Jimmy DeMatteis says he's the last guy who wants more government regulation of the trucking industry. But the longtime truck broker said federal legislation that would tighten requirements for brokers represents a compromise that could head off even stricter requirements in the future.

The Motor Carrier Protection Act of 2010, introduced in the U.S. Senate last month, would increase the surety bond requirement for truck brokers from the current $10,000 to $100,000, which supporters say would help curb the rampant fraud that's occurring within the industry.

"I think it's long overdue," said DeMatteis, president of Des Moines Truck Brokers Inc. in Norwalk and a board member of the Transportation Intermediaries Association (TIA), a national trade organization that supports the legislation.

"Some people are worried that it will make things harder for smaller carriers, but actually I think this will make it easier for them because they know they'll get paid," he said. "It will weed out a lot of bad players, I think."

Trucking companies have been scammed out of millions of dollars by fraudulent entities that set up shop as brokers, according to Sen. Olympia Snowe, a Maine Republican who sponsored the legislation. In one such scheme last year, a group repeatedly hacked into an online load board, double-brokered loads and pocketed payments from shippers after the deliveries were made by unsuspecting trucking companies.

Another group operated a dozen fraudulent freight broker companies over a three-year period in Georgia, evading law enforcement by continually changing business names and addresses.

The legislation, which is also supported by the Owner-Operators Independent Drivers Association, would help to eliminate fraudulent brokers by:

• Requiring every licensed broker to renew its authority every year and require the U.S. Department of Transportation to cancel any authorities not renewed;

• Requiring identifying numbers to be issued for each authority (motor carrier, broker, freight forwarder), and for each shipment, the parties will have to declare under which authority they are participating in the transaction;

• Prohibiting motor carriers from re-brokering freight without having a proper broker license and bond and placing unlimited liability for valid claims on companies that knowingly broker without a license or bond; and

• Imposing new requirements for licensing, including a requirement that at least one corporate officer has met minimum experience or training requirements.

The Iowa Motor Truck Association (IMTA), which represents more than 700 member companies in the state, doesn't have an official position on the legislation, said Brenda Neville, the IMTA's president. However, "overall feedback from the carriers indicates strong support for raising the bond requirement for brokers," she said.

"The brokers that are members of our association are all very respectable and operate at the highest level of integrity," Neville said. "These brokers provide a valuable service to the carriers, and in many cases are valuable business partners to the truckers and good supporters of the association and its efforts.

"We do, however, hear complaints about the fraudulent brokers, and with the minimal to nonexistent margins that exist in the trucking industry, the last thing a carrier needs to deal with is a bad broker, so the hope is that the new legislation may eliminate some of the bad actors."

Chip Thompson, operations manager for Concorde Refrigerated Inc. in Ankeny, said he agrees that a higher bond is needed. "Some of these (brokers) go into business for a year, and they rip off a bunch of companies, go out of business and then they're back in business a year later under a different name," he said. Thompson said his company, which specializes in hauling meat and produce, tries to avoid problems with fly-by-night brokers.

"We only deal with people we've dealt with before," he said, noting that he is particularly wary of brokers in Arizona, New York, California and Florida, which have had some of the highest instances of broker fraud. "You just can't go in on the load board and grab a load."

One of the issues regulators have struggled with is identifying how many brokers there are in the marketplace, DeMatteis said. "There are about 50,000 (broker) licenses issued, but there's no way of knowing how many are really in business," he said. "With annual registration, they will know how many are actually in business."

The legislation is a compromise with proposals that would have increased bonds to $500,000 or more, said Robert Voltmann, TIA's president.

"This is not about big companies versus small companies, as some will suggest," Voltmann said in a press release. "This legislation is about well-run companies of all sizes that follow the rules against those that think they can skate on thin ice."

Out of an estimated 12,000 truck brokers nationwide, fewer than 100 voluntarily carry a $100,000 bond currently, DeMatteis said. Des Moines Truck Brokers increased its bonding to $100,000 a year and a half ago. In May, the company purchased a $250,000 bond, after DeMatteis heard about a broker in Boston who had increased his bond to that level.

"I didn't even know you could get a bond that high," he said. "I like being one of the industry's leaders in that regard."

To address brokers' concerns, TIA is sponsoring a webinar this week to educate them about steps they should take to ensure that they can meet the requirements for the potential increase in bonds, DeMatteis said. He said he's confident the legislation will move forward, but that it may not happen until sometime next year.

Provided a broker is on solid financial footing, it should be able to purchase a $100,000 bond for between $2,500 and $3,500 per year, DeMatteis said. The requirement will probably result in some of the unsound companies going out of business, he said. Additionally, "it's going to be tough on new players in the market unless they have capital to back them up."