New Broker and Freight Forwarder Financial Rules Proposed

The Federal Motor Carrier Safety Administration (FMCSA) has issued a Notice of Proposed Rulemaking (NPRM) to change the financial responsibility requirements of brokers and freight forwarders. The changes are intended to benefit motor carriers.

Federal law requires brokers and freight forwarders to maintain “assets readily available” in the amount of $75,000 to meet obligations to motor carriers. Brokers and freight forwarders often meet the financial security requirement through surety bonds or trust funds administered by others, termed “financial responsibility providers.”

When a broker or freight forwarder improperly withholds payment for services from a motor carrier, the trucking company can submit claims to the financial responsibility provider backing the surety or trust fund. If the total claims from all carriers exceed the $75,000 figure, the financial responsibility provider may seek assistance from a court in an interpleader action. The court would decide share of the $75,000 each claimant receives.

FMCSA states that the percentage of unscrupulous brokers is small but acknowledges that procedures for recovering damages from such brokers are slow and tedious. To minimize claims and expedite the process, the NPRM would:

• Require that the “assets readily available” to meet the $75,000 requirement be capable of conversion into cash within seven (7) business days in order to rapidly compensate motor carriers. FMCSA lists several types of assets, such as real property, which commonly cannot be liquidated that quickly.
• Restrict the types of companies who can serve as a financial responsibility provider. Loan and finance companies would no longer be eligible.
• Initiate the immediate suspension of a broker or freight forwarder operating authority if their “assets readily available” are drawn down below $75,000 and not replenished within 7 business days. The bankruptcy or insolvency of a broker or freight forwarder would also be reported by financial responsibility providers.

The NPRM would allow three years for brokers, freight forwarders and their financial backers to make the proposed changes. Make comments on the NPRM, due by March 6, 2023.