We need as many of our Brokers as are willing to participate in this endeavor. Please contact us as soon as possible if you are available to attend meetings with congressmen or their staffers in Washington, DC within the next few weeks. When calling us, please indicate in which state you reside as well as the names of your Senators and Congressmen (you can obtain that information from our website at www.pac-fin.com). The Lobbyists for the AFA will decide who they believe is the most suitable from the list giving consideration to those brokers whose Senators and Congressmen are on the Conference Committee.

According to Sen. Barbara Boxer (D-Calif.), chairwoman of the Senate Environment and Public Works Committee, the transportation conference committee will first meet on Tuesday, May 8. Boxer, who shepherded the Senate’s two-year, $109 billion transportation bill through the upper chamber earlier this year, said she is eager to begin negotiations on the bill:

“I am sure that every member of the conference, Democrat or Republican, House or Senate, understands how critical it is to swiftly pass a comprehensive transportation bill that is a deficit neutral, reform measure that will preserve or create millions of jobs and thousands of businesses. Now is the time to set aside our personal wish lists and focus on the issue at hand – the reauthorization of a bill that is absolutely essential to our economy.”

We couldn’t agree more. In order for the Senate’s version to pass the committee, they will need to focus on job creation (or retention) and a bill that does not contain such controversial issues as ill-conceived broker regulation.

Boxer is one of 14 senators who were appointed to the conference committee this week. She will be joined by Sens. Max Baucus (D-Mont.), Dick Durbin (D-Ill.), Tim Johnson (D-S.D.), Bill Nelson (D-Fla.), Charles Schumer (D-N.Y.), Robert Menendez (D-N.J.), James Inhofe (R-Okla.), David Vitter (R-La.), Orrin Hatch (R-Utah), Richard Shelby (R-Ala.), Kay Bailey Hutchison (R-Texas), Jay Rockefeller (D-W.Va.) and John Hoeven (R-N.D.).

The House has appointed 33 lawmakers to the highway bill conference committee, including Republican Reps. John Mica (Fla.), Don Young (Alaska), John Duncan (Tenn.), Bill Shuster (Pa.), Shelley Moore Capito (W-Va.), Rick Crawford (Ark.), Jaime Herrera Beutler (Wash.), Larry Bucshon (Ind.), Richard Hanna (N.Y.), Steve Southerland (Fla.), James Lankford (Okla.), Reid Ribble (Wis.), Fred Upton (Mich.), Ed Whitfield (Ky.), Doc Hastings (Wash.), Rob Bishop (Utah), Ralph Hall (Texas), Chip Cravaack (Minn.), Dave Camp (Mich.) and Patrick Tiberi (Ohio).

Those GOP members of the transportation conference committee will be joined by 13 House Democrats: Reps. Nick Rahall (W.Va.), Peter DeFazio (Ore.), Jerry Costello (Ill.), Jerrold Nadler (N.Y.), Corrine Brown (Fla.), Elijah Cummings (Md.), Leonard Boswell (Iowa), Tim Bishop (N.Y.), Henry Waxman (Calif.), Ed Markey (Mass.), Eddie Bernice Johnson (Texas), Earl Blumenauer (Ore.) and Del. Eleanor Holmes Norton (D.C.).

Again, we urge our faithful to contact these specific Congressmen, especially if you live in their districts. Send letters, emails and phone calls to the offices of these committee members; the more responses they receive, the more they will take notice of our position.

Sincerely,

Daniel J. Larson
President, COO and General Counsel
Pacific Financial Association, Inc.

Go to www.pac-fin.com to obtain your U.S. House of Representative’s contact information

Here’s the bad news: the same provisions pushed by the TIA and OOIDA, defeated in two previous sessions of Congress, are still buried in the middle of two bills pending in the House of Representatives-H.R. 7 and S. 1813. The nation’s largest brokerages are still paying significant dollars to lobbyists in Washington to raise your firms’ surety requirement from $10,000 to $100,000.

Here’s the good news: while both bills are currently pending in the House of Representatives, they remain deadlocked over the particulars of proposed major infrastructure funding totally unrelated to any aspect of transportation broker regulation. Hence the passage on March 29th of the ninth in a series of continuing Highway Bill reauthorization extensions, delaying consideration of such comprehensive legislation for another 90 days. Ultimately, we believe the House will remain deadlocked on its own bill, H.R. 7, and will eventually address the version passed in the Senate, S. 1813. Therefore, the reauthorization will probably be extended further to allow for a conference committee to reconcile major differences between the two conflicting bills.

These circumstances create an opportunity for those of you who would be adversely affected to contact your local Member of the U.S. House of Representatives and both of your state’s Senators in order to influence any such reconciliation process through voicing your own concerns.  As you might mention, Democratic Senator Barbara Boxer, speaking for both herself and Republican Senator James Inhofe, was quoted in the February 14th edition of Transport Topics as having “begged colleagues not to attach controversial or extraneous amendments that would slow this bill down”.  Under the circumstances, we couldn’t agree more.

Essentially, you couldn’t find an amendment more “controversial or extraneous” to basic infrastructure funding legislation than one incorporating new broker surety requirements. Accordingly, here are a few of the key issues you should mention to your Congressional delegation based on Pacific Financial’s own experience as the surety provider for some 5,000 of the approximately 20,000 licensed transportation brokers in the country:

1. The objectionable sections we refer to are specifically titled as follows: In H.R. 7, §6203 starting on page 516 which amends 49 U.S.C. 13904; §6206 starting on page 525 which amends 49 U.S.C. 13906; and, §6208 starting on page 539 which amends 49 U.S.C. 14916. In S. 1813, §32917 starting on page 1265 which amends 49 U.S.C. 13904; §32919 starting on page 1269 which amends 49 U.S.C. 13906; and, §32920 starting on page 1283 which amends 49 U.S.C. 14916.

2. You should mention that quite apart from completely freezing new business entry into the market, Pacific Financial’s informed research indicates that the proposed broker surety requirement would force at least 75% of the currently licensed brokerages out of business as independent enterprises. That figure is consistent with the TIA’s own survey conducted in 2010 which found that 79% of that association’s own membership was opposed to any such $100,000 surety requirement increase. If you’re a TIA member yourself, ask them about that survey.

3. You should mention that the TIA’s obvious motive in fostering such legislation would be to force you and other small to mid-size brokers to sign on as agents for those large brokerage operations which actually call the shots in that association’s lobbying efforts. In fact, Robert Voltmann of the TIA claims he doesn’t understand why brokers wouldn’t be willing to pay a $5000 annual premium on a $100,000 bond. In previous years he stated that same bond would only cost $1500. Neither of his analogies apply to this type of bond subject to vendor claims and neither statements reflect the collateral requirements insurance companies will require of their small to mid-sized clientele.

4. You should mention it is obvious that forcing 100 brokers formerly holding individual $10,000 BMC-84s or BMC-85s to accept employment as agents for some larger broker holding only a single $100,000 BMC-84 or BMC-85 would reduce the total amount of surety actually available to pay claims to motor carriers by 90%. Anyone who thinks that large organizations somehow are more fiscally responsible than smaller ones should consider the case of Enron. That company’s truck broker division maintained a $10,000 BMC-85 issued by Chase Bank. Estimates of claim activity, even when most carriers didn’t bother to file, were forecast in the $10,000,000 to $15,000,000 range. In any event, a $100,000 surety instrument wouldn’t have made any difference.

5. You should mention that the entire rationale for incorporating such “controversial” and “extraneous” amendments in both proposed highway bills is highly questionable. In other words, if there is such a dire need to immediately stop broker “fraud” in the transportation industry, wouldn’t the claim statistics illustrate this emergency? With 25% of the entire broker surety market, Pacific Financial handles on average roughly 10,000 claim inquiries per year, indicating a total of 40,000 claims addressed to all the BMC-84 and BMC-85 issuers annually. Combine that with the fact that there are approximately 400,000 “authorized” motor carriers entitled to such indemnification annually. Remarkably then, when correlated with the reality that some 90% of such inquiries are resolved with a telephone call encouraging the broker to pay the valid claim instead of risking their authority being revoked, that would indicate an average of only one actionable claim per year for each 100 possible motor carrier claimants. Does that sound like an emergency to you? Does that sound like a valid reason to eliminate 75% of the entire transportation brokerage industry to you? 

Remember this: Pacific Financial will be here to address your needs regardless of what legislation is or is not enacted. We already provide $100,000 surety instruments to our customers that need the additional coverage. We are the leading surety company in the industry and we will remain the leader. We can fight these bills together and we can address the results of such legislation, if passed, together!

Contact your congressional delegation. Send complaints to the FMCSA, the SBA, and the DOJ’s Antitrust Division. We recommend that you refer to Pacific Financial’s website at www.pac-fin.com for a simple guide in contacting your local member of the U.S. House of Representatives. Additional resources are available at the Transportation Brokers Service Association website at www.transfinservice.com and the Association of Independent Property Brokers & Agents website at www.independentpropertybrokers.org. You can also sign on to the petition to fight these provisions at http://www.petitiononline.com/100KBOND/petition.html that currently has over 1173 of your colleagues’ signatures. Get involved, it’s your livelihood at stake!

Sincerely,

Daniel J. Larson
President, COO & General Counsel 

Go to www.pac-fin.com to obtain your U.S. House of Representative’s contact information

Senate Bill S-1813, as amended to include an increase in the broker surety requirement to $100,000, just passed in the Senate yesterday. The next step will be to hand the Senate bill over to the House of Representatives for consideration by that body.

Although both Boehner and Cantor have indicated that they would support the Senate bill in the House, we have been informed that they have so far been unable to secure the necessary votes for passage. We would like it to stay that way!

We implore those of you whose brokerage organizations might be driven out of business by a surety requirement increase to $100,000 to immediately CONTACT THE OFFICE OF YOUR MEMBER OF THE U.S. HOUSE OF REPRESENTATIVES in order to voice your objection to the House passing this Senate bill. We believe this bill will result in thousands of small and medium size freight brokerages going out of business with tens of thousands of their employees losing their jobs. This increase, should it become law, would be devastating to the transportation community as a whole and will only inure to the benefit of the very largest brokers. This will in turn result in less competition among freight brokerages in setting rates which in turn will result in higher prices to both shippers and ultimately consumers.

Because the current transportation funding expires on March 31, the Senate and the House need to reach an accommodation on this matter within a week or we can expect another extension which would put the whole matter (including any broker surety increase) over until after the November elections.

Our website, at www.pac-fin.com, provides a simple guide for contacting your local member of the U.S. House of Representatives. Given the shortness of time, we recommend you call the offices of that Congressman and register your objection to the Senate bill.

Daniel J. Larson
President, COO & General Counsel 

Go to www.pac-fin.com to obtain your U.S. House of Representative’s contact information

Our serious concerns about SB 3483 are numerous, and we suggest you consider the position stated on our web-site at www.pac-fin.com. Essentially, we don’t believe Pacific Financial should represent your protest in this matter because that might appear to be a conflict of interest for the nation’s leading provider of BMC-85 Property Broker’s Trust Fund Agreements.

By far the most effective way for you to take action and to present your point of view is to sign up with one or more of the non-profit broker associations now interested in this fight. By joining such groups, you will have far more clout than trying to go it alone. In fact, you should consider joining several member associations.

Last week we introduced you to the new Association of Independent Property Brokers & Agents (AIPBA). We are now encouraging you to join the Transportation Brokers Service Association (TBSA) as well. TBSA was established early in 2009 for the purpose of promoting better business practices for small to medium sized brokers. You may access TBSA’s web site at www.transfinservice.com.

TBSA opposes most of the regulatory changes proposed in the bill, including the proposed increase in the bonding requirement from $10,000 to $100,000. TBSA will continue to waive their membership fee for Pacific Financial brokers. Please find a copy of their membership application attached.

Thousands of hard working, honest brokers will be forced out of business resulting in a loss of hundreds of thousands of jobs if this bill becomes law. Please help us protect our Transportation Industry by joining our efforts and supporting the TBSA as well as the AIPBA.

While we continue to encourage all our brokers to join these and other service associations, our recommendations are not to be construed as endorsements of any one association’s entire agenda. Just as this bill was authored by entities with presumably different ideologies, there are many opinions as to the appropriate changes, if any, to broker regulation. Two things we can all agree on: this bill in its current form is detrimental to the industry, and Pacific Financial will remain the leader in Broker Surety Instruments regardless of the regulatory requirements.

A few of the key provisions of the bill:

Increases the broker bond/surety from $10,000 to $100,000.  Requires a minimum of $10,000 in cash.

Establishes a multitude of new regulations for brokers, freight forwarders and motor carriers.  In our view, the government should not be imposing excessive new fees and costs, especially as the industry is just beginning to show signs of life in this economic recession.

Thousands of hard working, honest brokers will be forced out of business resulting in a loss of hundreds of thousands of jobs.

We are working feverishly to update our website by gathering all the information you  will need to effectively fight passage of this bill in its current form. Expect to hear from us shortly on ways that you can act.

Rest assured that Pacific Financial Association, Inc. will remain the leader in Broker Surety Instruments regardless of the bonding requirement. We are committed to helping our customers succeed!

Thank you for your continued support of Pacific Financial Association, Inc., now in our 12th year of service.

By Eric Miller, Staff Reporter

An anti-fraud bill introduced in Congress would raise the freight broker surety requirement to $100,000 and mandate that motor carriers who broker freight loads obtain separate broker authority.

The Fighting Fraud in Transportation Act of 2011, introduced June 24 by Rep. Frank Guinta (R-N.H.) and Rep. Russ Carnahan (D-Mo.), is supported by American Trucking Associations, the Transportation Intermediaries Association and the Owner-Operator Independent Drivers Association — three trade groups that often don’t agree on transportation legislation.

Supporters said the legislation would go a long way toward keeping fraudulent brokers out of the business and help insure that truckers get paid for freight they haul.

Opponents claim the higher surety bond would discourage small brokers from entering or staying in the business.

The bill would also increase requirements and disclosures for any person or company seeking to obtain broker or freight forwarder authority, toughen penalties for violations of broker regulations, and establish strict guidelines for companies that provide brokers with surety bonds and on how they administer those bonds.

“This law would put a stop to a system that allows ruthless brokers and scam artists to continue to operate unchecked,” Todd Spencer, executive vice president of OOIDA. said in a statement. “Too often, we’ve seen deceitful brokers get away with collecting payments from shippers but cheating truckers out of what is rightfully theirs.”

A similar bill introduced in the Senate last year, the Motor Carrier Protection Act, failed to muster enough support to clear the Senate Commerce Committee (6-21-10, p. 4).

Robert Voltmann, TIA’s president and chief executive officer, said the three trade organizations had common ground in toughening up the broker requirements.

“The motor carriers are stung by companies that take freight, flip it to somebody else, and don’t pay,” Voltmann told Transport Topics. “We want the truck driver paid. We want the truck company paid.”

Voltmann refuted the notion that the bill would put small brokers out of business. “What it will squeeze out are underfunded or undercapitalized brokers,” Voltmann said. “A $100,000 bond to move DOD freight costs $1,500. If you can’t afford $1 ,500, what right do you have to collect someone else’s money? You shouldn’t start a brokerage
if you don’t have proper capitalization.”

But Daniel Larson, chief operating officer of Pacific Financial Association Inc., the nation’s largest provider of property broker surety instruments, said the bill would not reduce broker fraud and not be good for the transportation industry.

“Our statistical information indicates that a $100,000 bond is unnecessary and will force too many brokers out of business,” Larson told TT.

Larson said Pacific handles more than 10,000 claims a year, and most broker defaults would be “well handled” with a $20,000 bond.

Very few brokers get into the business with the intent of committing fraud, he said, and many payment problems are the result of a carrier who, for example, has a shipper that goes bankrupt, in turn causing the carrier to “get upside down.“

“Truckers think they’re going to get saved by these bonds,” Larson said. “History points out that you get saved by doing business with people that you know, you respect, or who you’ve properly vetted.”

The bill will require “just about every single motor carrier to get broker authority.” Larson added. “How many small truckers do you think can afford a $100,000 broker bond?”

ATA spokesman Sean McNally said a majority of ATA carriers have agreed that the positives in the bill outweigh the negatives and that ATA should support it.

“ATA strongly supports the legislation’s increase in the broker bond to $100,000,” McNally said. “That increase, along with the stricter regulatory oversight of brokers required by the bill, will go a long way to remedying the problem of motor carriers not getting paid by unscruplous brokers.”

But McNally conceded that other requirements of the bill, notably that motor carriers no longer can broker loadsunder their motor carrier authority, create concerns for some motor carriers.

“Unfortunately, ATA was not able to secure any modification of that language from the coalition supporting the bill,” McNally said.

David Owen, president of the National Association of Small Trucking Companies, called the legislation “a horrible way to go” and said it is designed to help “mega-brokers.”

Owen said the higher bond won’t stop fraud. Most small carriers that broker deals are honest and use their brokerage to be more efficient and retain contracts, he said.

“It’s horrible to have an industry where a few crooks can go out and intentionally rob trucking companies. I think that’s a shame,” Owen said. “But most carriers, it only happens to once. The next time, they check the guy out a little better.”