Escrow Rules
APRIL 2009 OVERDRIVE 25 often leads to a sour end to the lease if not legal action. When a trucker enters into a lease-purchase arrangement facilitated by ATBS Leaseco, Aaberg says, we're very careful about sitting down and going through all of it with them. One area to watch, says CRST Malone Vice President Bill Trotter, is a requirement for advance notice of contract termination for return of escrow monies. While Malone doesn't require a certain time period for its owner-operators to get escrow money back, Trotter says he's seen 30-day notifi ca-tion periods elsewhere. Some carriers operate on simple trust when leas-ing owner-operators. Just before I got my author-ity, says owner-operator Harsell, I was about to lease on to another company. They did not have an escrow requirement. Lease-purchase maintenance escrows CRST Malone's lease-purchase operators, similar to those in other lease-purchase arrangements, are required to have a $1,500 initial security escrow. Along with that is a maintenance contract and ad-ditional maintenance escrow that will cover most everything that goes wrong with the truck, Trotter says. Maintenance escrow accounts in lease-purchase situations are typically mandatory, often funded from settlements on a per-mile basis to account for variability in weekly mileage. These escrows are meant to protect both the carrier's and the owner-operator's investments in the truck. Lease-purchase operators must abide by the maintenance contract; if they don't, the carrier can use the maintenance escrow to help them abide. Jeremia Soriano, leased to Am-Can Transport (now part of the Greatwide companies) with his wife as team driver of a 2003 Freightliner Columbia, has only a couple months left in his lease period. After making a balloon payment of about $8,000 on the remaining value, he will own it. Working with ATBS Leaseco for fi nanc-ing, Soriano says his weekly settlement shows a lump-sum deduction of $225 that is placed in his maintenance escrow. For a solo driver, it's $125, he says. Though some might view it as just another payment, Soriano looks at the account as a Federal escrow requirements The escrow stipulations in 376.12 of the Federal Motor Car-rier Safety Regulations, which relate to written lease require-ments, contain lessons for owner-operators in what to look for in a lease. Carriers' failure to conform to these regulations, part of the Truth in Leasing revisions to leasing regulations, first codified in 1979, has resulted in class-action lawsuits over the years, filed by the Owner-Operator In-dependent Drivers' Association and others. One recently settled case involved the mishandling of escrow funds upon termina-tion of the carrier's lease with its owner-operators. The carrier held onto the escrow money beyond the 45 days given for settling the account and was ordered to return that money with a penalty. It might pay to have a trucking lawyer review a lease you're considering if it's unclear. At the very least, don't sign it before your questions are answered by the carrier. `If escrow funds are required, the lease shall specify...' 1 The total amount required to be paid to the carrier or third party to put in escrow. 2 The items to which funds from the escrow can be ap-plied. 3 Disclosure of any transaction, from deposits to withdrawals to interest earned, by the carrier to the leased owner-operator, whether by additions to settle-ment or in separate, monthly reports. 4 The right of the owner-operator to demand such an accounting in its absence. 5 Interest to accrue on at least a quarterly basis on the amount in the escrow, based on the average return yield of 91-day, 13-week Treasury bills (0.14 percent at the end of January). 6 The conditions the owner-op-erator must fulfill to have the full amount of money in escrow returned, with interest, at the end of the lease with a full accounting of any deductions; notice of the 45-day period in which this has to be done is also required. T odd Dills Jeremia Soriano, lease-purchasing his 2003 Freightliner Columbia with ATBS Leaseco, withdraws on his required maintenance escrow held with his carrier (AmCan/ Greatwide) only spar-ingly, preferring to let the balance build up in anticipation of the final balloon payment, due in May. (Continued on page 76)