Ban on cold calling by pre-paid funeral providers

Cold calling and commission payments to middlemen in the pre-paid funeral sector will be banned from July 2022, as part of a clampdown by the UK financial regulator on unscrupulous profiteering among providers.

The Financial Conduct Authority on Monday set out new rules for pre-paid funeral providers, which will apply when it takes over regulation of the sector in July next year. Those include bans on commission payments to intermediaries and the sale of products that do not include a funeral service. 

Consumer rights groups had raised the alarm that providers in the self-regulated industry were ripping off customers with unfair charges and pressuring them into buying unsuitable services.

Sheldon Mills, executive director of consumers and competition at the FCA, said: “Our new rules for the sector will drive up standards and ensure that when consumers buy a plan, they receive a product that matches their needs and expectations. 

“We are banning all commission payments to intermediaries to make sure products offer fair value and, having seen the real harm cold calling can cause consumers, we’ll be banning it.

The Treasury said in January it would bring the sale and administration of funeral plans within the FCA’s remit. Companies will be able to apply and pay for FCA authorisation from this September. Unauthorised sales of funeral plans will be illegal after July 29 2022. 

According to investment provider Hargreaves Lansdown, the average funeral costs £9,000 and the most basic costs around £4,000. An estimated 1.4m people in the UK have signed up to funeral plans, the company said.

However, research from consumer groups Citizens Advice Scotland and Fairer Finance found that many of those plans did not cover the costs of a funeral and contain expensive fees and commissions that were not clearly explained.

In response to a Treasury call for evidence in 2018, CAB Scotland said while some plans covered all the costs of a funeral, others only provided for the costs of a funeral director, leaving bereaved families facing a shortfall

In March, when the FCA launched its consultation on the pre-paid funerals market, it said it wanted to stop companies using additional fees to drive profits and give customers access to the UK’s compensation scheme in the event that things went wrong. The government is consulting on new laws to ensure the Financial Services Compensation Scheme is able to step in if an FCA-regulated funeral provider fails.

The FCA said it was imperative that companies started preparing to be brought under the banner of financial services regulation. The sector hit back, with the Funeral Planning Authority — the industry body that currently regulates pre-paid funeral providers — calling the proposals “disproportionate and costly”. They would result in “a significant reduction in market participants, limiting competition and choices and the proposals will thus lead to consumer harm”, the FPA said. 

The watchdog is asking for feedback on its draft rules by the end of August 2021.

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