5 Ways to Avoid Double-Brokering Scams
Double-brokering scams in the freight world can have dire consequences for brokers, carriers, and shippers, wreaking havoc on businesses’ credibility and reputations. This scheme began when shippers started using freight brokers to book carriers to move freight and is now costing the freight transportation industry over $100 million annually.
“Due to current market volatility, not only is the freight industry seeing an increase in double-brokering, but double-brokering schemes are much more sophisticated and organized, resulting in widespread fraud. There are measures you can take to protect yourself and your business, identify suspicious activity, and prevent double-brokering, whether you’re a carrier, broker, or shipper.”
Chief Product Officer at Truckstop, Julia Laurin.
What is double-brokering?
Double-brokering is the unauthorized transfer of a load from one freight broker to another without the knowledge or consent of the shipper. It can be a result of negligence or poor communication, but in most cases, it’s an act of malicious fraud. Bad actors execute double-brokering in an attempt to make easy money, resulting in financial loss for the victimized party or company.
In a legitimate shipper-broker situation, the broker typically assigns a load to a carrier and that carrier completes the haul according to agreed-upon terms. If for some reason the load is transferred to another broker or carrier, the original shipper is informed and in agreement with the transfer terms. Double-brokering occurs when the shipper is kept unaware that terms and parties have changed.
Either a carrier or a broker can commit double-brokering by making the following arrangements without shipper consent:
- A carrier accepts a load from a broker and transfers it to another carrier. When a carrier commits to more hauls than they can move, this can be a shortcut to getting freight delivered on time. This act is illegal without proper notice and shipper authorization and can result in financial loss and imprisonment.
- A broker gives a load to another broker. Similarly, brokers who take on too much freight might pass some on to another broker who can accommodate it. They illegally transfer the freight to another entity at a lower rate and then pocket the difference.
Is double-brokering illegal?
Double-brokering is illegal when it’s an intentional act to prey on unsuspecting trucking companies carriers, or brokers and criminal intent is at play. While double-brokering violates many state and federal laws, it should not be confused with the legal practice of co-brokering.
Double-brokering involves an illegal transfer of a contract to a broker or carrier without the knowledge of the shipper. It represents a breach of contract between parties and results in financial loss.
Co-brokering involves multiple brokers and carriers working legally with the original shipper to transport a load. Payment for the completed haul is divided among the parties according to agreed-upon contract terms. Co-brokering can help brokers work together to cover loads.
The risks of double-brokering
When double-brokering occurs, the original broker of the freight no longer knows who is handling their customer’s cargo but is still liable for its transportation and delivery. This is especially risky because the “new” carrier may not be qualified to haul the load or have the required permits or insurance.
And the carrier that delivers the freight is at risk of being left unpaid by the party who facilitated the fraud. They can also unknowingly face legal consequences, be denied an insurance claim, or be held liable in the event of an accident or lost or damaged cargo.
Double-brokering: 5 tips to avoid scams
Due diligence is critical when entrusting freight to a broker or carrier. To avoid the destructive scam of double-brokering, follow these tips:
- Work with vetted carriers and brokers. Ask the potential partner how they source carriers to cover their loads, the processes for vetting carriers, and how they avoid double-brokering. Take steps to verify broker and carrier history and their time in business.
- Use a trusted load board. Not all load boards are created equally. Look for one that vets and approves carriers and brokers prior to posting or handling loads and has increased security measures in place. The Truckstop Load Board has an entire team dedicated to denying access to fraudulent parties and vetting every carrier and broker.
- Find tools to automate your processes. Carrier onboarding and monitoring tools, like RMIS, help you reduce fraud and compliance vulnerability. Other transportation software helps you streamline your work and avoid the potential for human error, lowering the risk of costly mistakes.
- Read contracts carefully and verify documents. Many agreements address double-brokering head-on. Check the language thoroughly and make sure all compliance documents, insurance certificates, and required licenses are current and valid.
- Don’t hesitate to stop the transaction. If something seems off, trust your intuition. Ask questions, do your due diligence, and take extra precautions. The shipper will undoubtedly appreciate the effort you took to protect their freight instead of taking reckless and unnecessary risks.
Double-brokering is rampant in the transportation industry. But equipped with the right tools, you can go the extra mile to protect your business and your reputation against freight fraud and malicious intent.
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