BMC-84 Trust Funds vs. BMC-85 Bonds for Freight Broker Licensing
In 2012, the Moving Ahead for Progress in the 21st Century Act (MAP-21), was enacted by the Federal Motor Carrier Safety Administration (FMCSA) to hold motor carriers to a higher standard. The regulations aim to keep high-risk or unqualified drivers from entering the industry.
One of the key changes under this act was increasing the financial guarantee requirement from $10,000 to $75,000. Now, freight brokers must file either a BMC-84 surety bond or BMC-85 trust fund worth $75,000 to ensure they have financial capital to cover any potential damages.
What's a BMC-85 Trust Fund?
A BMC-85 trust agreement requires freight brokers to provide $75,000 of collateral until their licensure ends. The collateral is held by a bank or trust company who will assess an annual fee, typically 1–2%. The Secretary of Transportation is in charge of approving the collateral posted. Cash or another equally liquid asset are commonly used.
What’s a BMC-84 Bond?
A BMC-84 bond is a financial guarantee that freight brokers will adhere to industry regulations and pay for services rendered. The surety extends a $75,000 line of credit to the freight broker in exchange for a premium of around 2–10%, based on credit score. Brokers file these bonds with the FMCSA to become officially licensed and bonded.
What’s the Difference Between a BMC-85 and a BMC-84?
According to Title 49, U.S.C. 13904 all freight brokers must file either a BMC-84 or BMC-85. Both a BMC-85 trust and a BMC-84 bond are approved financial guarantee options for freight brokers to obtain a license. However, trusts and bonds are different with their own benefits and downsides. Read on to learn the key differences between the two.
BMC-84 vs. BMC-85: Cost Differences
A BMC-84 bond has a lower barrier to entry in terms of financial capital. With a BMC-85 trust you must deposit the full $75,000 of collateral and lose access to it. Whereas you only pay a 2–10% upfront premium for a surety bond and still have free working capital or liquid assets.
BMC-84 vs. BMC-85: Safety Differences
Trusts have more risk of change if the company becomes insolvent. This is because the FMCSA doesn't require BMC-85 trust fund providers to offer insolvency protection. If this happens, companies lose their BMC-85 trust, which is a license violation.
With a BMC-84 bond, you’ll work with a licensed and insured surety company that must notify you before canceling your bond policy and has higher industry protections against insolvency.
BMC-84 vs. BMC-85: Claims Verification
Regardless of the form you chose, if a claim is successfully filed against you, you’ll be financially responsible. However, when you partner with a surety company, you gain a mitigator for claims.
Since the surety shares liability with you, they will thoroughly investigate claims as opposed to a trust company which will simply pay and clear the claim using your collateral.
Overall, going with a BMC-84 freight broker bond can save you money and offer more security. Premium prices start as low as $938 per year. Get your free BMC-84 bond quote today!
