WASHINGTON — Federal regulators have issued a long-awaited proposed rule in response to allegations of fraud in the rate-making process raised by owner-operators against truck brokers.
In May 2020, the Owner-Operator Independent Drivers Association and the Small Business in Transportation Coalition petitioned the Federal Motor Carrier Safety Administration to improve broker transparency.
OOIDA’s petition requested that brokers automatically provide transaction information within 48 hours of the completion of contractual services and that brokers be prohibited from including any contract provision that requires a carrier to waive its rights to access the transaction records.
SBTC also wants brokers to be prohibited from requiring carriers to waive their rights to review transaction records, and wants FMCSA to adopt new regulatory language stating that broker contracts cannot exempt brokers from having to comply with transparency requirements.
FMCSA’s proposal stops short of outright prohibitions as requested, however.
“Though the proposed rule is responsive to the petitions in reinforcing the broker transparency requirement, the proposed provisions differ from those requested by OOIDA and SBTC,” the agency stated in a notice published on Tuesday.
“The proposed rule would revise the regulatory text to make clear that brokers have a regulatory obligation to provide transaction records to the transacting parties on request. The proposal would also make changes to the format and content of the records.”
The changes, in the form of four provisions that would amend current record-keeping regulations, would “further protect motor carriers and promote efficiency within the motor carrier transportation system,” according to FMCSA.
Four revisions
The major changes proposed by FMCSA:
- Brokers must keep records in electronic format: This would make it easier for carriers and shippers “to review broker records on request, and remotely, as compared to the current practice of some brokers who respond to transparency requests by making only physical records available at their principal place of business. The agency believes that many brokers already maintain their records in an electronic format.”
- Revisions to contents of brokers’ records, including itemizing charges and fees: FMCSA proposes eliminating a current distinction in the regulations between brokerage and non-brokerage services, and instead “require that the records contain, for each shipment in the transaction, all charges and payments connected to the shipment, including a description, amount, and date,” along with any claims connected to the shipment, such as a shipper’s claims for damage or delay. “This amendment would ensure the parties have full visibility into the payments, fees, and charges associated with the transaction so they can resolve issues and disputes among themselves without resorting to costlier remedies.”
- Brokers must provide records upon request: FMCSA stated that the current regulation frames the broker transparency requirement as a right of the transacting parties to review the records. However, “the proposed amendment would reframe broker transparency as a regulatory duty imposed on brokers to provide records to the transacting parties.”
- Records must be provided within 48 hours of request: This provision “is intended to ensure that the requesting party receives the records in a timely manner, to support the resolution of issues around service or payment.”
Mixed reaction from carriers, brokers
Commenting on the rulemaking, SBTC Executive Director James Lamb said the proposed changes are “too little too late,” and that the FMCSA “has gutted our request while at the same trying to make an appearance of strengthening the rule,” Lamb said in an email to FreightWaves. “It preserves the status quo, which caters to Big Broker and TIA [the Transportation Intermediaries Association, which represents truck brokers].
“There is no question now that FMCSA has been captured by Big Broker. Truckers and carriers must now come out in droves and file comments in full force against this starting tomorrow and demand a prohibition against contractual waivers” that prohibit customers from viewing contract details.
OOIDA President Todd Spencer appreciated FMCSA incorporating into the rulemaking OOIDA’s request to require that brokers make records available electronically.
“As FMCSA noted in its proposal, broker transparency is necessary for a fair, efficient transportation system, and is especially important to help carriers defend themselves against alleged claims on a shipment,” Spencer said in a statement.
“We look forward to responding to FMCSA’s request for feedback, and most importantly, will continue to press the agency, lawmakers, and other regulators to make all resources available to enforce these regulations and ensure that brokers finally play by the rules.”
In an email statement, TIA said it was “deeply disappointed” by FMCSA’s decision to release a broker transparency rule at all instead of addressing freight fraud, a problem the group considers significantly more urgent.
“While TIA respects that current regulations must be followed, we find it notable that during the COVID-19 pandemic, when broker transparency was last debated, the National Consumer Complaint Database [overseen by FMCSA] recorded zero complaints related to this issue,” the group stated.
“In stark contrast, there were more than 80,000 complaints related to freight fraud and unlawful brokerage activities. This stark disparity highlights the misaligned priorities of the FMCSA under the current administration.”
In the proposed rule, FMCSA noted that some carriers believe that having more broker transparency would have an effect on negotiated freight rates.
“The agency believes that other market factors, rather than the availability of additional information through broker transparency, are likely dominant in setting freight rates,” FMCSA stated. “However, the Agency has not ruled out the possibility that motor carriers and shippers could negotiate for better rates over time using the broker transparency information.”
The public will have 60 days to comment on the proposed rule’s potential effect on freight rates and on other issues.