Protecting Your Rights as a Carrier: Navigating Non-Payment
Once a shipment has been completed, carriers naturally expect brokers to pay them in full. Unfortunately, payment issues can sometimes arise between brokers and carriers. Understanding your rights and how to file a complaint against a freight broker with the FMCSA is an important skill in the logistics industry.
Discover how to tackle payment issues that freight carriers encounter including carrier-broker agreements, monitoring freight broker performance, solutions to payment disputes and unpaid freight, and techniques to avoid future problems.
Understanding carrier-broker agreements
A carrier-broker agreement is a contract between two or more parties that details mutual obligations that can be legally binding and enforced. There are several important components to every carrier-broker agreement, including (but not limited to):
- Payment Terms. This includes how the carrier will be paid, through what method, how much they will be paid, and when they can expect payment.
- Freight rates. This includes the agreed-to freight rates as well as any additional charges that might arise through the course of the contract.
- Bills of lading. The carrier agrees to either issue a bill of lading or sign one that outlines the type, condition, and quantity of goods that are delivered.
- Indemnification. This is included to protect the broker if you, as the carrier, don’t fulfill your end of the bargain.
- Liability clauses. Directly connected to indemnification, this states that the carrier is 100% responsible for the condition of the product while it is in their care. All damages are the carrier’s responsibility.
- Insurance. Brokers will require proof of insurance before they load any cargo. This area will outline requirements like motor truck cargo legal liability insurance, workers’ compensation insurance, etc.
- Dispute resolution processes. If either the broker or carrier feels the terms of the contract haven’t been filled, there needs to be a legal process for these complaints to be remedied.
Before you sign any contract or agreement with a broker, be sure to review it and understand your rights as the carrier. Take a careful look at the payment information and understand when and how you will receive payment.
Monitoring freight broker performance
You should also take time to do some research and check out the performance of a freight broker before signing a contract. Research the broker’s track record using the Federal Motor Carrier Safety Administration (FMCSA).
Make sure you can answer these questions before you sign an agreement with them:
- Is their license valid?
- Do they have up-to-date insurance?
- Are they registered with the Unified Carrier Registration (UCR) program?
- Do they have an active surety bond?
It’s important for you as the carrier to understand your role in regulating freight brokers. Federal law requires brokers and freight forwarders to have sufficient financial security for circumstances when they do not pay their carriers. This means carriers can submit claims to the financial responsibility of the broker if they don’t receive payment.
Before you sign a contract, look out for these red flags and warning signs:
- Limited or lack of communication. Brokers should be easy to contact and professional in every interaction. Expectations should be clear and defined before, during, and after load booking and completion.
- Rates that are not fair or competitive with the current market. Brokers should be transparent about lanes, modes, and logistics. Pricing should be competitive based on what is being hauled, how quickly it needs to be delivered, and location.
- Unclear paperwork and payment processes. Look for easy invoicing options and clear instructions on how payments are administered.
- Unprofessional practices. If something feels off, no matter how small, trust yourself. Do not sign the contract if you have unanswered concerns.
How to resolve a payment dispute
After you have completed your obligations outline in the contract, you are entitled to complete and on-time pay. If that doesn’t happen, there are steps to take to ensure you are compensated fairly.
Before you jump to legal action, do the following:
- Communicate and negotiate. Contact the broker to discuss the situation and provide proper documentation and proof that you haven’t been paid yet.
- Review your documents. Compile all of your documentation and communication you have had with the broker to provide sufficient proof that you haven’t been paid yet.
If nothing happens, it might be time to pursue legal action.
- File a claim against a freight broker surety bond through the Department of Transportation (DOT). The broker is required to have a surety bond through federal law, and this type of insurance protects you against nonpayment.
- Small claims court is a good next step. Time in court is time you aren’t making money on the road. Before you pursue this, be sure you have all of your documentation available to present to the judge.
- Retain legal representation. It’s best to rely on a professional to help you through the process. Retain legal advice or counsel so you feel confident.
Prevent non-payment issues before they happen
There are steps you can take to prevent non-payment issues from occurring at all.
- Build stop partnerships with reliable brokers. When you do sign a contract with a reliable broker, take the time to build up the relationship. Work together to build the contract, hammering out all the details and keeping everything in writing.
- Strengthen carrier-broker agreements. Make sure that every agreement you sign is clear and concise, but also detailed. Go through every section and clause and make it comprehensive and secure for both parties.
- Implement effective credit management practices. Maintaining a good credit score and managing your financial relationships professionally will help you spot any processes that seem suspicious or potentially risky.
Factoring solutions to secure payment
With finances on the line, freight factoring can help get paid fast and securely, relieving any cash flow worries.
Freight factoring expedites your pay once an invoice is received. It works by outsourcing the collections process to a third-party freight factoring company. The factoring company buys the invoice from you and pays you the invoice amount minus their factoring fee, usually a range of 2% – 5% of the invoice. This lets you keep your focus on hauling loads instead of worrying about collecting payment.
How it works:
- You haul a load from one place to the other.
- You submit your paperwork to the factoring company rather than the broker.
- You get paid within 24 hours.
- Your broker pays the factoring company in 30-45 days.
Some freight factoring companies have additional benefits like non-recourse factoring to protect you in case of customer financial insolvency (bankruptcy), flexible cancellation policies if the service is not working for you, and/or no minimum volume requirements.
Protect your rights
Your rights as a carrier are important and valuable. Don’t shy away from asking for third-party intervention or legal action when necessary. You deserve to be paid for the work you have completed. Take action now to prevent non-payment issues and maintain healthy carrier-broker relationships for every agreement.
Truckstop Factoring makes it simple. Haul a load, submit your paperwork, and get paid the same day upon invoice verification. Truckstop Factoring processes the invoices and sends them to the broker with no minimum volume requirements and you still get paid if the broker doesn’t pay due to credit insolvency. Get started today!
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