STOP! Proper Licensing and Insurance Required

LCT Staff
Posted on June 1, 2007

Wherever limousine operators gather to discuss industry-related topics, you can generally hear at least one conversation concerning illegal operators. Operators often wonder if other parts of the country are dealing with these same issues. LCT Magazine recently conducted a survey to gauge the severity of this issue. Nearly 300 operators from across the U.S. responded and the results were surprising.

An illegal operator is a company or person that operates without proper licensing and/or insurance. These entities generally undercut the prices of the legitimate companies and create price wars within their market. Many of these operators provide substandard service and in most cases operate older/less maintained vehicles. Although the clients receive bargain prices on the service, they often are dissatisfied with the experience and judge the entire market accordingly.

Of course, this isn’t the only problem they represent. Since they generally don’t have proper insurance, safety is a considerable issue. The public, who is generally uneducated about the dangers of unlicensed companies, is at risk every time it steps into these vehicles. Of course, in the end, the legal operators have to deal with the ramifications. The fact that they are paying for proper insurance, proper licensing, and proper maintenance means they have higher overhead and less profit.

The LCT survey gauged several factors:

·Is the problem worse, same or better?

·What geographic areas is the problem affecting most?

·Enforcement issues.

·What could be done to stop illegal operators?

LCT asked operators to share their opinions concerning illegal operators. The comments were enlightening to say the least. Here are a few of the responses:

Ø“It’s quite frustrating! The illegal operators appear to be getting away with breaking the law with little or no consequences.”

Ø“They make it hard for those of us who have gone the extra mile to be legitimate to make a living. So many people are unaware of the problem; they are just looking for the best price.”

Ø“In Connecticut, we have a huge problem with operators coming in from out-of-state with vehicles that are illegal here: Hummers and Excursions that hold more than nine passengers. We are losing prom and wedding work because the renters know these vehicles won’t be stopped.”

Ø“I don’t think the associations or law enforcement gives a rat’s ass. If they did, it wouldn’t be a problem. Millions of dollars are spent for security at Logan Airport and the illegal operators continue to pick-up and drop-off. Who’s kidding who?”

Ø“They are a danger to all of us, as well as to our clients. It’s going to take one of these yahoos hurting a client, and then there will be hell to pay for all of us.”

Ø“I am tired of operating legally and having the illegals take away our business. It seems when you are legal, the government comes down on you harder and just give the illegals a slap on the wrist. I feel this is totally wrong.”

Ø“There is no enforcement in my state. I see them operating illegally and report them to the authorities, and they do squat!”

Ø“It’s the Number One issue affecting my retail business. Our nights out, weddings, and proms have all seen steady decline in the past two-to-three years. Of the nearly 25 companies listed in our local phone book, only three of us have compliance with state and DOT authorities.”

Ø“My concern is that illegal companies are benefiting for free from the same privilege I had to pay for. If our local police encountered a person who acted and dressed like a police officer, they would be outraged. It’s just as big a deal to me when I see these fraudulent companies.”

Is it Getting Better?

It’s obvious from these survey responses that the illegal operator problem is bad for the industry. However, is this situation getting better? Unfortunately, the answer to that question is no. In fact, 60% of operators report that it has gotten worse during the past five years. Nearly 31% have reported the problem has stayed the same while only around 8% have seen any improvement. Of the operators who have reported the problem getting worse, more than half have seen it increase sharply.

Operators who have reported improvement appear to come from smaller and easier to manage markets: Arizona, Alabama, Colorado, Tennessee, and several others. The states that have shown the greatest increase are California, Connecticut, Florida, Massachusetts, New Jersey, and New York. States such as New York are not regulated on a state level. In fact, according to the survey, approximately 65% of operators are regulated on a state level. This creates even more problems when local jurisdictions set up their own regulatory commissions.

Survey Results:

In the past five years the illegal operator problem has gotten:

Much worse: 35.3%

Slightly worse: 24.8%

Stayed the same: 30.8%

Slightly better: 7.7%

Much better: 1.4%

Operators who operate legally in areas such as these are “permitted to death” because they have to acquire authority in several counties and cities as well as at airports. This can also create confusion for newer operators who want to become legal, but don’t know where to turn for information. Many operators in these areas want the state to step in and take the regulation away from local municipalities.

Even with state-run regulatory authorities, the situation is far from under control. In fact, only 0.3% of operators believe their enforcement is excellent.

How would you rate your law enforcement agencies' efforts to control the illegal operator problem?

Excellent: .3%

Good: 10%

Average: 22.4%

Poor: 32.4%

Very poor: 34.8%

There are no immediate answers. State authorities and regulatory agencies complain that they are under-staffed and under-funded. Airports complain they have enough security and terrorism issues to deal with. However, ultimately who will suffer most? Could it be the legitimate livery companies? How about the consumers? The answer is everyone loses.

The more illegal companies thrive, the greater the chance a legal company will fail. That means not only will the industry lose a peer, and clients will lose a high quality choice for luxury transportation, but also the regulatory agency will lose annual fees from that company. If this continues to get out of control, the industry could see more good operators leaving the industry and more “riffraff” entering it.

Where Are They Lurking?

Unfortunately, the illegal operators seem to be everywhere. However, by looking at the survey data, one can see that the “hotbeds” are in the largest markets. They are more able to flourish in these areas due to the large concentration of companies, which makes it more difficult for authorities to enforce regulations. These markets include: New England, the Mid-Atlantic states, the Southern states, and the Pacific region.

Where is your company located?

The survey also shows that most of the respondents (more than 67%) operate in a large city or suburban area. Once again, this allows for an illegal company to blend-in with other operators. In many cases, they can be seen hustling at airports, in front of popular nightspots, and anywhere else you would normally see a limousine, sedan, or taxi. Generally, the smaller markets are more difficult for the illegal companies to hide. The regulating agencies have far less companies to keep track of, so it is easier to track down and cite the illegals.

New England: 20.2%

Mid Atlantic 22.6%

South: 20.9%

Midwest: 7.9%

Plains: 4.1%

Mountain: 4.1%

Southwest: 5.1%

Pacific: 15.1%

What can be Done?

It is one thing to talk about the problem and another to actually solve it. Any solutions, of course, will take time. However, what can be done? Many livery company owners have expressed concern over lack of penalties severe enough to deter operators from illegal operation. Generally, any infraction is either met with a small fine or plea-bargained down to an insignificant punishment.

Which of the following do you think would help stop illegal operators?

More enforcement: 42%

Larger fines: 9%

Jail time: 3%

Confiscation of vehicles: 36%

Other: 10%

Operators surveyed chose more enforcement and confiscation of vehicles as the greatest deterrent, while a smaller group suggested larger fines or jail time would help alleviate the problem. Many regulating authorities would say they don’t have the resources to launch an all-out enforcement campaign. However, if fines were increased and vehicles were confiscated as suggested (to be sold at auction in lieu of unpaid fines), there would be a great surge in revenue for these agencies.

Many operators believe a stronger and more proactive approach by enforcement agencies could easily curb the surge of illegal operators. They also believe the regulating agencies are not living up to their end of the deal. After all, the operators pay money and live up to certain criteria in order to be legal. This money should be applied toward removing the illegal element of the industry. These operators offered several comments on ways to find and stop these illegals:

Ø“Authorities need to do frequent inspections at public arenas.”

Ø“If the authorities spent less time hassling the legal operators, they would have more resources to go after the illegals.”

Ø“Local authorities need to have an anonymous tip line.”

Ø“We need more enforcement without the growing piles of bureaucracy and then get nothing in return.”

Ø“Pressure for legislation to make phone directories stop advertisers who aren’t licensed.”

Ø“Legal operators need to become more proactive in identifying and reporting illegal companies.”

Ø“We need to force regulatory agencies to accept responsibility for administrative compliance.”

Many operators believe that it’s the responsibility of legal operators to report the illegals. This approach would wear upon the regulatory personnel’s nerves until they actually get out and remedy the situation. This was overwhelmingly suggested when asked: “What can individual operators do to help with the illegal problem?”

However, when asked what can associations do to help, the answers varied greatly. Here are a few of the responses:

Ø“Associations need to pressure the local authorities to get more involved.”

Ø“The NLA and local/state associations can pool resources to help combat this problem.”

Ø“Associations should make public service announcements to let consumers know what to look for in a limousine company.”

Ø“In states such as Florida, we should have statewide regulations instead of the great multitude of conflicting ordinances.”

Ø“Associations should create lists of illegal operators and provide them to the major affiliate networks.”

Ø“Voice this issue loudly at election time.”

Ø“There has to be consistent and hard-hitting lobbying to show legislators the consequences of passing weak laws with little or no enforcement.”

Ø“Associations that are succeeding in combating illegal operators need to share their tactics with the rest of the industry.”

ØAssociations should commit to invite enforcement representatives to every meeting throughout the year. Then LCT should conduct another survey.”

ØEducate law enforcement toward the negative impact of the illegals.”

Airports an Important Arena

Another area where proper enforcement seems to be lacking is at the airports. More than 52% of operators state that a business can obtain airport authority without having the proper state authority. This implies that you don’t have to be a legal operator to provide transportation at more than half of the nation’s airports. That’s not a very comforting thought when you consider these people haven’t had any background checks.

Illegal operators are loading and unloading the luggage of airline passengers. It wouldn’t take much imagination to see why that isn’t such a good idea. More than 66% of operators agree with that sentiment. They suggest airports should know and enforce state regulations. One survey respondent mentioned that airport authorities are more concerned with making sure the legal companies “move along” than they are concerned about enforcing rules and regulations.

How Can LCT Help?

Another question posed to operators was: As an industry resource, what do you think LCT Magazine could do to help with the illegal operator problem? Again, there were many varying suggestions. Here are a few helpful suggestions:

Ø“Make the politicians aware of the problem and demand action.”

Ø “Publish articles related to the issue and send them to local authorities.”

Ø“Keep this situation in the news.”

Ø“Encourage each state to sponsor a website that lists legal operators’ names and phone numbers along with links to the companies’ websites.”

Ø“Let the industry know the most effective methods and laws to stop the illegal operators.”

Ø“I have found that most smaller market airports don’t know the rules or understand the different operating authorities.”

Ø“If possible, list the most frequented hotspots for illegals.”

Ø“Raise awareness of the issue. Perhaps share articles and information with major newspapers or networks to let the public know of these issues.”

Ø“Bring national media attention to this problem.”



LCT Staff LCT Staff
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