How smash repair companies are fleecing crash victims with ‘car-napping’

Damaged vehicles are being held for ransom by smash repair companies until the owner coughs up huge fees in a practice known as “car-napping” — and in some cases it’s “a sh-t-fight” to get the car back.

Drivers are being caught out by smash repair companies in a practice known as ‘car-napping’. Picture: iStock

Big cash ransoms are being demanded by smash repair companies in a practice known as “car-napping”.

Industry sources said the practice is widespread with complaints against car rental and accident management companies surging 450 per cent since 2019.

The companies offer replacement vehicles and help manage repair claims for not-at-fault drivers in car crashes. These costs are then recovered from the at-fault driver’s insurer.

But if the costs can’t be regained, the not-at-fault driver is charged for the hire car, repairs and legal fees. And until they pay, the company holds their car.

“They refuse to release the cars and give them bills of $20,000 to $30,000,” a veteran smash repair industry source said

The Insurance Council of Australia (ICA) said it was “very aware and concerned” about the practice.

“While these companies often purport to provide a smooth, hassle-free process at no cost, there have been many reported cases where their actions have harmed consumers,” a spokesperson said.

Auto workshops pay upwards of $1000 per client to have the lucrative work brought to them.

As well as car-napping, the ICA said it had received complaints from ripped-off motorists regarding;

CHARGING drivers inflated rates for hire cars and repairs;

LEADING motorists to believe they are acting on behalf of insurers and in some cases displaying insurance company logos on their websites without authorisation;

INITIATING legal proceedings in the customer’s name without their knowledge;

SHARING personal information without the driver’s consent or knowledge; and

USING search engine optimisation tactics – also known as “ad-spoofing” – to direct consumers to their websites when people search for their insurer’s name or terms like accident claim.

Auto workshops pay upwards of $1000 per client to have the lucrative work brought to them.

The front bar of the vehicle is then removed so anyone who comes to collect it can be told the work has already started and that payment should be made.

One particular firm was known for making the process extremely difficult.

“It becomes a shit-fight. If a car is in one of their shops, don’t even think about trying to get it out,” the source said.

An ICA report released last month shows the number of claims involving hire and accident management companies rose 400 per cent between 2019 and 2022 and has increased a further 20 per cent each year since.

And the cost of using these firms is on average three times higher than not using these businesses.

“Alarmingly, we are seeing a growing overlap between credit hire companies (CHC) and accident management companies (AMC) claims and fraudulent insurance activities, like billing for a hire car that was never used or charging for repairs that were never performed,” an ICA spokesperson said.

They added regulations needed to be updated to better protect consumers because the industry was growing and changing.

Auto workshops pay upwards of $1000 per client to have the lucrative work brought to them.

“The ICA has suggested new enforceable obligations that would require CHCs and AMCs to be more transparent and disclose things like their independence from insurers and the risks associated with using their service, establish clear standards and not target motorists who are experiencing vulnerability or financial hardship,” they said.

“There should also be consideration of introducing regulated fees for credit hire car services – mirroring what’s already in place for towing services.”

ASIC said the reports was “highly concerning”.

“ASIC’s inquiries into these entities indicate they often structure their businesses to fall outside of financial services laws,” a spokesperson said.

“Third-party accident management companies often use SEO to boost their search engine results. Wherever possible, we recommend finding your insurer’s number on a piece of official correspondence, such as a letter or an email,” they added.

How does ‘car-napping’ happen?

1. You are involved in a car accident that isn’t your fault

2. In a distressed state, you search online for your insurer but click on a company that claims to represent your insurance company, has paid to be at the top of a Google search or has logos of your insurance firm

3. They offer you a free hire car, which they claim they will charge to the at-fault driver

4. If there is a dispute, or they refuse to pay, the company will invoice you for the costs

5. They can also charge inflated fees for repairs, any legal costs they take out in your name – sometimes without your knowledge – and towing

6. They hold on to your car until all the money is paid, in a practice known as car-napping

How to avoid it

1. Verify: When searching online for your insurer, be sure you click only on the insurer’s official website. Legitimate sites will typically include the insurer’s name in the URL. If you receive an unsolicited call offering “free” car hire or repairs, hang up and call your insurer directly.

2. Read the Fine Print: If you are considering using a credit hire or accident management service, do not sign anything until you fully understand the terms and conditions. These companies may require you to participate in legal action (in your name) to recover costs from the at-fault party or their insurer. If they fail to recover these costs, you could be liable for thousands of dollars in hire car, repair, storage, or towing fees.

3. Contact Your Insurer About Replacement Vehicles: If you were not at fault in an accident, your insurer or the at fault party’s insurer can generally arrange a replacement vehicle at no cost to you. Contact either your insurer or the at-fault driver’s insurer directly. 

Originally published as How smash repair companies are fleecing crash victims with ‘car-napping’