Press Release Thursday, October 19, 2000

Contact: Rob Schneider, (512) 477-4431, ext. 116; or Rafael Ayuso, ext. 114, ayusra@consumer.org Consumers Union Southwest Regional Office

AUSTIN, TX -- A study released today by Consumers Union finds many Texas consumers unhappy with their prepaid plans for funeral services and warns that the fragmented regulatory bureaucracy that oversees the industry has left consumers without a clear advocate.

According to the study of nearly 300 funeral services consumer complaints, Texas has a disturbing pattern of problems in the sale of funeral services - particularly those associated with prepaid contracts - and the regulatory structure that governs it is ineffective and ripe for reform.

Almost one-third of all complaints analyzed by Consumers Union related to prepaid arrangements, in which consumers can purchase a funeral in advance and the funeral home guarantees the delivery of a funeral service many years in the future at today's prices. The contracts are designed essentially like savings plans, but the funeral home keeps any interest earned.

"Plain and simple, prepaid contracts are not a fair deal for consumers," said Rob Schneider, senior staff attorney for CU's Southwest Regional Office. "Almost any other long-term savings plan, including CDs, would generate enough interest to cover funeral inflation with money to spare. And, with a prepaid plan, you're locked into a particular service with a particular funeral home since you stand to lose much of your investment if you make a change."

"Worse, with corporate giants replacing family-run independent funeral homes, there is an increased need to reform the laws that govern these arrangements," Schneider added.

Among the problems with pre-need contracts are:

· Texas law allows the funeral home to keep a substantial portion of the early payments, so if a consumer changes his or her mind, refunds can be minimal in the first years;

· the contracts lock families into a single arrangement with a particular funeral company, so changes can void the contract or create problems accessing benefits;

· unlike many states, if consumers cancel, they have no right to the interest earnings accumulated over time - which can be substantial - because the original funeral home may keep these excess funds; and

· insurance backed pre-need contracts sometimes lock in today's prices by requiring the buyer to pay substantially more over time than the cost of the service.

In Texas, the regulation of the funeral services industry is parceled among four separate state agencies: the Funeral Services Commission (FSC), the Texas Department of Insurance (TDI), the Texas Department of Banking (TDB), and the Attorney General (AG). Consumers Union reviewed complaints filed with these agencies from Jan. 1998 to Dec. 1999 and found that "most reveal a pattern of problems shared among many consumers that should be addressed through a stronger and more coherent regulatory system."

Among the most frequent of the nearly 300 complaints:

· Almost a third of the complaints - the largest category - related to pre-need arrangements.

· More than 14 percent dealt with services provided by funeral homes, such as rude employees, improper preparation of the body, and damaged or incorrect coffins.

· Another 7 percent of consumers complained of the high cost of a funeral, particularly the cost of the non-declinable "Basic Services" fee. The fee is allowed under federal regulation and can range from a few hundred dollars to over $2,000. Funeral homes can include various services under this charge, making it tough for consumers to work out an affordable funeral.

· More than 10 percent of complaints related to monument companies, which require a substantial down payment to fill the customized orders and are not regulated.

· Seven percent related to cemeteries, including run-down cemetery conditions and misplaced bodies.

In contrast to Texas, many states have been busy reforming their funeral service laws to curb abuses in the market. For example, California created a single state agency to ensure fair regulation of all aspects of a funeral, including cemetery practices. New York prohibits insurance backed pre-need contracts, and many states require funeral homes and cemeteries to place in trust all the money consumers pay into pre-need contracts and give consumers control over the accumulated interest on those accounts.

"We're playing catch-up in Texas and have a long way to go to make sure funeral service consumers get a fair deal," Schneider said. "The stakes are high because a funeral can be one of the most expensive purchases many consumers will make in a lifetime."

The price of a funeral can range from $2,000 to more than $15,000.

CU is recommending that the Texas Legislature:

· Reform pre-need laws to ensure consumer value for the money invested. This includes giving consumers a 30-day cancellation period for all pre-need contracts; standardizing contracts and allowing them to be fully transferable; prohibiting contracts backed by insurance policies where premium payments exceed the face amount of the policy; giving consumers the accumulated interest earned on their prepaid accounts; and restoring the previous Texas prohibition against finance charges for funeral products or services that are not delivered at the time of purchase.

· Consolidate funeral regulation into a single agency designed to assure regulation of all funeral services and devoted to advocating for consumers in need.

Consumers Union, publisher of Consumer Reports, is an independent, nonprofit testing and information organization, serving only the consumer. We are a comprehensive source of unbiased advice about products and services, personal finance, health nutrition, and other consumer concerns. Since 1936, our mission has been to test products, inform the public, and protect consumers.

What should consumers do:

Preplan, but do not buy a prepaid contract

· Be clear about your wishes after you die. Put your wishes in writing. Discuss your wishes with family and friends.

Instead of purchasing a prepaid contract, put the money in a bank account or CD:

· Establish a joint checking or savings account, or purchase a CD with a trusted family member or friend, with a "right of survivorship."

· Establish a "pay on death account" to pay a beneficiary - a friend or family member - to pay for your funeral expenses.

Shop for funeral services

· Get price lists from funeral homes and comparison shop.

By federal regulation, funeral homes must provide you with a complete price list that shows various costs for different services performed by the home. Homes also must provide prices and other information that reasonably answers your questions by phone.

· Consider competitive funeral good providers.

Casket stores, for example, can offer selection and lower prices than caskets available form funeral homes.

· Get help from consumer groups.

• Several non-profit groups work to assist consumers in purchasing funeral services. Local Funeral Consumer Alliances (also called Memorial and Burial Societies) offer tips, price comparisons, or discounted services to members. Also, AARP has information about funeral services available on its web page at www.aarp.org.
  

Non-profit funeral consumer groups in Texas:

· Amarillo, El Paso, Lubbock, Rio Grand Valley - Memorial Society of the Southwest

972-509-5686 or 800-371-2221

· Austin - Austin Memorial & Burial Information Society

512-480-0555

· Corpus Christi - Memorial Society of South Texas

1-800-371-2221

· Commerce, Dallas, Denton, Fort Worth, Longview, Tyler - Memorial Society of North Texas

972-509-5686 or 800-371-2221(TX and OK only)

· Houston - Funeral Consumers Alliance of Houston

713-526-4267 or toll-free 888-282-4267

· San Antonio - San Antonio Memorial Society

210-341-2213

· Waco - Memorial Society of N. Texas, Central Texas Chapter

1-800-371-2221 (TX and OK only)

 

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