Is the lease-purchase-agreement model in the trucking industry one that is even worth saving?
That question was posed at the Federal Motor Carrier Safety Administration’s Truck Leasing Task Force meeting on Tuesday, Oct. 17.
The task force was created with the goal of ending predatory lease-purchase agreements in the trucking industry. Such agreements involve programs where a carrier leases a truck to a driver for a certain amount of money and takes a percentage for the load. In some instances, drivers have claimed that they owed the carrier money at the end of the pay period. Commonly, the driver never ends up owning the truck despite making numerous payments to the carrier.
While many members were focused on creating regulations to prevent predatory practices, one member of the task force asked whether agreements where the driver is indebted to the carrier should even continue.
Is it worth saving?
“Why are we trying to get into the nitty gritty of fixing these lease-purchase agreements? I would like to keep on the table that instead of creating regulations, no debt related to a lease-purchase program should be held by the carrier or affiliated company. This would address the majority of the problems we are discussing,” said Paul Cullen Jr. of Cullen Law Firm. “Why is this a system we should save?”
Steve Viscelli, an economic sociologist at the University of Pennsylvania, agreed.
“Deciding whether there is any value to these lease-purchases is a critical step here,” he said. “That question is critical, because even if we could come up with a series of rules and procedures that in theory could help, my 18 years of talking to drivers suggests that’s a very high hurdle. The reality of this labor market is that we’ve had fraud laws that they aren’t able to take advantage of and haven’t stopped these practices.”
The discussion followed a presentation by the Consumer Financial Protection Bureau that spotlighted problems that arise when the “worker’s ability to repay the debt is controlled by the issuer of the debt itself.”
“Businesses controlling the debt is the origin of some of the problems,” said Emma Oppenheim of CFPB.
The presentation also showed examples of lease-purchases where truck drivers brought home as little as 67 cents in a week after payments and expenses, as well as accounts that paid $20,000 for the year to the driver and $95,000 to the company.
Task force member Jim Jefferson, who represents the Owner-Operator Independent Drivers Association, said that it’s advantageous to these companies to keep the drivers in the lease rather than have them pay off the truck.
“They control every aspect of what that driver is able to do,” Jefferson said, adding that this control includes essentially making the driver an employee who is responsible for costs that normally belong to the company.
Tamara Brock, a task force member representing independent owner-operators, said she wouldn’t like to see the model go away completely, as she previously used a similar type of agreement to get her start.
“You asked why people do this,” Brock said. “Because they want ownership. The playing field is unfair, but we just want to level the playing field.”
Viscelli suggested trying to acquire data on how often these lease-purchase agreements end with the driver owning the truck.
“We need to establish that fact,” he said. “How many are out there who actually did what Tamara did? That’s part of understanding this. You have to make the case, not just anecdotally, but with data. How many are actually making it through the program?”
But acquiring that information would be a big hurdle; several task members noted that only carriers with ethical programs are likely to volunteer their data.
About the task force
Congress ordered FMCSA to create the Truck Leasing Task Force as part of the 2021 Infrastructure Investment and Jobs Act.
U.S. Transportation Secretary Pete Buttigieg delivered the task force’s first meeting on July 11.
“We’re working to make sure truck leasing agreements are not trapping drivers into predatory situations, and that is going to be the focus of this board’s work,” Buttigieg said. “We’ve seen a lot of ways that lopsided leases are preventing drivers from ever getting ahead and even leave them in a worse place than where they started through no fault of their own … These conditions are unacceptable for any worker in America and certainly for essential workers like those who get our goods to where they need to be through trucking.” LL