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Guardians
An ICFA newsletter published semi-annually, Guardians is distributed to regional and state cemetery and funeral trade associations, federal officials, elected representatives and selected media. Each issue highlights recent ICFA activities on a variety of projects, including government relations, public service and consumer education.
Spring 2001
Cemetery Consumer Service Council Releases New Activity Survey Data
Second Federal Court Invalidates State Casket Law
ICFA Files 'Friend of Court' Brief in New York Federal Court
to Overturn Anti-Competitive Legislation
Consumers Union Gives Consumers Bad Advice,
Says the ICFA in Rebuttal Letter
Cemetery Consumer Service Council Releases New Activity Survey Data
The Cemetery Consumer Service Council (CCSC) recently announced the results of its Activity Survey Report for the year 1999, the latest year for which complete statistics are available. A total of 88 complaints and inquiries were processed during the year. Of that number, 81 were resolved. Seven complaints and inquiries were pending at the beginning of the year while another 7 remained at year's end. These figures are based on the responses provided by 22 of the 39 state and regional CCSC committees.
Among the various types of complaints and inquiries received, 23 dealt with improper cemetery maintenance, 24 with questionable sales practices, 8 with Truth in Lending matters and other contractual issues, 24 with cemetery rules and regulations, and another 8 with a variety of other issues including simple inquiries into cemetery practices.
The Cemetery Consumer Service Council is now in its 21st year of operation and continues to improve its effectiveness to assist consumers. An increasing number of calls originate as referrals from Better Business Bureaus and similar organizations. The CCSC also contacts members of Congress to advise them of the assistance and information the Council can offer their constituents.
CCSC is a non-profit organization created in 1979 by the American Cemetery Association (now the International Cemetery and Funeral Association), the Cremation Association of North America, the Central States Cemetery Association and the Southern Cemetery Association. The sole purpose of CCSC is to assist consumers, without charge, in resolving complaints or answering inquiries regarding cemetery services or policies. Participation in the complaint resolution process is voluntary for both the consumer and the cemetery.
Industry members volunteer their time and experience to serve as CCSC representatives in their respective states. The Federal Trade Commission, the U.S. Department of Veterans Affairs, various state consumer protection agencies, and offices of attorneys general are periodically notified of CCSC activities and are among the major sources for consumer referrals. CCSC is listed in the Consumer's Resource Handbook, a U.S. government publication that is circulated to public libraries and consumer assistance agencies throughout the nation.
Complaints are handled by the state and regional committees with the national CCSC office in the Washington, D.C., area being the overall coordinator of the project and the central contact point. Complaints received by the national office are logged in and each is given a file number for tracking purposes. A copy of the complaint is then forwarded to the appropriate state representative for investigation and action. At that point, many complaints are resolved by telephone and the consumer is promptly notified of the results. It is rare for a cemetery to refuse to participate in the CCSC dispute resolution process. Where no committee exists, CCSC works with the cemetery board or similar government agency to assist the consumer.
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Second Federal Court Invalidates State Casket Law
Following up by a matter of months a federal court in Tennessee striking down that state's law restricting casket sales exclusively to licensed funeral directors, the U.S. District Court for the Southern District of Mississippi has made a similar ruling. According to the decision in Casket Royale, Inc. v. State of Mississippi, et al., the casket manufacturer plaintiff alleged that the Mississippi law restricting casket retail sales only to licensed funeral directors violated the Due Process and the Equal Protection Clauses of the 14th Amendment to the U.S. Constitution. The court agreed.
Defendants claimed that the state government had a legitimate interest in the prompt disposition of human remains but the court held that the statute in question "does not advance this interest as nothing inherent in the licensing requirement, at least in regard to a coffin, would offer a quicker burial or cremation"
Regarding consumer protection claims to justify the licensing requirement, the Court held that the requirement "not only fails to advance the interest of Mississippi in consumer protection, it actually diminishes it. As a result of this requirement, consumers in Mississippi are offered fewer choices when it comes to selecting a casket. Consequently, there is less price competition among the sellers of caskets. Ultimately, the consumer is harmed by this regulation as one is forced to pay higher prices in a far less competitive environment."
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ICFA Files 'Friend of Court' Brief in New York Federal Court to Overturn Anti-Competitive Legislation
Recently, the ICFA filed an Amicus Curiae or "friend of the court" brief in litigation pending in the U.S. District Court for the Northern District of New York challenging the constitutionality of a 1998 state law regulating cemeteries. Supporting plaintiffs, including the New York State Association of Cemeteries, the ICFA urged the court to overturn Chapter 560 that, among other things, prohibits New York cemeteries from selling upright markers, memorials, and monuments; prohibits cemeteries 30 acres or more in size from having relationships with funeral homes; and prohibits cemeteries from having management contracts with anything other than a nonprofit cemetery corporation.
The ICFA stated in its brief to the court: "The prohibitions in this statute appear to have no rational basis but are anti-competitive and anti-consumer in effect. The only logical purpose served by the prohibitions in Chapter 560 is to maintain the status quo market shares of existing industry segments and to insulate those entities from competition." The ICFA provided corroborating evidence of its views through rulings and opinions from the Federal Trade Commission and the Internal Revenue Service, and from two recent federal court decisions in Tennessee and Mississippi that found as unconstitutional laws restricting the retail sale of caskets exclusively to licensed funeral directors.
The ICFA stated that prohibitions similar in nature to Chapter 560 "undermine the ability of cemeteries to function in the best interests of their lot owners and families, bar new entrants into the market place, and retard price competition - all to the detriment of consumers whom Chapter 560 purportedly seeks to 'protect.'" The court is considering plaintiffs' motion for summary judgment while briefs arguing to uphold the statute will be filed by the defendants, including the New York State Cemetery Board, and also by the New York Funeral Directors Association as Amicus Curiae in support of defendants.
Restrictions on the activities of New York cemeteries supposedly have been justified due to their nonprofit status. However, the ICFA demonstrated to the court that "the sale of markers, memorials, and monuments by nonprofit cemeteries is a well-established practice consistent with IRS policy. Likewise, the combined operation of cemeteries and funeral homes has met with approval from the FTC, and from the IRS for nonprofit cemeteries when the relationship is structured in an arms' length manner. Similarly, cemeteries should be permitted to contract with for-profit management firms when such relationships are in the best interests of the lot owners." The ICFA Amicus brief can be downloaded here.
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Consumers Union Gives Consumers Bad Advice,
Says the ICFA in Rebuttal Letter
The following is the text of a letter sent by the ICFA to the Consumers Union Southwest Regional Office in Austin, Texas, in rebuttal to a report titled, "Final Committal, Texas Problems with Prepaid Funeral Services."
The International Cemetery and Funeral Association ("ICFA"), representing nearly 6,000 cemeteries and funeral homes in the United States and other countries, is deeply concerned with the recent report, cited above, published by Consumers Union ("CU"). We believe that CU has performed a major disservice to the public by attempting to compare prepaid funeral and burial contracts to financial investment vehicles, then advising consumers not to prepay their funeral arrangements because of the low return rate on such contracts. We would agree that the prepayment of funerals and burials may not be suitable for everyone, but CU's conclusion that consumers should only save privately for their funerals ignores the distressingly common problem that occurs when medical expenses from the final illness exceed health insurance coverage, thereby forcing consumers to use savings to pay such bills leaving little or no funds for funeral expenses.
CU attempts to buttress its position by citing, out of context, approximately 300 funeral-related complaints filed with Texas governmental agencies over a two-year period, 1998-1999. A third of these complaints are said to relate to prepaid contracts, which equals only one complaint per week. CU fails to refer to the 842,000 prepaid funeral contracts in Texas, 510,000 of which are trust-funded and 332,000 of which are insurance-funded, that are outstanding as of 1999. Viewed in this context, the CU complaint percentage is the statistical equivalent of zero.
Nevertheless, the CU report claims that the complaints "reveal a pattern of problems" and cites a handful of anecdotal accounts as requiring legislative amendments to existing law. Make no mistake, the ICFA is concerned with the existence of any consumer complaints and has administered the Cemetery Consumer Service Council for over 20 years to informally mediate, and largely resolve, any such problems. However, the use by CU of "legislation by anecdote" is a dangerous policy that distorts the issues and renders little meaningful guidance to consumers.
The CU report ignores industry efforts to foster uniform consumer protection laws. For example, the ICFA has published twenty-seven model guidelines for state laws and regulations dealing with important consumer issues such as contract disclosures, trust funding, insurance-funded prepaid contracts, consumer guarantee funds to protect purchasers in the event of a defaulting seller, solicitation guidelines and restrictions, and many more. Yet the CU report distorts the picture by implying that the industry takes no initiative in fostering consumer protection laws and, instead, CU gives bad advice to consumers regarding their funeral planning.
Noticeably absent from the CU report is any reference to the findings contained in the September 1999 U.S. General Accounting Office ("GAO") report, "Funeral-Related Industries," which is historically significant as the first Congressional investigation of funeral and cemetery sales practices. CU cites the GAO report but only to compare the inflation index with funeral pricing. The GAO's findings, which mainly reflect favorably upon the industry, are omitted from the CU report, thereby suggesting a lack of objectivity, and even a lack of basic fairness, by your organization.
Having cited this report, CU must know that the GAO found a low number of funeral-related consumer complaints, citing a total of 453 received by the Better Business Bureau for 1997 on a national basis. The GAO speculated on why there were not more complaints but conceded, "Clearly consumers may not complain about the goods and services they receive from death care providers because they are satisfied." Speculation aside, and even factoring in a theoretical number of "unreported" complaints, the fact remains that the consumer complaint rate is infinitesimal when compared to the number of funerals and burials, approximately two million annually in the United States, and approximately 143,000 annually in Texas alone. However, consumers would never guess these facts by reading the CU report.
In an effort to further document the level of consumer concerns with funeral-related activities, last year the ICFA filed a Freedom of Information Act request with the Federal Trade Commission ("FTC") seeking any complaints involving cemeteries during the previous four years. Although the FTC announced that it had received a total of 60,000 consumer complaints in 1998 alone, the agency reported to the ICFA that it had received none relating to cemeteries. The ICFA informally questioned this result with FTC staff and the agency eventually found 26 complaints over the time period of September 1997 through January 2000, or less than one complaint per month on a national basis. When compared to the volume of approximately 5500 funerals and burials each day in the United States, the FTC complaint rate is almost non-existent.
Throughout the report, CU cites complaint percentages instead of actual numbers to disguise the fact that complaints are few. For example, on page 17, CU states, "Nearly 20 percent related to requests for refunds on cancelled or changed preneed policies...." Twenty percent of what? The 300 complaints received over a two year period or the 100 that relate to prearrangements? Either way, the numbers are small and the accounts anecdotal, but the hostility to the industry is unmistakable and counterproductive.
In many other respects, the CU analysis of consumer issues is seriously flawed. A table showing vigorous price competition among funeral homes is considered a negative factor. The investment return rates of certificates of deposit are viewed favorably compared to prepaid contracts in order to discourage consumers from prefunding their funerals. The ICFA does not quarrel with CU's math but we strongly disagree with its conclusions. Nobody has been able to calculate the return rate for peace of mind and this is the chief advantage of prepaying one's funeral and burial arrangements.
The CU report complains that preneed purchasers may not switch funeral homes, as though purchasers of other types of goods and services can routinely return or exchange them. Even airline tickets cannot be transferred from one carrier to another for flights on the same day and to the same destination. Ironically, there is no suggestion by CU that the funeral provider should be permitted to cancel a prepaid contract should the arrangement become less financially advantageous than originally planned.
CU believes that purchasers are unfairly treated because sellers may retain excess interest income, if any, on prepaid funeral contracts that give consumers guaranteed price protection. It is important to note that when AARP first published a model preneed law in 1987, it agreed that funeral sellers were entitled to retain any excess interest on guaranteed price contracts because the seller assumed the risk of price increases. AARP commented that this arrangement was a fair accommodation for the obligations assumed by the seller. Unfortunately, AARP later changed its position but for reasons no more logical than the opposition expressed in the CU report.
The report is correctly concerned over the fact that preneed purchasers may be required to pay federal income tax on their funeral trust earnings although they may never receive the income itself. This policy was mandated by the Internal Revenue Service in 1987 through Revenue Ruling 87-127, as noted by CU. Prior to 1987, funeral providers generally paid the tax on trust earnings. CU fails to state, or may not realize, that the industry has lobbied Congress since 1987 to change the law to enable funeral homes to once again pay the tax on trust earnings. In 1997, Congress passed Section 685 of the Internal Revenue Code that permits funeral trusts to elect to pay the tax instead of the preneed purchasers. This major victory for consumers is ignored by CU and, just as importantly, the industry is given no recognition for this accomplishment.
In closing, it is painfully obvious that CU did not bother to consult with any industry trade associations or related organizations that could have given the report an important business perspective it needs. Instead, consumers are warned away from purchasing prepaid arrangements and, as a result of following this advice, many will sacrifice their peace of mind and the financial security gained from knowing that their funeral and burial wishes are documented and funded.
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Click here to see Spring/Summer 2002 edition.
Click here to see Fall/Winter 2001 edition
Click here to see Fall 2000 edition
Click here to see August 1999 edition
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