Truckers and shippers in the United States are facing a growing threat from double brokering, an illegal practice that has surged to over $500 million annually. While this activity has been present for some time, a recent increase in its prevalence, coupled with a new variant known as 'load phishing,' has raised concerns.
Double brokering occurs when a party successfully bids for a load listed by a broker or load board and then brokers it to a third party. In some cases, this involves a trucker winning a load but deciding to offer it to other truckers due to a lack of proprietary capacity. Although these instances often go unreported when no harm is done to any party in the transaction, they remain illegal if the shipper's approval is not obtained.
The complexity of the freight industry, with around 16,000 freight brokerages and 400,000 registered motor carriers in the US, contributes to the challenge. Approximately 30% of US road freight is tendered on the spot market. Reported cases of double brokering are often fraudulent, ranging from rogue carriers obtaining payment without compensating the actual carrier to instances where loads are stolen and redirected.
A concerning development is the rise of 'load phishing,' where fraudulent carriers use fake credentials to obtain a load and then disappear with the cargo. Load board fraud, including double brokering, has surged recently, with reports of a 400% increase in fraud cases between the fourth quarter of 2021 and the same period in 2022, according to Truckstop, a load board provider.
The impact of double brokering and other forms of freight fraud is significant, costing the industry millions of dollars and potentially driving smaller carriers out of business. The Transportation Intermediaries Association (TIA) estimates the financial hit on the industry to be between $500 million and $700 million annually.
Law enforcement has been of limited assistance, with a lack of investigation into the 80,000 complaints recorded in a database. The damages from individual instances of double brokering may be relatively minor, but their cumulative effect results in substantial losses.
To address these challenges, the TIA published a white paper highlighting red flags for brokerages indicating potential double brokerage or load phishing attempts. Technology firms, recognizing the need, are stepping in. TriumphPay, a payment provider for the transport industry, has partnered with Highway, a tech provider for carrier identity management, to combat double brokering fraud. This collaboration aims to provide tools for detecting and mitigating fraud while enhancing the overall payment experience for carriers.