broker as:
(a) Broker means a person who, for compensation, arranges, or offers to arrange, the transportation of property by an authorized motor carrier. Motor carriers, or persons who are employees or bona fide agents of carriers, are not brokers within the meaning of this section when they arrange or offer to arrange the transportation of shipments which they are authorized to transport and which they have accepted and legally bound themselves to transport.
There are enormous liability concerns with motor carriers brokering freight. There was a recent court case, where a broker hired a motor carrier for transportation of property, and the motor carrier turned around and double brokered the load to another motor carrier (without the broker’s knowledge) whose driver was a meth addict and was involved in a fatal accident. The broker was found guilty of negligent hiring and the jury rendered the broker liable for millions of dollars.

Please join your fellow TIA members in contacting your Members of Congress todayand telling them to NOT support any attempt by motor carriers to create a carve out for them to continue to illegally broker freight.

Please let TIA staff know if you submit a letter, so we can follow-up with your Members of Congress and their staff.

If you have questions or concerns, please contact Chris Burroughs at burroughs@tianet.org or (703) 299-5705 or Jay Ruais at ruais@tianet.org or (703) 299-5713.
 
And the reason why carriers brokering freight also need the bond is because in so many cases, the ones that are the problem are those who represent themselves as carriers but broker the freight (which is why SAFER with 1 truck is a red flag that has to be dealt with) and carriers with very few trucks who do the same, but aren't capitalized to float their A/R.

The bond increase won't solve the whole problem, I agree ... it is shocking how many customers don't ask for it and how many carrier partners don't ask (though I have to say, our company is terrible about releasing that info). But at least it's an SOP that has a chance of keeping the industry in check to a degree.
 
What about Co Brokering like the some people in Quebec do is that still legal Heck CAT FLS and GRoch will all be out of business if they stop co-brokering as that is what the TIA wants according to they way I read that..

This is all a scam the 75k is no better than the 10k any broker worth a salt is doing 75k a month or darn close. The scam artists will do up fake bond papers whatever you need Mr Carrier I have just do my load I am not paying anyway. As stated most carriers sell of excess freight if they really think they can police this then why can they not get rid of the shysters we have now??


TIA members are usually the slowest payers for the most part anyway. Just another cash grab bend over truckers they are trying to give it to us again...
 
The only way co-brokering will stop is when everyone wises up about who they're using. The root problem is that US brokers are either not checking up on who they are using, or are just following 'the path to least resistance' in these cases. If the customer gets wind of what's going on, no doubt the relationship ends. I don't know of any customer who condones this sort of thing with the exception of those contracted to mytmc, Ryder, Unyson etc ... but those are a different animal actually.
 
it's all a joke and cash grab....nothing more. There is no policing in effect for the 10K bond requirement. Almost no one checks on a carrier or broker's authorities or Bond now so what will upping the requirement to 75K do? Nothing but add to the bottom line of bond issuers and insurance companies.....the same rats that don't have authorities now will still not after this goes into effect!
 
I can only assume that this increase in the amount of the surety bond was promoted by US carriers who have been burned by freight brokers going out of business and the previous 10K bond being no where near adequate to cover their loses. The 75K limit will help a little in that regard, but lets face it, most brokers that decide to close up shop will have considerably more than 75K in outstanding payables. the TIA of course would like to see the "herd" thinned out, but does the industry as a whole want only the large brokerage firms left in the game? As a small/mid sized broker, I won't have a problem obtaining a bond in the higher amount, but as was said earlier, who is going to police this, and how important will it be if no one asks for proof of a bond?
 
-Michael pulls out his soap box ...

Bond policing, same as credit worthiness checks, is done by the carrier. If we all checked for bonds and refused to do business with entities without bonds, then there wouldn't be any brokers out there that didn't have bonds ... correct?

Rob alluded to co-brokering and Quebec brokers ... simple, two-step, solution;
1) When a company asks you to ID as someone you don't even know, or has nothing to do with the transaction, give them the load back. There is no need to be polite about it either ... it's not like you ever want to do business with them again ... you're being scammed !!!
2) Go through your Rolodex, electronic or otherwise, and pick out every load broker and carrier with a Quebec or Nevada telephone number and/or address, and unless you have a rock solid, concrete relationship with them, throw out all of their information, put them on your DNU list, and throw in a voodoo curse for good measure. You probably have a better chance of doing a back alley coke deal and not getting shanked in the process than you do getting paid by some of these people.

Personally, I would hate to be G.Roch trying to do business out of Quebec. The reputation hurdles must be horrendous, and I for one, feel bad for companies like G.Roch that get painted with the same black tar brush as others in Quebec that have, shall we say, less than stellar reputations. That's not to say that other places don't have bad apples, it's just that Quebec and Nevada seem to have more of them.

Some have called the new 75K bonding requirement a "cash grab". Who's grabbing the cash? It's not the government. It's not the carriers. It's not the TIA or any other association. Insurance companies that write the bonds get paid for what they do. A $75,000.00 surety bond should cost about $400.00 a year ... at least that's what my 250K bonds cost (each). So, if you're a broker or a carrier and you can't afford a bond for $400.00 a year to maintain your authority, why are you in this business ??? ... Can't be anything constructive to my way of thinking. I have to prove to brokers that I am a good carrier. Why shouldn't brokers have to prove to me that they are good brokers?

I will, until my dying days, maintain that the transportation industry has changed considerably over the past several years and that trucking companies, regardless of size, cannot survive without load brokers. I have never been a big fan of the one person, basement office with a phone and fax, I'll pay you when I get paid, load broker. I personally take comfort in the fact that some form of regulation (or whatever you wish to call it) is coming into existence that provides me with some measure of confidence that the load brokers that I am dealing with are honest business persons that are earning their pay rather than trying to steal it.

There you have it ... my soap box rant for the day :)
 
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The value of the bond does not necessarily reflect the premium charged. Here's a cut and paste of what the TIA has sent to its members:

************************************************************************************************************************

Due to the success of the TIABond program, TIA now offers the $75,000 bond without the $8,000 collateral deposit requirement.


TIA Delivers Options.

Trust Plan: Deposit $75,000 cash into your trust held by TIA Services with no annual fee. Period. Like that's going to happen

Bond Plan: TIA, through our insurance associate, offers a low cost bond alternative to meet the new $75,000 Surety requirement.
Pricing:

Annual Premiums between $1,500 - $5,600 depending on risk. quite the premium rangeOne-time Program Fee of $2,000, which is credited back to you over 4 years. so they have you loan them $2000
No Collateral Deposit

**************************************************************************************************************************************************

The effective date is October 1, 2013 and the big US brokers love it.
 
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That makes sense Scam Chaser ... TIA is neither an insurance company, nor a bonding company. No doubt they are going to the re-insurance market for their policies, and equally as apparent is the fact the TIA has provided the re-insurance market with slightly above zero information, or at least such a broad range of information that there is no possible way to accurately quote such business.
Get a real quote from a real insurance or bonding company based on the realities of your business. I suspect you will find the cost considerably cheaper than what you have quoted ... assuming of course that you are trying to bond a real and upstanding, profitable company.
The "One Time Program Fee" ... really, that's pure genius !!! That would be like me charging you for dialing my phone number to offer me loads ... LOL ... BTW, you owe me 6 bucks for replying to my post ... ROFLMAO

BTW ... I stand corrected ... it appears TIA was trying to scoop a little off the top if you bonded through them.
 
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Load brokers aren't going anywhere anytime soon ... except there will be consolidation in the industry for sure. But co-brokering has had its time, and it's faded away. It's not a viable business model to grow business any longer.
 
"Some have called the new 75K bonding requirement a "cash grab". Who's grabbing the cash? It's not the government. It's not the carriers. It's not the TIA or any other association. Insurance companies that write the bonds get paid for what they do. A $75,000.00 surety bond should cost about $400.00 a year ... at least that's what my 250K bonds cost (each). "

Wow...we must be getting the "screw you deal" our bond cost $500 (which up till now I thought was good) and it's not even close to 250k. who is your bond with...if I may?
 
The bond that we have as carriers is a liability bond ... it's not the same as the broker bond though there are brokers out there that also hold a liability bond, believe it or not ...

The $10K broker bond that has been in place until now is not really expensive, but it's still for most about $1000 a year or so ... so when it goes to $75K, it will be more expensive for sure. But for any legit broker worth their salt, it shouldn't be an issue.

Insurance companies are being used as the conduit for enforcement, it's true ... not only on the broker side with the increased bond, but on the carrier side too. Try getting a crap SAFER rating and see what that does to your insurance rate. It can put you out of business.\

Insurance companies are loving this for sure ... but at least because there's a couple of bucks in it, they'll be interested in enforcement.
 
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