New rule for broker transparency during a time of fraud concerns

Federal regulators have proposed a new rule in response to allegations of fraud in rate-setting by freight brokers.

Federal regulators have proposed a new rule in response to allegations of fraud in rate-setting by freight brokers. In May 2020, the Owner-Operator Independent Drivers Association (OOIDA) and the Small Business in Transportation Coalition (SBTC) urged the Federal Motor Carrier Safety Administration (FMCSA) to increase transparency among brokers, including the requirement to provide transaction information within 48 hours and prohibiting brokers from requiring waivers to access these records.

While the FMCSA’s proposal strengthens transparency, it does not meet all of the demands, limiting itself to requiring brokers to provide transaction records upon request and adjusting the format and content of these records. The changes aim to protect carriers and improve system efficiency.

Proposed changes by the FMCSA

The key changes proposed by the FMCSA are:

Electronic format for records: Brokers must maintain records in an electronic format, making them easier for carriers and shippers to review remotely, rather than only offering physical records at their offices.
Review of record content: The proposal suggests eliminating the distinction between brokerage and non-brokerage services, requiring records to include full details of charges, payments, and claims related to each shipment.
Provision of records upon request: The proposal redefines transparency as an obligation for brokers to provide records to parties involved in the transaction upon request.
48-hour deadline for providing records: Records must be delivered within 48 hours of the request to ensure timely resolution of service or payment-related issues.

Industry debate: mixed reactions to the FMCSA changes

The OOIDA has welcomed the regulatory proposal. The organization appreciates the requirement for records to be available electronically and emphasizes the obligation for brokers to comply with the regulations. Todd Spence, president of OOIDA, comments that broker transparency is seen as essential for a fair and efficient transportation system, and critical for carriers to defend against claims regarding shipments.

On the other hand, the Transportation Intermediaries Association (TIA) has expressed disapproval, noting that the proposal does not address the growing issue of fraud in freight transportation. The TIA believes that fraud, which costs the U.S. supply chain over a billion dollars annually, is a much more urgent issue than broker transparency. The organization criticizes the proposal for focusing on outdated regulations rather than addressing problems that impact the safety and efficiency of the supply chain.

To continue evaluating the proposal and gather feedback from stakeholders, the FMCSA will open a 60-day public comment period starting November 20. This will allow carriers, shippers, brokers, and other involved parties to express their opinions and concerns, which could influence the final rule modifications.