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FAQ

»Who is Federal Service Corporation?
»What is the process for a claim to be filed against a broker?
»Are there instances when a claimant cannot collect from a BMC-85 Trust Account?
»What is the difference between a bond and a trust agreement?
»Does pursuing a claim against a trust agreement mean forgoing other avenues of recovery?
»How to contact the Federal Motor Carrier Safety Administration (FMCSA)?

 

1. WHO IS FEDERAL SERVICE CORPORATION?

Federal Service Corporation is an independent contractor engaged in administering claims for financial institutions authorized by the Federal Motor Carrier Safety Administration (FMCSA). We specialize in claims processing of BMC-85 “Property Broker’s Trust Fund Agreements”. Federal Service Corporation (FSC) has represented commercial banks and financial institutions since 1995 and currently handles more than 10,000 claims per year.

FSC’s largest client, Pacific Financial Association, Inc. (PFA), has issued more than 14,000 BMC-85s. Our staff handles all communications, verifications and investigations relating to claims presented against a broker’s trust held by PFA. As Trustee of the accounts, PFA always exercises executive control over the trusts they issue, but have delegated the administration of claims to FSC. The staff of FSC is here to assist in expediting the claims process and can effectively act as a middleman between the claimant and the broker.

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2. What is the process for a claim to be filed against a broker?

Claimants (carriers, shippers, and/or authorized third parties) first need to supply FSC with some basic information: the MC # of the broker, your carrier’s MC # and contact information, the dollar amount owed, the date the load was picked up, and the commodity hauled. This can be accomplished by filling out the online form at www.fedservicecorp.com or calling us at 623-209-2620. Within 24 hours, a claim application will be provided to a qualified claimant. The claim application should be filled out and mailed back to FSC with the required supporting documentation: rate confirmation, bill of lading, and carrier’s invoice for each load. Upon receipt of the documents from the claimant, our staff will verify the information provided. We work directly with our active brokers to get valid claims paid quickly. In 95% of the claim inquiries, the broker pays the claimant after being informed a claim has been filed against their trust. If pending claims total more than the surety instrument, or if the broker stops communicating with us, or if the broker stops providing timely payments to the claimant, FSC will recommend the Trustee issue a “Notice of Cancellation”. The FMCSA allows brokers to operate for an additional 30 days after PFA issues a Notice of Cancellation. We accept claims against a cancelled broker’s trust account for 60 days after their effective cancellation date with the FMCSA. If a broker is not reinstated and their claims continue to multiply, we cannot indicate which claimants will be paid from the trust until after all claimants have had an opportunity to file. When the time arrives for a trust payout, we will determine which type of payout is most suitable given the volume of claims. PFA pays available trust funds in one of three methods:


  1. Full claim payout – claims did not exceed the trust and all valid claims are paid in full.


  2. Pro rata payout – each valid claim is paid a pro-rata percentage of what they are owed.


  3. Date of load payout – the earliest load dates are paid in full until the trust is exhausted.

Please note that PFA does not pay based on a first-come, first-serve basis. While this practice may be followed by some of our competitors, it just encourages premature claim filings – sometimes even before loads are delivered!

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3. Are there instances when a claimant cannot collect from a BMC-85 Trust Account?

FSC diligently strives to be an industry leader in following federally mandated rules and regulations regarding the administration of a BMC-85 Property Broker’s Trust Agreement. We review all supplied documents to be sure that only valid claims are considered for payout against a trust. There are several categories of exemptions from federal economic regulation by the FMCSA. There are also certain categories of invalid claims:

Exemptions-

  1. The movement which occasioned your claim involved exempt commodities, such as agricultural products, horticultural products, dairy products, poultry or enumerated non-manufactured goods.


  2. It was an Intrastate movement and therefore not subject to Interstate Commerce regulation.


  3. Transportation involving prior or subsequent movements by rail (intermodal) or movements under terms of an airbill.


  4. Additional items incidental to the actual movement (e.g. trucks ordered not used, lumper or pallet fees).


Invalid-

  1. The movement which occasioned the claim did not occur within the effective term of the BMC-85 filing.


  2. A failure to establish legal liability (e.g. sufficient documentation to establish a contract existed between the broker and carrier was not provided).


  3. The trust has been exhausted.


On occasion, claimant’s attorneys contact us and insist that “federal regulations” require that the trustee pay their claims immediately; while other claimant attorneys insist that “federal regulations” require the trustee defer payment until their client has had an opportunity to obtain a judgment against the broker. While we understand that each claimant would like to be paid immediately, we have a fiduciary responsibility to handle all claimants equally and professionally. We have established guidelines in administering claims that are fair to the majority. We strictly adhere to those guidelines.

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4. What is the difference between a bond and a trust agreement?

The FMCSA requires a $75,000 surety instrument be filed for a transportation broker’s license. Both the BMC-84 (“bond”) and the BMC-85 (“trust agreement”) fulfill this requirement. The basic difference between the two is that a BMC-84 is issued by an insurance company while a BMC-85 is issued by a financial institution. An insurance adjuster may see thousands of claims per year but only a handful of those claims will involve a BMC-84. The claims adjuster’s lack of experience in BMC-84 claims, total volume of other claims and lack of accountability to the policy holder because of their discretion over the corpus of the bond inevitably leads to claims being paid too quickly and to the detriment of both the broker and other valid claimants. At FSC, all we do is handle claims against BMC-85 Trust Agreements. We faithfully uphold our fiduciary obligation to investigate all submitted claims. Proper investigation and adherence to the principles of good faith and fair dealing insure fraudulent claims do not get paid and monies remain available to pay valid claims.

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5. Does pursuing a claim against a trust agreement mean forgoing other avenues of recovery?

It is often not possible for Trustees to distribute funds to all valid claims against a $10,000 federal surety instrument. Claimants often seek multiple options for recovery. FSC asks that claimants contact us if they receive payment from another source so that we can record any full or partial payments against the total amount due on a claim. In some instances, carriers unable to collect the full amount of freight charges from the surety instrument can proceed collaterally against the underlying shipper or consignee. You should contact legal counsel in your State to determine if that option is available in your circumstances.

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6. How to contact the Federal Motor Carrier Safety Administration (FMCSA)?

  1. For general FMCSA website information, visit www.fmcsa.dot.gov


  2. To access information about a carrier or broker visit http://li-public.fmcsa.dot.gov


  3. For a list of exempt commodities visit www.fmcsa.dot.gov/documents/adminrule.pdf


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