Freight Tec Blog

Should Agents be 100% liable for their customer’s Bad Debts?

Imagine one of your largest customers going belly up… and they owe you and your Broker company $50,000.00…

You soon learn there is no hope of collecting any of the money owed…

Who should pay for that bad debt?

It should be split the same way your commission was paid out between you and your Broker. If you are on a 50% / 50% split with your Broker, then you should both pay $25,000.00 of the bad debt.  If you are on a 60%/40% split, you would pay $30,000, and the Broker would pay $20,000.

Why?

Its fair. Its ethical. And both parties always have great interest in doing business with customers who will pay you.

I’ve heard of Brokers paying 100% of any bad debts from their Agents… They are CRAZY !

Lets me share a story with you…

I know of a company who practiced the policy of paying 100% of any bad debts from their agents. They did it because they thought it would lure agents into their company, and you what? They were right! They did lure a lot of agents into their company!

A few years down the road, they were hit for a $400,000.00 bad debt from one customer, then another one for 109,000.00, then another one for $55,000.00. The agent (who’s customers they were) didn’t care… he didn’t have to pay any of that $500,000.00+ back. No worries for him…

But there was great pain and anguish for all the other agents, and the broker. The broker was not in position to handle these rapidly mounting bad debts (there were more that rolled in). The broker tried to work things out… but the hole they were in got deeper and deeper too fast.

The broker quit paying the carriers.

The carriers sued all of the customers (and I mean EVERY single customer).

The customers had to pay all the freight bills again. (after already paying the broker months ago).

The customers were very angry.

The customers no longer trusted the agents they had worked with for years.

Good agents and several other good people lost their customer base – and their jobs. They could no longer provide for their families.

Agents now had to start over – their previous customer relationships were ruined because their broker ended up going belly up and not paying the carriers.

The criminal thing behind it all was this: There was a rotten apple agent who PURPOSELY did business with companies he knew were at risk of not paying their freight bills for one reason or another. Because he was paid his commission each week – he knew he would be paid before the bad debts hit the broker.  One bad apple spoiled the bunch… Actually, he put them out of business.

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Winford Dallas JONES, Plaintiff,
v.
Loretta M. D’SOUZA, Personal Representative of the Estate of Kristina Mae Arciszewski, deceased, et
al., Defendants.

Sept. 11, 2007.

GLEN E. CONRAD, United States District Judge.
This personal injury action arose from a serious accident involving two tractor-trailers that occurred on
the night of September 12, 2004, in Wythe County. One tractor-trailer was driven by the plaintiff,
Winford Dallas Jones, and the other was driven by Kristina Mae Arciszewski, who died in the accident.
The plaintiff alleges that the court has diversity jurisdiction over this action, pursuant to 28 U.S.C. §
1332. In his complaint, he asserts state common law claims for negligence, negligent hiring and
supervision, and negligent entrustment, and federal claims under the MotorCarrier Act and the Federal
MotorCarrier Safety Regulations. The case is presently before the court on the motion to dismiss filed
by defendants C.H. Robinson Worldwide, Inc., C.H. Robinson Company, C.H. Robinson Company Inc.,

C.H. Robinson Company LP, C.H. Robinson International, Inc., C.H. Robinson Operating Company LP, and C.H. Robinson Transportation Company Inc. (collectively referred to as “ Robinson” ). For the following reasons, Robinson’s motion will be granted in part and denied in part.

Read more…

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If the Shipper gives notice to ALL parties (the broker and/or the carrier) that if the load misses its appointment time that there will be penalties assessed of $____ per day or $____ hour UP FRONT (notice of “foreseeable damages”) prior to the truck even being dispatched, and ALL parties agree to these terms, then the Shipper can collect for delay charges.  This notice must be in writing, and should require signatures. This falls under the “just in time” concept that the auto manufacturers use, and they pay a Premium for this guaranteed service.  If you negotiate something like this with your Provider, expect to pay a premium for this type of service. Use a company that is large and financially stable enough to execute this high level service.  If you use a smaller provider who has their truck break down, they may not have the ability to fix the truck fast enough to make the appointment, and they may not have the resources to pay for all the penalites from the delay. At best, your freight could sit for hours or days while you try to find another provider to move the load. Use a large, stable provider with the financial ability to support a broken down truck quickly – or any other type of delay that could cost YOU money.

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A truck has the right to deliver the freight in a reasonable period of time. The driver of the truck must act in the best interest of the public. He must drive safe, obey the speed limit, follow the HOS (hours of service) regulations, and follow local laws while making every reasonable effort to deliver your freight on time, or as soon as possible. If the Driver delivers late, you cannot legally deduct delay charges from the freight bill. Lets assume you and your provider both agreed to your “Foreseeable Damages” description in writing. In the event of a missed appointment, you legally must pay the original freight bill in full, and then file a formal claim to recover your delay charges. Your claim must include receipts and other supporting evidence of your damages and costs. Wise Shippers greatly reduce their risk by obeying the law and following this process to recover damages.

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