|
UNITED STATES OF AMERICA In the Matter of the 16 CFR Part 453 COMMENTS OF AARP appreciates the opportunity to participate in this review of the funeral industry trade practices rulemaking. AARP's constituency of over 34 million consumers age 50 and above has a substantial interest in this issue, and is more directly affected by funeral industry practices than younger consumers. By separate notice filed today, AARP requests an opportunity to participate in the Public Workshop Conference to be held in the fall to explore in greater detail the issues raised in this proceeding. AARP recommends that the current provisions of the Funeral Rule (the Rule) remain in effect. The Funeral Rule has been useful to consumers by:
There are several areas, however, where the Funeral Rule is incomplete or detrimentally silent in its provisions. These issues are discussed in response to certain questions outlined in the Rule Review notice. AARP will address a majority of the questions posed by the Commission in the Rule Review Notice. Our comments will focus on the Rule's impact on consumers. We have conducted survey research related specifically to the funeral and cemetery industries that supports many of our responses. We are attaching some of the research pieces, as they will be cited throughout our comments. QUESTIONS FOR COMMENT 1 Is there a continuing need for the Funeral Rule? With a goal of lowering "existing barriers to price competition and facilitate[ing] informed decision-making" (1) in the funeral industry, the FTC first published its Funeral Rule in 1982. To accomplish this stated goal, the Commission crafted a Rule with a mandatory disclosure scheme to ensure that "consumers have access to sufficient information . . . ." In addition, it banned the bundling of goods and services, thereby enabling consumers to pick and choose only those items they want, and prohibited misrepresentations "used to influence consumers' decisions on which goods and services to purchase." (2) Contained within that Rule was also a provision for a mandatory Sunset Review to be conducted four years after implementation. That review with testimony, research findings, expert witnesses, and anecdotal evidence took place in 1988. Based on evidence from this proceeding, staff recommended, and the full Commission subsequently adopted, a proposal to amend but reissue the Rule substantially unchanged. Staff argued that the Rule "does not appear to be sufficiently in place in the market to permit a full assessment of the Rule's potential benefits." (3) Specifically, staff indicated that the Rule had not "had the opportunity to work" because industry compliance with critical elements of the regulation was low. Some of these critical elements included:
A decade later and in preparation for the current review of the Funeral Rule, AARP set out to measure what changes, if any, had occurred in the industry. The Association contracted with survey research firm, Market Facts, Inc., to conduct a survey of individuals who arranged or prearranged a funeral or burial in the 18 months preceding the interview. Included in the survey were a number of questions relating to industry compliance with different provisions of the Rule. The report that summarizes the 1999 research is attached to this submission. The findings (5) indicate that compliance with key elements of the Rule remains a significant problem. For example:
In addition to these findings of non-compliance, the survey shows that the Rule is being violated by misrepresentations. For example, claims about the preservative value of caskets are widely reported (34 percent of those viewing a casket). In short, it appears that significant numbers of funeral providers remain out of compliance with important elements of the Funeral Rule. Without broad compliance, the Rule has yet to be fully tested 15 years after its 1984 implementation. (6) Until compliance begins to reach 90 percent or higher with critical requirements such as providing price information before goods and services are selected, measuring the efficacy of the Rule is difficult. Notwithstanding the continuing problems with compliance and the difficulties in securing price disclosures, consumers report that they value cost information. The 1990 FTC staff report states that empirical research submitted during the 1988 hearings indicates that "consumers consider that information [price information] important in selecting a funeral home and individual funeral goods and services." (7) While AARP remains concerned with funeral goods and service providers' compliance with the Rule, we also urge the Commission to expand the Rule to encompass all other providers of funeral and burial goods and services. For instance, burial arrangers report that they value price information, yet the existing Rule does not cover burial goods and services provided by cemeterians. Those burial arrangers who were provided a written price list for burial plots or other burial goods and services overwhelmingly found such cost information to be very or somewhat helpful (70 percent for those selecting a burial plot and 81 percent for those reviewing other burial goods and services). (8) However, even though consumers value such information and even though the cemetery industry argues that member institutions routinely provide such information, (9) AARP's recent research findings indicate that significant numbers of consumers are not receiving price information. For example, 36 percent of those arrangers who purchased a grave plot indicate they did not receive a price list. Similarly, 22 percent of those arrangers who purchased burial goods or services were not provided with a price list. Apparently, large numbers of cemeteries also misrepresent the preservative and protective value of their goods. The 1999 AARP survey asked those burial arrangers who purchased a burial plot or other burial goods and services, "Did anyone you spoke with about purchasing burial goods or services tell you that the protective features of a grave liner or burial vault would help preserve the body indefinitely?" More than one-fourth (29 percent) of the respondents answered yes. While there have been improvements in the sale and marketing of funerals and burials, compliance with the Funeral Rule remains a significant problem. a What benefits, if any, has the Rule provided to purchasers of funeral goods and services? The rule benefits consumers by:
From AARP's perspective, the Funeral Rule benefits consumers by making price information readily available and increasing the feasibility of comparison shopping for costs and options. Empirical evidence submitted during the Sunset Review indicated that only a limited number of consumers routinely comparison shop. (11) Since the adoption of the Rule, AARP has twice conducted surveys intended to determine what percent of funeral arrangers and planners were contacting more than one funeral home. AARP's Gallup Study of 1988 showed that 11 percent of funeral arrangers and planners contacted two or more funeral homes. AARP's 1999 survey again asked funeral arrangers and funeral preplanners about comparison shopping. Sixty-nine percent contacted only one funeral home. However, the number of funeral arrangers and preplanners contacting two or more funeral homes rose to 18 percent from the 11 percent reported in the 1988 survey. As a group, funeral preplanners (24 percent) were more likely to contact more than one funeral home than funeral arrangers (14 percent). Given the differences in the various samples of the two AARP surveys, it is impossible to directly assess changes in shopping habits over time. Nonetheless, the 1999 finding suggests a trend toward increased consumer shopping. It appears that consumers are benefiting from the disclosures provided under the Rule, even with the problems with limited compliance, to make informed decisions about funerals. (b) Has the Rule imposed costs on purchasers? AARP cannot cite any discernible costs that the Rule has imposed on consumers. We would like, however, to point to testimony on the record in the 1989 FTC Sunset Review wherein the president of the Federated Funeral Directors of America, Wendall Hahn, stated that the Rule had no pronounced effect on funeral home costs. (12) If the Rule has generated no cost increases to funeral homes, there should be no additional charges to pass on to consumers. 2 What changes, if any, should be made to the Rule to increase the benefits of the Rule to purchasers? There are several areas where the Rule's silence is detrimental to consumers. In short, AARP recommends that the Rule be expanded to encompass cemetery sales and services, crematories, and third-party casket sellers or anyone selling funeral or burial products. We also recommend provisions in the Rule that provide for minimum standards for preneed contracts. Each of these recommendations relates specifically to questions raised by the Commission in the Rule Review Notice. We will provide detailed responses to those questions later in our comments. AARP urges the Commission to amend the Rule to include language requiring that the price for embalming be disclosed when seeking permission to embalm and restricting vendors from making preservative or "protective" claims when selling vaults or caskets. AARP supports the Funeral and Memorial Societies of America (FAMSA) in its request to add four items to the required itemization on the General Price List (GPL). These items are: the price for private viewing without embalming, the price for body donation to a medical school, the price for the cremation process itself and the price for rental caskets. a How would these changes affect the costs the Rule imposes on the funeral providers subject to its requirements? It is difficult for AARP to assess what the above additions to the Rule would cost funeral providers. However, recalling FFDA President Wendall Hahn's testimony in which he said that the Rule had no pronounced effect on costs, it is reasonable to conclude that the same would be true for cemeteries. 5 Does the Rule overlap or conflict with other federal, state, or local laws or regulations? To the best of AARP's knowledge, the Rule does not overlap or conflict with any other federal, state or local law. More to the point, the problem is that the vast majority of states have not incorporated the Rule's provisions into their respective state codes. We recognize that the Commission relies on state enforcement, lacking adequate resources to strictly enforce the Rule nationwide. AARP is concerned that absent the adoption of the Rule by all fifty states, the patchwork quilt of state law and regulation that currently exists will not adequately protect consumers. As noted above, we urge the Commission to incorporate minimum standards for preneed funeral and burial contracts to fill a gap that remains glaringly open. The very nature of the purchase of funeral and burial goods and services argues for covering preneed arrangements. Upon the death of a family member or loved one the emotional trauma and stress and the myriad of other matters that must be attended to, make it more difficult to comparison shop among providers of services. If the Rule is to truly promote competition then it must enable consumers to better plan in advance of the incidence of death. Moreover, for those who wish to personally plan for their funeral or burial arrangements, including the choice of cremation versus a cemetery burial, it is obviously essential that they have such information in advance. We envision that the standards which we advocate for would neither preempt nor conflict with existing state or local law. AARP's Public Policy Institute has completed research of state laws regulating preneed funeral and burial contracts. There exist discrepancies from state to state in the manner in which they regulate this growing component of the funeral industry. Further, there are intrastate inconsistencies between funeral and burial legislation and regulation. (13) See Question #30 for a detailed discussion of our concerns in this area. 10 How, if at all, has the Rule affected the relative number of consumers who contact more than one funeral home before deciding which one to use? AARP believes that slowly, but surely, the Rule is having an impact on the number of consumers who contact more than one funeral home before deciding which one to use. Certainly one of the intended effects of implementing the Rule was to spur on competition, by making it easier for consumers to make an educated decision. Comprehensive price disclosure is essential for comparison shopping. Despite the introduction of the GPL, few consumers were contacting more than one funeral home prior to making a buying decision during the early years of the Rule. However, a recent AARP survey reveals that shopping is becoming more prevalent. As previously noted, a 1988 Gallup study commissioned by AARP found that only 11% of those who had arranged or planned a funeral over an 18-month period had contacted more than one funeral home. (14) In response to the same question earlier this summer, 18% of those surveyed in the Funeral and Burial Planners Survey had contacted more than one funeral home before purchasing goods or services. (15) This is a noteworthy increase. It shows that the Rule is having the desired effect and should be retained. 11 How, if at all, has the Rule benefited consumers by: a Alerting consumers to the importance of price information and ensuring that they obtain such information at the critical point of choosing a provider? As noted above, a recent survey shows that consumers are beginning to recognize the importance of receiving price information available to them as a result of the Funeral Rule. Additionally, as consumer groups and the media continue to focus on the relatively high cost of funerals and promote the availability of price information, individual consumers are starting to use price information to shop among providers. As to the timing portion of the question, AARP believes it is critical that price lists be provided at the beginning of any discussion of price or arrangements. Having price information from the outset alleviates a portion of the stress associated with such planning and allows a consumer to make more educated choices. The 1990 FTC staff report concluded that timely receipt of this information was a critical element of the Rule. (16) However, the Funeral and Burial Providers survey found that only 58% of persons surveyed were offered price information prior to discussing specific funeral goods and services. (17) This is yet another concern we have with Rule compliance. (b) Providing information about different purchase options? This provision of the Rule provides a significant benefit to consumers. It is also a provision, studies show, with which there is close to full compliance. Both the 1988 Gallup survey and the 1999 Market Facts companion survey found that over 90% of consumers who received a written price statement, received one that was itemized. (18) This provision is increasingly important, as packaged pricing has become a more prevalent and popular choice among consumers. In regard to packaged pricing, AARP recommends that standard terms be defined for specific packages. Standardizing terminology, we believe, will allow for comparison shopping for consumers and facilitate marketing those options for providers. c Protecting consumers from injurious misrepresentations? Despite efforts to provide consumers with credible information regarding funeral products and services, incidents involving injurious misrepresentations continue to occur. One area where misrepresentations are a major concern involves claims regarding the preservative value of caskets. According to the Funeral and Burial Providers survey conducted in July 1999, 34% of the persons who had arranged a funeral within the past 18 months reported being told by the funeral director that protective features of a casket would help preserve the body indefinitely. (19) This same survey also found that 29% of respondents were told that a grave liner or burial vault would help preserve the body indefinitely. (20) d Requiring authorization prior to embalming? As embalming rates are falling, (21) due in part to cremations and other alternative dispositions, the funeral service industry is making some progress in complying with the embalming authorization provisions of the Funeral Rule. In 1988, AARP's survey found that only 47% of survey participants or family members were asked for permission prior to embalming the body. (22) Today, only 25% of the survey participants report that they were not asked for permission. (23) This represents a significant shift but it still means that 25% are in clear violation of the law. While the trend is encouraging, we are disappointed in the fact that compliance is not complete by now. Further, there are still cases when a provider misrepresents the law regarding the necessity of embalming a body. Because of inconsistent state statutes and the ignorance of the public on this issue, most consumers are unaware that the provider has misrepresented the law. As stated in the opening to this response, more widespread enforcement of this provision seems necessary. e Prohibiting providers from conditioning the purchase of a wanted item on the purchase of an unwanted item? While AARP does not have much information on this topic, it appears that this provision of the Rule provides consumers with more flexibility to select the specific products and services that they desire. 12 How have the prices changed (in total and for specific funeral goods and services) since the Rule was amended in 1994? To what extent, if at all, are these changes attributable to the Rule? AARP does not have access to numbers comparing funeral costs in 1994 to funeral costs today. However, based on industry data referred to below, we can infer that cost of a funeral has increased since the 1994 amendments to the Rule. Whether or not these costs are attributable to the Rule is very difficult to gauge. Factors such as market consolidation and increasing pressure (24) from commissioned funeral services sales staff (25) contribute to the higher prices for consumers. The price of the total funeral and most of its component parts has risen. According to numbers compiled by the Federated Funeral Directors of America (FFDA), the 1988 cost of a "regular adult funeral" which includes services and a casket was $2,992. (26) The 1998 cost for the same product was significantly higher, $4,605. NFDA's numbers from 1997 track closely. Its figure for an average funeral is $4,782. Based on 1988 FFDA numbers, 75% of FFDA member clients purchased an adult funeral for under $3,500. In 1998, less than 20% were under that number, and one out of every five funerals exceeds $5,500 in cost! The price of caskets has increased as well. FFDA reports the average cost of a casket was $517 in 1988 and by 1998 had risen to $770. (27) That is an increase of close to 5% a year for ten years, an increase well above general inflation. Whatever the source of these price increases, there is no evidence to tie any of them to the Rule or its 1994 amendments. Further, as noted previously, FTC staff quoted industry leader Wendall Hahn in 1989 as saying that the Funeral Rule has not cost funeral homes any appreciable sum. There is no evidence that this has changed. 14) How, if at all, since the Rule was amended in 1994, have the following factors changed? a The number, size, and type of providers of funeral goods and services in the industry? The 1994 amendments to the Rule have ushered in a growing number of retail casket providers. Approximately 300 casket stores are now in existence according to a National Casket Retailers Association publication. (28) Much of this growth is likely attributable to the no-handling fee provision of the amended Rule. b The ability of new providers, both traditional and non-traditional, to enter the industry? The only segment of the industry that appears to be experiencing growth is that of independent casket providers (i.e. third-party sellers). As noted in the previous response, almost 300 casket stores are now in existence. There is concern, however, that the discount packages being offered by funeral directors will adversely impact business opportunities for these new entrants. c What types of non-traditional entrants have appeared in the industry, and how are they different from traditional providers? Retail casket sellers and electronic commerce vendors have emerged as non-traditional providers of funeral and burial goods and services. Additionally, traditional providers such as cemeteries and monument dealers have begun selling goods and services outside of their traditional product lines, further blurring the lines as to who is subject to the requirements of the Funeral Rule. The 1997/98 "mystery shop" of cemeteries conducted for AARP found that almost 23% of all cemeteries shopped in that study sold caskets. (29) This finding may be indicative of changes in the industry. Electronic commerce vendors present a different set of problems. The Internet has unleashed an avalanche of website marketing by funeral, burial and cremation businesses. Caskets are now routinely ordered over the Internet and shipped overnight across state lines. Many such Internet businesses offer lower prices. Some, however, do not provide prices for their on-line product offerings, providing instead a phone number to call to inquire about prices. Others give only a brief description of the product without providing enough details for a consumer to comparison shop. Many of these online businesses offer preneed contracts online. No face-to-face interaction with a salesperson is necessary. They require only that one fill out a vital statistics form online and place an online credit card order. Some of the online businesses sell only one product, like cremation urns. Others are traditional full service funeral homes or cemeteries. Either way, the number of businesses is staggering. If one were to type in "cremation" and conduct a websearch, over 6,000 documents would become available. Typing in "caskets" would yield 2,500 sites. AARP will comment on this phenomenon in our response to Question #22. (d) Mergers and other types of consolidation in the funeral industry? Since the amendments to the 1994 Rule took effect, mergers and funeral industry consolidations have mounted rapidly, causing growing concern to AARP. As the number of chain-owned funeral homes continues to grow, consumers are being misled into believing that the local funeral homes with which they are familiar are still owned and operated by a local businessperson. In an effort to draw attention to these non-disclosures, AARP has urged states to require that advertising for funeral and burial services disclose the ownership of the entity offering the service. The merging of smaller funeral parlors with larger chains also raises the issue of market power. The largest of these chains, SCI, is now involved in 1 out of every 9 funerals in this country, (30) and the top five consolidators account for almost 1 out of 5 funerals (31), prompting concern that the competition that is just beginning to develop in the industry will be quashed. Traditionally, such a movement toward market consolidation leads to higher prices for consumers -- a development that would defeat the goal of the Rule. Funeral service consolidation presents problems as well. As cemeteries, monument dealers and third-party businesses begin to offer funeral services, the fact that they are not subject to the provisions of the Rule creates problems for consumers. Without federal jurisdiction, consumers must rely on the states to provide a consumer protection framework. Unfortunately, as we have noted earlier, state laws are very inconsistent and in many cases, laws that govern funeral directors do not govern cemeteries or others. This affects consumers in at least two ways. First, if a dispute arises, it becomes more difficult for a consumer to reconcile it. For instance, a person moving to Florida may deal with the same company, but be subjected to completely different rules. Second, inconsistent state laws permit unscrupulous funeral and/or burial providers to mislead or deceive consumers. (e) Profits of funeral industry members? According to the FFDA, industry profit percentage has actually dipped to 8.92% from 9.87% in 1988. (32) Factors such as market consolidation and an increase in the number of cremations may have led to the decrease in profits; certainly, it cannot be linked to the Rule since the cost of the Rule has been assessed as minimal. 15 How, if at all, has the Rule affected the cremation industry? Should the Rule be amended to include within its scope unfair and deceptive practices by crematories, if any? The Rule has had a positive effect on the cremation industry as more and more consumers have taken advantage of cremation as an option. According to the Cremation Association of North America (CANA), in 1997, 23% of deaths resulted in cremation. By the year 2010, CANA predicts that a full 45% of all deaths will result in a cremation. (33) This is due in part to the fact that there is a growing acceptance of cremations as an alternative to ground burials, making it even more important that such activities be included under the Rule. However, even where cremation represents the final disposition, consumers often still choose to have a traditional funeral for their loved ones. A 1995 Wirthlin study conducted by the NFDA indicated that 33% of those surveyed chose a traditional service followed by a cremation. (34) This finding does not alter the fact that many consumers find cremations less costly. Still, over the years, the findings of various media investigations and court cases reveal cremation practices that are shocking and intolerable, such as:
To protect consumers against such practices, the Rule should be amended to include within its scope unfair and deceptive practices by crematories. 16 To what extent are providers of funeral goods and services complying with the Rule overall, and with each of its component requirements? As mentioned earlier, the findings of AARP's 1999 survey of funeral and burial arrangers indicate that compliance with key elements remains a significant problem. One-third of funeral arrangers and preplanners did not receive price information before talking about specific funeral goods and services and 30 percent of the respondents indicated they received no written price list at any time. One-third of those arrangers and preplanners viewing caskets did not receive price information before looking at those funeral goods and one-fourth of funeral arrangers and preplanners did not receive an itemized statement listing the goods and services they selected. In addition, misrepresentations occur with alarming frequency. One-fourth of funeral arrangers who reported that the body was embalmed said they were not asked in advance for permission to embalm the body, and 34 percent of those viewing caskets were informed that preservative features would preserve the body indefinitely. Withholding price information and misrepresenting the facts are practices that can also be found in the sales of burial goods and services. Even though consumers find price information to be helpful, AARP's survey research indicates that 36 percent of those purchasing a burial plot did not receive a price list and one in five of those purchasing other goods and services received no price list. AARP's 1997-98 cemetery mystery shop report also indicates that many of those provided "price lists" did not receive pre-printed lists, but fill-in-the-blank forms, hand scribbled notes or simply an adding machine tape. More than one-fourth (29 percent) of those purchasing an outer burial container were told the protective features of such goods would indefinitely preserve the body. Again, non-compliance with the Rule by funeral providers raises questions about whether or not this regulation has yet been fully tested. 18 How has the National Funeral Director's Association's Funeral Rule Offenders Program (FROP) affected compliance with the Rule, if at all? AARP wishes to recognize the enforcement efforts made by the Commission over the past decade and urge that such activities be continued. The Commission has conducted a number of mystery shops throughout the country, which in some instances led to serious court-imposed penalties against those violating the Rule. The industry too, through its national association, has taken steps to educate its members about the Rule. However, it is most disturbing to find minimal changes in compliance with critical elements of the Rule. AARP opposes offering violators of the Funeral Rule an option to make a voluntary payment and retain anonymity under the FROP. Based on the small sampling of violators identified by sweeps conducted by the FTC, it is difficult to ascertain the effectiveness of the FROP. However, in viewing the statistics culled from AARP's research, it appears that neither the FTC's enforcement efforts nor the Funeral Rule Offenders Program have had the desired effect. What remains a source of frustration is the fact that in a program designed to deter violations and reduce recidivism, the anonymity component of the program makes it impossible to gauge its success. 19 Do consumers who receive itemized price information at the inception of the arrangements conference tend to spend less on funerals than those who receive such information later? AARP does not have any meaningful research data to update the FTC staff finding quoted earlier that, "consumers who received funeral price information early in the funeral transaction spent less for their arrangements than those who did not." (35) 20 Do consumers who make preneed arrangements spend less on funerals than those who do not? If so, why? Does receiving price information at the inception of a preneed arrangements conference contribute to decreased spending? Does it encourage or facilitate comparison-shopping? As indicated in the Association's answer to Question #19, AARP does not have any meaningful data regarding whether consumers who are making preneed arrangements spend less on funerals than those who do not. AARP's survey research does indicate, however, that preneed planners are more likely to contact more than one funeral home than at-need arrangers (24 percent as compared to 14 percent). It appears that preneed planners are taking advantage of the Rule's quote disclosure provisions and are therefore afforded the opportunity to select the products and services they want. 21 Should the requirement that itemized price lists be given to consumers at the beginning of discussion about funeral arrangements be modified? If so, how? What would be the relative costs and benefits of such a modified provision? AARP emphatically supports the retention of the requirement that itemized price lists be given to consumers at the beginning of the discussion about funeral arrangements. It is imperative that consumers be informed at the outset about price information. Not only, according to the 1990 FTC Staff findings, do those consumers who receive price information spend "less for their arrangements than those who did not", but consumers also value such information. In the Gallup survey of funeral arrangers conducted in 1988 for AARP, funeral arrangers were asked the following, "Some people find it helpful when funeral directors give them information about the cost of funeral services when they first begin making arrangements. Others are offended that funeral directors bring up the subject of costs during their time of grieving. Which of these views comes closer to your own?" More than 80 percent answered that cost information is helpful and only five percent indicated that discussing costs is offensive. Nine percent volunteered that it does not make any difference. The Association is unaware of any research that indicates a change in such strong support for price disclosures even in a sensitive time. Changing the Rule's requirement of price disclosure at the start of any discussion about goods and services would disadvantage the consumer at a sensitive time. The cost to consumers could be significant. The benefits of such a change would accrue only to the sellers. 22 Should the Commission expand the definition of "funeral provider" in order to bring non-traditional members of the funeral industry within the scope of the Funeral Rule's coverage? Are consumers being harmed by the current limitation on the scope of the Rule's coverage? AARP believes strongly that the definition of "funeral provider" should be expanded. The Rule's current definition is too narrow and excludes portions of the death services industry that sell only goods and/or services such as certain cemeteries, monument dealers, ash scattering services, crematories and other third-party providers. The trend toward consolidation of the death care industry blurs the lines further and makes it imperative that a more inclusive definition be put in place. The Rule should be revised to include all components of the death care industry that provide goods or services. A consumer buying goods and services should have the same consumer protections regardless of the "title" of the person selling the services. Inclusion in the Funeral Rule of segments of the death services industry that provide only goods or only services would encourage advertising and competition for business, and would help reduce the instances where funeral providers circumvent the Rule and require consumers to purchase all of their funeral goods and services from the same source. All consumers are entitled to readily available prices, unbundled products and services and honest representations of state and/or federal law. Therefore, AARP urges the Commission to expand the Rule to cover all funeral and burial-related providers. As it is, most consumers do not differentiate between funeral directors and cemeterians when making funeral or burial service plans. Why then should the Rule cover one part of the industry, but not the other? We are convinced that "leveling the playing field" to include all cemeteries (profit and non-profit as well), casket retailers, monument dealers and other business entities involved in funeral and burial services, will benefit everyone. Additionally, with mergers and expansion of chains, funeral homes and cemeteries are increasingly existing side by side. With these businesses consolidated, it is possible for a combined operation to circumvent provisions of the Rule simply by selling the casket, vault, or other goods in the cemetery office rather than the funeral home. If non-traditional members of the funeral industry are included in the Rule, consumers will be able to do more comparison shopping because they will receive written price lists from all segments of the industry. Industry should benefit as well. Niche marketers could offer low prices on certain products and services, large companies could profit from the synergies of their size in offering discounted items, and cemeteries could promote their goods and services without being subject to scrutiny for improper disclosure of price information. In 1990, Commission staff concluded that the "evidence does not establish that sellers of funeral goods and services, particularly cemeteries and crematories that do not sell funeral goods, are engaged in the type of abuses addressed by the Rule." (36) To buttress the Association's position that the Rule should be expanded to cover all funeral and burial goods and services, AARP is submitting findings from a survey of burial arrangers and a cemetery mystery shop conducted by FGI Corporation, a marketing research firm. The findings of the burial arrangers survey were discussed in some detail earlier in this document. The Cemetery Mystery Shop interviews were conducted in 1995 and again in 1997-98. (37) These interviews examine the sales and marketing practices employed by for-profit cemetery salespersons and the types of preneed arrangements offered to older consumers. The mystery shop reports present a snapshot of the for-profit cemetery marketplace as experienced by older consumers. This is not quantitative research that allows us to generalize to other for-profit cemeteries, but rather consists of a series of case studies. The findings represent anecdotal evidence of problems faced by the older consumer when shopping for cemetery products and services. Additionally, we will reference findings from the AARP Funeral and Burial Planners survey conducted last month. Perhaps the most important finding from the 1997/98 Cemetery Mystery Shop report is the fact that two-thirds of all shoppers were not shown written prices for cemetery products or services. Of the one-third of shoppers claiming to have been shown some form of written price disclosure, a review of the actual documents provided to the shoppers reveals that only 8% of them were given standardized, published price disclosures. (38) Similar findings emerged from AARP's 1995 Cemetery Mystery Shop. In that report, only 41% of shoppers received a written price list. (39) The Funeral and Burial Planners survey paints only a slightly brighter picture. The respondents to that survey reported that only 55% of them received a written or printed price list for burial plots, and only 73% received such a list for burial goods or services. (40) Pre-published price disclosures are essential in helping consumers make informed decisions about what cemetery goods and services to purchase. Without some required minimum standard disclosures, however, receiving a "price disclosure" is no guarantee of receiving valuable information or actual itemized prices. As the 1997/98 Cemetery Mystery Shop report demonstrates, consumers cannot compare products, services and prices without a standardized form of price disclosure, and without being permitted to take such written forms home with them. Too often, the so-called "written price list" is no more than fill-in-the-blanks, handwritten notes or adding machine tapes. Handwritten and fill-in-the-blanks price disclosures provide the cemetery salesperson with the opportunity to alter the prices with each consumer. (41) The potential for consumer abuse is great. In addition to problems with cemeteries failing to provide printed price lists, the 1997/98 Cemetery Mystery Shop describes other questionable sales tactics regarding the marketing of vaults and mausoleums. Some of these include the failure to provide financial information, incorrectly telling shoppers that state law requires a vault or liner, and the marketing of extras like insurance to transport the body. In 28% of the visits, cemetery salespersons presented shoppers with various written documents other than price information. These documents included brochures, booklets, certificates and other marketing materials. Upon review, some of the documents appear to provide valuable information, while others are of questionable legitimacy. Some appear to be gimmicks to bring the consumer back to the cemetery for additional sales pitches, others entice consumers to upgrade their purchase, and still others play upon their emotions. We welcome the Commission's review of these research items. We believe that they demonstrate the very real need to expand the Rule to encompass all providers of funeral or burial goods and/or services. a What definition should be used to delineate those entities and individuals subject to the Funeral Rule? Any entity that sells funeral or burial goods and/or services to the public should be subject to the Funeral Rule. This includes funeral homes, cemeteries, crematories, monument dealers, third-party funeral or burial goods or service providers, vault dealers, casket sellers, and preneed and at-need policy vendors. (b) What are the costs and benefits of broader definitions? As mentioned earlier, Commission staff found that the costs of implementing the Funeral Rule were deminimus. Similarly, AARP believes an expansion of the Rule would result in nominal cost increases, if any, and improve business practices of those businesses not now providing such price information. 23 Should non-traditional providers of funeral goods and services be subject to only certain provisions of the Funeral Rule? (a) If so, to which provisions should they be subject? AARP recommends that the Commission expand the Rule to cover all funeral and burial providers and that the general provisions of the Rule should apply to all sellers. For example, price lists should include any product or service used in the final disposition of the body. If a private cemetery provides funeral or burial goods and services, all items should be presented to the consumer on a printed price list. If a casket provider only sold caskets, only those items relating to the sale of a casket would be required. Similarly, the misrepresentations currently specified under the Rule would apply to all sellers of goods and services used with the final disposition of bodies. This level of uniformity would greatly enhance the protections of the Rule for consumers while reducing the barriers to competition. 24 Does the prohibition on more than one non-declinable fee reduce barriers to competition and increase consumer choice? (a) Has this prohibition been effective to ensure that consumers can choose and pay for only the individual goods and services that they desire? Currently, the Rule permits funeral directors to charge consumers a single non-declinable fee to cover the funeral directors costs of doing business. Beyond that, the prohibition on more than one non-declinable fee has made it easier for consumers to choose and pay for only the goods and services that they desire. The fact that a consumer is not locked into purchasing goods and services that they do not want -- refrigeration after embalming, for example -- makes comparison shopping easier, and eliminates what amounts to nothing more than additional charges to cover overhead. b Has this prohibition been effective to protect consumers' right to decline unwanted goods and services? AARP does not have the information necessary to respond to this segment of the question. c What are the benefits conferred upon consumers or competition by this prohibition? AARP response to Part (a) of this question sufficiently addresses this question as well. (d) What costs or other burdens has this provision imposed upon providers of funeral goods and services? AARP does not have the information necessary to respond to this segment of the question. 26) Have the 1994 amendments been effective in prohibiting casket-handling fees? If so, what benefits or costs have resulted from these amendments? The fact that a number of third-party casket retailers have opened stores and have been advertising on the Internet since 1994-95 is a sign that the 1994 amendments prohibiting casket-handling fees have had some effect on the marketplace. An important benefit to consumers from these amendments is a wider range of choices in both style and prices. However, AARP believes that it would be helpful to consumers if a standardized price list with specific definitions of what materials are included in the casket would help a great deal in facilitating informed buying. 28 Should the requirement for a General Price List be modified? If so, how? a Are there any new fees, prices, goods or services which should be added to the General Price List requirements? Expanding the Funeral Rule to include all funeral and burial expenses would by necessity require the GPL to be expanded to include such items as openings and closings, headstones, memorials, and so forth. 1) Should the Rule require that the price of private viewing without embalming be included in the General Price List? The Rule should require that the price of private viewing without embalming be included in the General Price List. Including this item in the GPL is consistent with AARP's earlier appeal to expand the GPL to cover all possible funeral and burial goods and services. We support this addition recognizing that many funeral directors currently provide this service for free. While we do not seek to increase the cost of funerals, we believe that adding this item to the list would help to ease some of the uncertainty consumers have regarding whether or not to embalm. 2) Should the Rule require that the price of donating a body to a medical school be included in the General Price List? Again, including this item in the GPL is consistent with AARP's earlier appeal to expand the GPL to disclose the costs of all possible funeral and burial goods and services. Since most states have medical schools within their boundaries and virtually every state has a law dealing with anatomical donations, price information regarding these donations should be on the GPL. This information, tailored to the state in which the provider was doing business, would let the consumer know how much, if anything, such a disposition might cost. This would not only reduce potential "sticker shock" surprises, but in states that pay most or all of the cost, more consumers might consider that option. 3) Are the Rule's requirements [(Section 453.2(b)(4)(ii)(C)] to disclose on the General Price List the price for direct cremation effective to prevent deception regarding the amount a consumer will pay to have the funeral provider dispose of a body by cremation? Should the Rule also include an express requirement that the disclosed price of "direct cremation" include the actual price to have a body cremated? The existing requirement to include the price for direct cremation has helped to disclose the amount a consumer will pay for a cremation. However, AARP believes that each of the fees attendant to cremation should be disclosed separately as well. Comprehensive, uniform disclosure should be the purpose of the GPL and providing the price of "direct cremation" does not adequately inform the customer. Crematory fees imposed either by the funeral director or by state or local jurisdictions should also be listed separately on the GPL. 4) Should the Rule require that the price of renting a casket in connection with a cremation be included in the General Price List? Yes, the Rule should require that the price of renting a casket in connection with any means of final disposition be included in the GPL. Funeral arrangers with both traditional and non-traditional arrangements are increasingly accepting casket rentals. For example, the AARP Funeral and Burial Planners survey found that 12% of older consumers who arranged a funeral within the last 18 months rented a casket. (42) b Are there any fees, prices or services, which should be deleted from the General Price List? AARP does not support the deletion of any fees, prices or services from the General Price List. c Are there any other revisions that should be made to the current provisions in the General Price List? In deference to those, particularly older persons, who make more funeral arrangements than other demographic groupings and who have a higher incidence of impaired vision, we recommend that the General Price List be printed in at least twelve-point type. The consumer benefits by having an easy-to-read document and the provider benefits from having an educated consumer and by removing any appearance of deception. AARP also recommends that a standard description of items in casket models should be included. Among these descriptions would be the gauge of casket, and a description of the metal that is used. We also suggest that if surcharges are imposed for weekend or holiday services, they be disclosed in writing. d For any change made in response to this question, what, if any, would be the costs and benefits to consumers and to funeral providers? In each of the responses attached to this question, AARP has discussed the attendant costs and benefits. 29 The Rule applies to both preneed and at-need funeral arrangements. Should preneed and at-need consumers be treated differently? If so, why? The Rule should continue to apply to both preneed and at-need funeral arrangements. Both preneed and at-need purchasers face the same difficulties in the marketplace. However, additional safeguards should be provided to deal with preneed consumers in regard to the agreements they enter into. AARP will detail our concerns and recommendations in our response to Question #30. a Can a funeral provider readily distinguish between a preneed and an at-need customer or will this complicate compliance with the Rule? A funeral provider can readily distinguish between a preneed and an at-need customer and having to make this distinction will do nothing to complicate compliance with the Rule. 30 Are there widespread unfair or deceptive practices occurring with respect to the pre-arrangement of and pre-payment for funerals by consumers? What are these practices? How could these practices be remedied? Are these remedies within the Commission's authority and jurisdiction? Would the benefits to consumers likely to result from such remedies outweigh the likely costs to funeral providers or other industry members? AARP is quite concerned with the business practices occurring with respect to pre-arrangement of and pre-payment for funerals by consumers. While we have voiced similar concerns over the years, Commission inaction has led us to believe that the issue was not yet ripe. Today, we are convinced that is no longer the case. According to the Gallup survey conducted for AARP in 1988, 34% of those surveyed had pre-planned a funeral and 50% of those persons had pre-paid. The 1999 version of the survey found that 44% of those surveyed had planned in advance within the last 18 months, while 67% of those had already paid for the goods and services. (43) In another recent nationwide AARP survey on preneed funeral and burial arrangements, 43% of the population age 50 and older -- in excess of 28 million people -- report being solicited about the purchase of preneed funeral arrangements. (44) Thirty-six percent report having paid in advance for either funeral or burial arrangements. These high participation percentages translate to over $40 billion currently sitting in preneed fund accounts. (45) It is indisputable that this is the growth area of the funeral and burial services industry. While size alone does not mean that abuse exists and we do not assume that large portions of these funds are being treated unscrupulously, we are saying that the sheer number of transactions occurring in states with widely different regulatory approaches highlights the need for uniform federal standards in this area. Therefore, AARP believes that the Rule should apply to preneed funeral and burial contracts. The integration of the funeral and burial industries over the years (46) makes it imperative that the Rule encompass such contracts regardless of the seller involved. Since preneed contracts are now likely to include a package of both funeral and burial goods and services that may be sold by funeral directors, cemeterians and third parties, there is no reason why only funeral directors should be covered by the Rule. An AARP survey found that more people age 50 and over have prepaid for burial goods and services (18% or 12 million) than funeral goods and services (13% or 8 million). (47) Unfortunately, these preneed burial purchases, if purchased from a cemetery, do not currently have any federal protections. (48) It should be noted that those who prepay for funeral or burial goods or services tend to be among the more vulnerable of consumers. Typically they are older (65+) and tend to have low to moderate annual household incomes of between $15,000 and $40,000. (49) State laws governing preneed contracts (funded through trust funds, insurance policies, and other investment vehicles) vary greatly in their provisions regarding how much of the funds must be placed in trust, what information must be included in the contract, and whether the purchaser can obtain a refund on cancellation. The AARP Public Policy Institute has produced a Chart on Preneed Funeral and Burial Laws which clearly demonstrates the wide variation among these laws. While every state except Alabama has a law regulating funeral and burial preneed arrangements, there are a number of states that do not address preneed burial contracts. (50) Goods covered by one state's preneed funeral law may or may not be included in another's burial statute and only ten states have consumer protection recovery funds. Depending on the state, preneed contracts will be subject to the jurisdiction of a state insurance department, state funeral or cemetery board, Department of Health, or the Attorney General. Many state laws allow preneed sellers to put less than 100% of funds into trust, raising concerns about the security of the consumer's purchase. Other states prohibit sellers from withdrawing earned income until the contract has been fulfilled. To sidestep this requirement and to avoid some of the taxes associated with revocable trusts, preneed sellers have moved aggressively into insurance-based products, with commissions based on the value of the funeral and the age of the applicant. Another concern that AARP has with the sale of preneed contracts is the fact that consumers do not know where their money is being held. Findings from a five-state telephone survey on the preneed and burial arrangements of older Americans are revealing. According to the report, "considerable proportions of individuals reported that their prepaid funeral funds are either not invested, or they do not know what happens to their funds." (51) The states with the largest percentage of those who were unaware of where their funds were placed were California (60%) and Alabama (56%). The AARP 1997/98 Cemetery Mystery Shop provides similar anecdotal evidence that shoppers were not provided information about where their prepaid funds were invested. Similarly, only 13% of cemetery shoppers received information on cancellations or refunds. As preneed sales continue to increase, it is anticipated that these problems will become more common. Because of uneven state regulation, and lack of adequate supervision of these accounts, the FTC should incorporate uniform minimum standards for preneed contracts into the Funeral Rule. Consumers have a right to receive the same level of protection in this area, regardless of the state they live in, who sells the preneed agreement, and what goods and services are included in the contract. The FTC Funeral Rule should be revised to require that a preneed contract be in writing and include full disclosure of all rights, duties, and obligations of the parties; cancellation and modification procedures; fees assessed; portability restrictions; and distribution requirements. These issues are clearly within the existing jurisdiction of the Commission. CONCLUSION AARP welcomes the opportunity to respond to the Commission's review of the Funeral Rule. We look forward to working with the Commission and interested parties as the process moves forward. We urge the Commission to consider seriously our recommended changes to the Rule, as we firmly believe that such changes will benefit all consumers. AARP's goal in these comments and throughout the rule review process is to ensure that consumers are treated fairly, are provided with accurate information and can fall back on adequate consumer protection safeguards, if necessary. Anything that can be done to assist consumers in making educated decisions while conducting this very sensitive business transaction is welcome. If additional information is needed on any of the points raised in this statement, please do not hesitate to contact Jeff Kramer of the Federal Affairs staff at 202/434-3800. Sincerely, Martin Corry Attachments:
Endnotes: 1. 47 FR 42260 (1982). 2. Id. 3. Final Staff Report to the Federal Trade Commission, Funeral Industry Practices: Mandatory Review, Washington, DC: Federal Trade Commission, 1990, p.3. 4. Id. 5. AARP Funeral and Burial Planners Survey, Washington, DC: August 1999. 6. At least one trade publication is reporting that compliance levels "are now consistently high among American funeral homes, whereas in the early years, they were found to be consistently low. See FTC Announces 1997 Year-End Results: Enforcement Sweeps Yield Crop for FROP, Funeral Monitor, No. 11, (March 15, 1999) 7. Op Cit, p. 56. 8. AARP Funeral and Burial Planners Survey, Washington, D.C.: August 1999, pp. 28-29. 9. See p. 117 of Funeral Industry Practices: Mandatory Review, wherein is found the following, "Cemeterians further argue that the very nature of pre-need marketing of grave sites, vaults, and caskets requires cemeteries to freely discuss price information with consumers." 10. See for example, p. 56 of Funeral Industry Practices: Mandatory Review. Here, staff report that empirical evidence disclosed in the 1988-89 Sunset Review of the Rule indicated that "consumers who received funeral price information early in the funeral transaction spent less for their arrangements than those who did not." 11. See for example, p. 63 of Funeral Industry Practices: Mandatory Review. 12. See p. 81, of Funeral Industry Practices: Mandatory Review. 13. Chart on State Preneed Funeral and Burial Laws, AARP's Public Policy Institute, forthcoming in 1999 14. Gallup Organization Survey, 12/1/88. 15. AARP Funeral and Burial Planners Survey, Washington, D.C.: August 1999. 16. Final Staff Report to the Federal Trade Commission, Funeral Industry Practices: Mandatory Review, Washington, DC: Federal Trade Commission, 1990, p.3. 17. AARP Funeral and Burial Planners Survey, Washington, D.C: August, 1999. 18. Id. 19. Id. 20. Id. 21. AARP Funeral and Burial Planners Survey, Washington, D.C.: August 1999 22. Gallup Organization Survey, 12/1/88. 23. AARP Funeral and Burial Planners Survey, Washington, D.C.: August 1999. 24. FAMSA Website 25. SCI Sales Counselor's Reference Guide, July 1997. 26. Funeral Monitor, May 17, 1999, pp. 3-4. 27. Id. 28. Casket Retailers Association Newsletter, April, 1999. 29. AARP Cemetery Mystery Shop, FGI for AARP, August, 1999, p. 7. 30. SCI Website, Corporate Information, p. 1. 31. Merchandise Research, The Loewen Group, Conning & Company, 1996. 32. Funeral Monitor, May 17, 1999, pp. 3-4. 33. Statistics Report, Cremation Association of North America, May, 1999. 34. Wirthlin Study, NFDA, 1995. 35. See p. 56, Funeral Industry Practices: Mandatory Review 36. Id. P. 119. 37. Cemetery Mystery Shops, FGI for AARP, July, 1999, p. 3. 38. Id. p. 6. 39. AARP Cemetery Mystery Shops, FGI for AARP, 1996, p. 13. 40. AARP Funeral and Burial Planners Survey, Washington, D.C.: August 1999. 41. The Funeral Rule, 16 CFR Part 453. 42. AARP Funeral and Burial Planners Survey, Washington, D.C.: August 1999, p. 11. 43. Id. 44. Older Americans and Preneed Funeral and Burial Arrangements, Results from a National Telephone Survey, AARP, May, 1999, p. 3. 45. Id. p. 12. 46. Major commercial chains now account for approximately 30 percent of the country's funeral business. Carlson, L. (1998). Caring for the Dead: Your Final Act of Love. Hinesburg, VT: Upper Access. 47. Older Americans and Preneed Funeral and Burial Arrangements, Results from a National Telephone Survey, AARP, May 1999, p. 3. 48. Id. p. 3. 49. Id. P. 8. 50. Chart on State Preneed Funeral and Burial Laws, AARP's Public Policy Institute, forthcoming in 1999. 51. Findings From Older Americans and Funeral and Burial Arrangements - Five-State Telephone Survey, June, 1999, p. 16. |
