Article

Bond Fallout Could Mean One-Third Fewer Brokers in 2014

December 2013, TruckingInfo.com - WebXclusive

by Michele Greene, DAT

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The FMCSA has revoked the operating authority of 8,180 brokers since Dec. 2, the date the federal agency began revoking authority from brokers without a $75,000 bond. That’s a whopping 38% of the 21,700 brokers that had operating authority at the beginning of the month.

The story is different at DAT. Even though the vast majority of brokers on the DAT network are small businesses, only a few have had their authority revoked and many of these will continue to operate as carriers without a brokerage. And despite the new bond requirement, load posting volume on DAT load boards is at an all-time high for this season.

While the percentage of brokers losing authority is certainly high, the impact on the industry is likely to be less significant. It’s long been clear that a sizable chunk of brokers registered with the FMCSA were what you might call “casual” brokers. These are companies for whom brokerage was never a major source of income. The amount of freight moved by these brokers was only a small percentage of the overall freight moved nationwide each year. That said, it is regrettable that such a large number of small brokerages are leaving the industry and we hope they will come back reasonably soon.

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At the same time that the industry is losing some brokers, new brokers are being added. Since Jan. 1 of this year, the FMCSA added about 2,000 brokers. Many of those are carriers who occasionally broker freight. MAP-21 requires that they, too, have freight broker operating authority and possess a $75,000 bond. The number of authorized brokerages in the U.S. peaked in March 2013 at a little shy of 22,000, but we are likely to end the year with fewer than 14,000.

Comments

  1. 1. Robert Johnson [ December 18, 2013 @ 01:30PM ]

    I was considering entering the freight broker business. Reading about the increase in the bond requirement reminds me of my 20 years of owning an independent stock brokerage. The big houses such as Merrill sat on the board of the NASD (now FINRA). I left the business 12 years ago and back then it was the NASD.

    A lot of the laws promulgated by the NASD were instituted by those on the board and they were not independents. Many, many times the laws were meant to place great burdens upon the independent brokerages and had little effect on the wirehouses such as a Merrill.

    I would bet that this new requirement was the idea of some large freight brokerage as a way to shake out the competition. Greasing the palms of elected officials to get favors is part of the American political life. I could go on but the multi-national corporations do it all the time. We live in a time of Oligarchy and form of Corporate Fascism, a time where the big dogs have access to the political power. They don't give the big money and not expect the return on their investment.

    I could be wrong about the change and it would be almost impossible to prove.

  2. 2. charles miles [ December 22, 2013 @ 02:21PM ]

    I think bond should have been raised to percentage of business you do per month butt 75000 will help to be sure we get paid owner ops spend big to be intrucking business so why should brokers have free ride

  3. 3. sasha Renfrow [ December 23, 2013 @ 06:36AM ]

    If a broker has been in business and never had bond hit I think things should not have changed for them. I am a mom who supports her son with my broker income. I am not on the system I actually making the brokerage work after 10 years in industry. I think it is very unfair. I have never used government system to pay for my child like a lot of women do. It was very unfair legislation to people that are honest and hard working.

  4. 4. BILL DOLLOFF [ December 27, 2013 @ 09:00AM ]

    I THINK THE BOND SHOULD BE MORE THAN $75,000 THOSE THAT CANNOT MAKE THE BOND SHOULD NOT BE IN THE BUSINESS.

  5. 5. ken keith [ December 27, 2013 @ 08:34PM ]

    I would just like to know why the brokers feel like they have to lie about loads. Something as simple as including the 3,000 pds of pallet weigh on a 42,000pd cargo load would save alot of heartburn on wether I would take the load. With EOBR's on the horizon, why don't they already know if there is parking at the customer. Personnelly I would love to see CH Robinson go out of business.

  6. 6. Trucking Planet [ January 03, 2014 @ 01:18AM ]

    If the bond is a hurdle you can't overcome, there are good folks out there who are willing to work with you. We've started a site just for people going through this now, you are all welcome to come and look around. www.freightagentprograms.com 2014 shows promise if you want to stay in the business, take care.

  7. 7. James Lamb [ January 25, 2014 @ 08:24AM ]

    In OOIDA's World, Two Middle Men are Better than One?

    Simply stated, this is a matter of classic supply and demand economics.

    The theory, here, is... if you reduce the supply of brokers and the demand for loads stays constant, then the rates offered to brokers by the remaining brokers will decrease because the truckers have less options and choice and are at the mercy of the mega brokerages. That's a tough pill to swallow for the trucker who doesn't like brokers to begin with but it's now the reality in his world. This is the same theory that causes you to pay $6 for a hot dog at a baseball game in New York or Miami. They can charge $6 because the vendor has a monopoly and there is no competition to keep them in check. Where else are you going to get a hot dog in the middle of the game. And where else are you going to get a load now that nearly 10,000 intermediaries or 40% of the industry are gone?

    The theory is being proven right now as in December, according to the Consumer Price Index, prices went up. And according to the TransCore DAT Trendlines stats, rates for truckers in December went down for all types: standard vans, reefers and flatbeds. Whether you know it or not yet, YOU are the secondary victim of the $75,000 if you are a trucker. But eventually, you will see the light.

    What has happened, here, is some formerly independent brokers that were making 100% of the transaction have gone to work for the bigger brokerages and now earn 60% of the commission. And whereas those same people could offer a trucker a high rate as the broker (with a 15% commission going to them), they are now selling the load at a lower rate as an agent so that the brokerage they work for can realize its ideal 22.5% commission rate. That means, for every $1,000 load, whereas this guy working in the brokerage industry used to walk away with say $150 in commission as an independent broker a

 

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