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 as-yet undetermined administrative authority.
But a few hurdles need to be cleared, including establishing a regulatory authority within government, before contemplating transfer of control to the private sector.
Over the past decade, there have been a number of attempts to review and/or regulate the cost of towing and storage of vehicles in Ontario, several of which I had some involvement.
In 2003, the government tried to introduce a $300 cap on towing and storage costs through a revision to the Ontario Automobile Policy (OAP 1), but the effort was abandoned out of concern that consumers would be responsible for any excess charges.
In 2004, the province’s Ministry of Finance and the Financial Services Commission of Ontario (FSCO) formed a working group with representatives from government, the insurance industry, police services and the 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.
Four years later, on June, 4, 2008, MPP David Zimmer introduced Bill 87 that would have provided for the self-regulation of the towing industry in Ontario. The bill never proceeded beyond second reading, although Zimmer reintroduced it as Bill 147 on December 10, 2010. Again, however, it failed to proceed beyond second reading.
The key to the task force’s recommendations on regulating the towing industry is the formation of an administrative authority to act as the regulator. Personally, I have some concerns with these recommendations.
Will the administrative authority model work for Ontario’s towing sector?
The province’s Ministry of Consumer Services has oversight responsibility for eight of the authorities currently in operation. With the exception of the Vintners Quality Alliance (VQA) sector, the provincial government had previously regulated the other seven sectors directly.
The seven were selected for delegated responsibility because they were mature sectors that had not only demonstrated the ability to work in partnership with government, but also had a track record for addressing and resolving consumer and public safety concerns. In all but the VQA sector, there were pre-existing statutory standards.
The first problem with a proposed towing administrative authority is that no existing provincial public authority is currently regulating the sector. There are municipal authorities that issue business licences, but they do not really regulate the industry. As such, there is no store of regulatory expertise or knowledge to transfer to the private sector.
In addition, one could argue the towing sector does not have the maturity or track record in dealing with consumer complaints and public safety issues. Representatives from the towing sector — the Provincial Towing Association (Ontario) and the Ontario Recovery Group — met with task force members to express support for self-regulation, but their enthusiasm cannot make up for the lack of regulatory expertise.
The task force noted that participants repeatedly complained towing operators are engaged in organized or premeditated auto insurance fraud. Concerns were expressed regarding road safety concerns, insufficiently trained employees, improper equipment, a lack of clarity around fees and illegal referral fees.
Industry representatives reported they have been unable to deal with corruption in their industry, and legitimate operators have become so frustrated that they have begun leaving the industry. This does not sound like a good environment in which to create a self-regulating body.
I am not suggesting that an administrative authority model for the towing sector can never happen. To its credit, the task force points out there is a need for capacity building in the towing
industry. This simply means that the past approach employed by Ontario’s Ministry of Consumer Services is unlikely to work in this instance.
Initially, a towing administrative authority would not be able to have as much delegated authority. The council or board overseeing the authority would likely have a smaller proportion of representatives coming from regulated sectors and would need to rely on directors with some experience in regulatory administration.
Administrative authorities are not new to Ontario. In 1976, the provincial government established its first administrative authority when the 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, clearing the way for the creation of a number of administrative authorities.
Between 1997 and 1999, the Ontario government delegated authority and responsibility for day-to-day regulatory administration to the following sectors under the act:
• Motor vehicle dealers and salespersons — Ontario Motor Vehicle Industry Council;
• Real estate salespersons and brokers — Real Estate Council of Ontario;
• Travel retailers and wholesalers — Travel Industry Council of Ontario;
• Electrical inspections and safety — Electrical Safety Authority; and
• Safety of amusement devices, boilers and pressure vessels, elevating devices, fuels, operating engineers, ski lifts and upholstered and stuffed articles — Technical Standards & Safety Authority (TSSA).
With regard to regulatory authority, in 2000, VQA Ontario was designated as the not-for-profit corporation responsible for administering the provincial 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; and the Retirement Homes Act, 2010 established the Retirement Homes Regulatory Authority and sets out its role, responsibilities and powers with respect to care, safety standards and other requirements applying to licensed retirement homes in the province, with oversight by the Ontario Senior’s Secretariat.
Key objectives of the administrative authority 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.
So where can towing go from here?
The current patchwork of municipal licensing systems is not protecting the public, and the task force is correct in concluding a province-wide regulatory framework needs to be established.
I believe the first step to creating a towing administrative authority 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 establishing 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 related associations time to gain some experience working with government, working with consumers and establishing some credibility.