Truckers and the Truth in Leasing Law

Those who own and drive their own “big rig” trucks are independent folks. They like to work for themselves. But when the economic climate is shaky, owner-operators can use the stability and steady work that a lease agreement with a carrier can provide.

Such leases often used to work to the disadvantage of the owner-operators, who found surprising charges on their settlement sheet – charges that had eaten away at their bottom line. The good news is that the Truth-in-Leasing federal law (49 CFR 376) requires lessee carrier companies to comply with strict, explicit requirements. That law, bolstered by several court cases, has evened the playing field for owner-operators. If they know their rights under the law, they can do their job, hauling freight, without having to worrying about funny business with the paperwork when the job is done.

Here’s what owner-operators need to know:

1. The lease spells out all the specifics of the arrangement. There can be no surprises. It spells out when the lease starts, when it’s over, what the compensation arrangement is, when the o-o gets paid, what insurance is needed, what signs and markings are to be added and removed. The lease specifies the whole arrangement, for sure, beforehand. Owner operators need to read a lease carefully before they sign it – and to examine their earnings statements with equal care. If they find discrepancies, they need to speak up – and if necessary contact resources, such as OOIDA, (Owner-Operator Independent Driver’s Association) who can help them seek remedies.

2. The lease may require specific kinds of insurance – bobtail, health, etc. – but it can’t make the o-o purchase that insurance from anyone in particular, like from the lessee. A carrier might say that their insurance is cheaper, and that their arrangement of policies and payments might be more convenient, but the o-o would be wise to get his own insurance because, 1) he has the peace of mind to know exactly what it costs and 2) there may be times when its good to have an agent who has no special attachment to the carrier and will be eager to defend the interest of the o-o. If the owner-operator does use carrier-provided insurance, the law requires that he receive not just a copy of insurance documents, but a statement of the policy’s actual cost as well.

3. Similarly, other chargebacks to the owner-operator – for cargo damage, for example – cannot just be plopped on settlement sheet. The owner-operator must have a chance to examine a specific charge – and to respond to it – before it can be charged against him.

4. A lease may specify that an escrow account be set up to hold the owner-operator’s funds for repairs. damage, or other contingencies. The Truth-in-Leasing law is quite explicit about such escrow accounts. They belong to the owner-operator, they must bear a specified level of interest, they must be accounted for at any time, and they must be returned 45 days after the lease is up.

5. Avoid leaseback agreements whereby the carriers lease rigs to drivers, then lease them back to to operate them. While this arrangement can give drivers the illusion of being owner-operators, it too often leaves them at a disadvantage. If regular leasing arrangements can be murky, leasebacks can be more so, clouding the accountability of both parties, sometimes robbing drivers of their hard-won earnings. Plus, the federal Truth-in-Leasing law doesn’t always apply as clearly to leasebacks, and so provides less protection to drivers and their interests.