In the chaotic aftermath of a car accident, a tow truck driver rolls up. He offers to take your car to a repair shop, waves a clipboard at you and asks you to sign the attached form.
The next thing you know, you've been hit with thousands of dollars in inflated charges for towing, storage and repairs. Unfortunately, this isn't a theoretical scenario -- there's been a recent boom in tow truck scams. From the first nine months of 2009 to the first nine months of 2010, the number of suspicious U.S. auto insurance claims involving inflated towing charges doubled, according to the National Insurance Crime Bureau.
Crime bureau spokesman Frank Scafidi says that $1,800 "is not an unusual bill to get for driving a car a few miles and parking it in a storage yard." A typical bill should be less than 10 percent of that overblown charge.
Many states and cities are cracking down on tow truck scams by passing new laws to better regulate the industry. Both the state of California and the city of Houston enacted new laws for 2011. In Houston, the National Insurance Crime Bureau kicked off a "Know Before You Tow" billboard campaign in December to help educate consumers about the problem.
While there are hot spots such as Houston, tow truck fraud is a national problem, Scafidi says. That's because in many places, towing is an unregulated industry. States and cities have the power to set rules on towing prices and procedures, but many have not. For instance, Texas prides itself on being a pro-business state with little regulatory red tape.
How the towing scam works
Tow truck scams begin with drivers who listen to police scanners for news of a crash, says Aaron Patterson, a special investigative analyst at Allstate. Then, they speed to the scene, hoping to beat police and any towing company a driver might call on his own. Their goal: To get the driver to sign a release form giving permission to tow away the vehicle.
The truck drivers know that if police order the tow, they'll be able to charge only a set, regulated price, usually about $130. This is known in the industry as a "no consent" tow. But if the driver signs a release, the towing company is free to charge whatever it pleases.
Unscrupulous tow truck operators use a number of tactics to get crash victims away from the police to sign a release. Patterson knows of one case where a tow truck operator followed an ambulance to a hospital emergency room to get a crash victim to sign a release.
A more common ruse, according to Patterson: "They'll say, 'Let's get out of the traffic -- follow me to the next exit to sign some paperwork.'"
Self-dealing storage and repair yards
Once they've got your car hitched up, crooked tow truck drivers may convince consumers to use the company's own storage yard or repair shop. More overcharging can take place at this stage.
Houston Police Lt. Wendy Baimbridge says: "They'll charge you a $500 administration fee, a $1,500 teardown fee, a $500 environmental fee. And nothing's been done to the car yet. And it's legal."
Automotive consumer attorney Steven Simons in Sherman Oaks, Calif., says he recently represented one BMW driver who had her wrecked car towed to a repair shop owned by the towing firm.
The repair shop subcontracted out part of the work without the customer's permission. The repairs were botched, and Simons says his client ended up spending more than $11,000 for repairs that her insurer estimated at less than $6,000. The repair shop also is accused of forging the customer's signature on the auto insurance company's payment.
The final insult: Insurance companies end up paying the inflated towing, storage and repair bills. They have little choice -- if they don't pay up, the towing company won't release the car to its owner.
Baimbridge says the high insurance payouts have hurt consumers in the Houston area, who are charged higher auto insurance rates than drivers in nearby areas. Patterson says Allstate is suing a ring of Houston-area towing companies for $60,000 in allegedly fraudulent towing charges that the insurer has paid in recent years.
How to prevent being taken for a ride
Here are 11 tips from the National Insurance Crime Bureau, Allstate and the New York State Insurance Department for avoiding tow truck scams:
• If there's a crash, be sure the police are called to the scene. Let the police handle towing arrangements.
• If a police officer orders your vehicle to be towed, do not sign any additional paperwork presented by a tow truck driver.
• Don't use a tow truck operator unless a truck was called by your or the police.
• Don't give your insurance information to a tow truck operator.
• Ask upfront what your tow will cost, and get pricing information in writing.
• Insist your vehicle be taken to the repair shop of your choice.
• Be wary of any towing company that wants to drive your car to its own repair shop.
• Carefully read any paperwork you are asked to sign, and make sure you understand it. Sign directly below any dollar figures, not just at the bottom of the form.
• Get a copy of any paperwork the tow truck company presents to you.
• Make sure the tow truck operator completes a damage report before towing your car, so you have a record of the damage before moving the vehicle.
• If possible, use a towing operator affiliated with an established membership program such as AAA, or a program run by your insurer, car maker or credit card company.