A new group is investigating if trucking companies can use lease-to-own agreements to pressure drivers financially.
The Truck Leasing Task Force (TLTF) of the Federal Motor Carrier Safety Administration discussed a draft idea during its initial meeting on Tuesday.
There are two types of leases:
- Leases of truck equipment and
- Leases in which the owner-operator leases on to a carrier’s working authority
A carrier’s equipment lease becoming abusive can have various effects.
There are numerous instances where carriers have control over the driver’s income and ensure that the driver is nearing the end of their lease. Paul Cullen, founder of Cullen Law Firm and one of the nine TLTF panel members, mentioned that the loads start to dry up somehow.
The driver is unable to make his truck payments suddenly, resulting in a default on the lease-purchase agreement. The driver loses all the equity they believed they were building up in the truck, and the carrier finds the next person to take advantage of.
Task Force Members Discuss the Need for Separation Between Lease-Purchase Companies and Carriers
Cullen suggested that motor carriers should not have the additional financial power to control the driver and own their debt, as a successful ending to a lease-purchase program is extremely rare.
Jim Jefferson, a task force member who oversees regulatory compliance for the Owner-Operator Independent Drivers Association, concurred that when a carrier has control over both the lease-purchase agreement and the operating authority of the driver, it results in complete control over the supposed independent contractor, essentially turning them into a glorified employee.
He is treated as an employee but assigned the responsibilities of an independent contractor, often resulting in lower earnings compared to company drivers. There could be some potential benefits of having a separation between a lease-purchase company and a carrier, ensuring that the company does not have complete control over every aspect of the driver’s relationship.
The TLTF’s Mission to Address Unfair Truck Leasing Agreements and Their Impact on Drivers
As part of the Bipartisan Infrastructure Law, the TLTF was set up in 2022, when its first two-year charter was signed. The commission’s job is to look into financial deals between motor carriers, entry-level drivers, driver training companies, and others that could cause new drivers to join the trucking industry “burdened by too much debt and unfair terms for paying it back.”
FMCSA Administrator Robin Hutcheson stated that the challenges drivers face and the distraction of unfair truck leasing agreements greatly impact a driver’s day-to-day activities.
There are stories of drivers who have signed truck leasing agreements to become their own boss and reach their potential. Additionally, there are stories of high-mileage trucks that do not offer test drives, are presented with unclear agreements, and have ineffective service contracts. Drivers may not be able to realize their full potential due to this situation.
Concerns Over Stricter Rule Changes and Their Impact on the Trucking Industry
A person from the FMCSA said that the Consumer Financial Protection Bureau (CFPB), which is a different government body, was “integrally involved” in setting up the group. A CFPB official told the panel that the agency’s investigation into business practices and financial goods that leave workers in debt to their bosses would depend heavily on the details of truck lease purchase deals discussed at task force meetings.
The panel’s main goal is to stop illegal and unfair leasing practices. Joshua Krause, chief operating officer at OTR Leasing, is concerned about stricter rule changes. He worries that these changes could have unintended effects. Specifically, he is worried that if the rules make it harder for carriers to respond to changes in market demand, it could cause problems.
Krause stated that if the impacts of the discussed matter result in a decrease in carrier-backed leases, which offer carriers the chance to have a variable cost structure, the carriers will need to compensate accordingly. The elasticity of demand and the carriers will experience a negative impact.
In conclusion, The panel believes in protecting drivers from unfair leasing deals. They also aim to work toward fair leasing deals. Their goal is to improve the lives of drivers and the overall business. For more such news on Logistics and Trucking industry, stay tuned with Lading Logistics.