States allow cash "kickbacks" for people who report cars for towing, watchdog group says

Tow truck companies are slipping money under the table to people who report illegally parked cars, creating incentives for abuse, according to a report from a consumer watchdog group that is pushing states to ban the practice.

California, Texas and 14 other states have legislation that prohibit so-called "kickbacks" from towing companies, according to a report from the U.S. Public Interest Research Group released Wednesday. The nonprofit is calling for the remaining 34 states — including Arizona, Louisiana and Ohio — to pass similar measures.

If more states don't pass a ban, tow companies will likely continue their "predatory towing" practices, PIRG said. 

"You're having cars being towed that really aren't causing an issue," Teresa Murray, a PIRG consumer watchdog, told CBS MoneyWatch. "But whenever you have an incentive to call a tow company, then bad things happen."

Tow companies make money by charging between $200 and $300 to a vehicle's owner when they come to retrieve their car from an impound lot. Murray said some companies don't mind passing $20 — or even $50 — to people if it encourages them to call and point out more cars to tow.

Drivers typically get their car towed for illegally parking on private property, unpaid tickets or an expired vehicle registration.
But some companies could be abusing their power, Murray said. She said PIRG has received complaints from drivers that some tow companies haul away vehicles for minor offenses, like low air in tires.

Some tow truck drivers are even patrolling college towns, senior citizen complexes, neighborhoods populated by people of color and low-income communities in search of vehicles to take, Murray said. He believes tow companies focus on those communities because they think the people there won't have the time or resources to fight being targeted for a tow.

"A lot of cases we hear about are someone just in a parking space for five minutes," she said. "They're just preying on people." 

The Towing and Recovery Association of America, the industry's trade group, called PIRG's report inaccurate and misleading. 

"Private property towing is often only a small segment of a towing company's operations and the practice of paying "kickbacks" in exchange for work is not a widespread problem," the group said in a statement to CBS MoneyWatch. 

Towing kickbacks are common across the nation, PIRG contends. Murray specifically noted a recent case in Detroit involving police officers. 

In the Detroit case, three former police officials have been accused of calling to have cars towed, and working together with the towing company to have cars sit in an impound lot for weeks, racking up fees. The tow company would then hike up the storage fee once owners came to retrieve their vehicles.

The officers are accused of receiving thousands of dollars in kickbacks under the scheme, according to a federal indictment. 

Vehicle towing is already a lucrative business in the U.S. Automotive towing is projected to become an $11 billion industry this year, up from $10 billion in 2020, according to IBISWorld.

There are often justified reasons for towing someone's car — like if it's blocking emergency department parking spaces at a hospital or occupying assigned spaces at an apartment complex. Murray said PIRG is not pushing for a complete ban on all vehicle towing. Most towing companies are doing their jobs ethically, she said, but the report aims to stop the handful of businesses that aren't.