New towing rules should explicitly ban compulsory loans, attorney general’s office says

Lawmakers pressed the chief executive of Colorado’s largest towing company Monday about the company’s alleged loan practices that might violate a 2022 law governing the industry.

House Bill 22-1314 is meant to make it easier for car owners to retrieve their vehicle after a non-consensual tow. Tow yards are now required to release cars if owners pay 15% of the total fee, up to $60. Then they would have time to pay off the rest of the balance so that a large towing fee wouldn’t inhibit their ability to pay rent and other bills.

The law also mandates that towing companies provide a 24-hour notice before towing a car in most cases.

Lawmakers and other stakeholders, however, have raised concerns that Wyatts Towing is compelling people to agree to a loan program with high interest in order to get their car back at the reduced rate. Consumers need to provide their employer, income, banking, and rent or mortgage information in order to get that loan, according to reporting from The Denver Post.

“(People) are telling us that companies like yours have built what I consider to be predatory and illegal loan programs,” Rep. Andrew Boesenecker, a Fort Collins Democrat, told Wyatts CEO Trevor Forbes during a Monday hearing at the Capitol.

The attorney general’s office is also concerned about the loans. A July 17 letter from the office to the Public Utilities Commission, which oversees the towing industry, says the practice is not allowed and wants rules to clearly ban loans as a condition for car retrieval.

“Neither the plain language nor legislative intent of HB 22-1314 permits such a practice. The intent of this statute was to allow consumers to retrieve their vehicles quickly and avoid (as much as possible) the devastating collateral consequences that can accompany a non consensual tow,” the letter reads.

A loan, because of the interest, increases the amount a person owes beyond the towing fee. The letter does not name Wyatts but says the office is aware of one towing company that will not release cars unless the consumers agrees to a 12% loan, which is the maximum amount a lender can charge without being licensed through the Administrator of the Uniform Consumer Credit Code.

Additionally, the loan program creates a mandatory element that acts as a barrier to a person exercising their statutory right guaranteed by last year’s law, the attorney general’s office wrote.

“The Towing Rules should include language that makes clear that compulsory loans do not comply with the Rules or Colorado law. Without such clarification, some towing carriers may continue to employ these unlawful practices and impose costly litigation on consumers or the State to vindicate consumers’ rights,” the letter reads.

The PUC is in its rulemaking process now.

The office suggests that the eventual towing rules set examples for how towing carriers can collect outstanding fees — by setting a certain repayment date, for example, or offering consumers an optional repayment plan that charges the statutory interest of 8%.

On Monday, Forbes pushed back on the suggestion that Wyatts engages in a predatory loan practice. He said that there was confusion about allowable repayment options and Wyatts has reached out for guidance. Within the last few months, he said no new loans have have been initiated and that when the company saw the July 17 letter it stopped charging interest. He said that Wyatts has never denied someone a loan in order to get their car back.

Forbes also said that Wyatts does not have a high expectation that many people who signed loan agreements will actually pay them back, and in practice the company is not tracking the loans. He said Wyatts doesn’t intend to pursue collections on any of the loans.

“We knew nobody was going to come back and pay us again. And we also know the economics of collection would make it not economical to pursue collections,” he said. “There’s been about 200 who have used this program since Aug. 10 of last year. Of those, probably 20 have come back and paid later.”

The PUC’s rulemaking hearing to implement the new towing rules will continue on Tuesday.