Consumer Law Newsletter
Funeral Homes, the FTC and the Funeral Rule
In response to consumer criticism of the funeral industry, the Federal Trade Commission (FTC) drafted the “Funeral Rule” (the Rule) which became effective in 1984 and was revised in 1994. The Rule applies to “funeral providers” (i.e., businesses, whether licensed or not, that sell or offer funeral goods and services, or solely services, to the public).
Under the Rule, funeral providers must give prospective customers an itemized list of the funeral goods and services offered, specifying prices and descriptions. Customers must also be notified that specific purchases need not be part of a “package plan” (although such plans may be offered). – In addition, the Rule provides disclosure requirements and a list of claims and representations that cannot be made. The FTC has authority to enforce the Rule.
Enforcement of the Rule
When the FTC becomes aware of violations of the Rule, it usually conducts an investigation and demands correction, if necessary. The FTC also has the authority to file court actions to seek injunctions, relief and penalties that may include fines of up to $11,000 per violation and arrests of individuals who fail to comply with court orders. Most cases, however, are settled without trial by “consent decrees.”
Improving Rule Compliance Through Investigative “Sweeps”
Initially, FTC enforcement of the Rule was based almost entirely on consumer complaints. However, between 1984 and 1994, the FTC only filed 41 civil penalty cases. As a result of this low number of enforcement actions and the accompanying belief that compliance was low, the FTC adopted a different approach.
In October 1994, the FTC initiated investigations (“sweeps”), coordinated with local authorities targeting funeral providers within specific regions, states or cities. Sweeps use a “test-shopping” method: investigators from the FTC or state agencies (and in some cases even AARP volunteers) pose as potential customers and contact funeral providers to check if they comply with the Rule's requirements.
Funeral Rule Offenders Program
In 1995, the National Funeral Directors Association (NFDA) proposed the Funeral Rule Offenders Program (FROP) for violators of the Rule, to offer a less-public alternative to court action. When test shopping reveals a violation, (such as failing to provide the required itemized price list) violators may be allowed to avoid court action by making voluntary payments to the United States Treasury in amounts usually less than the potential civil penalties. Violators must also agree to participate in a five-year training and competency program run by the NFDA. The NFDA must certify the completion of FROP requirements to the FTC. – The FTC accepted the FROP proposal, and the FROP has since been implemented, having enjoyed some success.
Criticism of FTC Enforcement of the Rule
In late 1999, the General Accounting Office (GAO) released a study criticizing FTC enforcement of the Rule. Criticism included the following:
- Lack of a central agency or organization tracking compliance with the Rule
- FTC test shopping of only funeral homes, but not cemeteries, which can provide services as well as funeral “goods”
- Apparent lack of FTC action on all suspected violations of the Rule
Despite GAO criticism, the FTC does not appear to have changed its approach to investigating and punishing violations of the Rule.
© 2019 NextClient.com, Inc. All rights reserved.