End of the grace period for the $75K freight broker bond
A freight broker bond is a form of financial guarantee set in place to protect customers and motor carriers from fraudulent practices. For example, truckers frequently complain about delayed payments. Thus, the increase aims to remedy such problems.
When the $75K freight broker bond increase was first announced, it came as a shock to many. Small and mid-sized freight brokers were afraid they would be unable to afford the higher bond price and be pushed out of business by the bigger players. Fortunately, for them, the freight broker bond market softened and most of them can now afford the bond. But for those who still haven’t, time is ticking.
The FMCSA set October 1st as the deadline by which all freight brokers and freight forwarders should have complied with the new requirement. But a wave of complaints (even a lawsuit) probably led to a grace period extension of 60 days. On November 1st the federal agency sent out warning letters to 1,034 brokers and forwarders who are still not compliant.
End of the grace period
December 1st marks the end of the grace period given by the FMCSA. If you don’t have a valid $75K freight broker bond by that date, the federal agency will have the right to terminate your brokering rights and revoke your license.
Operating without a license, even for a day, can seriously hurt your business. In addition to the fine you can incur, a lot of motor carriers are likely to refuse to do business for you. Since they want to be certain that they will get their payment, they get more and more conscious of whom they work with. It’s easy for anyone to check if you are compliant with the bond requirement through FMCSA’s website. That’s why your best bet is to apply as soon as possible.
How to comply
There are two ways to comply with the MAP-21 requirement. One is the said freight broker bond (BMC-84), the other one is a trust fund (BMC-85).
Small and mid-sized freight brokers will find the BMC-84 option suits their needs better. With it they pay an annual premium that is a small percentage of the $75K freight broker bond. The more your credit score improves and business grows, the less price you can expect to pay.
The BMC-85, on the other hand, is a trust fund and requires you to come up with the whole $75K. A bank will keep your money tied up as long as you operate as a broker or forwarder. In addition, you might have to borrow the money which affects your credit score and the bank will charge you for its services.
Thus, you should hurry up and apply for a freight broker bond quote. All brokers and forwarders who wish to be fully compliant, should apply before November 25 at the latest. Even though the actual deadline is December 1st, paperwork processing and the upcoming Thanksgiving holiday can delay the process. Moreover, it’s not allowed for existing brokers to have bonds that are backdated for more than 60 days.
Lance Surety Bonds works with a broad network of sureties to make sure you get the best deal. No collateral required, even if you have bad credit. Get your quote instantly!
Latest posts by Victor J. Lance, President/Owner (see all)
- The Full Iowa Mortgage Broker License Guide - October 28, 2020
- How to Get an Oklahoma Mortgage Broker License [2020 Guide] - September 29, 2020
- Lance Surety Bonds is on the Inc. 5000 List! - September 23, 2020