The Truck Leasing Task Force convened under the Federal Motor Carrier Safety Administration recently released a 51-page final report calling for a federal ban on truck lease-purchase agreements made with a motor carrier or its affiliates. Motor carriers, the report says, promote lease-purchase agreements to prospective truck drivers, offering an image of independent income from truck ownership and a first step toward a successful small business. In fact, TLTF report alleges that the majority of truck drivers in lease-purchase agreements experienced limited success or even had “negative” incomes and did not complete the term of the agreement.
The report noted that lease-purchase agreements are commonly combined with an Independent Contractor Operating Agreement whereby a truck driver contracts to work exclusively for a motor carrier. While TLTF acknowledges that drivers may earn some income from such arrangements, the report says that the motor carrier controls all aspects of work and deducts from the driver paycheck many charges, including truck purchase, insurance, fuel surcharges, and maintenance costs. Contractually categorized as an “independent contractor,” the truck driver does not benefit from retirement and health care plans or from contributions available to the carrier’s employees. Meanwhile, the motor carrier saves money by avoiding government-required payments to Medicare, Social Security, unemployment insurance and workers’ compensation.
The TLTF report makes it clear that there are legitimate truck lease-purchase agreements offered by truck manufacturers and dealers, unaffiliated with a motor carrier. Those legitimate arrangements include underwriting to assess the risk to the lessor and creditworthiness of the lessee, as well as disclosures of the conditions and prior depreciation of the equipment to be sold or leased. Such a financial assessment seldom occurs with lease-purchase agreements from a motor carrier.
The task force was aware that an outright ban on lease-purchase agreements may be difficult to achieve through Congress, so the report calls for other remedial actions to monitor and take action against fraudulent and oppressive lease-purchase agreements.
ICSA is closely monitoring this issue and will report to members if FMCSA or other federal agencies seek to ban lease-purchase agreements.
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