FMCSA sharpening focus on broker fraud

Trucking stakeholders have been sounding the alarm on unscrupulous and fraudulent brokers for years. And the industry is still waiting on the Federal Motor Carrier Safety Administration to address transparency issues with broker transactions, which will allow truckers to make better decisions about who to work with.

But even as FMCSA sits on a petition for rulemaking on broker transparency, the agency is strengthening efforts to combat broker fraud.

Registration Fraud Team

One way FMCSA is combating broker fraud is by aiming to prevent bad actors from existing in the first place.

The agency recently announced that it will create a Registration Fraud Team. FMCSA’s registration system has been compromised in the past by people hacking into it and illegally registering a company. The fraud team will investigate fraudulently registered companies as well as cases where legitimate companies had their identities stolen.

The Registration Fraud Team is just the latest effort by FMCSA to address broker fraud through its registration system. The agency has already bolstered security of the system by employing multi-factor authentication and driver’s license checks, as well as by preventing principal places of business that do not meet regulatory requirements. Future improvements will include an identity verification service, which will require registrants to submit a live photo, or selfie.

Other actions against broker fraud

Over the past year alone, FMCSA has beefed up efforts to address broker fraud.

In terms of going after fraud allegations, FMCSA will have more resources to conduct investigations. The Infrastructure Investment and Jobs Act provided for hiring nine new commercial enforcement safety investigators.

Last year, FMCSA conducted a program called Operation Protect Your Move, which included compliance reviews on a few dozen household-good brokers and five property brokers in four states. And this year, the agency will launch Operation Protect Your Load, which will focus on property brokers.

FMCSA also issued a final rule addressing broker financial responsibility last November. The rule went into effect in January, with a compliance date of January 2025 for most provisions. A month later, the Owner-Operator Independent Drivers Association filed a petition for reconsideration of the rule.

“The final rule should be enhanced to ensure transparency when a broker/freight forwarder’s financial responsibility falls below $75,000,” OOIDA wrote in the petition signed by President Todd Spencer. “The agency should also stipulate a seven-day period for the surety provider or financial institution to investigate and determine the validity of the claim. These and other modifications will promote a fair working environment between brokers/freight forwarders and motor carriers that will best serve the public interest.”

In June 2023, FMCSA issued final guidance on the definition of “broker” and “bona fide agents.” However, OOIDA said definitions were never the issue, calling for FMCSA to address how the business itself operates.

Issues with enforcing broker rules

FMCSA is limited in what it can do about broker fraud, creating issues with enforcing the rules.

Limited by statutory and regulatory authority, the agency can enforce broker regulations that deal with recordkeeping, misrepresentation and other economic regulations. Outside of that, many broker fraud complaints are criminal in nature and fall under the jurisdiction of law enforcement.

There appears to be a lack of action with law enforcement agencies. Local police departments often do not have the manpower to go after fraudulent brokers. Since broker fraud deals with interstate commerce, cases can go to the Federal Bureau of Investigation. However, little action has been taken at the federal level, either. FMCSA has been working with law enforcement and offices of attorneys general to educate them on the problem.

Even when it comes to civil action, FMCSA can do only so much. Due to a recent court ruling, agencies can no longer enforce civil penalties. Rather, enforcement of civil penalties must go through the judicial system. For a civil penalty to be handed down, a federal lawsuit has to be filed.

What can truckers do about broker fraud?

Enforcement measures against broker fraud are reliant on information provided by truckers.

Any driver who has been a victim of broker fraud is encouraged to file a complaint with the National Consumer Complaint Database. This is where FMCSA gathers formal information regarding bad actors in the industry.

The more truckers use the database, the more likely egregious fraudsters will be dealt with. Due to volume, FMCSA cannot review or act on all complaints. However, if the agency notices multiple complaints of one broker, it will act on those.

Truckers are advised to report incidents of broker fraud or identity theft to local law enforcement and the FBI. Fraud also should be reported to the U.S. Department of Transportation’s Office of Inspector General by going to oig.dot.gov/hotline or calling 800-424-9071.

In addition, FMCSA recommends truckers do the following immediately after identifying broker fraud and reporting it:

• Contact their insurance company
• Inform all load boards and factoring companies
• Make social media posts
• Inform customers

Truckers also should ensure their phone numbers displayed on the SAFER system are visible and correct.

Broker transparency still needed

Although FMCSA is taking measures to prevent broker fraud, stakeholders believe more transparency in broker transactions will have a greater effect on the issue.

Efforts to strengthen broker transparency began four years ago, when OOIDA petitioned FMCSA to begin the rulemaking process. The agency did not grant the petition until March 2023.

“We believe the agency must publish a notice of proposed rulemaking and promote broker transparency as soon as possible,” OOIDA wrote in an Aug. 17 letter to FMCSA. “Updating these regulations will protect carriers from unlawful brokers and help protect the public by providing a marketplace in which each party behaves in a clear and transparent manner.”

OOIDA’s petition requested the following:

• To require brokers to automatically provide an electronic copy of each transaction record within 48 hours after the contractual service has been completed
• To explicitly prohibit brokers from including any provision that requires carriers to waive their rights to access the transaction records

Since the petition was granted, a notice of proposed rulemaking has been delayed, with the publication of the rulemaking not expected until Oct. 31. LL