FMCSA Red Flagging Brokers with Bonds Pending Cancellation

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The beginning of November 2018 saw a change in how the Federal Motor Carrier Safety Administration (FMCSA) marks carriers, brokers and forwarders whose surety bond or insurance is about to expire or is being canceled. Now, the public page of entities licensed with the FMCSA will display information if an entity’s insurance or bonds pending cancellation.

FMCSA’s primary motivation for this move is to reduce the number of fraudulent actors who previously made use of the lack of such information being public. Yet, this also means that anyone who doesn’t renew their freight broker bond on time will be marked similarly which may lead to lack of trust in brokers who are otherwise trustworthy.

Here’s what you need to know about the new bonds pending cancellation notice, why the FMCSA has introduced it, and how it may affect brokers, carriers, and forwarders.

“This entity has insurance or bonds pending cancellation.”

As of November last year, this is the inscription which anyone can see on a broker’s, carrier’s or forwarder’s FMCSA’s public Licensing and Insurance page. This notice will appear whenever an insurance or surety bond has been marked for cancellation. Since registration with the FMCSA requires an active surety or insurance policy, once a policy is cancelled, entities’ authority is revoked and they cannot operate legally.

In displaying this type of notice to the public, FMCSA seeks to crack down on any entities which, in the past, made use of the lack of publicly available information regarding the status of their policies. Previously, claims against an entity’s bonds pending cancellation would take up to 60 days before they effectuated the suspension of its authority with the FMCSA. Yet, the lack of public information meant that fraudulent actors who already had a claim against their bond had a window of as much as two months at their disposal.

Now, as soon as an entity’s bond enters the 30-day “bonds pending cancellation” window, either because it is about to expire or because of it has been cancelled by the surety provider, this notice will appear on their public profile. Such information will provide shippers and carriers with the possibility to vet brokers at a glance and, hopefully, avoid those who are not reliable. On the downside, brokers who are otherwise professional but have not renewed their bond on time may end up being scrutinized and miss out on opportunities.

A Temporary Solution

At the end of September last year, the FMCSA published an advance notice of proposed rulemaking (ANPRM) which follows the recommendations and provisions of the Moving Ahead for Progress in the 21st Century Act (MAP-21). In 2013, under MAP-21, freight brokers’ surety bonds were increased to $75,000, and further financial security requirements were introduced.

Last year’s ANPRM included a request for comments in various areas, one of which directly relates to the issue of broker and forwarder financial responsibility. The FMCSA wanted to know if it should create rules which would allow it immediately revoke authorities of brokers and forwarders whose bonds fall beneath the minimum $75,000. The comment period for this ANPRM closed at the end of November.

While the FMCSA is yet to follow-up with comments, the introduction of a bonds pending cancellation notice on individual entities websites signals a temporary solution until rules have been created and approved. Currently the cancellation of a bond or falling beneath the federally required minimum due to claims will not result in immediate suspension.

Yet, by publishing information about bonds pending cancellation, the FMCSA will provide shippers and carriers with additional information which may help reduce instances of fraud. On the other hand, brokers who forget to renew their policies on time, will need to step up their game if they don’t want this notice to appear on their public FMCSA page.

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Will This Change Help Reduce Fraud?

What do you think of the measure taken by the FMCSA to notify of bonds pending cancellation? Do you think it will help in combating the instances of fraud that have plagued the industry for years? Let us know what you think in the comments!

Vic Lance is the founder and president of Lance Surety Bond Associates and the author of the Complete Compliance Guide for Freight Brokers ebook . He is a surety bond expert who helps freight brokers get licensed and bonded. Vic graduated from Villanova University with a degree in Business Administration and holds a Masters in Business Administration (MBA) from the University of Michigan’s Ross School of Business.                                        

In January 2020, Cerasis was acquired by GlobalTranz, a leading technology and multimodal 3PL solutions provider. To learn more, please read the press release. If you are a current or prospective Cerasis customer, we invite you to reach out to us to learn how our combined capabilities can deliver new services, solutions and enhanced value to your supply chain. To learn more about GlobalTranz, please visit www.globaltranz.com.

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