Collecting Freight Charges When A Broker Doesn’t Pay
By Brian Schrumpf from The Fuentes Firm published on July 24th, 2018.
Too many motor carriers have experienced brokers that collect money from shippers and then fail to pay the motor carrier. The broker may go out of business, file bankruptcy, or be operating a scam brokerage. Fortunately for motor carriers, there are alternative methods to collecting the freight charges.
The broker’s bond is an alternative method to collect the freight charges. However, often the broker owes money to lots of motor carriers, so the bond is empty or only pays pennies on the dollar. In addition, bond companies will often deny freight charge claims at the direction of the broker.
Importantly, motor carriers can also collect freight charges from the shipper and consignee, even if the shipper or consignee already paid the broker. By law, the shipper and consignee can be required to pay the freight charges twice if the motor carrier is not paid. While shippers and consignees are often resistant to pay a motor carrier when the shipper or consignee hired a broker, especially when the shipper or consignee already paid the broker, many shippers and consignees will accept their liability after being educated on the law. If the shipper or consignee refuses to accept their liability, courts regularly enforce shipper and consignee liability for freight charges, so the freight charges can be collected with a lawsuit.
This same principal also applies when a motor carrier’s shipper customer fails to pay freight charges – the motor carrier can generally collect the freight charges from the consignee. Similarly, if the motor carrier was hired by the consignee, the motor carrier can generally collect the freight charges from the shipper.
The law protects motor carriers and favors motor carriers getting paid their freight charges. As a court in the the Southern District of Texas explained, “The bedrock rule of carriage cases is that, absent malfeasance, the carrier gets paid.”