Last Call to Renew Your Freight Broker Bond
It is now more than a year since the FMCSA increased the requirement for the freight broker bond and the deadline for this year’s renewal is approaching.
If you were a freight broker last year, you couldn’t have missed the big buzz around the freight broker bond increase. Virtually everyone involved in the trucking industry was talking about it, since it brought about some hefty and important changes. The biggest of them was the more-than-sevenfold increase of the total bond amount – it jumped from $10,000 to $75,000. More than that, another important change was that the freight broker bond (also known as BMC-84) became a requirement for freight forwarders, as well.
A year has passed and that means it’s time to talk about your freight broker bond renewal. Here’s what you need to know.
Why do you need to renew your bond every year?
As you probably know, the FMCSA requires freight brokers and forwarders to post the bond in order to protect shippers and carriers from fraud and scams and also ensures timely payment. The bond also guarantees that freight brokers and forwarders comply with all regulations related to their professions.
Freight broker licenses need to be renewed each year and since freight broker bonds are an important prerequisite for getting the license, they need to be renewed as well. But getting bonded isn’t the only way to satisfy this licensing requirement. You can also go the way of a trust fund agreement (BMC-85), depositing $75,000 of your own money with a bank or trust company. The trust fund option, however, is very inconvenient because while the money is held in the bank, it’s totally frozen. You neither have access to it, nor do you receive interest. In fact, you will likely be charged servicing fees from the financial institution for holding your funds.
Therefore, for all but the largest companies, the BMC-84 is a much better option. It lets you fulfill the licensing requirement with one small annual premium, which is just a percentage of the total bond amount.
When do you need to renew your freight broker bond?
When the FMCSA adopted the new rule, it was to take effect on Oct. 1 last year. The decision was followed by protests from many industry groups. They argued that an increase of this kind could endanger small, mid-sized and independent freight brokers, and put them out of business. This prompted the Administration to extend the deadline to Nov. 1.
Many brokers and forwarders who hadn’t purchased their freight broker bond by Nov. 1 received letters that their licenses would be revoked if they didn’t comply by Dec. 1. This means that you probably purchased your bond sometime between Oct. 1 and Dec.1 last year. And since a freight broker bond is valid for one year, your deadline for renewal is probably fast approaching. In order to be on the safe side, don’t postpone any longer.
Why is renewing your freight broker bond important?
The importance of renewing your freight broker bond on time cannot be stressed enough. Without the bond in place, you are virtually operating illegally, even if everything else in your license is in good order. If you delay your renewal by just a day, you are breaking the law.
Furthermore, shippers and motor carriers are increasingly careful when choosing with whom to work. They always want to make sure their freight brokers are licensed and bonded, because it reduces the chance of being defrauded. The FMCSA lists all bonded freight brokers on their website, so it’s easy for shippers and carriers to do a quick check and see if you’re on that list.
Can you renew your freight broker bond if you have bad credit?
Having a poor credit score should not prevent you from renewing your freight broker bond, but with bad credit, it’s all the more important that you apply as soon as possible. Since not all sureties will approve a bond if you have credit issues, you need to apply now, so that your agent will have time to find the right surety for you. This also maximizes your chances of paying the lowest possible premium for your bond.