For many older consumers, a funeral is their third-largest expense, behind their home and car. The so-called deathcare industry is undergoing change as it consolidates. Previously, funeral directors sold funeral goods and services. Cemetarians handled goods and services for burials. These distinctions are blurred. In addition, more third-party vendors now provide goods (such as caskets and headstones) and services. Especially noteworthy are so-called digital memorials, which provide websites and phone applications for grieving survivors. Like all funeral services, digital memorial providers are susceptible to consolidation.
Commercial chains now own many funeral homes. Consumers may not be aware of this, since a chain may purchase an independent home yet continue to advertise under the name of the local business.
Large chains are extremely active in marketing preneed agreements to purchase funeral and burial goods and services prior to death. Fraud, bankruptcy, and violation of fiduciary responsibility place these contracts at risk.
Some funeral, cremation, and burial providers bill service and finance charges that are unconscionably high and anticompetitive. Intercity and interstate burials, which usually involve two funeral providers, prompt many complaints about excessive charges. Standardized price information, which would allow comparisons among funeral providers in a selected area, is not widely available to the public.
The key federal rule governing the deathcare industry is the Federal Trade Commission Funeral Rule, which governs disclosure of price information by funeral directors. The rule applies only to businesses that provide both funeral goods and services and bans third-party casket-handling fees. Businesses that provide only one type of service (e.g., cemeteries, crematories, and third-party sellers) are exempt. Also, the rule does not cover direct purchases of burial goods from third-party sellers, such as online merchants and storefront casket vendors. The Federal Trade Commission’s practice of allowing violators to make voluntary payments to the Treasury Department—in lieu of fines, other types of enforcement actions, or public disclosure of violations—weakens the rule’s deterrent effect.
State regulation of the deathcare industry varies, with enforcement responsibilities spread among state agencies, commissions, and boards. Multiple state organizations are responsible for regulating all or most of the five deathcare industry segments. These include funeral homes, crematories, cemeteries, sellers of preneed plans, and third-party sellers. These agencies’ powers and authorities vary greatly. The regulation of prepaid contracts in such areas as vendor licenses, funds held in trust, contract provisions, and consumer protection (or guarantee) funds also varies widely among states in scope, approach, and requirements.
The growing interest in cremation and environmentally friendly burials, sometimes called green or natural burials, adds to government oversight responsibilities. The Green Burial Council has established the deathcare industry’s first certification program. It helps consumers find professional providers and assists conservation groups in developing burial grounds that protect natural areas and further their long-term stewardship objectives.
Some families cover funeral expenses with the proceeds of life insurance policies. Because there may be some delay between death and payout for a policy, some companies offer immediate loans to families in exchange for rights to a life insurance policy. This creates a conflict of interest, because families may not be able to collect the full benefits provided by their life insurance policy if they assign it to such a company. Consumers should be cautious when considering arrangements like these.
FUNERALS AND RELATED SERVICES: Policy
Strengthening the Federal Trade Commission Funeral Rule
The Federal Trade Commission (FTC) Funeral Rule should be strengthened to promote transparency in pricing. The rule should require standardized formats for price lists and contracts for funeral and burial goods and services. It should also require that all price lists and contracts include information on how to file complaints (including the name and phone number of the agency to contact). It should also be expanded to cover cemeteries, crematories, and third-party sellers.
Enforcement should be strengthened. The FTC should continue to monitor compliance with the funeral rule and should investigate other aspects of the industry, including the costs and charges for transporting bodies, fraud and abuse in cemetery sales, tie-in arrangements, the effects on competition and prices of major funeral and burial chains, and cremation practices.
Violators of the Funeral Rule should not be offered an option to make a voluntary payment and retain anonymity under the Funeral Rule Offenders Program.
States should adopt the FTC Funeral Rule to strengthen their ability to enforce it.
Consumer protections in the deathcare industry
The FTC should adopt minimum standards for prepaid funeral contracts. These are sometimes called preneed funeral contracts. States should provide additional consumer protections. States should require portable, written contracts for prepaid funeral and burial arrangements.
All rights, duties, and obligations of the prepaid funeral provider and the consumer should be disclosed in the contract. These include
- itemization of goods and services purchased,
- cancellation, modification, and revocation procedures,
- funding mechanisms,
- handling of escrowed funds,
- fees related to the transaction,
- whether the contract is or is not guaranteed, and
- distribution requirements.
All prepaid contracts should be written in plain language and large type; the contract’s material provisions should be prominently disclosed.
Funeral establishments should be required to present to the person handling the arrangements for the deceased a copy of any preneed agreement that is in the possession of the establishment.
States should protect consumers from misuse of prepaid funeral and cemetery funds. Consumers should be compensated when funds are misused.
Irrevocable contracts should be available only for buyers who seek to meet eligibility tests for public benefit programs. For example, an irrevocable prepaid funeral contract is not considered an asset when determining Medicaid eligibility.
Insurance-funded prepaid contracts and trust arrangements should be subject to state regulation. States should give the purchasers of preneed contracts a statutory lien so that consumers have priority more than unsecured creditors with claims against the seller.
States should establish guarantee funds to provide a source of recovery for preneed consumers who are harmed by a seller’s or provider’s theft, fraud, or bankruptcy.
Independent audit reports of all trust funds should be submitted regularly to the state enforcement agency.
States should apply sound actuarial principles to ensure that consumers’ preneed funds will be available to purchase the funeral and burial goods and services selected.
States regulation should favor consumer protections. States should:
- encourage efforts to coordinate the regulations of the various state departments that oversee funerals, crematories, cemeteries, third-party sellers, and preneed goods;
- establish a single, toll-free number that consumers can call when they incur problems with any deathcare provider;
- provide adequate authority and funding for a state enforcement agency to perform periodic field audits and investigate complaints;
- establish civil remedies and criminal penalties for unfair, deceptive, and fraudulent practices by prepaid providers; and
- enact laws on preneed funeral and burial contracts to ensure a level playing field between consumers and sellers.
States should prohibit unfair, deceptive, or abusive sales practices. This applies to the sale and maintenance of burial spaces and other goods and services, as well as in the disposition of remains.
States should also:
- require registration of all prepaid funeral providers;
- prohibit the addition of finance charges and interest on installment contracts for prepaid goods and services unless they are delivered to the consumer;
- prohibit the direct or indirect solicitation of consumers in hospitals, retirement facilities, nursing homes, group homes, or health care facilities without having been expressly requested to do so by these consumers or their representatives; and
- require that advertisements for funeral and burial services disclose the ownership of the entity offering the service.
States should ensure that consumers who assign life insurance policies to funeral directors to pay for expenses receive clear disclosures. This includes with respect to the cost of doing so and the net insurance proceeds they will receive. State insurance regulators should create a clear process for reporting any problems.
Cemeteries should be required to:
- establish escrow accounts designed to ensure that income will always be available for the continued upkeep and maintenance of the cemetery; and
- offer burial land on equal terms, including price, to all consumers. This includes those who purchase ahead of time and those who purchase for immediate use. It also includes those who select a third party (other than the cemetery) to provide goods and services, including grave markers and funeral services.
States should establish standards for natural burial grounds that encourage environmentally sustainable and ethical practices. Natural burial grounds should use only plants and vegetation native to the land and prohibit toxic chemicals, vaults, and other items that harm the natural surroundings. They also should have criteria for visitation rights that allow adequate visitation while protecting the environment.
States should establish enforcement measures for cemeteries that purport to be natural burial grounds but do not adhere to established ecological standards.