It’s no secret that freight fraud and scams are increasingly common in the transportation industry. One of the most common forms of fraud currently causing the most significant problems in trucking is double brokering. Double brokering occurs when a load is transferred from one broker to another without the shipper’s consent. Double brokering is a type of fraud that often leaves the legitimate initial broker the shipper and the carrier facing significant financial losses.
According to a joint survey conducted by FreightWaves and TriumphPay last year, approximately 85 percent of freight brokers and carriers have been impacted by double brokering. The same survey found the financial impact of double brokering to be substantial. Nearly 56 percent of those surveyed reported losses of up to $50,000, 18 percent experienced losses between $50,000 and $150,000, 10 percent lost between $150,000 to $500,000, and 1 percent saw losses greater than $500,000. It’s estimated that the industry loses up to $700 million in revenue to double brokering annually.
Read on to learn more about the rise of double brokering in the trucking industry and its devastating impact on carriers and brokers — as well as our top tips on how to avoid double brokering as a carrier.
What Is Double Brokering?
Before we dive into the impact of double brokering and effective strategies for avoiding it, it’s important to clearly define what double brokering is.
With a legitimate shipper-broker agreement, a freight broker assigns the freight load to a carrier and that carrier picks up and delivers the freight according to the terms of the broker-carrier agreement. Double brokering involves the illegal transfer of freight and contractual obligations without the shipper’s knowledge. Double brokering can occur in three different scenarios.
1. The first type of double brokering occurs when a carrier accepts a load from a freight broker and then assigns the load to another carrier to transport the freight without the broker’s consent.
2. The second type of double brokering occurs when the freight broker assigns the load to another broker without the shipper’s consent. In these first two examples of double brokering, innocent mistakes caused by miscommunication or lack of knowledge of industry regulations may be the cause of double brokering.
3. However, a third type of double brokering which involves scammers pretending to be legitimate brokers or carriers, is intentionally fraudulent. This third type of double brokering is increasingly common in the industry. Scammers accept the freight load and payment while the actual carrier hauling the load is left empty-handed.
How Are Carriers and Brokers Affected by Double Brokering?
Freight brokers typically encounter double brokering when they inadvertently do business with scammers pretending to be legitimate carriers. Or, scammers can steal a broker’s identity. When a load is double brokered, the original freight broker on the load (and their shipper) no longer knows who is transporting the freight even when they are the ones legally contracted to move it. The broker has no idea how or if the load is being transported, who is driving the load, if or when the freight will arrive at its destination, and what condition the load will be in when, and if, it is delivered.
As a carrier, you may be involved with a double-brokered load if you book freight with a scammer pretending to be a legitimate freight broker or your identity is stolen, and scammers use your credentials to contract a load. In either of these two scenarios, you run the risk of not being paid for transporting the load, facing legal action, or being held liable for the lost or damaged freight.
Double brokering can be financially devastating for freight brokers and carriers, as both types of transportation businesses operate on slim margins. Double brokering also may raise rates for shippers, result in legal and insurance disputes, negatively impact service levels, and hurt your reputation and credibility in the industry, even if the double brokering wasn’t intentionally fraudulent.
The Differences Between Double Brokering and Co-Brokering
There is some confusion in the industry about what exactly double brokering is and the difference between co-brokering, a legal practice in the transportation industry.
Double brokering is an illegal, unethical practice that may involve the theft of cargo, transportation services and/or payments. It violates multiple state and federal laws, and criminal intent may be at play with double brokering. Double brokering may involve broker or carrier identity theft as well.
Co-brokering, on the other hand, is a legal brokering or sub-contracting relationship that allows multiple freight brokers and carriers to collaborate on the transportation of freight. When a load is co-brokered, all parties involved in the transportation of the freight are aware that the load is co-brokered and the shipper is aware that the load is being co-brokered, too. Once the co-brokered load is delivered, payment is split among the brokers and carriers involved according to their previously agreed upon contract terms.
Six Tips for Carriers on How to Avoid Double Brokering Scams
There are proactive steps you can take to avoid double brokered loads and minimize the financial losses associated with scams. Check out our top six tips for carriers on how to avoid double brokering scams:
1. Use Credit Checks
Checking a freight broker’s credit limit and days-to-pay rating is one way to learn more about a broker’s reputation and status to avoid double brokering scams. Many load boards will provide this information automatically, but you can also check a broker’s credit online using a factoring company like Triumph’s credit check tool. In addition to checking a broker’s credit limit, it’s also a good idea to confirm that a broker is in good standing with the FMCSA.
2. Make Communication a Priority
If you have questions about a broker-carrier agreement or something seems off, be sure to ask the broker questions and make communication a top priority. If a broker doesn’t respond quickly or seems hesitant to communicate with you or provide details on the load, that could be a red flag for double brokering.
3. Leverage Technology
Another way to avoid double brokering is to use technology to your advantage. Consider using Triumph’s back office solutions to check a broker’s credit, average days to pay and other data to help you avoid double brokering scammers. Our back-office technology also allows you to track payment status and manage invoicing and collections efficiently all in one place.
There are also many companies, using technology to identify bad actors, preventing carriers from accepting loads that could, then, be double brokered. This is a positive for carriers and brokers as they are less likely to be scammed and it limits the opportunity for those loads to go to fraudulent parties.
4. Review Documents Carefully
Be sure to read all agreements and contracts, including the broker-carrier agreement and rate confirmation sheet. Most agreements address double brokering directly. If there is no mention of double brokering in the agreement or the rate con seems short on details, that should give you pause. Once the freight is delivered, you can also carefully examine the Bill of Lading to ensure the freight broker name on the BOL matches other documentation.
5. Focus on Building Relationships
One of the best strategies for avoiding double brokering scams is to focus on building relationships with quality freight brokers and shippers. Seasoned carriers often will only work with brokers they know and trust. Building long-term relationships with high-quality brokers has the added benefit of reducing downtime and helping you run as efficiently as possible.
6. Practice Proactive Vetting
Double brokering scams have the potential to upend your carrier operations, which is why it’s worth it to take the time to practice proactive vetting when it comes to working with new freight brokers. In addition to checking credit limits and FMCSA status, ask any potential partner or broker about their processes, including what steps they take to minimize double-brokered loads.
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