An undercover investigation conducted by the Federal Trade Commission ("FTC") found that funeral homes nationwide deceived customers into making unnecessary purchases and failed to give customers required up-front pricing, according to CNN.

The FTC conducted investigations in 102 funeral homes and found "significant violations" committed in 23 of them.

The funeral home operators violated provisions of a 1984 FTC regulation, better known as the "Funeral Rule."

The regulation prohibits funeral home operators from forcing customers to buy caskets and other associated items as a condition precedent to  paying for a funeral and requires funeral home operators to provide customers with an itemized price list during an initial in person meeting.

According to the FTC report, Virginian cities Richmond and Fredericksburg had the greatest number of funeral homes found with significant violations. Almost 50% (8 of 19) of the homes investigated in the 2 cities turned out to be significant violators.

Additionally, Columbia, South Carolina, clocked in at a 50%, as 5 out of 10 homes investigated committed significant violations.

Further, 33 homes had minor compliance problems, according to the FTC report.

The FTC contacted those funeral homes and required them to demonstrate that they were are in the process of remedying their violations, as the federal administrative agency allows homes to fix problems before resorting to civil penalties.

In lieu of civil penalties, which run in the neighborhood of $16,000 per violation, significant violators may agree to participate in a 3-year program run by the National Funeral Directors Association ("NFDA"), which provides participants extra training and additional compliance monitoring. The NFDA also allows participants to make a payment to the U.S. Treasury instead of incurring the civil fines.

The NFDA's Jessica Koth said that the "NFDA takes compliance with the Funeral Rule seriously."

The FTC began its policy of annual undercover investigations in 1996, during which time investigators have found less than 400 significant violators out of 19,680 funeral homes nationally.

After looking at the aggregate numbers (400 significant violators in 16 years) the FTC investigations find approximately 25 significant violators per year.

Accordingly, at 23, this years rate seems to be right on par with the yearly average.

Although the FTC would ideally love to find no violators, I am unsure as to whether 2011 results are within the projected FTC quota.

Possibly, punishment reform could be instituted as a deterrent effect to reduce the number of funeral homes that significantly violate the FTC regulation in the future.

What do you think?

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