Double freight brokering is an act where a carrier accepts a load from one broker but turns around and re-sells it to a different broker without first notifying the broker or shipper. Ultimately, the perpetrator takes a load for a higher rate and pays less, thus pocketing the difference, or pocketing the entire payment and disappearing.
Co-brokering is different and legal. With co-brokering, all parties, including the shipper, are aware that multiple carriers and brokers are being used to complete a job. If you’re being asked to work in an arrangement of this nature, it’s generally safe as long as you do your research and verify all participants are legitimate and are aware of the arrangement.
Why would a company risk getting caught double brokering? It could be they’re trying to run a con. But, they can also be trying to quickly establish themselves by taking more work than they have the capacity to do. Brokers may attempt double freight brokering to not lose business from a shipper when they lack the drivers or certifications necessary for a specific load. Double brokering works like this:
- Carrier A sees a load posted by Broker A and accepts the job.
- Carrier A then takes that job and re-sells it to another broker (Broker B).
- Broker B hires Carrier B to deliver the load.
- Carrier B arrives to pick up the load and the shipper is unaware that the carrier has changed from the original arrangement.
- Carrier B completes the job and submits proof of delivery (POD) to Broker B to get paid.
- Broker B submits the POD to Carrier A to get payment.
- Carrier A submits the POD to Broker A and gets paid.
- Carrier A disappears with the money and doesn’t pay Broker B, who then cannot pay Carrier B, or Carrier A collects the money but only agreed to pay Carrier B a smaller portion and pockets the extra.
Sometimes, everything goes smoothly and the double brokering situation is never revealed. But, it’s more common for someone to not get paid, a carrier or broker’s reputation to be damaged, a load to go missing or get damaged due, and someone who didn’t realize the scheme was happening could become liable to pay the carrier. If the second carrier is in a crash, your insurance claim could end up denied.
Estimates put the losses in double brokering at more than $100 million per year. DAT is working hard to crack down on scammers that use their marketplace for double brokering and make sure the violators are reported to authorities. You need to also protect yourself. It’s important to know the signs of double freight brokering to ensure you avoid these situations.
How Can You Identify Double Freight Brokering Scams?
When carriers do not get authorization to sell a load to a secondary broker, it’s illegal. The government is cracking down on double brokering and load payment theft. The illegal practice gained attention recently when a Mexican resident posed as a carrier to one broker and then as a broker and hired carriers to deliver the loads.
In this case, the resident of Tijuana stole the identity of an actual carrier and took work from one broker. He then posed as a broker and hired a carrier to deliver the load and collect payment. He fled to Italy without paying the carriers who actually delivered the shipments. He was arrested, extradited to the U.S., and charged with double freight brokering. His plea agreement requires him to pay his victims, but his final court hearing is coming up in December.
How do you identify these scams when they can be so convincing? Start by paying close attention to the broker’s name. Often, double freight brokering scams use names that are slightly different from the real company’s. For example, they might add an “S” to the main part of the name or make a slight change to the spelling, such as America instead of American.
Is the price unbelievably generous? If you’re approached by a broker with the chance to deliver a load for three times the average rate in the area, it’s likely a scam. A slight increase over your usual rates may be legitimate, but drastically increased rates that are too good to be true are always worrisome.
Has the new broker refused to work with you if you work with a factoring company? If so, it could be because they know they’re going to get investigated by the freight factorer, and they don’t want that business credit report to alert you. If they ask you to request a Letter of Release from your freight factoring company prior to you accepting the job, don’t take it. It increases your risk.
Tips for Protecting Yourself
Before you take a job, do your homework. Run a Saint John Capital real-time credit check. Verify that the broker or shipper is a legitimate company with a good credit rating. If you see negatives or feel something is weird, don’t agree to transport the freight.
If the credit check goes well, head to Safer FMCSA and run a search for the broker there, too. Safer is a free online service that offers information about a broker, shipper, or carrier, the company’s size, safety record, and inspection information. Search by MC/MX number, company name, or DOT number. Make sure the name and email on your rate confirmation sheet match what FMCSA shows.
Once you’re at the pick-up site to load the freight onto your trailer, verify the broker’s name and information. Again, if something is off, you should clarify it before you load items onto your truck. If you find a discrepancy, gather evidence and report the suspicious broker. You should always report suspected cases of double brokering.
Factoring your invoices gives you another level of protection. Saint John Capital’s non-recourse agreements take the pressure off you if a broker doesn’t pay the invoice. You get paid after you deliver the load, and that’s your part done.
If you sign a recourse factoring agreement, you will be held liable for repayment if the broker fails to pay. Always look at the terms and make sure you’re signing a non-recourse factoring agreement. The factoring fee may be a little higher, but the protection you get is worth it.
Keep the original copies of your bills of lading. If you are asked by your broker to hand over the original copy, ask why. Most brokers will accept a scanned, emailed copy. If they insist on an original only, it helps to talk to them. It could be they’ve been scammed in the past, but it could also be they’re looking for the original to use for identity theft and double brokering. Protect yourself.
Saint John Capital has an app you use to submit a photo of your bill of lading. We will not ask for the original. We work with you to ensure you’re paid quickly, have the resources available to find loads that aren’t fraudulent offers, and be able to run free business credit checks if you’re working with someone new. Sign up free online and learn more about our low-cost freight factoring services.