How To Verify Your BMC-85 Trust
How You Can Get Ripped Off
BMC-85 Trust Funds require that the trustee hold either $75,000 cash or obtain a financial instrument such as an Irrevocable Letter of Credit (ILOC) to guarantee that the full claim amount can be paid on your behalf. The FMCSA does not confirm that each trust is properly funded as they are filed. That burden is left on the freight broker. It is possible for a trust provider to file your BMC-85 trust fund without proper funding.
If your trust is not properly funded, you may not find out until it is too late. The FMCSA has shut down BMC-85 trustees in the past for only partially funding trusts, resulting in Federal indictments and leaving freight brokers scrambling to pay for a new bond or trust to remain in compliance.
How To Protect Yourself
If you're buying a trust, you need to make sure that you are getting what you're paying for. The FMCSA declared that the group trust funds are not an acceptable option. Therefore, if you are purchasing a BMC-85 trust fund and not providing $75,000 in cash collateral, you must provide an Irrevocable Letter of Credit (ILOC) to the trustee, or they must post the ILOC on your behalf.
Obtain a copy of the ILOC (see: example ILOC)
Check the ILOC to ensure it specifically lists your company
Contact the bank backing the ILOC to confirm it is legitimate
Contact the state in which the bank is licensed to confirm its status
If the trustee refuses to provide you a copy of the ILOC, it should be a huge warning flag that you are not getting what you are paying for and the trustee may be at risk of getting shut down.
Save Yourself The Headache, Get A Bond
You don't have to verify that a surety bond is properly funded, as it is already done for you by the Department of Insurance and third parties like A.M. Best. Bonding companies are given both a financial size category and financial stability grade by the rating agency. These ratings are used by the government to verify everything is in place for you.
The majority of freight brokers choose the BMC-84 surety bond to secure their $75,000 FMCSA requirement (see: BMC-84 Surety Bond vs. BMC-85 Trust). However, roughly 1 in 3 freight brokers still utilize a trust fund to meet the requirement. If you're currently one of them, it's a good idea to follow the steps above to ensure you're safe.
Alternatively, you can obtain a bond with JW Surety Bonds, the #1 provider of BMC-84 freight broker surety bonds in the country. We'll provide you a pre-verified surety bond as your security and save you money too!
Author: Michael Weisbrot
Michael is a surety bond expert who specializes in streamlining the surety process. His background in both computer science and surety knowledge provides a unique knowledge set that has fueled his mission to make the process of obtaining a surety bond simple and painless. His efforts have helped grow JW Surety Bonds to become the largest volume producer of surety bonds in the nation.
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