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Double Brokering in Transportation

May 08, 2024 | Factoring
3 trucks parked in parking lot

Unfortunately, fraud impacts all industries across the board. For the transportation industry fraud comes in many forms, let’s talk about — double brokering.

What is Double Brokering?

Here’s how double brokering typically plays out: First, a shipper hires a broker to handle their freight, trusting them to ensure timely delivery. Instead of directly hiring a carrier, the broker hands off the load to another broker, who might pass it along again. This makes it difficult to track down the actual carrier responsible for transporting the goods. 

As a result, when the carrier finally moves the freight, they may not even know about the original arrangement. This can lead to problems if the initial broker fails to pay the carrier or, in the worst-case scenario, if the cargo goes missing.

Related: How To Work With Freight Brokers When You’re A New Carrier

The Impact of Double Brokering

Double brokering negatively affects the transportation industry in several ways:

  • Financial Losses: Carriers often don’t get paid, leading to significant financial strain. Shippers may face extra costs and legal fees to resolve disputes.
  • Operational Disruptions: With multiple brokers involved, transparency and shipment tracking suffer. Delays and miscommunications become more likely, disrupting supply chains.
  • Reputational Damage: Trust is crucial in the transportation sector. Double brokering incidents erode trust between shippers, brokers, and carriers, damaging long-term business relationships.
  • Legal Complications: Resolving double brokering disputes can involve complex legal battles, draining resources and time.

Preventing Double Brokering

Preventing double brokering requires a combination of due diligence, technology, and robust industry practices:

  1. Rigorous Research Processes: Shippers should thoroughly investigate brokers before entering contracts. This includes verifying the broker’s credentials, checking their business history, and looking for red flags. iThrive has a free credit check for their customers.
  2. Clear Contractual Agreements: Contracts should explicitly prohibit re-brokers without the shippers consent. Legal agreements must clearly outline the responsibilities and liabilities of all parties.
  3. Utilizing Freight Matching Platforms: Platforms like RMIS (Registry Monitoring Insurance Services) can help verify the legitimacy of brokers and carriers, reducing the risk of double brokering. Most brokerages use RMIS for their carrier packets and will not ask for the information via text or phone call.
  4. Industry Collaboration: Shippers, brokers, carriers, and regulatory bodies should work together. Sharing information on fraudulent activities and best practices can help the industry combat double brokering more effectively.

Related: Top 4 Legal Tips for Freight Brokering

The Toll

Consider the effect double brokering has on the real world.

When a truck driver puts in long hours to ensure that deliveries are made on time, turns around and is faced with payment delays and the looming threat of disputes, not only does it affect their livelihood but it puts the drivers reputation at risk.

There are a considerably large number of individuals who bear the brunt of double brokering – hardworking truckers and shippers who are left vulnerable to exploitation and deception.

Identity Theft Scams

Fraudsters are purchasing identities of people and either opening a new authority in their name, with insurance, and everything. Then using that company to defraud brokers and factoring companies.

In some instances they are purchasing the identities of existing company owners, updating their contact information with the FMCSA and using that company to commit fraud on brokers and factoring companies.

Some simple things owners can do to protect their identity and their company’s reputation are:

  1. Sign up for an identification monitoring service which can alert when your information is found on the dark web
  2. Regularly check your information with the FMCSA to ensure no unauthorized changes have been made to your account
  3. Setup 2 Factor Authentication on your business accounts

Related: How To Get Your Own Trucking Authority

6 Red Flags that iThrive Warns Carriers that could Indicate Double-Brokering

To protect themselves from being scammed by double brokering, motor carriers should be aware of these red flags. It does not necessarily mean the load is being double brokered, but it is important to double check when you run into one or more of the instances below when booking and running loads.

  • Always check the broker’s MC number for credit reliability: Use tools like iThrive to check if the broker is legitimate and has a good credit history.
  • Freight agents using a Gmail domain vs a company email domain: Legitimate brokers use professional email addresses associated with their company.
  • If you are required to check in as a different name than you or the brokerage company that posted the load: Always confirm that the details match those of the broker you have contacted with.
  • If you see a different company listed as the carrier on the BOL (Bill of Lading): The listed carrier should match your records to avoid any discrepancies.
  • Offers sent to you from an email: Verify authenticity of the sender and cross-check their details with known records.
  • An unusually high rate for the lane and request for POD immediately upon delivery: Always questions rates that are significantly above market value and ensure all standard procedures are followed before providing any documentation.

How Double Brokering Affects Factoring Companies

Double brokering can throw a wrench into things for factoring companies. Here’s how factors are impacted:

  • Payment Delays or Non-Payment: If a carrier doesn’t receive payment from the original broker due to double brokering, they may struggle to repay their factoring company.
  • Increased Risk of Non-Recourse Factoring: Factoring companies may face losses if they offer non-recourse factoring and the broker defaults on payment, increasing financial risk.
  • Reputational Risk: Regular involvement with carriers engaged in double brokering can damage a factoring company’s reputation, making it harder to attract and retain clients.
  • Increased Due Diligence: Factors may need to enhance their due diligence processes, including stricter credit checks and ongoing monitoring, to mitigate the risk of working with carriers involved in fraudulent activities.
  • Legal and Regulatory Compliance: Involvement in disputes resulting from double brokering incidents can lead to legal regulatory challenges.

Double brokering messes with the entire process far beyond just financial losses. It makes it hard to track the cargo, leaves it uninsured, and can even scam the shipper and the carrier. Plus, it ruins the reputation of the original broker, shipper, and factoring company. 

Trust your instincts and be wary of any behavior from the broker that seems evasive, unprofessional, or suspicious. If something feels off, it’s worth investigating further.

Related: 7 Benefits of Factoring for Trucking Companies