Missouri Preneed Reforms Are Anything But

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UPDATE 5/4/08 - Funeral Consumers Alliance and the FCA of Greater Kansas City have sent a joint letter to Missouri Lawmakers asking for amendments to the flawed prepaid funeral reform bills below. We also sent a line-by-line analysis of what's wrong with a proposed bill from the Missouri Board of Embalmers and Funeral Directors.


Missouri lawmakers have two bills in the hopper that would supposedly “reform” the state’s prepaid funeral laws to better protect consumers from losing their money to shady companies that steal their payments or go belly up. Trouble is, the bills don’t go far enough, and they’ll do as much harm as good if they’re passed.

Neither HB 2469 nor HB 2594 [you can download copies of the bills at the bottom of this article] adequately address the worst problem with current law - the fact that funeral directors can pocket a 20 percent commission from consumers’ prepaid deposits, then skim the interest every year from the consumer’s account! Allowing this kind of legalized robbery is not only unfair, it fairly begs shady operators to pad their pockets today with money that ought to be left to fulfill their obligations to consumers at the time of death. To put it bluntly, the law encourages companies to build a house of financial cards by putting short-term greed ahead of long-term stability.


Let’s look at the pros and cons of each bill, starting with HB 2469.

PROS

  • Beefs up the disclosure requirements on insurance-funded prepaid funerals. The seller will have to show the buyer, in writing, which funeral home the seller works for, whether the contract is “price-guaranteed,” contact information for the insurance company and the funeral home, how much money the buyer loses if he cancels the insurance policy, and other pertinent stuff.
  • Prohibits the seller from charging any extra fees above the actual premium payments on the policy.
  • Requires the Division of Professional Registration to investigate any violations of prepaid law found by the state funeral board
  • Requires the Division to conduct at least five random inspections or audits of prepaid funeral sellers every year.
  • Requires preneed sellers to deposit money received from customers within three days (actually, we think this is impractical - 30 days is more fair). This is obviously an attempt to stop the practice of companies “forgetting” to deposit the money for as long as possible.


CONS (and these are big enough to drive a Caddy hearse through with a sidecar attached)

  • Lets any funeral director petition the state funeral board to be exempted from establishing a trust fund to safeguard customers’ prepaid money if he can show it’s an “undue hardship.” What? Any prepaid funeral seller who finds it too hard to put his customers’ money in the bank shouldn’t be allowed to do business.
  • Continues to let funeral directors keep a 20 percent commission from the customer’s money and put only 80 percent in the bank. 20 percent for what - having made a sales pitch to an elderly couple? If the customer’s paying in installments, the funeral director can keep all their payments until he gets his 20 percent.
  • Continues to let funeral directors skim all the interest from a consumer’s prepaid account. How in the world are these accounts supposed to keep up with inflation and pay for the customer’s funeral if the seller’s skimming the accrued value? Why should consumers lose all that interest if they change their mind or transfer the account to another funeral home?
  • The bill requires “any investment of preneed funds [to be ] made in investments designed to increase the value of the preneed funds.” This kind of vague language does nothing to stop speculative, risky investments. It sets no standards, and it states the obvious. What the bill really needs is clear standards on exactly, specifically what kinds of investment accounts are acceptable and which are not. A good start would be to follow New York’s lead - require investment in government-backed securities.
  • Fails to require preneed sellers to give customers an annual report on where their funds are held, how much interest has accrued, how much was skimmed (of course, who wants to tell Mrs. Smith how much you took out of her account?), etc.
  • The worst provision of this bill is how it enshrines secrecy — “All complaints, investigation materials, annual registration, reports, and information pertaining to [the prepaid funeral seller] shall be closed and may be disclosed only as authorized by statutes or order of the court.” Whoa. That means consumers and citizens aren’t allowed to check the license status of a business? They can’t check to see if the seller has disciplinary actions? Reporters or citizens’ groups can’t check up on the annual report filings to make sure a business is operating legally? We cannot figure out who thought this level of secrecy was a good idea, and we doubt it passes legal muster under open government laws.


Now for House Bill 2594:

PROS

  • Increases the trust deposit requirement from 80 percent to 90 percent, but only for contracts sold after August 28, 2008.
  • Requires preneed sellers to send the state a list of every contract sold annually. But why not require a copy of the actual contract? Anybody can make up a fake list.
  • Gives consumers a clear right to transfer their prepaid contracts to another funeral home.
  • Adds certain activities - fraud, felony conviction, etc. - to the list of things that can get a funeral home’s license pulled.
  • Requires sellers to deposit money received from customers within 60 days.


CONS

  • Continues to allow funeral homes to skim all the interest from a customer’s account.
  • Like HB 2469, this one also makes all information about the sellers filed with the state a secret.
  • Exempts retail casket sellers (stores that sell caskets directly to the public, often for less money than funeral homes) from the prepaid funeral regulations. Why? If casket stores are selling caskets in advance, they should have to follow the same laws requiring them to deposit customers’ money as funeral homes have to follow.


A source also told us the Missouri Board of Embalmers and Funeral Directors had a last-minute conference call April 11 to present their own bill. This left no time for public comment, and no one from the state has returned our calls asking for a copy of the bill. It’s simply wrong to fast-track this kind of legislation in secret, and with no input from consumer advocates such as FCA or AARP.

The bottomline: Missouri’s preneed laws are broken, and these bills do nothing but daub mud in the cracks. It’s time to start over with new laws. At a minimum, Missouri should follow the lead of states like New York and New Jersey and require 100 percent deposit of the customer’s prepaid money, no skimming of interest, and annual reports to the consumer on the status of their accounts.

Attachments:
Download this file (HB2469I.PDF)Missouri HB 2469, 2008[ ]48 Kbm/j/Y
Download this file (HB2594I.PDF)Missouri HB 2594, 2008[ ]83 Kbm/j/Y
Last Updated ( Sunday, 04 May 2008 20:41 )  
Comments (8)
1 Sunday, 13 April 2008 11:40
Let's demand mandating the submission of the IQs of members of the MO house (and senate?). It is hard to believe that any person of reasonable mind and intelligence could possibly want to pass such bills. Are they all invested in the Funeral Home business is some way or the other?
2 Monday, 14 April 2008 16:39
Why not take a clue from the KS Board of Mortuary Science, which is an honest organization. As it is now a person with a complaint with a MO funeral home does not have a chance to have an unbiased ruling from the MO Board of Embalmers and Funeral Directors, with 5 Funeral Directirs on the board. And now they want more power? I think they've taken advantage of the citizens of the State of MO long enough. The MO legislators need to wake up and realize they are elected to look out for the welfare of the people who elected them, not to cater to the Funeral Industry.
3 Monday, 28 April 2008 00:28
Getting people to "DO" anything will be hard but it looks like this is a good project for a voter 'initiative.' Getting it done is the hard part
4 Monday, 28 April 2008 18:12
Do people cashing out prepaid funerals receive the interest earned in Missouri?

If the funeral home guarantees a price paid then they honor the service that was arranged no matter how bad their investments went, Right?
5 Monday, 28 April 2008 21:01
Josh Slocum
Hi Ryan,

In answer to your questions:

1. No, funeral directors are allowed to skim the interest from your account annually, plus a 20 percent commission of the principal. You will not get your interest back if you cash out.

2. Funeral homes are supposed to guarantee the prices if they signed a contract saying they would. In a perfect world, they do. I'm afraid, however, that some are going to find ways to wheedle out of it if the investments go bad. Customers have a right to expect them to honor the contracts, of course, but experience tells me there will be bad apples. So, if you're asking me if a prepaid buyer can feel secure, I'm sorry to say I can't give you that assurance.

I hope Missouri citizens will write their lawmakers and demand a fix to these broken laws. I blog about this stuff so consumers and lawmakers can understand the dangers consumers face, but it's up to regular folks in Missouri to take that information and stand up for their rights.
6 Monday, 04 August 2008 22:58
My wife and I, after watching the ads on Tv about the wonders of preneed, went to the local friendly undertaker and ended up paying a goodly chunk for our funerals in advance. The brochure hyped how they were a privately owned enterprise and were not obligated to outside boards, stockholders, etc.. Later, we read the publicity on how crooked the industry was and went to the funeral home and demanded the return of our many thousands. By this time they were owned by an out of town Corporation and we found out they had sent our money to an out of state Corporation and possibly on to another. We firmly believe they have stolen our money and do not know how our funerals will be handled . Our check was made payable to the local funeral home, the contract was with the local funeral home, but 2 years later we learned the check was endorsed by the first out of state Corporation. We were very explicit that we did not want any plans with any other company, just the local funeral. Now the new owner of the home denies any liability. The Kansas Attorney General Consumer Protection has refused to help, the Insurance Commissioner is no help, the Kansas Board of Mortuary Arts seems more concerned about the poor funeral homes and one authority spoke of the probability that if the funeral home provided services for us the services would be inferior to what we paid for. Another funeral home advised me that funeral directors had attempted for years to get the Missouri Corporation shut down in Kansas but the Kansas authorities refused and are now attempting to cover up their malfeasance.
7 Monday, 04 August 2008 23:02
Hi there,

I'd like to help you in more detail. Please email me at josh@funerals.org. When you do, please have with you:

1. The original contract you signed.

2. The names of the companies involved.

3. Any other supporting paperwork.


Josh Slocum
Executive Director
FCA National
8 Monday, 04 August 2008 23:24
The local County Attorney turned us away. Most of the State Offices advised us to consult with attornys. Most of the podunk locals are already aligned with the funeral home. Two attorneys have advised me it would cost thousands to sue: more than I have lost. I have come to the conclusion that this is systematized robbery of the have-nots by renegade Corporations and our elected officials. We need local alternative courts with honest judges in every County to hear larger claims cases without greedy attorneys such as the Small Claims Court or a combination of the two.

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