Freight fraud is becoming a rampant issue within the trucking industry, with scammers posing as middlemen to steal thousands of dollars in payments for shipping goods. The problem has escalated in recent years due to the shift towards online load matching and increased competition for shipments, which has led to inadequate background checks on businesses.
TriumphPay, a carrier-payments platform, estimates that double brokers are receiving between $500 million to $700 million annually in fraudulent freight payments from shippers and brokers.
“We consider this really a threat to the way of doing business,” said Anne Reinke, chief executive of the Transportation Intermediaries Association, an Alexandria, Va.-based trade group representing freight brokers. “How can a shipper trust either a carrier or a broker if they’re not sure their shipment is going to get to where it’s going to go?”
Freight brokers connect truckers with loads that need to be transported. However, the industry is facing a concerning problem known as double-brokering. This involves individuals using fake identities and posing as legitimate truckers to bid on loads, causing the original shipper to pay the wrong person. The load is then reposted, leaving a legitimate company to handle the shipment without realizing the funds have been diverted.
This leaves smaller carriers and brokers in disarray, as they lack the financial flexibility to handle the loss of shipment payments. With costs increasing due to rising interest rates and a decrease in freight demand, the impact on these businesses can be as much as $7,000, according to Jeff Hopper, the Chief Marketing Officer of DAT Solutions LLC, whose company specializes in matching U.S. shipments and trucks in the spot market.
“It’s a very difficult environment, and so they’re on the hairy edge of profitability anyway,” Mr. Hopper said. “When they get a hit like this, it can be the determinant of, ‘Do I stay in business or not?’”
Truckstop.com’s freight marketplace has seen a surge in fraud complaints, with a 400% increase in the fourth quarter of 2022 compared to the previous year. This marks the highest level of reported fraud since 2004. The rise in digital transactions has left businesses more vulnerable to double-brokering and other fraudulent activities. Executives attribute the increase in fraud to a struggling trucking market, which has made it easier for scammers to target unsuspecting clients.
“The thieves tend to come after the marketplace when the rates go down, when the rates are difficult in the market, because people don’t do their normal vetting of information,” said Brent Hutto, Truckstop.com’s chief relationship officer.
While double brokering is illegal, enforcement is lacking and it could cost you big bucks. A recent case involving Tennessee-based brokerage Direct Expedite LLC resulted in a $5,000 loss due to a fraudulent carrier relisting their load. Experts say the Federal Motor Carrier Safety Administration has gaps in its ability to penalize unauthorized brokering, leaving brokers vulnerable. To protect yourself, always check licensing status and be vigilant.
“First of all, it takes a lot of time away from our people that they’re looking for bad guys all the time. The second thing is that it’s a financial burden,” Mr. Prax said. “That’s what really drove me to become on a crusade now to get rid of these guys.”
Source: The Wall Street Journal
