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Truck Leasing Task Force by FMCSA Targets Predatory Leasing Contracts

07/12/2023 18:56

A recently established advisory panel tasked with providing guidance to federal regulators is currently examining potential restrictions on the financial influence of trucking companies over drivers through lease-purchasing agreements.

The preliminary recommendation was discussed during the initial meeting of July 11, 2023, of the Truck Leasing Task Force (TLTF) within the Federal Motor Carrier Safety Administration.

The TLTF prioritized the establishment of clear definitions for two types of leasing arrangements between carriers and owner-operators, namely, truck equipment leases and truck leases in which the owner-operator leases a carrier's operating authority.

Additionally, the potential harms that may arise from predatory equipment leases held by carriers were also discussed. Let's read more about it in this article.

Truck Lease Task Force Emphasized Stopping the Manipulation of Earnings of Truck Drivers

According to Paul Cullen, founder of the Cullen Law Firm and a member of the TLTF panel, there are numerous instances in the trucking industry where carriers manipulate the earnings of drivers. As the driver approaches the end of their lease, it is often observed that the availability of loads diminishes substantially, rendering it challenging for the driver to meet their truck payments.

This results in the driver defaulting on the lease-purchase clause of the agreement, resulting in the loss of equity they believed they had accumulated in the truck. Consequently, carriers exploit this opportunity and quickly replace the driver with someone else.

Cullen expressed his view that the successful conclusion of a lease-purchase program is a rare occurrence.

He believes that motor carriers should not have the capability to own the driver's debt, nor should they possess the additional financial authority to oversee the driver. This will have a major impact on the future retention of drivers. The labor organization is taking a closer look at this since every commercial driver is looking not just for a good driving experience but a good fair leasing agreement with trucking employers.

Task force member Jim Jefferson, who has oversight over regulatory compliance for the Owner-Operator Independent Driver Association/Owner-Operator Independent Drivers Association, concurred with Cullen's sentiment. Jefferson claimed that when carriers possess control over both the lease-purchase agreement and the operating authority of the driver, they have complete power over the independent contractor. The driver is reduced to being a mere employee, unable to exercise their independence. 

The transportation sector is a vital industry and a great workforce strategy should be in place. Aside from having a skilled workforce, there should be a gold standard on how professional truck drivers are treated as a trucking company in essence.

It has been observed that certain lease-purchase companies often impose the duties of an independent contractor on their drivers while treating them as employees, resulting in lower earnings than those of company drivers. It may be beneficial to establish a clear demarcation between such entities and carriers to prevent undue influence over driver relations. Indeed this is more than negative financial impacts but impacts future driver shortages due to this condition.

This is what we call predatory truck leasing arrangements. Truck drivers should be treated as industry partners.

TLTF was created through the Bipartisan Infrastructure Law

The formation of the TLTF took place as a result of the Bipartisan Infrastructure Law, and its initial charter, which spans two years, was signed in 2022.

The TLTF has been assigned the crucial task of scrutinizing financing arrangements or inequitable leasing arrangements amongst motor carriers and the motor carrier industry, driver training providers, and entry-level drivers, with a view to identifying potential impediments to the entry of new drivers into the trucking workforce. This has been one of the supply chain bottlenecks and supply chain issues that every daily news and news release has been talking about. A key component that is taken for granted by a lot of American trucking associations.

The charter stipulates that the TLTF must prioritize eliminating inequitable repayment terms and preventing new drivers from being burdened with excessive debt. Listening sessions, political jurisdictions, regulatory actions, and longer-term actions by the Department of Transportation (U.S. Transportation) and the FMCSA are expected in the coming years.

Further Meeting Results and Discussions

At the meeting's outset, FMCSA Administrator Robin Hutcheson conveyed her concern over the difficulties faced by drivers, including the undue distraction caused by unjust truck leasing agreements, which can significantly impede their daily operations. 

This issue distracts drivers risking potential safety. Safe drivers are at risk. There are job safety risks due to mental distractions. This is not the trucking experience or career path that drivers want and this has become an issue of truck driver in the past years. There should be a better program for truck drivers when it comes to leasing agreements. 

Maybe a grant program from non-profit organizations or industry associations with better grant funds agreements? Or some grant awards as one of the opportunities for advancement? The path in trucking lease agreements should be improved as it impacts future driver retention and incoming drivers' expectation.

Numerous drivers have pursued truck leasing agreements in hopes of attaining self-employment, better quality trucking jobs (job quality), and maximizing their potential when it comes on driver compensation.

Regrettably, there are instances where drivers are presented with vague agreements and inadequate service contracts for high-mileage trucks without the opportunity for a test drive. As a result, drivers may find themselves in a situation where they are unable to fully realize their potential.

During a meeting, a Federal Motor Carrier Safety Administration (FMCSA) representative noted that the Consumer Financial Protection Bureau (CFPB), an independent government agency, played a pivotal role in establishing the committee. The CFPB official informed the panel that the insights shared during the task force meetings regarding truck lease purchase agreements would be invaluable in their ongoing inquiry into financial products and practices that leave employees indebted to their employers.

The primary objective of the panel is to investigate and rectify any illegal or predatory leasing practices.

However, Joshua Krause, the Chief Operating Officer at OTR Leasing, has expressed apprehension regarding the inadvertent effects of excessively stringent regulations, particularly those that may curb the carriers' ability to adapt to the evolving market demands.

Krause has cautioned that if the proposed measures result in a reduction of carrier-backed leases that offer variable cost structures, it may compel carriers to make compensatory adjustments. This could lead to a negative impact on the elasticity of demand and carriers.

Who are the Current TLTF Members as of July 2023? 

The following individuals represent an array of industry expertise:

  • Tamara Brock, who operates as an independent owner-operator for both Brock Logistics and Lewis & Lewis Logistics

  • Troy Hawkins, who offers consulting services through TTOH Consulting & Logistics as an independent owner-operator

  • Kaitlyn Long, a labor expert affiliated with the Teamsters union

  • Steve Rush, an experienced carrier affiliated with Carbon Express Inc.

  • Lesley Tse, a seasoned attorney recognized for her contributions with Getman, Sweeney & Dunn

  • Steve Viscelli, is an esteemed educator affiliated with the University of Pennsylvania.

Conclusion: Summary of the importance and potential impact of the Truck Leasing Task Force.

In conclusion, the Truck Leasing Task Force established by the Federal Motor Carrier Safety Administration (FMCSA) plays a crucial role in ensuring the safety and efficiency of truck leasing operations.

By addressing key issues such as driver qualification standards, vehicle maintenance requirements, and lease agreement transparency, this task force has the potential to significantly impact the trucking industry.

Firstly, through its focus on driver qualification standards, the task force aims to enhance safety on our roads. By setting stringent criteria for leasing companies to hire qualified drivers with a clean driving record and proper training, it helps prevent accidents caused by inexperienced or unfit drivers. Moreover, by implementing vehicle maintenance requirements that ensure leased trucks are well-maintained and meet all safety regulations, the task force contributes to reducing breakdowns and accidents caused by mechanical failures.

Mainly, by prioritizing lease agreement transparency between carriers and drivers/owner-operators, this task force strives to improve fairness in business practices within the trucking industry. Clear agreements that outline responsibilities and expectations can protect both parties from potential disputes or exploitation.

Overall, with its emphasis on safety measures and fair business practices, the Truck Leasing Task Force can have a significant positive impact on enhancing road safety while promoting efficiency in truck leasing operations across the country. Excited to see the next-generation trucking workforce with better working conditions.  

Do you want to learn more about how to make your trucking business more profitable? Check this article.

Moreover, if you need support with DOT and FMCSA compliance, feel free to reach out to us at Labworks USA. 

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