FMCSA Seeks New Financial Controls on Brokers

Federal regulators want to tighten financial controls on broker and freight forwarders’ operations, in part to protect carriers working with them. 

The Federal Motor Carrier Safety Administration (FMCSA) is specifically looking to make modifications in five aspects of their financial operations, according to a Jan. 5 Federal Register notice. This proposed rule would “result in benefits to motor carriers,” according to the notice. 

“FMCSA is aware that some brokers improperly choose to withhold payment to motor carriers for services rendered,” reads the notice. 

To address this, the first proposed restriction would require brokers and freight forwarders to have “assets readily available.” FMCSA proposes that brokers put these assets in trusts that “meet certain criteria,” including that said assets can be liquidated within seven days if needed for a payment. 

Another part of the proposed rule would mandate that a broker’s “available financial security” falls below $75,000 when there is a drawdown on the “surety bond or trust fund.” This would ensure that a broker can’t go above its own bond financials. If the funds aren’t replenished within seven days of receiving notice from FMCSA, the agency would suspend the broker’s operating authority. 

FMCSA is also looking to define “financial failure or insolvency” specifically to mean “bankruptcy filing or state insolvency filing,” and would require brokers to notify the agency in case of insolvency, as well as cancel the related financial responsibility. 

To enforce these planned requirements, FMCSA would first have to inform the surety or trust fund provider of any suspension, and then wait 30 days for a response before making its final decision. 

Lastly, the agency wants to strike an existing rule allowing loan and finance companies to serve as trustees on a Form BMC-85. 

“FMCSA believes that most brokers operate with integrity and uphold the contracts made with motor carriers and shippers,” the notice reads. “However, a minority of brokers with unscrupulous business practices can create unnecessary financial hardship for unsuspecting motor carriers.” 

FMCSA is accepting comments on the proposed rule through March 6.