Many within the transportation industry have argued that MAP-21’s bond increase to $75,000 would put many brokers out of business due to an unobtainable bond requirement.
According to statistics provided by My Carrier Resources, LLC, the number of active brokers listed in the FMCSA database has steadily increased throughout 2013. In fact, the biggest spike of the year occurred at the start of September. Is this the result of carriers registering as brokers prior to October 1st or are brokers actually increasing? In this article, we’ll examine where we’ve been over the past 12 months and where the freight broker industry may be heading.
Update: Since this initial post, many have questioned how many of the new brokers are carriers vs. new broker registrations. You can find further details on the breakout here
What’s All The Fuss About?
Until recently, the surety bond market for the October 1st requirement was extremely difficult to qualify for without collateral and high annual costs. It was common to see collateral requirements in the tens of thousands of dollars along with premiums 200-300% higher seen in the current bond market. And that was for freight brokers that actually qualified for approval. Scores of freight brokers were flat out declined, leaving them the option of posting $75,000 to a trust, partnering with a larger company, or closing their doors. With trusts having several downsides outside of the large financial commitment, the opponents of MAP-21 had a strong case that the bond was unobtainable for many.
In August, JW Surety Bonds introduced a $75K bond program that allows any broker in the country to qualify for the bond without having to post any collateral. Premiums were also slashed by thousands comparative to the other market participants.
The introduction of the program not only offered a real solution to brokers that couldn’t previously qualify, but it also loosened the overall bond market. Since the program’s inception in August, some other bond providers have loosened underwriting guidelines as well. However, as of now, the only program in the country that can approve 99% of applicants, never requiring collateral is the JW Surety Bonds $75K bond program.
Will Active Brokers Continue To Rise Through Oct. 1st?
It is possible we may see more active brokers in the FMCSA database than ever after the $75,000 bond increase. How can this be?
- Many brokers are changing their plans. Those who were once planning on closing their doors or partnering with a larger company no longer have to.
- Brokerage start-ups that were sitting on the sidelines, thinking about opening their business may now begin to do so in droves.
- The overall health of the economy is slowly, but steadily improving, which will equate to more loads shipped.
- With MAP-21, freight forwarders are required to register as a broker, even if they broker business only occasionally.
Certainly, the last item skews the numbers a bit. However, despite many doomsday predictions, we may actually see an increase in active freight brokers even when you don’t include the freight forwarders not currently listed.
What To Expect In 2014?
No one can say with certainty whether the amount of freight brokers will increase or decrease post MAP-21. The key time period to keep an eye on will be October 1st and the 60 days following. The FMCSA has held firm to the 10/1 enforcement date, but is allowing for a 60 day compliance window. This means that brokers obtaining a bond after October 1st will need their bond backdated; something that is only typically done for a max of 30 days within the surety industry. Bonding companies can choose to make exceptions if they believe the FMCSA will not go after freight brokers with a $10,000 fine per incompliant load. We’re advising to all freight brokers to err on the side of caution and be compliant for 10/1. You do not want to put the fate of your business in someone else’s hands.
Get A Bond Quote In Minutes
JW Surety Bonds has an exclusive bond program for the $75,000 freight broker bond available now:
• A+ rated, Treasury-listed surety
• No collateral
• Lowest rates in the country
• Approvals regardless of credit strength
• 99.9% approval rate
Be prepared for the October 1 deadline. Apply directly on our website to get an instant approval.