The Consumer Financial Protection Bureau was slated to deliver a 30-minute presentation regarding the severity of predatory lease-purchase agreements in the trucking industry.
Instead, the Bureau’s Ryan Kelly spent close to two hours breaking down many of the ways the model is set up to benefit the motor carrier over the truck driver. What’s more: The presentation to the Truck Leasing Task Force on Thursday, July 18 was only preliminary. The bureau plans to release a written report that dives deeper into the predatory practices.
“This is only the preview,” Kelly said. “This is the soup before the meal. There’s much more to come on this.”
The task force, which was established by Congress with the goal of ending predatory lease-purchase agreements in the trucking industry, started in 2023. Since that time, numerous stories of truck drivers getting into bad deals with motor carriers have been relayed. In these predatory lease-purchase agreements, a carrier leases a truck to a driver but still largely holds control over the operation, including the driver’s ability to pay off the loan. It is common for drivers to report owing money to the carrier at the end of a pay period.
CFPB presentation
In cooperation with the task force, the Consumer Financial Protection Bureau received more than 40 examples of lease-purchase agreements in the trucking industry.
The presentation highlighted examples of truck drivers failing to complete the lease. Additionally, the bureau pointed out five ways that truck lease-purchase agreements differ from leases involving passenger vehicles:
- Absence of comprehensible financial disclosures
- Broad default provisions
- Expansive remedy provisions
- Use of escrow accounts and personal guarantees
- Ease of inducing driver to relinquish truck
Kelly said the problems start with the agreements themselves. Often, the contracts are labeled as lease agreements, but the language switches back and forth between sounding like a loan to sounding like a lease. There’s a huge difference between the two, because while the trucker would gain equity in a loan, there’s no equity in a lease.
“It’s a contract that’s trying to have its cake and eat it too,” Kelly said. “It says it’s a lease but uses loan language … It’s quite confusing … I don’t see how (the driver) was ever meant to understand whether this was actually a loan or a lease.”
The broad default provisions can leave truckers in a “damned if they do, damned if they don’t situation,” Kelly said.
Some of the submitted agreements included language that said drivers would be in default if they violated safety regulations or any other agreement with the lessor, including refusing a load. Kelly then provided an example of a driver saying a carrier asked him to violate hours-of-service regulations. When the driver refused to do so, the lease was placed in default.
“As soon as the driver was asked the question, he was in default no matter how he answered,” Kelly said.
The CFPB also examined how carriers are able to use escrow accounts as a way to ensure they are paid when the lease is terminated. In addition, carriers often have little problem having the truck returned so that it can be leased again.
Many of the task force members said the report confirmed the predatory nature of the business model.
“If this is the appetizer, I don’t know if I can stomach the meal,” said Tamara Brock, a task force member representing truck drivers.
The Truck Leasing Task Force will use the CFPB’s findings to create its report to the Federal Motor Carrier Safety Administration, which is due on Nov. 16. LL
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