TUCSON, Ariz. — Brokers attending the 2010 Transportation Intermediaries Association convention and trade show here were warned to beware of financial services firms that allow them to skirt federal requirements that they post a $10,000 surety bond.
Federal Motor Carrier Safety Administration regulations require that brokers maintain and file with the agency a bond, insurance policy or other type of approved security to cover possible legitimate claims filed by shippers and carriers.
However, a “new animal” has emerged in the market that allows cash-strapped brokers to pay financial institutions an annual fee of roughly $1,000 in lieu of posting the $10,000 bond, said Joe Foxall, chief financial officer of ITS Financial Services, an affiliate of Internet Truckstop, a freight matching service.
As a result the broker may pay a fee with the belief that the financial company actually has the $10,000 set aside for them to protect any claims, Foxall said.
“But that money does not go into a trust fund, it goes as a service fee to the trustee,” Foxall told brokers. “The fact is the carriers just don’t get paid. We see it every day.”
