Fraud in the Trucking Industry

With tight profit margins, motor carriers and freight brokers have to move freight both economically and efficiently. Few transportation companies have resources to waste: most trucking professionals, whether they are own a trucking brokerage or a single truck, keep their operations lean.

That’s why people in the freight industry are concerned about fraud in freight matching, a crime that can bring on business losses that are difficult to reclaim. The most common fraud problem is double brokering freight, where criminals manipulate online load boards and accept payment for loads they did not book with the shipper.

Even when the people perpetuating the double brokering crime are arrested and fined for their scams, often the motor carrier, broker, or shipper never collects on the loss. Individually, losses may not be huge as a typical load could pay $1,000 to $2,000. However, collectively, double brokering losses can be significant for a trucking company or freight broker. In addition to the financial losses, these scams add stress and headaches to an already difficult job. They can wreak havoc on a broker’s or motor carrier’s operations.

fmcsaThe Federal Motor Carrier Safety Administration (FMCSA) regulations and federal laws make double brokering freight illegal. Yet even the most careful broker for trucking can end up as a victim of unscrupulous individuals. Sometimes their first clue that they have been cheated is when the motor carrier they hired to pick up a load discovers that the load is already gone.

How does double brokering work?

The double brokering scam can take a few different approaches. For instance, if a broker with a legitimate freight brokers authority chooses to assign a load to a second qualified broker and the second broker finds and pays the designated motor carrier, that is not fraud. However, if the second broker keeps the money for the load without paying the motor carrier, that is definitely fraud. That second broker could invoice the first broker and receive the money from them — and then disappear.

While the problem of double brokering has existed for years, the industry’s dependence on Internet-based freight matching makes the illegal practice common and easy. Without a paper trail and with only online communication, it’s simple for an unscrupulous player to take a payment and vanish without paying the motor carrier.

In the world of broker trucking, criminals can defraud brokers and motor carriers under one false name and then re-surface with another fake company when they are close to getting caught for their first crimes. These bogus brokers can leave the country, change their identity, and go on to take advantage of other trucking companies by not paying for brokered loads.

How can motor carriers protect themselves against double brokering?

With the rise in double brokering, motor carriers are wise to exercise caution. Here are a few tips to protect against this kind of business loss:

  1. If a broker’s offer and rates look too good to be true, the deal may not be real. Face it: typically brokers stay within certain mileage rates because they know what the shipping market will bear and what motor carriers will accept. A load that varies significantly should raise red flags.
  2. Use reputable brokers. Visit their websites, check their credentials on the FMCSA site, and find out how long they’ve been in business. However, be aware that it’s easy and cheap for criminals to create a fictitious brokerage with fake names of corporate officers, fake addresses, and other false information on the FMCSA website. Do your research before committing to a load.
  3. Check a broker’s payment history and credit before signing up for a load. Visit FreeFreightSearch.com, the world’s largest free load board. Register and access more than 10,000 freight brokers’ credit histories.
  4. Be cautious about the information you share with brokers you don’t know.
  5. Make sure the freight bill includes both your company’s name and the broker’s name. This may help you get paid in legal proceedings.

How can fraudulent double brokering be reduced?

three keys to great customer serviceOnce a fake broker is cleared for interstate operating authority, pays for the broker’s bond, and receives a DOT number, the scam moves online to defraud unsuspecting owner-operators and fleet owners. With a prepaid mobile phone and a fabricated email address, the bad-faith brokers contact trucking companies with no intention of paying them for their hard work and fuel. The scam can earn crooks hundreds of thousands of dollars until they vanish.

Fortunately, load board security investigators are working toward reducing the problem with advanced technology and research into questionable brokers. Law enforcement officers have shut down some of the largest load board fraud operations.

The best way to slow down this kind of fraud is for every load board member – motor carrier and broker – to exercise due diligence before ever working with an unknown broker. To be safe, some brokers have narrowed down their partners to only familiar and trusted companies.  They scrutinize all paperwork and require phone numbers and insurance certificates and operating authority proof for everyone involved.

Verifying that a broker is up to date on their insurance payments is especially critical as bogus brokers have a pattern of not keeping up with their premiums. Their insurance company cancels the policy and then when shippers or brokers discover that a load has been stolen or not delivered, they cannot recoup the losses against a canceled insurance policy or an unpaid bond.

FreeFreightSearch.com, the world’s largest completely free load board, provides a very useful tool to motor carriers, brokers, and shippers in the fight to reduce double brokering. The original purpose of the site, which was initially called Check Freight Broker, was to simply provide free access to real-time reports on brokers’ payment history. The popularity of the credit reports site quickly evolved into that full-service load board that FreeFreightSearch is at present. With credit histories on more than 10,000 freight brokers, FreeFreightSearch.com continues to provide a valuable service to the industry today while matching up thousands of carriers and loads each week.

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About Interstate Capital

The Interstate Capital Group of Companies operates businesses in the factoring, freight brokerage, freight matching, and payable discounting industries.