FMCSA Struggles to Combat Double-Brokering Fraud

Report to Congress Highlights FMCSA’s Challenges in Penalizing Illegal Brokers and Double-Brokering

Federal regulators have informed Congress of ongoing difficulties in addressing broker fraud, particularly double-brokering due to a lack of comprehensive data and jurisdictional constraints. The Federal Motor Carrier Safety Administration (FMCSA) outlined these challenges in a recent “Unlawful Brokerage Activities” report.

The FMCSA has been working to understand the connection between motor carrier safety and unlawful brokerage activities. However, despite numerous concerns raised by stakeholders about double-brokering fraud, the agency lacks sufficient data to determine its impact on safety. The report acknowledges this gap, stating, “While the agency has received multiple expressions of concern from stakeholders regarding fraud related to ‘double brokering,’ it lacks data to quantify or confirm a safety impact.”

The report further notes a correlation between motor carriers with poor safety records and those operating without a verifiable physical principal place of business (PPOB). There is also an indication that the use of virtual PPOBs is more prevalent among entities engaging in unauthorized brokerage. Nonetheless, the direct safety implications of brokers failing to register with the FMCSA remain unclear, as brokers do not typically transport goods themselves.

In response to these issues, the FMCSA is considering further research into the safety connections related to unlawful brokerage, as mandated by a 2022 appropriations bill. The report highlights the FMCSA’s limited ability to combat broker fraud due to a 2019 ruling by a U.S. Department of Transportation administrative law judge. This ruling stated that the FMCSA lacks the statutory authority to impose civil penalties on unauthorized brokers, significantly hampering the agency’s enforcement capabilities. Instead, the FMCSA must refer cases to the U.S. Department of Justice (DOJ) for enforcement, complicating and delaying the process.

To enhance its enforcement powers, the FMCSA suggests revising federal statutes to allow the agency to administratively assess civil penalties, streamlining the penalty process. In the meantime, the FMCSA is planning efforts to increase awareness of unlawful brokerage activities, particularly in the general freight sector.

The report also updated Congress on recent initiatives to tackle broker fraud, including guidelines issued in June 2023 aimed at exposing illegal brokers.

Mercer Transportation is closely monitoring these developments to ensure compliance and maintain the highest standards for our owner operators, brokers, and carriers. By staying informed and proactive, we continue to support a safe and fair operating environment for all parties involved in the transportation industry.

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