WASHINGTON — A new panel set up to advise federal regulators is looking into limiting — or eliminating — the ability of a trucking company to wield financial power over a driver through truck lease-purchasing agreements.
The recommendation, still in draft form, was one of the discussion points Tuesday during the first meeting of the Federal Motor Carrier Safety Administration’s Truck Leasing Task Force (TLTF).
One of the first orders of business was defining two types of leasing arrangements between carriers and owner-operators — truck equipment leases and leases in which the owner-operator leases on to a carrier’s operating authority — and the effects they can have when the equipment lease held by the carrier becomes predatory.
“We see many examples of carriers that control the income of the driver and will see that the driver is coming closer to completing their lease … and then somehow the loads start to dry up,” said Cullen Law Firm founder Paul Cullen, one of nine TLTF panel members.
“The driver all of a sudden can’t make his truck payments and therefore defaults on the lease-purchase part of the agreement. The driver loses all the equity that they thought they were building up in the truck, and the carrier finds the next person to take advantage of.”
Because a successful ending to a lease-purchase program is so rare, Cullen said, he suggested that motor carriers should not be able to own the debt of the driver “and should not have that additional financial power to control the driver.”
Task force member Jim Jefferson, who supervises regulatory compliance for the Owner-Operator Independent Drivers Association, agreed that when a carrier controls both the lease-purchase agreement and the operating authority of the driver, “they have total control over that guy that’s supposed to be an independent contractor, who basically ends up being a glorified employee,” he said.
“They treat him like an employee, but they give him all the responsibilities of an independent contractor, and in a lot of cases they make less money than what a company driver can make. So maybe there should be some separation between a lease-purchase company and a carrier so that that company doesn’t control every aspect of the [relationship] with the driver.”
The TLTF was created through the Bipartisan Infrastructure Law, and its initial two-year charter was signed in 2022. It is tasked with examining financing arrangements among motor carriers, entry-level drivers, driver training providers and others that may result in new drivers entering the trucking workforce “encumbered by outsized debt and inequitable terms for repayment,” according to the charter.
“We consistently hear about the challenges drivers face … and the distraction of unfair truck leasing agreements that really affect a driver’s day to day,” FMCSA Administrator Robin Hutcheson said in opening the meeting.
“We hear stories of drivers who signed truck leasing agreements to become their own boss, to reach their potential, and we hear stories of high-mileage trucks not offering test drives, presented with unclear agreements, and ineffective service contracts. This ultimately places drivers in situations where they may not be able to realize their full potential.”
The Consumer Financial Protection Bureau (CFPB), an independent government agency, was “integrally involved” in standing up the committee, an FMCSA official noted at the meeting. A CFPB official told the panel that information on truck lease purchase agreements discussed at task force meetings will be critical to a CFPB inquiry launched last year into practices and financial products that leave employees indebted to their employers.
While the panel’s primary focus is to examine and address illegal and predatory leasing practices, Joshua Krause, chief operating officer at OTR Leasing, warned of the potential for unintended consequences of overly stringent rule changes, particularly those that might limit the ability of carriers to respond to changes in market demand.
“If the impacts of what we’re talking about reduce the amount of carrier-backed leases that provide carriers with the opportunity to have a variable cost structure, the carriers will … have to compensate accordingly,” Krause said. “That elasticity of demand and the carriers will be negatively impacted.”
In addition to the those cited above, TLTF members include:
Tamara Brock, Brock Logistics/Lewis & Lewis Logistics (independent owner-operator).
Troy Hawkins, TTOH Consulting & Logistics (independent owner-operator).
Kaitlyn Long, Teamsters union (labor).
Steve Rush, Carbon Express Inc. (carrier).
Lesley Tse, Getman, Sweeney & Dunn (attorney).
Steve Viscelli, University of Pennsylvania (educator).
The post FMCSA advisory panel targets predatory leasing contracts appeared first on FreightWaves.