The new bill would allow the FMCSA to impose a $10,000 penalty on dual brokers

On Wednesday, a bipartisan pair of lawmakers introduced a bill that would authorize the Federal Motor Carrier Safety Administration to impose civil penalties of $10,000 on registered entities that violate its trade regulations.

The bill’s title, the Household Goods Transportation Consumer Protection Act, refers to HHG’s consumer-facing trucking niche, but the legislation has serious implications for all registered carriers and brokers and the load boards they connect to.

Importantly, the bill appears to echo the calls of anti-commodity fraud organizations: Enforce the rules on the books and actually punish bad actors.

Currently, a 2019 ruling by a Department of Transportation administrative law judge means that FMCSA does not have the authority to assess civil penalties for violations of trade regulations and registration requirements, even though these are actually codified regulations.

If the act is adopted and ultimately enters into force, carriers intermediating in the transport of cargo without the authorization of an intermediary will be subject to financial penalties. The regulations could allow the FMCSA to more easily block or terminate carriers or brokers/forwarders who do not have a valid principal place of business address (sometimes a hallmark of fraud). Registrants would also be required to disclose connections with other operations, or face the same $10,000 penalty.

The bill was introduced by Congresswoman Eleanor Holmes Norton (D-DC) and Congressman Mike Ezell (R-MS), presenting a broad cross-section of support for trucking. Commercial Vehicle Safety Association, Association of Independent Drivers Owners and Operators, Association of Trucking Brokers, National Association of Small Business Trucking, American Trucking Association’s HHG Conference, and Institute for Safer Trucking are all express support.

Under provisions of the bill that amend Title 49 of the United States Code, not only could the FMCSA impose a $10,000 penalty on dual brokers, but the agency would gain express authority to deny registration to any applicant who fails to provide a valid principal place of business at the time of registration. Currently, FMCSA can only take action against existing entities that do not cooperate with investigations at a designated address.

The bill defines a valid principal place of business (PPOB) as “a single physical location of business of a specified entity at which management officers of such specified entity report to work; such specified entity carries out a significant part of its activities relating to the transport of persons or property; and such a specific entity keeps documentation.”

In short, no more UPS stores, empty parking lots, and so-called “virtual office” addresses that have sometimes served as PPOBs for bogus carriers or other double middlemen. The push for inappropriate PPOBs is tied to reform efforts by the FMCSA itself, including a massive modernization of the registration system and the elimination of MC numbers.

(Related: FMCSA to eliminate MC numbers, overhaul registration system to eliminate fraud)

The bill would allow FMCSA to “withhold, suspend, amend, or revoke any portion of the registration of a motor carrier, foreign motor carrier, foreign private motor carrier, broker, or freight forwarder” if they “fail to identify a valid principal business location.”

Additionally, any broker or freight forwarder would have to disclose its affiliations to other regulated entities. This section is aimed at major dual brokers with dozens of MC numbers with a triple or quadruple brokerage load.

Section 13904(a) of Title 49, under the terms of the bill, would require any broker to disclose “any relationship involving joint ownership, joint management, joint control, or joint family affiliation between such person and any other motor carrier, freight forwarder, or broker or other applicant for registration of a motor carrier, forwarder or broker, if the relationship occurred during the period of 3 years preceding the date of submission of the application for registration.

TIA vocally supported and helped draft the legislation following protests from its members that the scourge of dual agency had done serious damage to the industry’s reputation.

(Related: ‘We’re losing money’: Big brokers, freight forwarders feel pressure from dual brokers)

“We wanted to kind of pamper FMCSA with enforcement,” said Chris Burroughs, vice president of government affairs at TIA. Just a few days ago, “a member called us back and said a fraudulent carrier was using his physical address. He said, ‘We have no idea who they are and we are the only tenants in this building.’

If someone has “37 different trucking companies and licenses, that should raise a red flag,” he added, referring to pressure to address the issue of unified registration.

Anne Reinke, president and CEO of TIA, made it clear that brokers are concerned that fraud is damaging their image. “Fraud not only causes significant financial losses, but also undermines public confidence in institutions and markets,” she said in a statement. “By implementing these strong anti-fraud laws, our government can ensure a more stable and predictable economic environment that is essential for sustainable growth and investment.”

David Owen, president of NASTC, noted that “this devastating epidemic (of fraud) continues to plague the trucking industry,” signaling full support for the new law. “It is taking steps to ensure that the fraudulent intermediation of criminals and criminal enterprises is caught and held accountable.” He added that the focus on PPOB “should help stop the many fraudsters who take advantage of the opportunity to conduct and continuously transmit their brokerage fraud schemes exclusively online. NASTC looks forward to working with these lawmakers to bring this bill into law.”

OOIDA’s statement underscored the harm done to motor carriers “who are daily victims of unpaid claims, unpaid loads, double-brokerage of freight, or load-related phishing schemes,” stating that the fraud problem costs the trucking industry more than $800 million annually.

“Freight fraud by criminals and fraudsters has been devastating to many small businesses just trying to make a living in a difficult freight market,” said OOIDA President Todd Spencer. “OOIDA and the 150,000 small business truck drivers we represent applaud Rep. Holmes Norton and Rep. Ezell for their bipartisan leadership to provide FMCSA with better tools to root out rogue actors who are also harmful to consumers and highway safety. We hope that with broad industry support for these commonsense reforms, this bipartisan legislation will pass through the Transport and Infrastructure sector without delay.”

(Related: The Slow Burn of Dual Agency: How It Happens and How to Fight It