The U.S. trucking industry is estimated to be worth over $730 billion — yet each year, around $100 million of that is lost to scams like double brokering. Sadly, the supply chain issues of recent years have only led to an uptick in these and other types of carrier fraud.
But what is double brokering, and how does it pose a risk for carriers?
In this article, we cover all the basics, plus give tips on how to identify and report common signs of double brokering, so you can avoid losses, litigation and other downfalls.
What is double brokering?
Simply put, double brokering occurs whenever a broker or carrier reassigns a freight load without the knowledge and consent of all parties involved. The process often involves multiple parties, which can make potential scams difficult to spot.
Because there are so many different iterations of this scheme, here are a few of the most common:
- A broker contracts what they believe to be a legitimate carrier to transport their load. However, the carrier isn’t a carrier at all, but rather an individual with a false MC number so they only appear to be an actual carrier. The fraudster then re-brokers the load to a real carrier. At this point, the fraudster may arrange for the load to be stolen, or the load may reach its destination while the actual carrier never receives payment, since the fraudulent “carrier” is the one who delivered according to the paperwork.
- A broker may receive a shipment contract and outsource the contract to another broker without the shipper’s knowledge and consent. Sometimes this is simply poor business practices, but sometimes it’s a scam to avoid paying the carrier. Either way, it’s illegal and considered double brokering.
- A carrier may receive a load from a broker and, instead of delivering it, pass it off to another carrier. This practice may seem like an attractive option when carriers are overloaded or trying to maximize their revenue, but when done without the broker’s knowledge and consent, it is illegal and considered double brokering.
Co-brokering vs. double brokering: what’s the difference?
You may think this sounds a lot like co-brokering. Are they the same thing?
The short answer is no.
The main difference between co-broking and double brokering is transparency. If a broker needs to engage the help of another broker, they inform the shipper so all parties know with whom they’re working, then outsource the load to a carrier with everyone’s consent. This way, all parties have a clear understanding of who’s delivering, when the delivery will be made, who needs to be paid and when.
While co-brokering is legal if a broker’s contract doesn’t forbid it, double brokering is illegal across the board because it is specifically designed to defraud one or more parties.
Risks of double brokering
While all parties except the scammer stand to lose out with double brokering, carriers bear the brunt of the financial risk.
Carriers who accept double brokered shipments — knowingly or unknowingly — may encounter:
- Delayed or unreceived payments. In an illegal double brokering scheme, the fraudulent broker’s goal is often to pocket the shipper’s fee without paying the carrier. This can result in the carrier never being paid for the delivery. If the carrier tries to dispute the lack of payment, tracking down the original broker may prove challenging or impossible.
- Denied insurance claims. Because insurance doesn’t cover double brokered loads, if the load is damaged, lost or late, the carrier may be on the hook for these costs.
- Loss of credibility. If a carrier is caught hauling a double brokered load, their credibility takes a hit. You may even have your FMCSA authority canceled and your business may be blacklisted.
- Potential fines. Because double brokering is illegal, the FMCSA may impose penalties up to $10,000 if you’re found to have knowingly contributed to a double brokering scheme.
How to avoid losses due to double brokering schemes
The risks of double brokering can be extreme, but thankfully there are several simple steps you can take as a carrier to ensure you’re never trapped in one of these scams.
Use the SAFER System. The FMCSA’s Safety and Fitness Electronic Records (SAFER) System allows you to look up company profiles to verify their legitimacy. If the contact information you receive from a broker doesn’t match or isn’t found in the SAFER System, don’t accept the load until you’ve done some more digging.
Be on the lookout for red flags. If a broker is not forthcoming with details about the load’s destination, offers to pay you well over market value or asks you to misrepresent who you work for, you may be talking to a scammer. Don’t accept contracts from suspect brokers, and report them to the Office of Inspector General right away.
Check company credit scores. Use resources, like RTS Pro’s free credit search tool, to verify a company’s standing and track record before accepting a shipment from them. This kind of transparency can let you know whether you’re working with a legitimate broker or not.
Use a reliable freight factoring service. Working with a quality freight factoring service improves your company cash flow and can serve as a safeguard against scammers. RTS Financial offers freight factoring services and free credit checks on over 85,000 brokers and shippers to protect you from fraud, ensure quick payment and reduce your financial risk.
Improve your financial position with RTS Financial
The best way to avoid a scammer is to be on alert and do your due diligence before accepting a shipment for transport. Protect your self from beginning to end with free credit checks before you book and reliable, same-day payment after.