Can A Towing Company Send You To Collections?

A towing company can most definitely send any unpaid towing and impound fees over to collections.

This however, depends on the scenario, as it is sometimes just as likely that the vehicle will be removed from the drivers possession – sometimes for good.

Beware that before the towing company can send you to collections, they would need to notify you prior to selling your vehicle, otherwise, they would have most likely violated state laws.

Note that you are also protected from:

  • Inaccurate credit reporting under the Fair Credit Reporting Act (FCRA) should the repossession and collections be reported to the credit agencies under false pretenses.
  • Abusive and unacceptable debt collection practices under the Fair Debt Collections Practices Act (FDCPA).

When can a car be towed?

A towed car may result from one of the following situations.

  • Accident: The vehicle was in an accident and is temporarily or permanently no longer drivable.
  • Parking Violations: Vehicle was parked illegally, parked on private property without authorization, or has an extreme amount of unpaid parking tickets.
  • Improper Verification: Driving without insurance, driving without a license and registration, driving on a license that is suspended.
  • Illegal Activity: Reckless driving, driving under the influence (DUI), evading the police, arrest of driver, vehicle has connection to a criminal investigation.
  • Repossession: The vehicle loan is severely delinquent or in default, and the creditor issues an order of involuntary repossession.
  • Registration: The vehicle is well overdue on its registration which has not been renewed.

Can a towing company take my car?

Yes, if the vehicle is in an accident, a tow truck may bring the vehicle to an impound storage if it is severely damaged.

But the vehicle might also be taken to a repair facility at the driver’s request.

In situations when authorities confiscate a vehicle, they will generally have court approval issued prior to possession.

However, some vehicles are confiscated on the spot as part of law enforcement protocols for drunk drivers and individuals involved in other illegal activities.

In the case of repossession, it is the creditor that decides when delinquency is severe enough to take the vehicle.

Their goal is to mediate further loss by selling or auctioning the vehicle in an attempt to recover the unpaid debt.

By the time this happens, the registered owner typically will have been notified many times prior to the repossession commencing.

Repossession is always the last resort for a creditor.

Where is my car towed?

This can vary depending on whether the vehicle was confiscated by law enforcement or repossessed by a lender.

It also depends on which state the driver lives and applicable state laws.

After towing, cars are taken to an impound lot or storage facility. This is a secure location that does not allow open public access.

In 37 states, a tow company is required to notify the driver about the location of the car and to allow the driver to retrieve personal effects from the vehicle.

Vehicles can be held in impound for up to 30 days waiting on payment from the registered owner.

If uncollected, the tow company has the right to auction or sell the vehicle outright to recover funds.

For repossessed vehicles, the lender will either keep them in vicinity of the financial institution or keep them in impound storage.

This entirely depends on whether the car will be sold outright on the premises or assigned to an auction.

How to get your car back after being towed?

If the car was towed due to an accident, simply contact the towing company to find out the amount that is owed and hours of operation.

It may be necessary to work with the insurance company on the vehicle to address the situation appropriately.

If the vehicle has been confiscated in connection with illegal activity, the authorities may not release the vehicle until an investigation is complete or until a court decision releases it.

If a vehicle has been released, for example, after parking tickets are paid or dismissed, contact the towing company directly.

Request a written statement of fees owed for the vehicle before proceeding with payment.

How much are tow ing fees?

Fees will include towing costs and impound processing fees, as well as storage fees at roughly $50-$80 per day.

Depending on how long the car has been in storage, it can be very expensive, so it is best to claim it as soon as possible.

Claiming the vehicle requires the following:

  • Personal identification
  • Documentation to verify ownership and that the vehicle is insured (when required by the state)

Ensure you are ready to pay the amount in full with cash or credit card. It is unlikely that checks will be accepted.

I can’t afford to get my car out of impound

If you can’t afford to pay the necessary fees to retrieve your car from impound, the result will depend on the situation by which your car was towed.

Repossessed vehicle

The towing company would be keeping the vehicle impounded on behalf of the lender.

The lender must be contacted for any negotiations to pay the impound fees and bring the loan current.

Otherwise, these will be paid when the lender sells the vehicle to recover the defaulted loan.

The lender retains the title of the vehicle, whilst any remaining debt is charged off as a loss and sent to collections.

Confiscated vehicle

Towing companies will hold a vehicle for 30 days. If the vehicle has not been retrieved in that time, the tow company will file a lien against the vehicle and assign it to be auctioned.

The amount sold will cover all fees and loan balance still owed. Anything left over, will go to the registered owner.

It will then be sold at auction to cover all associated fees.

Short-term impound

Contact the towing company directly to discuss any available options, possibly making a partial payment in exchange for no further daily fees.

This scenario is highly likely, which may mean that the funds may have to be borrowed to pay for the vehicle’s release.

If they are willing to release the vehicle without full payment, expect the remainder to be assigned to a collection agency if not paid.

Can I stop the towing company from sending me to collections?

By the time a vehicle is repossessed and impounded, the level of delinquency or wrongdoing has likely moved beyond simple collection of fees.

However, if a vehicle was released for some reason without payment in full, then this amount could be collected if the owner refuses to pay.

If the car is impounded, as an example, for parking tickets and it still carries a debt against but is not delinquent, then the consumer can pay the fees and get the car back without issue.  

However, if the car is repossessed due to delinquency or default, only the lender will be releasing the vehicle, and if the car is confiscated in a crime, it is unlikely the owner will ever get it back.

Can a towing company make profit from selling my car?

If a towing company sells a car at auction for outstanding impound fees and storage, they are not allowed to make a profit.

Any amount beyond fees and debt against the vehicle must be returned to the registered owner.

My car was towed, what are my rights?

If your car was towed wrongfully or you have been the victim of predatory towing practices, you may be able to contest all fees and charges, as governed by your state laws.

Consumer protections under the Fair Debt Collections Practices Act (FDCPA)

If the car has been sold without your knowledge, contact the towing company and kindly request for the bill of sale.

If a debt has also been assigned to a collection authority, request for an itemized list of the fees and charges to verify the owed amount.

Advocacy groups have worked to improve consumer protection laws in most states, but there is a long way to go. There is no federal oversight of this industry.

When delinquent fees and storage costs are assigned to a collection agency, the collection practices are regulated through the Fair Debt Collections Practices Act.

When this happens, the same guidelines apply as for all collectors. Under no circumstances are they allowed to threaten, blackmail, harass or attempt to collect debt in abusive ways.

State laws against predatory towing practices

The unfortunate reality is that there can be unscrupulous tow drivers. Consumer groups continue to advocate for improved laws for prevention of predatory practices and protection for consumers who have been victims.

This is particularly critical in states where the towing company is under an obligation to disclose to the owner of a vehicle of when it will be towed and where it will be stored.

In addition, approximately half of the American states have maximum tow rates in place, so keep this in mind when you are provided with the towing fees and storage costs.

Predatory towing practices include:

  • Charging unreasonably high towing rates and fees
  • Towing your car from your private property without permission, if necessary
  • Damaging your car in the process of towing
  • Damaging or stealing personal items from inside your vehicle
  • Selling your car for their own benefit without first being informed

The debt collector may then report both the repossession and collections to the credit agencies, despite the towing company having no right to tow your car in the first place.

If you genuinely believe that your car has undergone the following predatory practices, you may have grounds to file a lawsuit:

  1. Unlawfully towed, then
  2. Sold to recover partial towing costs
  3. Leftover debt sent to collections, and/or
  4. Unnecessarily reported to the credit agencies

Gather as much evidence and information as you can to support your case. Enlist the help of a lawyer, particularly one that specializes in these matters, as you may have grounds to file a lawsuit.

Statute of limitations

Depending on when the debt collector begins pursuing you, it may not be worth engaging in any sort of payment – rather, confirm whether the statute of limitations on your debt can come into play.

Statute of limitations is usually around 4 years, however state laws may vary. The collections agency will no longer be able to pursue you for any debt beyond this time period.

If you do make a payment however, statute of limitations will begin from that point in time.

Dispute inaccuracies in your credit report as per Fair Credit Reporting Act (FCRA)

Like any derogatory credit, both repossessions and collection activities remain on individual credit reports for 6 years 9 months from date of last activity, unless they are paid in full or settled and then removed by the collection agency.

If you have fallen victim to any predatory towing practices described previously, you should either of the following:

  • File a dispute directly with the collection agency
  • File a dispute with the credit bureaus

If the dispute is denied, and the statement is deemed to meet FCRA requirements, you can choose to add a consumer statement to indicate that you disagree with the derogatory statement.

This ensures that beyond statute of limitations, the derogatory remark that will continue to be reported for a further 3 more years, will be accompanied with your statement of disapproval.

This is particularly important for creditors who will view that you have made every effort to improve your credit report in order to qualify for future loans.

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