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Washington Report
April 1999
ICFA Meets with GAO Staff to Discuss
Federal Preneed Investigation
by Robert M. Fells, Esq., General Counsel
On March 12th, the ICFA inaugurated its new Washington, D.C., satellite office by hosting a meeting with staff from the U.S. General Accounting Office (GAO). As reported in last month's column, the GAO, at the request of two Congressional committees, is conducting an investigation of preneed sales practices and related consumer complaints in five states: California, Florida, Maryland, New York and Texas. GAO staff expects their report to be published by the fall, with Congressional hearings to follow.
The ICFA was represented by Executive Vice President Linda E. Christenson and General Counsel Bob Fells. After providing an overview of the investigation, GAO staff asked a series of questions regarding the types of funding used for prepaid contracts, whether such prearrangements should be viewed as a form of financial investment, and the nature of cancellation and refund policies. In particular, GAO staff questioned why preneed trust deposit requirements were generally lower for cemeteries than for funeral homes.
The pending review by the Federal Trade Commission of the Funeral Rule also led to some questioning by GAO staff concerning the effectiveness of state regulations over prearrangement transactions. The ICFA staff inferred, based on the inquiries, that various sources who have been interviewed by the GAO, especially consumer advocates, may be urging the federal regulation of preneed sales. With respect to the FTC Funeral Rule, the ICFA staff discussed the issues involved in expanding the Rule to include cemeteries and other sellers.
The ICFA staff highlighted the nature of anti-competitive laws in various states that restrict the sale of caskets, markers and memorials, and even vaults. Prohibitions on combined cemetery/mortuary operations were also discussed, including a recently enacted New York state law that prevents cemeteries from selling markers and operating a funeral home. GAO staff expressed an interest in the concept of consumer guarantee funds, such as those in Illinois and Florida, to protect purchasers against the insolvency of preneed sellers.
Virtually every position taken by the ICFA was supported by data, especially surveys and FTC opinion letters. The GAO staff indicated that they hoped to conclude the interview phase of their investigation by May, then turn to drafting the report. Normally, the GAO spends about two years on an assigned project; in this case, it was given six months. ICFA members will be kept informed of important developments as they occur.
Copyright ICFA 1999.
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