Revenge Is Best Served Cold - S3-E1
Other mistake: Stokes tells "Michaelangelo" he is looking for a blue Honda, blue rims, blue tint. The picture Michaelangelo shows Stokes and Willows is an Acura RSX, not a blue Honda. (Note: The red Honda that the victim was driving is not the one that Stokes is looking for.) Just because the two car brands are owned by the same parent company does not mean that they are interchangeable when describing them. You certainly couldn't call a Cadillac a GM and not be considered wrong even though they are both made by the same parent company (GM).
Answer: He doesn't have the authority to arrest him - when anyone is arrested in the show, a police officer does it. Also he tells Ty that he is going to be submitting his case findings to Ty's insurance company, who would no doubt contact the IRS, who then would have him arrested for fraud etc.