As the trucking industry continues to navigate numerous challenges, including economic headwinds, high insurance rates, and ever-tightening regulations and safety requirements, a widespread and consistent issue continues to loom large: fraud.
Commonly referred to as “double-brokering”, this fraudulent practice is costing the freight industry as a whole, an estimated whopping $800 million.
Primarily based in southern California, fraud operations have, in the last few years, noticeably expanded into Ohio, Texas, Kentucky, Colorado, and Idaho.
Typically, the scenario unfolds somewhat like this: A fraudster posing as a legitimate trucking company, will contact a legitimate broker on a freight board posting. Engaging in superficial “negotiations” they secure the freight from the original broker, and repost the very same load back onto the load board. This time, using a freight broker account, usually with an unrelated MC number, name and address.
The fraudster will negotiate with a genuine trucking company, providing them the pick up and delivery information. Once the job is completed, the fraudster invoices the original broker, often demanding expedited payment. Upon receiving payment, the double broker will disconnect phone lines, stop responding to emails, and virtually disappear. Leaving the actual hauling company grappling with the challenge of recovering payment
Although the surge in fraud can be contributed to a loose approach from FMCSA, there are more factors at play: The rise of questionable “dispatch services'', often based overseas, a lack of technology and solid vetting practices on the carrier’s behalf, and a disconnect between factoring, bond, insurance and carrier companies -each operating within their own closed systems. This leads to the evident fact: fraudulent carrier and brokerage companies are able to exploit these inconsistencies and use them to their advantage.
To make matters worse, the industry still relies on the old school methods and processes. Shippers often handle a large volume of trucks on any given day, without any real visibility of whether or not the trucking company on the dock is the one that is legally hired to haul the freight. A significant number of carriers remain unfamiliar with the Carmack Amendment, and often haul freight that lists another transportation company on the bill of lading papers, leaving themselves without leverage and recourse in the event of a payment dispute.
Looking at the bigger picture, it is evident that we need a comprehensive overhaul of the industry’s paperwork procedures, communication protocols, and education on best practices.
In the meantime, we must adopt a vigilant stance, exercising caution and over-communicating on each and every load. Your business depends on this very approach.
