FTC’s Junk Fee Rule Exemption Impacts the Towing Industry

In late 2024, the Federal Trade Commission (FTC) released its much-anticipated “Junk Fee” rule. Initially, the proposal raised concerns across various industries, including towing and recovery, due to its broad potential scope. Many stakeholders in the towing industry feared that new regulations would impose additional compliance burdens and restrictions on their pricing structures. However, the final rule narrowly targeted industries such as live event ticketing and short-term rentals, excluding the towing and recovery sector altogether. This exemption represents a significant win for towing equipment retailers and towing operation owners/managers. Here, we’ll explore what the rule entails, why the exemption matters, and how the towing industry can benefit from this development.

What is the FTC’s “Junk Fee” Rule?

The FTC’s “Junk Fee” rule is designed to enhance transparency and protect consumers from deceptive or hidden fees. According to the FTC, “junk fees” are additional charges that lack clarity or justification, often surprising consumers at checkout or after a transaction has been completed. These fees can appear in various sectors, from concert ticketing to vacation rentals, and the FTC’s rule aims to ensure businesses clearly disclose pricing details upfront.

For instance, in the live event ticketing industry, consumers often encounter hidden service charges that significantly inflate ticket prices. Similarly, short-term rental platforms sometimes add cleaning or service fees that are not immediately apparent when browsing listings. The rule requires these industries to present all fees in a straightforward and transparent manner before consumers make a purchase.

Why Was the Towing Industry Initially Concerned?

When the “Junk Fee” rule was first proposed, its broad language made many in the towing industry worry that it could apply to their operations. The towing and recovery industry often includes a variety of charges—such as towing fees, storage fees, and administrative costs—that can vary based on local regulations and specific circumstances. Industry professionals were concerned that:

1. Increased Regulation: The rule might mandate new disclosure requirements, adding administrative overhead and compliance costs.
2. Pricing Limitations: Restrictions could limit flexibility in setting fees, potentially impacting profitability.
3. Legal Risks: Non-compliance with new regulations could result in fines, lawsuits, or reputational damage.

Given that many towing companies operate in high-pressure environments—responding to emergencies, clearing accident scenes, and retrieving illegally parked vehicles—the industry’s complexity made the potential application of the rule particularly daunting.

The Final Rule: A Relief for the Towing Industry

When the FTC released the final version of the “Junk Fee” rule in late 2024, it was clear that towing companies were excluded from its scope. The rule focuses specifically on industries where consumers are frequently blindsided by hidden fees—such as live event ticketing and short-term rentals—and does not extend to towing and recovery services. This decision was likely influenced by the unique nature of the towing industry, which already operates under significant oversight at the state and local levels. However, FTC Chair Lina M. Khan encouraged “enforcers to continue cracking down on these unlawful fees and encourage state and federal policymakers to build on this success with legislation that bans unfair and deceptive junk fees across the economy.”

This exemption is a favorable outcome for towing equipment retailers and towing operation owners/managers. Here’s why:

1. Avoidance of Additional Regulatory Burdens: Towing companies will not need to implement new compliance measures, such as restructuring invoices or creating detailed fee disclosure documents. This allows businesses to focus on operational efficiency rather than navigating complex federal regulations.
2. Preservation of Pricing Flexibility: Companies can continue setting fees based on the specific needs of their operations and local markets without worrying about federal mandates dictating pricing structures.
3. Legal and Financial Protection: By excluding towing from the rule, the FTC has mitigated the risk of fines, lawsuits, or other penalties arising from non-compliance with new disclosure requirements.

Best Practices for Towing Operations

Although the towing industry is exempt from the “Junk Fee” rule, transparency and fairness in pricing remain critical for maintaining consumer trust and avoiding potential state-level regulations. Towing operation owners and managers can take proactive steps to build credibility and strengthen their businesses:

1. Clearly Communicate Fees: Ensure that customers understand towing and storage charges upfront. While this is not federally mandated, clear communication can prevent disputes and improve customer satisfaction.
2. Stay Informed About State Regulations: Many states have enacted laws addressing predatory towing practices. Compliance with these regulations avoids legal issues and demonstrates a commitment to ethical business practices.
3. Invest in Quality Equipment: Reliable, high-quality equipment minimizes operational delays and reduces long-term costs. Collins Manufacturing’s lightweight towing dollies and other products are designed to enhance efficiency and safety, making them an excellent choice for forward-thinking operators.
4. Adopt Transparent Billing Practices: Itemized invoices that outline all charges help customers understand the value of services provided. Transparency can also protect businesses from unfounded complaints or legal challenges.
5. Train Staff: Equip team members with the knowledge and tools to communicate effectively with customers, handle disputes professionally, and adhere to all relevant regulations.

Collins Manufacturing is Your Partner For Success in the Towing Industry

The FTC’s “Junk Fee” rule may not directly impact the towing and recovery industry, but its emphasis on transparency reflects a broader trend in consumer expectations. Towing operations and equipment retailers should view this exemption as an opportunity to enhance their reputation and build trust with customers.

By prioritizing clear communication, investing in reliable equipment, and staying informed about state and local regulations, towing companies can position themselves for long-term success. Collins Manufacturing remains committed to supporting the industry with innovative, high-quality equipment designed to meet the unique needs of towing professionals.

The towing industry’s exemption from the FTC’s “Junk Fee” rule is a positive development that allows businesses to avoid additional regulatory burdens while maintaining pricing flexibility. However, the spirit of the rule—promoting transparency and fairness—offers valuable lessons for towing operations and equipment retailers alike. By embracing these principles and leveraging high-quality equipment from trusted suppliers like Collins Manufacturing, the industry can thrive in an increasingly competitive and consumer-focused landscape. Contact us today to learn more about our products and how we can revolutionize your business.