A new reform bill aimed at curbing broker fraud is moving through Congress — and creating controversy throughout the transportation industry.

Sponsored by Sen. Olympia Snowe, R-ME, and Sen. Amy Klobuchar, D-MN, the Motor Carrier Protection Act of 2010 proposes critical changes to the ways brokers and freight forwarders are regulated and registered. Currently, the only requirements to become a broker are an authority, $10,000 bond and BOC 3 on file with the Department of Transportation proving you have a Process Agent.

Like many transportation professionals, Senators Snowe and Klobuchar believe the low barriers to entry and minimal regulation are contributing to broker fraud. They hope to combat illegal activity with the new bill’s significant changes, including:

Annual Registration Requirement

Unlike current registration requirements which all brokers and freight forwarders would be required to renew their operating authority each year or risk immediate revocation of their authority by the FMCSA.

New, Stiffer Penalties

If an agent brokers or forwards freight without the necessary bond or licensure, they would be open to unlimited liability for freight charges.

Stricter Licensing Requirements

Trucking companies could not receive compensation for arranging another carrier’s freight without a broker or freight forward license and bonding. Conversely, in order to haul freight, brokers or freight forwarders would need carriage authority from the Department of Transportation.

Increased Bond

Undoubtedly the most controversial aspect of the Protection Act’s proposed regulation, the increase would raise the cost of a brokers’ required bond from $10,000 to $100,000. The tenfold increase is designed to weed out deceptive brokers who would be unable to qualify with any bonding service or unwilling to risk so much of their own cash. The $100,000 bond could drastically decrease broker fraud, but some industry experts are concerned small brokers with limited cash flow might be pushed out of business in the process.

For now, the bill is in with Congress, and has received vocal support from the Owner-Operator Independent Drivers Association (OOIDA) and Transportation Intermediaries Association (TIA).

We’ll keep you posted as new developments occur, but in the meantime, we’d like to know:

What are your thoughts on these proposed changes?

Do you think the bond requirement is too much or a much-needed guard against fraud?