In a notice to be published in the Federal Register soon, the Federal Motor Carrier Safety Administration (FMCSA) announced revisions to its regulations pertaining to property broker and freight forwarder financial responsibility.
This final rule, which is set to take effect 60 days from the date the rule is published in the Federal Register, modifies the following five regulatory areas relating to broker and freight forwarder financial responsibility:
Assets Readily Available. In its 2012 MAP-21 legislation, Congress mandated that broker/freight forwarder trust funds consist of “assets readily available to pay claims without resort to personal guarantees or collection of pledged accounts receivable." To satisfy this requirement, the FMCSA's final rule sets out a list of the acceptable asset types a BMC- 85 trust may contain. FMCSA has determined that these asset types are "readily available" because they are stable in value and can be easily liquidated within 7 calendar days of an event that triggers a payment from the trust. The list includes: cash, ILCs issued by by the FDIC or NCUA, and Treasury bonds. Notably, no other asset types, including but not limited to real estate, stocks, bonds, and other securities, will be considered acceptable.
Immediate Suspension of Broker/Freight Forwarder Operating Authority. The final rule authorizes the FMCSA to suspend a broker or freight forwarder’s operating authority if their available financial security falls below the required $75,000. As explained in the notice, "a broker’s or freight forwarder’s 'available financial security' may fall below $75,000 because a broker or freight forwarder consents to a drawdown, or if a broker or freight forwarder does not respond to a valid notice of claim from a surety or trust provider, or if a claim against the broker or freight forwarder is converted to a judgment." If the available financial security falls below $75,000 and the broker or freight forwarder does not replenish funds within 7 calendar days after notice from FMCSA, the Agency will issue a notification of suspension of operating authority to the broker or freight forwarder.
Surety or trust responsibilities in cases of broker/freight forwarder financial failure or insolvency. In the final rule, FMCSA defines the term "financial failure or insolvency" as "any payment made or other default pursuant to § 387.307(e)(1), the regulatory provision that addresses the situations under which a broker or freight forwarder’s operating authority may be immediately suspended, which the broker or freight forwarder does not cure in accordance with § 387.307(e)(5) or (6)." If a surety or trustee becomes aware that a broker or freight forwarder is experiencing financial failure or insolvency, it must notify FMCSA and initiate cancelation of the financial responsibility. FMCSA will then publish a notice of failure in the FMCSA Register.
Enforcement Authority. With this rule, the FMCSA implements the requirement in MAP-21 for suspension of a surety or trust fund provider’s authority in certain circumstances. The Agency will first provide notice of the suspension to the surety/trust fund provider, followed by 30 calendar days for the surety or trust fund provider to respond before a final Agency decision is issued.
Entities Eligible to Provide Trust Funds for BMC-85 Filings. Lastly, the final rule removes loan and finance companies from the list of providers eligible to serve as BMC-85 trustees, because this type of institution "is not subject to the rigorous Federal regulations applicable to chartered depository institutions or to the state regulations applicable to insurance companies."
Brokers, surety providers, and financial institutions must comply with the provisions regarding immediate suspension, financial failure or insolvency, and enforcement authority on January 16, 2025. Additional details are available in the final rule, available here.
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