New legislation designed to significantly beef up regulatory oversight of freight brokers and freight forwarders operating within the trucking industry is drawing both praise and concern-- especially over a provision that substantially boosts the monetary bond brokers and freight forwarders must post to conduct business.

Introduced by Sen. Olympia Snowe (R-ME) and Sen. Amy Klobuchar (D-MN), the Motor Carrier Protection Act of 2010 (S. 3483), would make several critical changes to the operating requirements of brokers and freight forwarders.

For starters, the bill would Increase the required broker bond from $10,000 to $100,000 and expand that bond requirement to freight forwarders.

Next, it would establish significant penalties for violations of broker regulations, including unlimited liability for freight charges for conducting brokerage activities without a license or bond.

The bill also would clarify that trucking companies must have a broker or freight forwarder license and an appropriate bond in addition to their motor carrier operating authority to arrange freight for another carrier for compensation. This would in essence mean that motor carriers could not broker freight without a broker’s license, while ensuring that brokers could not haul freight without obtaining carriage authority from the Dept. of Transportation (DOT)

The legislation also creates a new requirement for brokers and freight forwarders to renew their operating authority annually, with the Federal Motor Carrier Safety Administration (FMCSA) required to revoke operating authority that is not renewed annually. Revenue generated from the renewal fees will be dedicated to FMCSA’s oversight and enforcement of broker regulations, the bill states.

“If passed, this law would put a stop to a system that allows rogue brokers and scam artists to operate unchecked,” said Todd Spencer, executive vp of the Owner-Operator Independent Drivers Assn. (OOIDA), which worked closely with both Senators and the Transportation Intermediaries Assn.—which represents brokers--- to develop this legislation.

“Too often, we’ve seen bad brokers get away with collecting payment from shippers but leaving truckers holding the bag,” Spencer said.

Some industry experts, however, question whether this legislation will achieve its expected goals.

“The biggest issue with this is the bond fee,” pointed out Tim Brady, consultant and FleetOwner columnist. “For many smaller brokers, that $100,000 bond translates into about a third of their annual earnings,” said Brady. So implementing it would force brokers to raise their fees-- thus further lowering the monies paid to truckers for hauling the freight or even pushing smaller brokers and forwarder out of business altogether.

By contrast, the $100,000 bond is a small cost to larger multi-million dollar national brokers, which could give them an advantage in the marketplace. “If the smaller brokers leave the business that would allow larger brokers to gain more control over the price of freight,” Brady noted.