Wednesday 28 November 2012

Is Self-Regulation Realistic, For The Ontario Towing Industry?

The recently released report of the Ontario Automobile Insurance Anti-Fraud Task Force recommends province-wide regulation of the towing industry, which has strong support from the insurance industry. The Task Force would like to see a province-wide licensing scheme administered by an Administrative Authority (AA).

 There have been a number of attempts to review and/or regulate the cost of towing and storage of vehicles in Ontario over the past decade, several of which I had some involvement. In 2003, the government attempted to introduce a $300 cap on towing and storage costs through a revision to the Ontario Automobile Policy (OAP 1) but that was abandoned out of concern that consumers would be responsible for any excess charges.

In 2004, the Ministry of Finance and the Financial Services Commission of Ontario (FSCO) formed a working group with representatives from the government, insurance industry, police forces and towing industry to address some of the abuse reported by consumers and insurers. There was no consensus coming out of the working group and it was eventually abandoned.

On June, 4, 2008, MPP David Zimmer introduced Bill 87 which would have provided for the self-regulation of the towing industry in Ontario. The bill never proceeded beyond second reading. David Zimmer reintroduced the bill at Bill 147 on December 10, 2010 but it also failed to proceed beyond second reading.

History of Administrative Authorities 

 The key to the Task Force’s recommendations on regulating the towing industry is the formation of an AA which would act as the regulator. Personally, I have some concerns with these recommendations.

Administrative Authorities are not new to Ontario. In 1976, the government established its first AA when Board of Funeral Services was established by the Funeral Services Act to regulate funeral services. As well, Tarion (formerly the Ontario New Home Warranty Program) was established by the Ontario New Home Warranties Plan Act to administer warranty coverage to new homebuyers.

In 1996, the Safety and Consumer Statutes Administration Act came into effect which allowed for the creation of a number of AAs. Between 1997 and 1999, the government delegated authority and responsibility for day-to-day regulatory administration to the following sectors in accordance with this Act:
  • Motor Vehicle Dealers and Salespersons → OMVIC 
  • Real Estate Salespersons and Brokers → RECO 
  • Travel Retailers and Wholesalers → TICO 
  • Electrical inspections and safety → ESA 
  • Safety in 4 sectors: boilers & pressure vessels, amusement & elevating devices, hydrocarbon fuels, upholstered & stuffed articles → TSSA 
  In 2000, the VQA Ontario was designated as the not-for-profit corporation responsible for administering the Vintners Quality Alliance Act.

On May 1, 2010, the TSSA became a statutory corporation with enhanced accountability requirements upon the proclamation of the Technical Standards and Safety Statute Law Amendment Act, 2009.

 The Retirement Homes Act, 2010, established the Retirement Homes Regulatory Authority (RHRA) and sets out its role, responsibilities and powers with respect to care, safety standards and other requirements applying to licensed retirement homes in Ontario with oversight by the Ontario Senior’s Secretariat.

Key objectives of this model in the 1990s was to reduce government expenditures, deliver services more efficiently, avoid unnecessary regulatory burden, and harmonize regulatory regimes across jurisdictions in response to mounting trade pressures.

Administrative Authority
Technical Standards and Safety Authority (TSSA)
Public safety
Responsibility transferred in 1996 from the Technical Standards Division of the Ministry of Consumer and Commercial Relations
Electrical Safety Authority (ESA)
Public safety
Responsibility transferred in 1998 from the Electrical Inspection Division of Ontario Hydro
Ontario Motor Vehicle Industry Council (OMVIC)
Consumer protection
Responsibility transferred from the Ministry of Consumer and Commercial Relations
Real Estate Council of Ontario (RECO)
Consumer protection
Responsibility transferred from the Ministry of Consumer and Commercial Relations
Travel Industry Council of Ontario (TICO)
Consumer protection
Responsibility transferred from the Ministry of Consumer and Commercial Relations
Tarion Warranty Corporation
Consumer protection
Evolved from the New Home Warranty Program that was originally established in 1976
Board of Funeral Services (BOFS)
Consumer protection
Formed in 1976 but predecessor organization established in 1914
Vintners Quality Alliance Ontario (VQAO)
Consumer protection
Established by Ministry of Consumer and Commercial Relations in 2000

  Will the AA model work for the towing sector? 

The Ministry of Consumer Services has oversight responsibility for eight of the authorities currently in operation. With the exception of the VQA sector, the government regulated the other seven sectors directly. These sectors were selected for delegated responsibility because they were mature sectors which had demonstrated their ability to work in partnership with government, and had a track record for addressing and resolving consumer and public safety concerns. With exception to the VQA sector, there were pre-existing statutory standards in all of these sectors.

The first problem with a proposed Towing AA is that there is no existing provincial public authority is currently regulating the sector. There are only municipal authorities that issue business licences but they do not really regulate the industry. Therefore, there is no regulatory expertise or knowledge to transfer to the private sector.

In addition, the towing sector does not have the maturity or a track record in dealing with consumer complaints and public safety issues. Representatives from the towing sector (Provincial Towing Association (Ontario) and Ontario Recovery Group) met with the Task Force to express support for self-regulation but their enthusiasm will not make up for the lack of regulatory expertise.

The Task Force reported that participants repeatedly complained that towing operators are engaged in organized or premeditated auto insurance fraud. There were concerns expressed regarding road safety concerns, insufficiently trained employees, improper equipment, a lack of clarity around fees and the illegal referral fees. Industry representatives reported that they have been unable to deal with corruption in their industry and legitimate operators have become so frustrated that they have begun to leave the industry. This does not sound like an environment where you can create a self-regulatory body.

I’m not suggesting that an AA model for the towing sector can never happen. To its credit the Task Force points out that there is a need for capacity-building in the towing industry. I just think it would be irresponsible if it were to happen in the near future.

So where can we go from here? 

The current patchwork of municipal licensing systems is not protecting the public. The Task Force is correct that a province-wide regulatory framework needs to be established. I believe the first step to creating a Towing AA is to establish a regulatory authority within government to develop and enforce industry standards. If the government is contemplating creating a government-run regulatory system for treatment and assessment facilities then it should also consider creating one for towing operators. Only after a regulatory system has been established should consideration be given to transferring it to the private sector. This will provide the towing industry and its associations time to develop some experience in working with the government, working with consumers and establishing some credibility.

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