$100,000 Broker Bond

The feds only require $750,000 liability for general freight. You only need more if you haul hazmat. At one time we were required to have $5,000 in cargo insurance. That was changed not long ago. It is the brokers and shippers that require $1 million liabiltiy and $100,000 cargo.

 

It amazes me how many owner operators and carriers want the government to do their job for them. If owner operators and carriers took the time to check out brokers before extending credit this would be a non issue. We need to get rid of the bonds. I have yet to have to file on a broker's bond. I take time to check out brokers before I will do business with them. I wonder how many who complain and want the higher bonds have had a broker fail to pay them? Out of those, I would like to know how many bothered to take time to check out a broker before doing business with them? I would wager that most got the load and didn't even check to see if the broker had authority. Most would not have taken time to check their bond or credit history. This is a business. There are millions of businesses in this country that use salesmen. Most don't have the problems that some experience in this business. A broker is a salesman. Just because you need a load and the broker has a load, doesn't necessarily mean that you must take that load. It may be late in the day and you are tired. If you can't check them out today then wait until tomorrow when you can. Major carriers don't extend credit to brokers without checking references and credit history. There are some who don't pay truckers and go out of business. That is a minority of brokers. Most pay within a reasonable time as long as the carrier delivered the load as agreed and gave them the paperwork that they required. Having a higher bond will not insure that a carrier or owner operator receives their money. Why not just spend the time to check them out and if they don't check out then don't do business with them. All this higher bond will do is eliminate the number of smaller brokers. It will reduce the number of brokers from whom a small carrier or owner operator may do business. The DOD has a bond requirement that brokers and carriers must post before doing business with them. The minimum is $25,000 and it goes up to $100,000. Perhaps the government should raise the bond even higher. That would reduce the number of carriers that can haul DOD loads. Frankly, I don't think that a performance bond should be required from either. One reason most smaller carriers don't do business with the DOD is due to the bond requirement. There is an annual cost associated with having a bond. We need less government involvement in this business, not more. We need more people who treat this as a business and not a hobby. There are always risks involved in starting any business. From some of the posts that I have seen there are some who think that the government should take away the risks of doing business. You can reduce the amount of risks in this business, but you will NEVER take away all of the risks of being in business.

 

Some small carriers and independents who failed to check out brokers and were members of OOIDA also pushed for the increased bond. If you have been in business for any length of time you have suffered some losses. It is part of business and not limited to trucking. Every business will lose money on some accounts. It may be small with some, but if you have high losses from those with whom you are extending credit then you are doing something wrong. Having a high broker bond won't make a poorly managed business run more efficiently.

It is primarily the major brokers and big carriers that want the higher bond. It is about reducing or eliminating competition. That is the reason that the major carriers want EOBR's. It is the major carriers that are pushing the EOBR's. It is not about safety or having a level playing field. Those are their two arguments. It is about reducing competition. This increased broker bond is the same thing. Forcing brokers to have a higher bond will only reduce the number of small brokers. I have never had a problem collecting money from a small broker. In fact, I had one small broker that would pay me for a load the day he received the bills. If I hand delivered them he would write me a check while I waited and with NO discounts. Try that with any of the major brokers. Most major brokers will charge 1 1/2-2% to pay within 48 hours. Some charge as much as 8%. This small one man brokerage did not charge anything for paying me on the spot. I dealt with this brokerage for many years and never had a problem collecting my money. My contract with him was about a paragraph long. It basically stated that I would carry adequate insurance and never mentioned the amount. There was also not a non compete or non solicitation clause in his contract. But, I never back solicited any of his accounts, anyway. Dealing with this broker was just a step above a handshake.

As far as the $1 million auto liability that most brokers want, it has more to do with exposure in a lawsuit. The feds require $750,000. Lawyers love to sue trucking companies because they know we carry a lot of insurance. The extra may offer a little extra protection for the broker, but it primarily protects the carrier. I have carried $1 million in liability ever since I first got my authority. It wasn't required by most brokers or shippers at the time, but I figured that if someone will sue for $750,000 they will go for $1 million. It has now pretty much become the norm.

A broker bond will only make the carrier or owner operator feel better and give him the false illusion that they will get paid. That may or may not be the case. A broker could book that much freight in a few days to a month. By the time you file on the bond he could have closed his doors. The only way to protect yourself and your business is to check credit and stay on top of your receivables. Don't allow any broker or shipper to dominate your business or allow them to get into you too deep before you cut them off. The major carriers only extend a certain amount of credit to a broker. They raise the limit based upon their experience with that particular broker. They could lose some business by not extending or raising their credit line, but it limits their exposure. By minimizing their exposure they have few losses. Most small carriers and owner operators don't take the same precautions. That is why some get into financial difficulty. They allow one or two brokers to get into them for too much money before they find that there is a problem.

We have never needed a bigger bond. We need more people who know how to run a trucking company. It would do more to help these people by training them how to run a business and how to check credit.