Legal Information Trucking Law Truth in Leasing

When you lease out your truck and hauling services, you expect to be paid what you are owed. Time is money and you don’t want to waste it in disputes over compensation. Part 376 of title 49 in the Code of Federal Regulations, generally referred to as the “Truth in Leasing” law, regulates compensation and provides protection for both truckers and their clients.

The protection offered has its base in part 376.11 by requiring a lease to be in writing. A written lease is safer than an oral lease as it does not rely on the subjective memory of the parties to determine what was agreed. A written lease provides an objective and definitive document when disputes arise. The amount of compensation, the way it is calculated, when it is paid and methods of verification are all required to be a part of the written lease.

When negotiating a lease arrangement, you need to decide how compensation will be calculated. It could be a percentage of gross revenue, a flat rate per mile, a variable rate depending on the direction traveled or some other method. Whatever method is agreed part 376.12 requires that it be specified in the lease.

In addition to the amount to be paid for equipment use and services, the lease must clearly state who is responsible for the cost of fuel, fuel taxes, empty mileage, permits, tolls, ferries, detention and accessorial services, base plates and licences, and insurance. What happens to any unused amounts at the end of the lease must also be covered. Each of these items is negotiable however there are some items that are clearly the responsibility of the carrier.

Insurance coverage for the protection of the public is the legal obligation of the carrier under part 387.303 of the Federal Motor Carrier Safety regulations. The costs of fines for overdimension and overweight loads are also the responsibility of the carrier unless they are due to an act or omission of the lessor.

Payment for a trip does not have to be made until the lessor has provided delivery dockets, log books and any documents needed for the carrier to receive payment from the shipper. The carrier must then pay within 15 days of the documentation being submitted. Payment can be withheld until the required documentation has been provided but not for any other reason.

At the end of the lease the lessor may be required to remove and return devices which identify the equipment as that of the carrier. If it is specified in the lease the final payment can be withheld until this is done.

The amount to be paid by the carrier can be reduced by charge-backs and deductions. Charge-backs are costs the carrier has paid but are identified in the lease as being the responsibility of the lessor. To charge back costs the carrier must provide details of the specific item, how it has been calculated and copies of documents which support the validity of the charge.

Deductions for cargo or property damage can also be made however the carrier must provide an itemized written explanation before reducing the payment.

If the lessor purchases or rents any products, equipment or services from the carrier, payments for these can be deducted from the amount owed to the lessor but only if this is agreed in the lease. Renting or buying any products, equipment or services from the carrier cannot be a condition of entering into the lease arrangement.

In some lease arrangements, an escrow fund is set up to pay for specific costs. If escrow funds are required all transactions must be accounted for by the carrier on a monthly basis and interest paid on the funds at least quarterly. Any escrow funds remaining at the end of the lease must be returned to the lessor within 45 days of the date of termination of the lease.

The “Truth in Leasing” law provides protection for both truckers and their clients by requiring clear, specific leases to be put in writing before any haulage takes place. The amount of compensation, the way it is calculated, when it is paid and methods of verification are all required to be a part of the lease.

While these requirements are enforceable and provide transparency of compensation, they do not prevent unfair deals from being made. To protect your rights and ensure the negotiated arrangements provide fair compensation you should consult your attorney prior to signing a lease.