Justification for Administrative Rule Adoption

JUSTIFICATION FOR ADMINISTRATIVE RULE ADOPTION
Vehicle Towing and Booting Program
16 TAC Chapter 86, amendments §86.700

The Texas Commission of Licensing and Regulation (Commission) adopts amendments to an existing rule at 16 Texas Administrative Code (TAC), Chapter 86, §86.700, regarding the Vehicle Towing and Booting program, without changes to the proposed text as published in the December 18, 2020, issue of the Texas Register (45 TexReg 8949).

EXPLANATION OF AND JUSTIFICATION FOR THE RULES

The rules under 16 TAC, Chapter 86, implement Texas Occupations Code, Chapter 2308, Vehicle Towing and Booting.

The adopted rule clarifies the limited locations to which a tow truck company or a tow truck operator may take a vehicle involved in an Incident Management (IM) or other Non-Consent tow, by stating the two options in more concise language.

Additionally, the adopted rule explicitly prohibits: 1) a tow truck company or tow operator from recommending or soliciting authorization to tow or move a vehicle involved in an IM or other Non-Consent tow to any location other than a licensed vehicle storage facility (VSF) or 2) from obtaining authorization for any repairs or services other than those that are necessary for the tow.

The adopted rule is necessary because the Department continues to see a rise in vehicle “flipping” – a practice which involves towing vehicles involved in IM or other Non-Consent tows from one location to an unlicensed and unregulated body shop for storage and unauthorized work. The adopted rule will explicitly prohibit this practice and allow the Department to prosecute both tow companies and tow truck operators for using deception and dishonesty to funnel disabled vehicles away from licensed VSFs where storage fees are regulated and capped.

The need for rules addressing the practice of “flipping” has been discussed by the Towing and Storage Advisory Board for more than a year. During a Board meeting on September 22, 2020, it formally requested that the Department engage in the rulemaking process on this issue and present it with a proposed draft. The Sunset Commission has also recommended that the Department consider rules on this issue.

SECTION-BY-SECTION SUMMARY

The adopted rule amends §86.700 by:

  1. adding tow truck operators to the persons or entities subject to the rule;
  2. explicitly adding Incident Management (IM) tows to the rule language to emphasize applicability to all types of Non-Consent tows;
  3. adding a prohibition on tow truck companies and tow truck operators recommending or soliciting authorization to tow vehicles involved in IM and other Non-Consent tows to locations other than those allowed by rule;
  4. adding clarifying language to emphasize where a vehicle involved in IM or other Non-Consent tows must be taken if the vehicle operator selects a location of their own choosing and the tow truck company or tow truck operator declines to tow the vehicle there; and
  5. renumbering all sections.

PUBLIC COMMENTS

The Department drafted and distributed the proposed rules to persons internal and external to the agency. The proposed rules were published in the December 18, 2020, issue of the Texas Register (45 TexReg 8949). The deadline for public comments was January 19, 2021. The Department received comments from five interested parties on the proposed rules during the 30-day public comment period. The public comments are summarized below.

Comment: Although the Department received five comments, one of them was unrelated to the proposed rule and concerned a licensing question.

Department Response: This unrelated comment was forwarded to the appropriate TDLR Division for handling. The Department did not make any changes to the proposed rule as a result of this unrelated comment.

Comment: Of the remaining four comments, two echoed the sentiment of the Board that “flipping” is an ongoing and pervasive issue in the TOW/VSF industry. Both commenters, speaking as individual licensees, stated that they were in support of the proposed rules and did not suggest any changes.

Department Response: The Department agrees with these two comments. The act of “flipping” has become an increasing concern to both TDLR and TOW/VSF licensees who operate honestly and in compliance with their respective statutes and rules. Both the industry and the Sunset Commission have recognized the need to enhance consumer protection by amending the applicable rule to explicitly address this practice. The Department did not make any changes to the proposed rule as a result of these comments.

Comment: The third remaining comment expressed concern that the proposed rule would allow tow operators to refuse a vehicle owner or operator’s request to take their vehicle to a destination of their choice and instead re-route the vehicle to a VSF that may be at a much farther distance and which may also be owned by the tow company. The commenter, commenting as an individual licensee, further expressed that the vehicle owner or operator could be subject to ‘extortion’ through no fault of their own. Although the commenter did not explicitly express whether they supported or opposed the proposed rule, TDLR construes the comment as being opposed to the rule.

Department Response: The Department disagrees with this comment. The rule protects consumers from unilateral, and often undisclosed, decisions by tow operators to take vehicles to unregulated body shops. Additionally, the rule protects tow operators by providing them with the ability to decline to take the vehicle to locations suggested by a consumer that may be long distances, or which may be difficult to reach. By mandating that if a tow operator declines to take the vehicle to a destination chosen by the vehicle owner or operator it must still be taken to a regulated vehicle storage facility, the rule effectively reduces the opportunity for “flipping” to occur. The Department did not make any changes to the proposed rule as a result of this comment.

Comment: The fourth remaining comment proposed a modification to the proposed rule to remove tow companies from being subject to the rule. The commenter, commenting as an individual licensee, stated that tow companies may not have control over a tow operator or know what they are doing but will still be held accountable under the rule. Although the commenter did not explicitly express whether they supported or opposed the proposed rule, TDLR construes the comment as being opposed to the rule.

Department Response: The Department disagrees with this comment. The rule addresses the significant problem for TDLR Enforcement of tow companies seeking to absolve themselves from engaging in “flipping” by asserting that they are not responsible for the actions of tow operators. It also puts equal responsibility onto tow companies and tow operators to recognize and stop a practice which harms consumers and the industry. The Department did not make any changes to the proposed rules as a result of this comment.

ADVISORY BOARD RECOMMENDATIONS AND COMMISSION ACTION

The Towing and Storage Advisory Board met on March 16, 2021, to discuss the proposed rule and the public comments received. The Advisory Board recommended that the Commission adopt the proposed rules as published in the Texas Register. At its meeting on May 6, 2021, the Commission adopted the proposed rules as recommended by the Advisory Board.

STATUTORY AUTHORITY

The adopted rule is adopted under Texas Occupations Code, Chapters 51 and Texas Occupations Code, Chapter 2308, which authorize the Texas Commission of Licensing and Regulation, the Department’s governing body, to adopt rules as necessary to implement these chapters and any other law establishing a program regulated by the Department.

The statutory provisions affected by the adopted rule are those set forth in Texas Occupations Code, Chapters 51 and Texas Occupations Code, Chapter 2308. No other statutes, articles, or codes are affected by the adopted rule.

§86.700. Responsibilities of Tow Truck Permit Holder and Tow Truck Operator--Storage of Towed Vehicles.

(a) A towing company or tow truck operator that performs an incident management or nonconsent tow may only tow the vehicle to one of the following locations:

(1) a vehicle storage facility operated by a person who holds a vehicle storage facility license issued by the department; or

(2) a location other than a vehicle storage facility licensed by the department that is specifically requested and authorized by the vehicle owner or operator and to which a towing company or tow truck operator agrees to take the vehicle.

(b) Neither a towing company nor a tow truck operator may recommend or solicit authorization for a vehicle involved in an incident management or nonconsent tow to be towed or moved to any location other than a vehicle storage facility licensed by the department.

(c) In the event the vehicle is taken to a location other than a licensed vehicle storage facility, the authorization for the tow ticket must not include authorization for repairs or any other services other than those necessary to perform the tow.

(d) A towing company or tow truck operator may decline to take a vehicle to a location specifically requested and authorized by the vehicle owner or operator. However, if the towing company or tow operator declines, they may not take the vehicle to any location other than a licensed vehicle storage facility as set forth in subsection (a)(1).

REVIEW BY AGENCY COUNSEL

The agency certifies that legal counsel has reviewed the adoption and found it to be a valid exercise of the agency’s legal authority.

Filed with the Office of the Secretary of State, on May 12, 2021.


Brad Bowman
General Counsel
Texas Department of Licensing and Regulation