The City of Toronto plans to overhaul how it governs towing companies — an industry plagued with illegal kickbacks given to drivers who take damaged vehicles to a particular garage.

There are already penalties, of course.

In fact, two tow truck drivers face fraud charges in recent separate incidents, police announced in a news release Wednesday.

But it's unclear how many others are not getting caught. And those in the towing and insurance sectors told CBC Toronto that the unlawful referrals happen regularly.

T.O. towing fees less than in Vaughan, Mississauga

The president of the provincial towing association blames the city for the practice, saying that its capped fees — $166 for street tows, $188 for highway pickups — are much lower than those charged in other GTA municipalities.

It creates a system that "encourages" tow truck drivers to seek "tips" elsewhere, Joey Gagne said — though he argued in an interview on Metro Morning that "99 per cent of tow truck operators charge the fees as they are set."

Vehicles that need a tow in Mississauga pay a flat rate of $290, according to its bylaw. Vaughan towing firms can charge $250, plus a $67 hourly fee if the truck has to wait for more than 60 minutes.

After an accident, motorists could be vulnerable to being taken in by tow truck drivers, who may refer them to an autobody shop in exchange for kickbacks. (CBC)

It's why Gagne said the towing industry has routinely called on Toronto for price hikes.

Rates are something municipal staff will review, along with charging and billing practices and consumer protection.

Ontario conducted a similar review in 2015, vowing to crack down on corrupt practices in towing. That probe happened after insurers complained that kickbacks and other unethical practices — like storing an owner's car and not telling them about the mounting bill — had been driving up insurance payouts.

But those costs trickle back down to consumers through higher premiums, David Orazietti, the former minister of Consumer Services, told CBC Toronto at the time of Ontario's public consultations.

No guarantee of quality repair

While Gagne argued that other industries, like real estate, offer cash for referrals, an Insurance Bureau of Canada spokesperson said customers need to know that they're getting a recommendation based on the tow truck driver's interests rather than their own.

Insurance companies also have preferred vendors, Pete Karageorgos acknowledged. But in that case, they're the ones paying for the cost of repairs and "will stand behind the quality of the work."

In an interview on Metro Morning, he said that when it comes to tow truck operators, "transparency is key."

"Consumers don't know. You've been involved in a crash, you're not thinking straight, and perhaps there is an arrangement that is hidden between a body shop and tow truck operator," he said.

Municipal staff will report on the outcome of the consultation and their recommendations to the licensing and standards committee in June.