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Our industry is facing three federal investigations. What could this mean to your business, and what is the ICFA doing about it? We asked Irwin Shipper, CCE, chairman of the ICFA Government and Legal Affairs Committee.
Irwin, as we speak it’s early July. We’re sort of date-stamping our conversation because events are moving quickly on the federal level, so we want our readers to have a sense of timing. The Chinese curse says, “May you live in interesting times.” Should we identify with that?
You might say that we are living in very interesting times. At present, our industry is facing no fewer than three federal investigations: by the Senate Special Committee on Aging, by the U.S. General Accounting Office (GAO), and by the Federal Trade Commission as part of its periodic review of the Funeral Rule. This is an historic first and, believe it or not, I believe these three actions provide us with a forum to tell our story on a national platform. I think that’s more of an opportunity than a threat.
Are you saying that the investigations are a good thing?
In the long run they will act as a catalyst to clear the air of a lot of innuendo and false assumptions that have plagued our industry in recent years. As I’ll explain, the GAO and the FTC in particular appear to want an objective fact-finding inquiry. We have nothing to fear with that kind of approach.
What kind of innuendo and false assumptions do you mean?
In the last few years, the media has discovered funeral homes and cemeteries as the new whipping boys to fuel their exposé reports. Urged on by mostly self-appointed consumer advocates, many stories on both television and in print rather gullibly accept a half dozen indefensible incidents of consumer abuse as “proof” of widespread wrongdoing by industry members. Surveys and other statistical data that show otherwise are ignored by the media because, frankly, they ruin a good story.
The public companies have been stigmatized because they’re big and, in my opinion, the cumulative effect of this anecdotal reporting is to make some people uneasy about making prearrangements. Instead, consumers start believing they will be ripped off by industry members, so they do no preplanning and their survivors end up in the at-need market where everybody admits consumers are in the worst possible bargaining position.
Has all this negative coverage encouraged the various federal investigations?
I think it has, which explains my belief that the industry will ultimately be exonerated if these investigations are in any way objective. The documented cases of consumer harm will be placed in their true perspective as isolated and exceptional incidents.
You mentioned statistics that disprove the claims of widespread abuses. If there were one statistic you could make the media use, what would it be?
In the world of 10-second sound bites, I would have the media point out that, according to the U.S. Census Bureau, there are over 2 million deaths in this country every year. This means there are about 2 million funerals, burials, cremations of one sort or another—or about 5,500 each and every day, 365 days a year. With that said, now let’s look at the complaints.
Has ICFA ever told this to the media?
Repeatedly. But they just don’t want to hear it because then they have no story.
So with a great deal of negative reporting as the catalyst, let’s talk about the three investigations. Let’s take the Senate Special Committee on Aging first.
Back in mid 1996, we got a call from committee staff telling us they were holding a hearing to expose preneed sales abuses. ICFA staff met with committee staff to explore the issues, and it seemed to be a case of “Do you have anything to say before we hang you?” It was obvious that everything the committee staffers knew about our industry they had learned from industry critics. To them, we were the Great Satan.
Were hearings held in ’96?
They were scheduled on two different occasions but canceled. I believe the chairman, then-Sen. William Cohen, now secretary of defense, realized that something of a witch hunt was going on, and to his credit, he stopped it. The ICFA was invited to submit comments to accompany a published report on preneed sales abuses. We accepted the invitation but neither the report nor our comments were ever published. We now understand that the report probably never existed.
When Sen. Cohen left the Senate to become defense secretary, did that result in a change of committee staff?
Yes it did, and for some time thereafter we continued to contact the staff to ask about the status of this project. Sen. Charles Grassley of Iowa is now chairman, and last fall we learned that the Special Committee on Aging together with the Senate Government Affairs Permanent Subcommittee on Investigations had requested that the GAO investigate preneed sales practices of funeral homes and cemeteries.
Are you more optimistic that this time the committee’s handling of this will be more impartial?
Yes and no. Last fall, one of the industry trade press called an investigator on the committee staff, who said they were looking for people who had bad preneed experiences. When the reporter asked whether they were looking for people who had good preneed experiences, the investigator said no.
Subsequently, ICFA Executive Vice President Linda Christenson and General Counsel Bob Fells met with committee staff and with staff from Sen. Grassley’s office and others. When Linda and Bob repeated this story about looking only for consumers with bad preneed experiences, the committee staff denied it. I think this incident helped set the tone for the meeting and made it clear that a witch hunt would not be tolerated by ICFA.
What was the upshot of the meeting with the new committee staff?
Nobody seemed to have an ax to grind with the industry, and we left them with a great deal of statistical and survey information. We were told the committee would wait to examine the GAO report and, depending on the findings of the report, may or may not hold hearings in the fall. The one sour note occurred when we said we wanted to testify if hearings were held. The response was very non-committal. In any event, the committee’s future activities apparently depend on the GAO report.
What do we know about the GAO investigation?
The General Accounting Office is the investigative arm of Congress. It has the reputation of being objective and non-partisan. If that’s true, then I don’t think we have to be worried about its report.
The GAO is normally given about two years to research and report on an assignment, but in our case they were given six months. They are investigating the industry in five states: California, Texas, Florida, Maryland and New York. GAO staff have contacted the ICFA, the National Funeral Directors Association and other organizations for information and have interviewed government regulators, industry members and consumer advocates in these states.
Did the GAO meet with ICFA?
We met with them twice, and again Linda Christenson and Bob Fells were our representatives. Since the GAO seems more interested in facts and not opinions, we gave them a great deal of material, both our own and from other organizations. The GAO representatives asked a series of questions about how prepaid contracts are funded, whether they should be considered a financial investment, and the types of cancellation and refund policies. We were careful to make sure virtually every response we made was supported by data.
Were there any indications as to which direction the GAO report may take?
Not really. They asked some very probing questions and then listened. We did get the impression that consumer advocates may be urging the GAO to recommend a federal preneed law. But when we asked whether the report might contain a recommendation for federal regulation or urge continued state regulation, we were told it may do neither.
What is the ICFA’s position on a federal preneed law?
Since the industry is regulated more effectively at the state level and consumer sales are local transactions, the ICFA favors the continued state regulation of the allied industries. We understand that the NFDA has also gone on record and told the GAO that a federal preneed law is unnecessary.
So the ICFA and NFDA agree on something?
Oh, we agree on many things. In fact, the Funeral Rule may be the only serious issue where there is a difference of opinion. You know, sometimes the trade press give the impression that the leadership of ICFA and NFDA are at each others’ throats, but I have to say that the relationship is quite cordial. We feel very comfortable calling on them when the occasion arises, and I’d be surprised if they didn’t feel the same way. NFDA’s incoming president, Bill Aaron, has been an active member of our association for many years, so there are some personal ties of long standing.
Speaking of the FTC Funeral Rule brings us to the third in the trilogy of federal investigations. There has been so much already said about changing the Rule that we have to play devil’s advocate here. First, please bring us up to date on this issue.
Every several years, the FTC is required by law to review its various trade regulations and guides. Part of the review solicits public comment on whether the rule or guide should be retained, repealed or amended. In the last few years, the FTC has repealed a number of trade rules and guides. Now it’s the Funeral Rule’s turn for review again.
The Funeral Rule was enacted in 1984 and first reviewed in 1988. The Rule was amended as a result in 1994. Can you tell us how it was changed?
The first principal amendment to the Rule in 1994 eliminated the requirement that funeral homes had to automatically give prices over the phone unless they were asked. The second amendment prohibited funeral directors from charging a casket handling fee for caskets brought in to the funeral home by third-party sellers.
The FTC decided not to repeal the Funeral Rule in 1994. Is repeal a realistic possibility today?
I don’t think anybody believes the Funeral Rule will be abolished; at least I wouldn’t want to bet money on it. But having said that, the FTC is supposed to be holding an objective inquiry on whether the Rule is still needed. With the amount of price information now available through the Internet and memorial societies, I think the continued need for the Rule is a fair question for inquiry.
Is anyone pushing for Rule repeal at this time?
Not that I am aware, but the record for comment is open until August 11 and we probably won’t see most of the comments until after that point. However, the Rule review is not a popularity contest. For example, the FTC recently voted to repeal its Watch Guide, which regulated the sale of wrist watches and time pieces. Of the 18 organizations that commented on the Watch Guide, all of them wanted it retained with amendments. The FTC decided to repeal it anyway.
Let’s assume the Rule will be retained but possibly with some amendments. What are the top issues for amendment?
The FTC requested public comments on more than 30 issues, but the two that will probably attract the most attention are whether the Rule should be expanded to cover cemeteries and other sellers, and whether the non-declinable basic service fee should be prohibited. Historically, the ICFA has opposed expansion of the Funeral Rule to cemeteries, and it’s no secret that we are again pursuing this position this time around.
The ICFA staff has met with the Funeral Rule review staff, and we were impressed with their emphasis on statistics and complaint histories as the deciding factors. We also discussed the jurisdictional problems of regulating nonprofit cemeteries under the Rule.
As devil’s advocate then, let me ask you: Why is the ICFA opposed to price disclosure, a key requirement of the Funeral Rule?
We’re not. Since most cemeteries sell on a preneed basis, it is impossible to market preneed without making price disclosures. So it’s a self-correcting issue of the free enterprise system.
All right, if cemeteries are already disclosing prices, what’s the problem with having the Funeral Rule require them to do so?
Your questions get tougher every year, but this one is easy. If the Funeral Rule were some sort of recommended business practice, the ICFA would endorse it in a second. In fact, our Code of Ethics requires price disclosures as a condition of membership, so the ICFA is on record in favor of price disclosure.
But the Funeral Rule isn’t just a recommended business practice—it’s a federal law imposing thousands of dollars in fines for non-compliance. The Rule was specifically designed to remedy sales abuses by funeral homes, and that explains why cemeteries weren’t covered in the first place. To impose the Funeral Rule on thousands of cemeteries—the majority of which are small businesses—without proof of rule-related abuses is objectionable to the ICFA.
So it’s a liability issue, not a disclosure issue?
That’s right.
What about the “fairness” argument—that it’s unfair to subject funeral homes to the Rule but not other sellers? Proponents of that argument say this limitation creates a competitive disadvantage for funeral homes and there needs to be a so-called “level playing field.”
Let me suggest it is not unfair to prohibit funeral homes from engaging in abusive sales practices when there was clear and convincing evidence that these practices were ongoing. The FTC stated that there was substantial evidence funeral homes were not disclosing prices and forcing the purchase of bundled package plans. So these practices were prohibited by the Rule. Unless there’s substantial evidence of these same types of abuses by cemeteries, the Rule should not be expanded to cemeteries.
But aren’t cemeteries and funeral homes basically in the same business and should be regulated the same?
They are related industries, of course, in the same way car dealerships and gas stations are related because they both work with automobiles. But funeral homes provide vastly different services to the public than cemeteries. I don’t think anyone would disagree with that. A plain reading of the Funeral Rule shows it was designed for funeral homes, and the existing rule-making record proves that.
Are you concerned there will be credible evidence of widespread abuses by cemeteries along the lines addressed by the Funeral Rule?
Complaints should be the central focus of the proceedings, and we’re prepared for that. For the last 20 years, the ICFA has served as administrator for the Cemetery Consumer Service Council, an industry-sponsored consumer assistance organization. Industry members in 40 states volunteer their time and experience to answer consumers’ questions and to informally mediate disputes.
Personally, I have served as the New Jersey representative for many years and I speak directly with consumers all the time. I cannot recall even a single complaint about price disclosure. This is an important point because we don’t pick and choose the complaints we want to handle, we just accept whatever comes in.
CCSC resolves most of the complaints it receives, but the process also enables us to monitor the types of problems consumers are having with cemeteries. The council handles between 100 and 150 complaints annually, and we have found Funeral Rule-related types of complaints to be rare and exceptional.
Do you think that the Federal Trade Commission will agree with you?
We’re trying to find out. Recently the ICFA filed a Freedom of Information Act request with the FTC to find out how many cemetery complaints on any issue it has received in the last four years. We were very surprised with the answer.
How many complaints has the FTC received?
None.
That seems too good to be true.
It seemed incredible to us because we knew from past experience that the FTC would receive maybe 20 complaints or so each year. We even called up the FTC and said that there must be some mistake, that there had to be some cemetery complaints from somewhere. But they stuck to their guns and said there were no complaints.
That must have been a strange conversation.
We like those kinds of conversations. But the point of asking for FTC complaints was to corroborate our own findings from CCSC regarding the types and volume of consumer complaints against cemeteries. In that sense, we welcome the public comment phase of the Funeral Rule review because it gives us a rare opportunity to examine the universe of complaints. This is the one proceeding in which industry-related complaints are actually solicited and consumer groups urge their members to send in their complaints. So we really don’t know what’s going to happen, but as I said when we started, it gives us a chance to separate fact from innuendo.
Won’t industry critics say the reason the FTC didn’t receive any cemetery complaints is because consumers don’t know how to contact the FTC or even know that the FTC is a resource?
The FTC just issued a news release stating that last year it logged in over 60,000 consumer complaints. I think people know to contact the FTC if there’s a problem.
In the past we’ve seen a fallback tactic used by industry critics when few relevant complaints materialize. This tactic is to claim that there are many complaints but that consumers are too grief-stricken to complain or just want to forget about the whole thing. Can you comment?
This tactic is used by industry critics and the media but won’t work in an objective investigation. The ploy is a close relative to the “When did you stop beating your wife?” approach that damns the victim either way. It allows critics to say the industry is bad even though they can’t document complaints. In reality, a consumer may not complain right away, especially in an at-need situation, but sooner or later we’d hear from them. This is especially true with cemeteries because consumers have an ongoing relationship with cemeteries for years and decades after the funeral is over. If they feel they have been exploited or treated badly, they will be reminded of this every time they visit the cemetery. Sooner or later, they will complain.
You mentioned that the deadline for public comments on the Funeral Rule is August 11. What happens after that?
The commission announced that a public workshop conference will be held this fall in which selected individuals and organizations will be invited to participate. The conference will be open to the public, and interested parties may make statements for the record. As a practical matter, unless the comments to the FTC are relatively few, the workshop may not be convened until next year. The Funeral Rule proceedings have a history of being behind schedule.
At some point after the conference, FTC staff will consider all the comments and then will announce its proposed recommendations, including any Funeral Rule amendments, for another round of public comments. Following that phase, final recommendations will be sent to the commissioners for a vote. (Editor’s note: See the interview with Diane Kauffman, chair of the ICFA Funeral Rule Review Subcommittee, on page 10.)
Is it likely that the Senate Special Committee on Aging and the GAO investigations will influence the outcome of the Funeral Rule review?
I believe so because all three proceedings are related to the same issues. It’s reasonable to assume that FTC staff will use some of the conclusions or recommendations from the other two forums in deciding its own proposals.
Are there any lobbying activities on Capitol Hill to influence the Funeral Rule review?
Yes. There has been an increased amount of lobbying by some organizations that favor Funeral Rule expansion. At this point it seems premature, and efforts to have members of Congress pressure the FTC into expanding the Rule are drawing mixed reactions at best. Our contacts indicate that Congress wants the FTC, as an independent federal agency, to conduct its own inquiry and does not intend to ride roughshod over it. Everybody in Congress is in favor of consumer protection, but most seem to draw the line at enacting new laws to solve non-existent problems.
Is there a sense among members of Congress that the allied industries are united behind expanding the Funeral Rule to cover all sellers?
If they do have that impression, it won’t last very long. As I’ve said, lobbying efforts up until now have been one-sided and premature. Few of the affected parties have communicated with Congress. But once members of Congress have heard from all parties affected by potential Rule expansion, they will realize the issue is politically divisive. This may backfire on some groups, especially if they represented the issue as uncontroversial.
Let’s turn to a state-level activity, the North American Cemetery Regulators Association and its model policy statements. Is NCRA making an effort to create more uniformity in the state laws on certain issues?
Yes, and it’s an ambitious project. The NCRA is a diverse group composed of regulators from states with pro-competitive laws and from states with, in my opinion, anti-competitive laws. As a result, it may not be easy for NCRA to reach a consensus on very many issues. The ICFA has encouraged NCRA by providing copies of our Model Guidelines for State Laws and Regulations, and NCRA has acknowledged adapting some of them in its own work.
Do you see any value for the industry in the NCRA?
The NCRA performs two important functions that I believe benefit both the regulators and industry members. First, it provides the regulators a forum for comparing notes and bringing up to speed their newer colleagues. How many times have I heard industry members complain, “We have a new regulator we have to educate all over again”? The NCRA helps to expedite this process through peer group communications, and I think it’s a good idea.
Second, in the last couple of years, the NCRA has provided a forum for diverse industry-related groups such as trade associations and consumer organizations to meet and discuss issues of mutual concern. Sometimes acting as a referee, NCRA sets down some basic ground rules for presentations and questioning. As a result, an invitation from NCRA is a call nobody can or should refuse. (Editor’s note: See the interview with incoming NCRA President Jerri Robinson on page 12 and with Maryland regulator Steve Sklar on page 15.)
Readers would think we were ducking the issue if we didn’t ask about the Loewen bankruptcy proceedings and how this may affect the industry’s image in terms of consumer protection.
I remember when the Chrysler Corporation went into reorganization through bankruptcy back around 1980. Its demise was greatly exaggerated. It emerged from bankruptcy a few years later and has remained healthy from that point on. The Loewen Group is basically doing the same thing. It’s important to remember that Loewen’s underlying businesses, funeral homes and cemeteries, are sound operations and all consumer contracts are being honored.
I believe when Loewen emerges from this reorganization it will become a textbook example of how the trust fund requirements and other consumer protection features really do work. This event is the big test that nobody really wanted to see, but now that it’s happened, it can prove consumers are protected when they make prearrangements.
We traditionally end our interview with a look ahead. Do you have any predictions for the next 12 months?
A year from now, we should have heard from the GAO and the Senate Special Committee on Aging. It seems unlikely that the FTC staff would have made its recommendations by then, but it will probably be influenced by the GAO and Senate committee findings. I don’t want that to sound ominous because it could be very good news. In the meantime, I believe members of Congress will be much better informed of the issues involved in the Funeral Rule review and will have heard from many parties other than just those in favor of Rule expansion.
Thank you, Irwin. Any closing observations?
Yes. We are living in interesting times.
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Copyright ICFA 1999.
Individual written contributions and advertisements appearing in International Cemetery & Funeral Management do not necessarily reflect either the opinion or the endorsement of the International Cemetery and Funeral Association.
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