Sunday, 5 August 2012

Anti-Fraud Task Proposes Regulating the Towing Industry

The Task Force observed that oversight and enforcement activities around tow truck operations in Ontario are inconsistent across the province, creating opportunities for fraud organizers, and for tow-truck operators themselves, to exploit. Issues raised include the participation of some tow truck operators in the creation or manufacture of false claims, exorbitant towing fees, and inappropriate referral practices (such as paid referral fees for directing consumers to particular health care, automotive body shop, or legal service providers).

The Task Force asked the Regulatory Practices Working Group (RPWG) to examine options that would reduce the potential for practices that may fraudulently inflate insurance costs without impairing quick removal of damaged vehicles from roadways.

The RPWG established an ad-hoc inter-ministerial committee to help gather information and conduct analysis on the towing industry. Their focus has included:
  • options to address practices that may fraudulently inflate insurance costs;
  • broader regulatory options that also address road safety and consumer protection; and
  • market-based options.

Here are the options that the Task Force would like feedback on from stakeholders and the public:

1. Give consumers better information, including information about personal rights and responsibilities, as well as existing protection from potentially unfair or deceptive acts or practices.

The objective would be to alert consumers — and provide a signal to members of the towing industry potentially involved in fraudulent or abusive activities — that these activities are prohibited.

2. Strengthen existing bans on paid referrals to other services.

Bans on accepting referral fees already exist in some municipal bylaws and UDAP regulations — however, these are not consistent. For example, they do not apply to every tow and are limited to municipalities where bans exist and/or where auto insurers pay. Creating a province-wide ban on referral fees for other services could provide greater clarity and consistency.

3. Harmonized municipal business licensing.

This option would require municipal business licensing based on provincially-set standards/requirements — potentially including fees, codes of conduct, and bans on paid referrals. This would have the objective of creating greater consistency in municipal licensing.

4. Provincial business licensing through a Designated Administrative Authority (DAA).

Under this option, the province could create a new regulatory regime through a third-party Designated Administrative Authority (DAA, a non-Crown and non-profit entity) that would oversee provincewide requirements. A DAA model establishes an accountability and governance framework between a Ministry and a not-for-profit corporation that administers legislation on behalf of the government.

5. Roster system similar to what has been established by Halton Regional Police Services.

Halton Regional Police Service maintains a list of pre-selected towing operators to recommend to consumers requiring towing services. Consumers are directed to the first available towing operator based on a rotating list of eligible businesses.

My thoughts...

The DAA model is appropriate where the government determines a well-regulated industry has the maturity and sophistication to take over regulatory responsibility. An example is the travel industry. The towing sector is not currently regulated by the province and certainly isn't sophisticated enough to develop a DAA. This is not a workable model.

It makes sense to build on the existing network of municipal licensing regimes and develop provincial-wide standards and rules. This will also prevent the confusion what currently exists when towed vehicles cross municipal borders. There is also a lot of merit to a roster system that is used in Halton. A similar system exists in a number of U.S. jurisdictions and eliminates chasers from the system. I understand that in these jurisdictions the police provide the first towing firm called a limited amount of time to make it to the scene and then contact the next company of the roster.

Bans of referral fees are well intentioned but difficult to enforce. These payments are "under the table" and difficult to uncover. I believe the best way to combat referral fees is to control fees charged by towing companies, body shops and rehabilitation facilities. Controlling fees reduces the ability to pay for referrals and then pad bills to cover the payments.

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