Double Brokering in the Trucking Industry: Understanding the Risks and Solutions

Double brokering is a deceptive practice in the trucking industry where a freight broker or carrier subcontracts a shipment to another party without the shipper's knowledge or consent. This can lead to significant financial losses, operational disruptions, and reputational damage for all parties involved. Let's explore what double brokering is, its impact on the industry, and how it's being addressed.

What is Double Brokering?

Double brokering occurs when a broker or carrier accepts a load from a shipper but then re-brokers it to another carrier or broker without informing the shipper. This practice creates confusion over payment responsibilities and delivery schedules, often resulting in financial losses for carriers and shippers alike.

Impact of Double Brokering

Double brokering has severe consequences:

• Financial Losses: Carriers may not receive payment, while shippers face potential legal liabilities and damaged relationships.
• Operational Disruptions: Delays and confusion arise due to the lack of direct communication between parties.
• Reputational Damage: Trust is compromised when shippers and carriers are unaware of who is handling their shipments.

Growth of Double Brokering

Over the past decade, double brokering has seen a significant increase. Between Q4 2022 and Q1 2023, there was a 400% rise in double brokering complaints, according to Truckstop. This surge highlights the need for better oversight and preventive measures.

Examples of Double Broker Schemes

Example 1:

Targeting Carriers

Many fraudulent brokers operate for a short period, typically less than six months, book loads with a legitimate carrier’s MC, then re-broker them out and never pay the carrier. They do this over a long period and let insurance settle the cost. Because a broker’s bond is only $75,000, it is not enough to cover all unpaid carriers. Many of these brokers are not factorable and insist on paying via Quick Pay after 7 or 30 business days. Additionally, many intrastate loads involved in these schemes are not covered by most insurance policies, leaving carriers without payment.

Example 2:

Load Theft Scheme Affecting Shippers, Brokers, and Carriers

In this scheme, scammers book a load using an MC that is either legitimate or stolen. They then broker the load out to another carrier, who picks it up and unknowingly delivers it to a warehouse as a blind shipment. Once at the warehouse, another carrier is hired to transport the load to the scammer’s own facility, where they steal the shipment and disappear, or they hold the load hostage and demand a ransom.

This creates chaos for all involved—the carrier doesn’t get paid, the broker loses credibility, and the shipper loses their goods.

Identifying Double Brokering

To identify double brokering, look for these red flags:

• Discrepancies in Paperwork: Check for inconsistent documentation, such as differing addresses or contact information for the broker and carrier.
• Multiple Brokers Involved: Be cautious if multiple brokers are involved in the same load. Verify the chain of communication and contracts to ensure transparency.
• Unfamiliar Brokers: Be wary of new or unknown brokers. Verify their credentials and history before engaging with them.
• Unusually High or Low Rates: Rates that seem too good to be true or are unusually high may indicate double brokering.
• Load Posting on Multiple Boards: If a load is posted on multiple boards at different rates, it could be a sign of double brokering.
• New Brokerages (Less than 6 months old): Many fraudulent brokers operate for a short period and vanish after multiple unpaid transactions.
• Broker has No Credit Score or Approval: If a broker pushes multiple loads within a short time, offers unusually high rates, and does not have a credit score, be cautious.
• Wrong Carrier Name on BOL: If you pick up a load and notice that your company’s name is not on the BOL but another carrier’s name is, take a step back and investigate further.

Many new owner-operators have been forced to file bankruptcy after being victims of these scams.

Preventing Double Brokering

To prevent double brokering, consider these strategies:

• Vet Carriers and Brokers: Conduct thorough background checks on freight brokerage companies. Verify their broker authority and track record in the industry.
• Strict Contractual Terms: Clearly outline terms and conditions in contracts, specifying that re-brokering without consent is prohibited.
• Regular Audits: Periodically review and audit brokerage agreements and transactions to ensure compliance and detect irregularities.
• Technology Integration: Use tools like Transport Management Systems (TMS) and Electronic Logging Devices (ELDs) to monitor and manage brokered loads in real-time.
• Build Strong Relationships: Establishing solid relationships with reputable brokers and carriers can help prevent double brokering. Regular communication and performance monitoring are key.
• Verify Contact Details: Ensure that contact information, such as email addresses and phone numbers, matches the broker's official details. This is a critical step in avoiding fraudulent brokers.
• Check Credit Scores: Review a broker's credit score and days-to-pay information to assess their business reputation. Use tools like DAT credit score or factoring company tools like OTR, RTS, and others to check broker approval status.

Agencies Fighting Double Brokering

Several agencies are involved in combating double brokering:

• Federal Motor Carrier Safety Administration (FMCSA): FMCSA has implemented stricter registration requirements to ensure only legitimate carriers and brokers operate in the industry.
• Transportation Intermediaries Association (TIA): TIA provides guidelines and resources to help brokers and carriers avoid double brokering.

Role of Cargocredible

Platforms like Cargocredible.com are crucial in preventing double brokering by providing tools to vet carriers and ensure secure transactions. Cargocredible helps verify the legitimacy of carriers and brokers, reducing the risk of dealing with unauthorized intermediaries. By promoting transparency and using secure payment methods, Cargocredible can help prevent payment disputes and ensure that shipments are handled by trusted parties.

Additional Tips for Prevention

• Educate Your Team: Train employees to recognize signs of double brokering and report suspicious activity immediately.
• Use Reliable Load Boards: Utilize trusted load boards to find legitimate freight opportunities.
• Report Suspicious Activity: If you suspect double brokering, report it to regulatory bodies or law enforcement promptly. Also, report it on Cargocredible.com to help others see it and avoid the same fraud.

Conclusion

Double brokering is a serious issue in the trucking industry, but with awareness and the right tools, it can be prevented. By understanding the risks and using platforms like Cargocredible.com, businesses can protect themselves from financial losses and reputational damage. Regulatory agencies and industry associations are working together to combat this practice, ensuring a safer and more transparent environment for all stakeholders.

By staying informed and vigilant, you can help prevent double brokering and ensure a safer trucking industry for everyone involved.

Have you or someone you know ever been affected by double brokering? Share your experiences in the comments below!