FTC Funeral Rule Review: What to Expect

Written for NFDA's Memorial Business Journal - January 23, 2020 Vol. 11 No. 4 
www.nfda.org

CHICAGO – Last year was supposed to be the year that the FTC’s Funeral Rule would be opened up for review – 2019 came and went without this much anticipated event taking place.

During their presentation at the recent NFDA International Convention & Expo, “FTC Funeral Rule: Reducing Your Risk,” T. Scott Gilligan, NFDA general counsel, and Patti Poss, coordinator of the FTC’s Funeral Rule program, offered an update on what is expected to take place when the FTC brings the rule up for review. No date has yet been set for the review.

Poss gave an update on the Funeral Rule review and explained the steps the FTC will go through, while Gilligan highlighted the point that NFDA wants to focus on with the Funeral Rule review.

Poss, an FTC staff attorney, succeeded Craig Tregillus in the role of Funeral Rule coordinator.

The stated purpose of the Funeral Rule is to make sure consumers get the information necessary to make informed purchasing decisions, as well as to lower existing barriers to price competition in the market for funeral goods and services.

“The FTC is a civil law enforcement agency, not a criminal agency,” explained Poss. “Its focus is to protect consumers, and we work very hard to find the right balance in the marketplace.” Getting into the nuts and bolts of the Funeral Rule, Poss said its main components provide that a funeral provider must give consumers an itemized General Price List at the start of an in-person discussion of funeral arrangements, as well as a casket price list and outer burial container price list before showing any of those items. It also prohibits certain misrepresentations and prohibits funeral homes from requiring consumers to purchase any items as a condition of providing funeral goods or services.

“By requiring the provision of itemized prices, the Funeral Rule enables consumers to compare prices and buy only the goods and services they want,” continued Poss. “This is the perspective from which the rule comes.”

Addressing the rumor that has persisted over the past three years or so that a Funeral Rule review is imminent, she acknowledged that most of the calls she’s received over the past several months have been about the Funeral Rule review.

Offering a quick timeline of the rule, which took effect in 1984, Poss said the last rule review was in 1999, and it didn’t close until 2008. “I am hoping that we’re not going to repeat that [dragged-out process] again, but I did want to give you some perspective,” she said.

The FTC has a number of rules and guidelines; the Funeral Rule is just one. Others include the Contact Lens Rule, the Franchise Rule and the Used Car Rule, to name just a few. The FTC has a goal of reviewing these rules at least every 10 years.

Poss said that those interested in knowing when the review would start can sign up for email alerts and a business blog on the FTC website (ftc.gov/ subscribe).

“The public has the chance to comment – that’s the whole point,” said Poss. “We rely on our law enforcement experience from having been working with this rule and the knowledge we’ve gained of the industry, but we also rely on input, of course, from everyone involved in the rule, whether from an industry covered by the rule, one not covered by the rule, consumers or stakeholders. We rely on any experts who can help us decide what to do.”

She also emphasized that this is all done in public. The FTC puts questions on its website for the public (meaning anyone) to comment on; the comments are posted to the public.

Poss was careful to distinguish the rule review from an actual change to the rule. During the rule review, the commission will receive all information and decide whether changes would happen. The next step would be opening up a rule-making amendment, but there is no guarantee that will happen.

“I will encourage you, if you have thoughts about the rule, that this would be the time to comment because there is no guarantee of a second pass [for comments] if the commission decides there wasn’t enough to open up a rule-making [amendment],” she said.

Poss outlined the types of questions that likely come up when the commission does regulatory reviews:

  • What is the economic impact of the rule?
  • Is there a continuing need for the rule?
  • Are there possible conflicts between the rule and state, local and federal laws or regulations?
  • Has the rule been affected by any technological, economic or industry changes?

During the last Funeral Review in 1999, there were a few specific questions, such as should the rule revise the definition of funeral provider? There were also questions about the casket handling fee and a few other requests. “Sometimes we do [ask specific questions], so there will be a list of broad general questions and then specific questions,” she said.

As an example of what to expect, Poss again steered attendees to the FTC website, where the Franchise Rule is currently under regulatory review. “You’ll see the kind of posting that comes out and the process that happens,” she said. While the comment portion closed earlier in 2019, Poss said this process is an accurate representation of what to expect when it’s the Funeral Rule’s turn.

Circling back to the questions the FTC would put forth in the next review period, Poss said one likely question will be: Has the rule been affected by any technological, economic or industry changes? “This is one of the hotter questions,” she said. “Certainly since 1984 there appears to be quite a few changes in your industry.”

One of the more frequently addressed topics has been the issue of online shopping. Obviously, online shopping was not contemplated when the rule was originally drafted, and it certainly has increased over the years. Poss noted that two groups have petitioned the FTC to amend the rule to require price lists on all funeral provider websites, so she expects that to be a part of the discussion during the review. Again, she reminded attendees that the first step is not a change to the rule but a review to decide whether to change the rule or make any amendments to it.

“We get input to see if the commission should propose amending the rule,” she said. “And the commission needs to review all that information to determine if there evidence that an existing act or practice is unfair or deceptive.” Among the questions it will consider:

  • Is that act prevalent?
  • Does significant harm exist?
  • Would the rule reduce that harm?
  • What are the potential benefits and burdens of the rule?

NFDA AGENDA

Before Gilligan outlined what NFDA will ask the FTC to consider during the Funeral Rule review, he offered his take on the Funeral Consumer Alliance’s request to the FTC to mandate that funeral homes post GPLs on their websites. “Right now, only the state of California has a similar requirement – it requires that funeral homes at least post a link on their website so consumers can access the funeral home’s GPL,” explained Gilligan.

Gilligan said NFDA’s position on the matter is that pricing information is readily available for consumers seeking it, offering statistical data in support of his conclusion.

“We’ve looked into whether there is a demand by consumers for [online GPLs],” he said “We hear from the Funeral Consumer Alliance that it does surveys saying that a lot of funeral homes don’t have price information on their website.”

Gilligan concedes that point, as only about 20% of NFDA members include price information of their websites. “Our response is that there isn’t a demand for it,” stated Gilligan. “If you go back to when the rule was started, much of it was based on anecdotal evidence; there was not a lot of hard, consumer survey evidence.”

Gilligan then offered his evidence. “This evidence is based on NFDA’s annual Consumer Awareness and Preferences Survey,” he said. “When we asked consumers how many funeral homes they visited before selecting one, we found that the majority (about 79%) only visit one funeral home. They either already know the funeral home they’re going to use, they’ve always used one funeral home, it’s the local firm or they know the funeral director. Just 16.8% of consumers surveyed actually look at more than one funeral home.”

When this 16.8% was asked why they shopped more than one funeral home, invariably the answer came down to price. What this boils down to, said Gilligan, is that of the consumers surveyed, less than 10% are price shoppers.

Consumers were then asked how they obtained that price information. Two-thirds of respondents went to the funeral home in person to seek price information. An additional 25% did it by phone, and only 6.2% went on the internet to seek pricing information. “That leaves us with less than 1% of consumers who are price shopping online,” said Gilligan. “So, do we have to change the rule to require all funeral homes to put price information on their websites when you have less than 1% of consumers actively seeking that information?”

Gilligan predicted that consumer groups will flip the survey results and say that the reason more consumers aren’t price shopping is because they are frustrated, claiming it’s hard to get that information from funeral homes because no one is putting the information online.

But Gilligan then pointed to a subsequent survey question that asked consumers how easy it was for them to get pricing information. Of nearly 1,000 consumers surveyed, 16.7% said it was very easy, 40.9% said it was easy, 28.8% said it was somewhat easy. Just 13.6% of consumers had any problem getting price information, according to the survey.

“You also have to consider the difficulty of comparison shopping when you have so much itemization,” Gilligan continued. “Consumers will have to locate numerous funeral homes, add up all the prices of the services they want – that is, if they even know what services are going to be involved in the arrangements – add those prices up and then comparison shop.

“It’s a very difficult exercise and probably why we see only 6% of those consumers who price shop using the web,” Gilligan added. “Most of them are going to go to the funeral home because they need the advice and the information to effectively comparison shop.”

Gilligan said that of those consumers who want to compare firms online, a far easier way to do so (rather than contacting numerous funeral homes) would be to use one of the websites that have already done the work, such as Funeralocity.com. “They have surveyed area funeral homes, they have that price information and they will group the information into a direct cremation price, a traditional funeral price or a cremation with a funeral service price,” Gilligan explained. “They put those packages together, and a consumer could very easily go to [the site] and find 10 firms in their area and determine the cost of a traditional service followed by a cremation so they can easily compare prices. The information is out there already.”

Gilligan also highlighted another question in the NFDA survey that asks consumers what the most important reason is for selecting a funeral home. “It’s consistent year after year,” he said, “previous experience, location, convenience, reputation and existing relationship with the funeral home. Price is usually sixth or seventh on the list when selecting a funeral home. This has not changed since the Funeral Rule took effect.

“We are not seeking to repeal the rule, but we have to recognize consumer behavior,” he added. “The rule hasn’t changed consumer behavior when we look at the selection of a funeral home.”

Other issues NFDA would like to see addressed during the review process include distribution of the General Price List. Over the past 10 years, 23.2% of funeral homes shopped by the FTC have been cited in violation of the Funeral Rule. “Obviously, we’d like to lower that,” said Gilligan.

“One thing we keep hammering is that you want to get the General Price List out from just the arrangement office. Put it around the funeral home, put a stack on the receptionist’s desk, put it near entryways so it’s available. You also want to develop a system to sit down with that family just to make sure you get the General Price List in their hands at the earliest moment possible.

If you include the GPL in a folder, make consumers aware that it’s in the folder, saying something like, “We’ll go over it in the arrangement conference but just want to make sure you have it.” Gilligan also advised against laminating the GPL since consumers should take it with them.

According to Gilligan, the current rule says funeral providers have to give out a GPL upon “beginning discussions of funeral goods, funeral services, funeral arrangements and funeral prices.” Gilligan said he believes that the language is very imprecise and overly broad. “It’s very difficult to say at what point “beginning discussions” commence, especially when we’re talking about overall funeral services,” he said. “It’s tough to say precisely when you have to meet that requirement to give out a GPL.”

This is nothing new, as NFDA has been making this complaint since the Funeral Rule was first reviewed in 1988. The association maintained that the language had to be tightened, and Gilligan said the FTC staff at the time agreed with NFDA’s position. “If you go back and look at some of the staff reports back then, they said there is a general confusion among funeral professionals regarding how this triggers [the handing out of the GPL],” said Gilligan. “The FTC suggested a change that NFDA endorsed – that the price list should be given out when anybody requests price information or before the selection of funeral goods and services. If you look at 1985 staff guidelines, that’s the track they followed.” The FTC came out with a proposal with similar language when the Funeral Rule was first reviewed. However, in 1994, when the rule was changed, this language was not included.

“Our primary goal would be to tighten this up using language similar to what was proposed by FTC staff back in the early 1990s,” he said.

CASKET AND OUTER BURIAL CONTAINER PRICE LISTS

NFDA wants to tighten up the casket price list and outer burial container price list requirements as well. A sentence in the Funeral Rule to which NFDA objects reads: “A funeral provider must offer the list upon beginning discussions of, but in any event before showing, caskets.”

Gilligan shared that NFDA has had disagreements with the FTC, which maintains that before anyone enters a room of the funeral home that has a casket or outer burial container display, even if the consumer hasn’t inquired about caskets, they need to be given a casket price list or outer burial container price list. “A common problem for some smaller funeral homes is that the same room that’s used for a conference or even a breakroom may have a casket display in it.”

Gilligan suggested training staff to have them present the price lists before entering any room with a casket or outer burial container display. Or he suggested that a funeral home could add caskets and outer burial containers to its General Price List, thereby eliminating the need for three lists. “Combine them into one and then give out the General Price List before they go into a room, and you have complied with the rule,” he said.

NFDA is looking to change the requirement wording to provide that a consumer be given a casket price list when they ask for price information or before a casket is selected. “That is all a consumer needs,” Gilligan said. “It is more than what they are getting if they buy a casket online or walk into a retail casket store. We are giving them more protection under this scenario than they are getting with any of those other outlets.”

Another issue that has come up with regard to packaging involves the variable basic services fee. According to Gilligan, the FTC said funeral homes can offer discount packages, and offer that package in conjunction with a casket, but it does not permit the discounting of the basic services fee. “If you have different services you are providing and you put together packages, you can offer a discount, but you cannot discount the basic services fee,” explained Gilligan.

He cited an example of a low-cost discount funeral home in Oregon that had a $1,250 basic services fee. The firm also offered a $725 direct cremation, but for $95, they would permit a one-hour visitation or one-day visitation for $300. Gilligan related that the Oregon state funeral inspector said the firm could not have prices like that because according to the Funeral Rule, the firm would have to charge at least $1,250 for any type of cremation with visitation.

“So, here’s a low-cost funeral home trying to be a little innovative and give consumers more choices at a cheaper price and, ironically, we have the FTC saying it has to charge a higher price,” Gilligan said.

It is NFDA’s position that a funeral home should have the right to change its variable basic services fee. “If you are doing a graveside service, it makes no sense for you to charge the same as you would in arranging a traditional funeral with a two-day visitation,” he said, noting the obvious – that a lot more work goes into the traditional funeral with a two-day visitation than a graveside service.

“People paying for the graveside service would then be getting ripped off if they had to pay the same amount someone else does for arranging a traditional funeral,” he added.

Gilligan warned that if funeral homes do discount their packages, they must make sure to never go below the price of the basic services fee. There are four exceptions:

  • Direct cremation
  • Immediate burial
  • Forwarding of remains
  • Receiving remains

The FTC issued an opinion letter saying that when pricing these four services, funeral homes don’t have to include their entire basic services fee. “You can include a portion of that,” Gilligan said. “So, if I have a $2,000 basic services fee, I can have a $1,500 direct cremation. But if I add a visitation to that direct cremation, now I’d have to charge at least $2,000.”

Another area Gilligan said NFDA would like to see cleaned up is with regard to price ranges. Right now, the Funeral Rule requires funeral homes to have a price range for caskets and burial vaults on their GPL (providing the funeral home hasn’t already included the full lists of casket or vaults). “We don’t believe that provides any helpful information to a consumer,” said Gilligan. “A consumer really doesn’t need to look at your GPL to see the most expensive casket or vault. If they are price shopping, they’re looking for your least expensive casket or vault. Let’s eliminate the price range; our recommendation is to replace it with the least expensive price,” he said.

When he reviews GPLs for funeral homes, Gilligan said he notices, on occasion, that funeral directors may forget to update price ranges after they’ve changed prices on caskets and vaults. Again, he suggested that if a funeral home wants to eliminate the price range for caskets and outer burial containers, directors should combine the three price lists.

NFDA would also like to add to the Funeral Rule an exception that recognizes certain things are a practical necessity. “One example would be that the FTC allow funeral homes to require a casket for an immediate burial,” Gilligan explained. “That’s not written anywhere in the rule; it’s just a staff guideline that allows us to do that.”

The same would go for embalming and public visitation. “We know you’re allowed to require embalming if there is going to be a public visitation, but it’s not written in the rule anywhere,” he said.

One area in which NFDA has sparred with the FTC is over identification before cremation. “We all know it’s a lawsuit waiting to happen if you don’t have a body identified prior to cremation,” Gilligan said. “We believe that to be a requirement and would like to see it as a practical necessity.”

The FTC also has an advisory position, said Gilligan, that NFDA would like to see incorporated into the Funeral Rule. “If a funeral home is not doing the disposition, you don’t have to allow people to use your funeral home for a visitation,” he said. “If a family is using your competitor but likes your facility because it holds more people, coming to you to use your place just for the visitation – you don’t have to do that.”

The last point NFDA is looking at in the Funeral Rule review involves third-party casket handling fees. Since 1994, when the Funeral Rule was first reviewed, funeral homes have not been permitted to charge a handling fee. “But there is work involved when handling a casket from a third party,” Gilligan said. “You have to coordinate the delivery and have staff present to accept the delivery.”

He added that even though there is an FTC opinion letter that says the receiving funeral home doesn’t have to unload the casket or remove or dispose of the packaging, sometimes you do have to do that because the shipper won’t. “And there are costs involved,” Gilligan said. “You can’t tell the family the casket is out in the side yard and we’re not going to unpack it. While the opinion letter is helpful, it doesn’t solve the problem.

“We would like to see the ability to recoup costs,” he said. According to Gilligan, NFDA’s proposal is if you’re going to charge a handling fee, it would only cover charges that are actually performed or incurred.

TRIGGER REVIEW

Following Gilligan’s remarks, Poss said she wanted to emphasize the triggers for the GPL to be handed to consumers. The funeral provider must give the list upon beginning discussion of any of the following:

  • The prices of funeral goods or funeral services
  • The overall type of funeral service or disposition
  • The specific funeral goods or funeral services offered by the provider.

These triggers account for the majority of complaints against funeral homes by FTC secret shoppers. In 1994, the FTC started doing sweeps of funeral homes using undercover test shoppers to determine whether funeral homes were in compliance with the rule’s core requirements. “Most of the cases that have been litigated or referred to the Funeral Rule Offenders Program (FROP) were about the GPL, the casket price list and the outer burial container price list,” Poss said.

“We periodically put out announcements about the test shopping,” she added. The most recent sweep was in 2018, when the FTC announced that it had conducted undercover operations in 11 states; 134 funeral homes were visited. Of those, 29 had failed to disclose all pricing information – a 21% fail rate.

In 1996, the FTC inspected nearly 3,200 funeral homes and found 559 with violations that required a referral to FROP.

“Typically, FTC staff will conduct a second shop to make sure a violation wasn’t isolated,” she said. “If a violation was found as not severe, the FTC may send a compliance letter describing the infraction and asking the funeral home to correct it. A more significant letter would inform the funeral home of a violation and give it the option of litigating the violation or being referred to the FROP program.

In that program, the firm would pay a fine and be referred to NFDA, which runs the FROP program, which reviews compliance requirements as well as additional education and training.”

This program is only offered once. If a firm is found in violation after completing the three-year program, the violation will be litigated or a settlement reached.

The penalty for violating the Funeral Rule is a maximum $42,530 fine for one violation.

Poss said a PDF of the Funeral Rule is available at ftc.gov, along with other information. There are sample GPLs on the site as well.

THE PROCEDURE AT A GLANCE

According to T. Scott Gilligan, NFDA general counsel, the FTC will issue a formal invitation for interested parties to submit comments on what parts of the Funeral Rule need to be revised or updated.

The FTC staff could also hold a roundtable meeting for interested parties to discuss these issues, as they did in 1999, but is not required to do so.

After comments are submitted, the FTC staff would make recommendations to the commission on whether to reopen the Funeral Rule for revisions, and the commissioners would then vote.

If the commission decided not to make any revisions, it would simply close the review like it did in 1999. If it decides to open it up, the FTC would issue a Notice of Proposed Rulemaking outlining specific issues to be looked at.

There would be more comments and possibly formal hearings in which testimony is given.

The FTC staff would then take all that information and make a recommendation to the FTC on whether and how to revise the Funeral Rule.

FTC commissioners would then vote on whether and how to amend the rule. Any party not happy with the commission approved revisions could appeal the results to the U.S. Court of Appeals (as NFDA and the Pennsylvania Funeral Directors Association did in 1994 with casket handling fee amendments).

“So, it’s a two-step process and there is no guarantee we’ll get past the first step,” noted Gilligan.

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