How To Avoid Surprising Double-Brokering Impact | Best Free Hacks
Double brokering involves a broker, carrier, or individual unlawfully passing a shipment to a different company without informing the shipper. While there are some reports of misunderstandings and accidental double brokering, more often than not the guilty party is trying to make an extra buck at someone else's expense.
Responsible brokers and carriers are always on the lookout for double brokering, which is why companies have such meticulous and lengthy vetting processes. But from 2022-2023, double brokering saw a 100% increase, meaning we have to be more careful than ever.
Why the increase? The freight industry took huge hits during and after the COVID pandemic causing desperation, confusion, and uncertainty. Criminals jumped at the opportunity to take advantage of the chaos, and ops teams are the ones taking the most punches.
The following segments will explain the difference between double brokering and co-brokering, how to avoid scams, and how Cota Systems is helping carriers protect themselves from them.
What is Double Brokering?
If someone takes responsibility for moving a load and pawns it off to someone else without the shipper knowing, that's illegal double brokering. Why? It has a history of resulting in stolen loads, stolen labor, liability disputes, and severely delayed shipments. Check out this Reddit thread of double brokers explaining their process.
If a carrier gets caught double brokering, it stays on their carrier report and prevents most brokers and shippers from working with them.
Is Double Brokering Illegal?
Yes - double brokering is shady and illegal. There's nothing preventing a company from being totally transparent about co-brokering a load (more on that below).
The freight industry has money set aside for brokers and dispatchers to make money connecting shippers with truckers. To do so secretively and deceptively means there's probably something nefarious going on.
Can You Go to Jail for Double Brokering?
Those caught double brokering can face fines in the tens of thousands, license revocation, or jail time, in severe cases. In one 2015 case, the guilty party was convicted to three years of jail time and $532,000 in restitution payments.
Double Brokering Example
The most common and consequential double brokerage example looks like:
Carrier A calls on a load, books it, and runs it. Unbeknownst to them, Carrier B had already booked the load directly with the shipper and re-posted it on another board. When it comes time to get paid, they hear nothing from their contact, and the shipper says they already paid another carrier, Carrier B. Carrier A paid for labor, gas, and spent time on a load that someone else took the credit and payment for. A case like this just got busted in March 2023.
Another double brokering scheme:
Carrier B accepts a load from a broker and negotiates $2,000 in truck driver pay. They then post the load out as their own and pay Carrier C $1,500, keeping $500 for themselves.
No harm no foul, right? Wrong.
Carrier C calls in to tell Carrier B they'll be 3 hours late and will be combining the load with other cargo, partial style. Carrier B doesn't tell the shipper. Now the customer gets hit with a $100 late fee, and the shipper refuses to load because they didn't want a shared trailer. The customer ends up recovering the load themselves and paying another carrier $3,000 to get it moved last minute. Note that neither Carrier C nor Carrier B got paid a cent.
The list of mishaps is endless, and double brokers don't care who they hurt in the process.
Co Brokering VS Double Brokering
Co-brokering can be a beneficial strategy for handling complex or large-scale shipments or accessing a broader network of carriers. While more than one party is arranging transportation and splitting commission, the dealings are ethical and transparent - and the customer is in the loop.
Suppose Company A has a client who needs to ship a large quantity of goods from New York to Los Angeles. Company A has expertise in finding clients and negotiating rates but doesn't have a strong network of carriers on the West Coast. In this scenario, Company A signs a co-broker agreement with Company B, which will find carriers based out west to take trips heading home. The customer is aware that different carriers are taking their loads and can get information from them if need be.
Co-brokering vs Double Brokering: If this scenario were a case of double brokering, the customer would think that Company A had its own capacity employed on each load. If there were ever a claim, they incorrectly would file it with Company A who is also getting paid for the shipment. Company B would be at a loss and not get paid by Company A for their work.
From 2022-2023, DAT suspended over 6,000 accounts suspected of fraudulent activity. Other Third Party Logistics (3PLs) and payment processing companies reported occurrences of fraud increasing by 300% in the first few months of 2023 alone.
The Role of FMCSA, DOT, & IIJA
Recently, the FMCSA guidelines came out with a statement to define the accepted roles of each part: broker, bona fide agent, and dispatch. While they failed to provide an official FMCSA double brokering definition for the industry, they did provide some helpful guidance. Below are some useful definitions to be aware of:
IIJA: Infrastructure and Job Act - Focuses on infrastructure investment and mandates FMCSA to inform the public on the interpretation and definitions of industry terms
DOT: Department of Transportation - Has regulatory authority over interstate transportation. The DOT can take enforcement actions against individuals or entities engaging in illegal and deceptive practices, such as penalties for double brokering.
FMCSA: Federal Motor Carrier Safety Administration - A branch of the DOT focused on ensuring the safety and security of commercial motor vehicles and carriers. They conduct compliance reviews and ensure broker bonding and trusts that protect carriers and shippers from non-payment.
Broker: A person, other than a motor carrier or an employee or agent of a motor carrier, that as a principal or agent sells, offers for sale, negotiates for, or holds itself out by solicitation, advertisement, or otherwise as selling, providing, or arranging for, transportation by motor carrier for compensation.
Bona fide agent: People who are part of the normal organization of a motor carrier and perform duties under the carrier’s directions pursuant to a preexisting agreement which provides for a continuing relationship, precluding the exercise of discretion on the part of the agent in allocating traffic between the carrier and others.
Dispatch: While not mentioned in the recent announcement, the FMCSA has previously defined dispatch as those who work exclusively for carriers to source loads and perform additional services unrelated to sourcing shipments.
A few key takeaways:
Bona fide agents work for or are contracted by carriers and perform duties listed in an official contract.
Dispatch can act as brokers or bona fide agents, providing the correct authority is active and complies with state licensing requirements.
A broker authority is required if dispatch will be assigning another motor carrier.
When it comes to double brokering, the FMCSA is the most direct authority to contact. It's widely hoped that they take stronger action soon to protect carriers.
What This Means for Carriers & Shippers
Nothing in the recent announcement addressed or discussed plans to back against freight fraud. The main goal was to define the issue of scammers acting as bona fide agents when in fact, they are pulling double brokering schemes. Nothing changes as far as the penalty for double brokering or a definition of double brokering illegal activities.
With fraud getting worse, shippers and carriers should be making sure they document every detail and have the best insurance possible so they don't have to bear the brunt of any scams.
"Double-brokering has no place on our platform. We've taken extreme measures to ensure all shipments on our load boards are validated to protect our carriers and our shippers from losing their hard earned revenue." - Jeremy Vrchota, Founder and CEO of Cota Systems
How Cota Systems is Leading the Fight Against Double Brokering
Cota Systems as Broker
Our team is working on a solution to allow only the most reliable brokers onto the Cota Systems platform. As we grow, so will our strict vetting system and network of trusted brokers. This way, carriers can access more load variety, in more regions, for more equipment types.
Carriers Paid By Cota Systems
Carriers that book through Cota Systems can feel confident that our team will be making their payout. The agreed-upon rate is the TTT (to the truck) rate; any fees or payments to other parties are accounted for and paid separately.
The team that designed and operates our TMS for carriers is full of experienced drivers who fully understand carrier pain points. Our goal in creating Cota Systems is to make life as easy as possible for carriers. This includes nipping any double brokering scheme in the bud.
Working with Co-Brokers
Brokers bring variety and volume to a load board. Cota's network includes hand-selected small and mid-sized brokers with solid reputations. Our commitment to due diligence ensures that carriers can confidently join our network, knowing they are part of an ecosystem that prioritizes the interests of all stakeholders, from the shippers and brokers to the drivers on the road. Over time, our carriers form strong business relationships and can increase their loaded miles and on-the-job satisfaction. We're not just co-brokering loads; we're connecting people and building an ecosystem within the hectic world of freight that benefits all parties involved.
How We Help Co-Brokering Companies
Our carrier vetting process is meticulous, as is our approach to accepting shipping customers. We manually make sure that carriers have:
A high success rate
A high safety rating
An active authority (not broker authority)
Limited or no Freightguard reports
Cargo and liability insurance coverage & more.
Because we leave no stone unturned, shippers trust the carriers that we connect them with, and the co-brokering process goes smoothly.
With CARRIERPRO™, carriers can stay connected with drivers in the same place where they communicate, upload paperwork, and sign and send documents. The streamlined system and open lines of communication mean any snag or miscommunication gets solved right away. We're available on desktop and mobile and both forms are free and user-friendly.
Is It Double Brokering or Just Frowned Upon?
Many shippers with large operations will tell their carriers, 3PLs, and brokers "If it's not your company truck, don't send it in." This means that they want company drivers on a load, not a broker who finds a carrier to do it.
While it's not considered illegal or double-brokering to say "We'll do our best but might have to outsource," it's certainly unethical. It can also hurt carriers that get turned away at the door and waste precious hours (and gas).
The key takeaway of all of this is that transparency is the best way to operate. Honesty is the best policy!
How Can You Avoid Double Brokering?
There's no way for carriers to spot and skirt double brokering every time. So, there's only one solution: to go where it doesn't exist.
Even big player load boards like DAT and Truckstop can't get in front of every scammer. Unauthorized intermediaries can exploit the anonymity and sheer volume of listings on these platforms to engage in double brokering disguised as co-brokering. But, that's where we differ. We act like bouncers taking IDs at the door.
By building a network of upstanding partners who share our commitment to industry regulations and ethical business practices, we don't give scammers a chance.
Sign Up with Cota Systems
For new drivers and dispatchers, it might be hard to spot the signs of double-brokering. Using the Cota Systems platform is a surefire way to steer clear of it.
The platform is free, but it's by no means lax on monitoring and safety. We take all measures to vet our brokers and our carriers to ensure hands are shaken and everyone's needs are met. You'll feel confident in who you work with, co-brokering or not. Remember - we're the platform that ID's at the door. Scammers don't even get in.
Here are a few beginner tips for sniffing out double brokering. We do all of these for Cota Systems users.
Vet Your Broker
If you haven't heard of a broker, do some research into their reputation online and ask other drivers what they've heard.
If the load is "blind" - double down on your research.
Some co-brokers use blind loads to prevent their partners from cutting them out of the agreement. Others use blind loads to create confusion in double brokering.
A general rule of thumb is to try and work with a handful of trusted brokers and avoid names like TQL and Landstar that broker freight with little concern for the final carrier's pay or preparedness. Stay informed about ongoing scams and talk with other industry connections often to stay in the loop.
Even so, the issue is that the people double brokering freight have been known to impersonate reputable companies. This is why the SAFER number check is so vital. With Cota Systems, carriers can safely choose new loads when they need them and co-broker worry-free.
If It's too Good to be True…
If someone is offering double or triple the market rate for a lane, it's probably too good to be true. Think about it - why would they be willing to give so much away when plenty of carriers would do it for less? No matter how tempting it is, it's not worth the risk of not getting paid at all.
There are a few exceptions when overpaying on a lane makes sense:
Double brokering freight is a $500-700 million per year black market. Unfortunately, the practice is only growing. Carriers and brokers need to be more on the lookout than ever to protect themselves.
Not only does the practice weaken trust in an already skeptical industry, it can lead to honest brokers, carriers, and shippers taking big hits if they don't have the proper documentation to back up their claims.
How to Report Double Brokering:
Call the broker to verify their information (this is not a call to confront them). This prevents you from reporting them over a misunderstanding or miscommunication. It would be unfortunate to report someone who is being impersonated.
To verify, you can call shippers or receivers and ask what carrier arrived.
Notify the load board.
Notify your insurance company and file a claim if you have not/will not be paid.
File a complaint with the FMCSA and DOT.
Report them to the authorities.
NEVER pay the company that double brokered. Only one company carried the load, and that's who should get paid. A double broker broke the law and has no claim or standing to receive payment.
More from Cota Systems
How we help carriers: Our mobile app is a TMS for carriers that connects with direct, certified shippers. How we help shippers: We provide guaranteed freight quotes on their full, partial, and LTL loads. No re-rates and 4x less cargo damage frequency than traditional LTL.
How we help dispatchers: As past drivers and dispatchers ourselves, we've created a trucking dispatch software that streamlines communication, tracking, and document sharing.
Double brokering is rampant and isn't going away anytime soon. It seems like once a strategy gets widespread enough to easily spot, some scammer in some corner of the world finds a new way to trick honest people out of their money.
We hope this article helps you understand the ins and outs of double brokering so you can prevent it from happening to you. At Cota Systems, we're on your side. Check out our other services and find out for yourself why so many shippers and carriers are joining our network!
I joined Cota Systems to help U.S. truckers grow their businesses. I proudly served in the U.S. Navy, managed some of the largest brands on earth, and I'm excited to share what I've learned with you. Truckers are the backbone of our great nation and when you and your family are thriving, so is America! 🇺🇸