Rip-off pre-pays dead and buried

I HAVE received many questions and complaints about pre-paid funeral plans over the years.

Many readers have been the victim of mis-selling and subjected to rip-off practices.

From July the pre-paid funeral plan sector is finally being cleaned up with new laws to, at last, make it a regulated sector under the wing of the Financial Conduct Authority. Here’s what you need to know:

WHAT WILL BE DIFFERENT AFTER JULY?

The FCA told me they will take over regulation of pre-paid funerals on July 29. It says there will be higher standards in the market and greater consumer protection, with better value products, sales practices and controls so consumers can be confident they will receive the funeral they expect.

WHAT ARE THE NEW RULES?

The FCA says many new measures are being introduced including:

Banning cold calling and setting new standards on advertising to ensure plans are sold fairly.

Banning commission payments to intermediaries, such as funeral directors, to ensure products represent fair value.

Carrying out full checks on the fitness to operate of those selling funeral plans, to improve governance standards and oversight.

Guaranteeing that funeral plans will always deliver a funeral, unless the customer dies within two years of taking out the plan, in which case a full refund will be offered.

Guaranteeing that customers will receive a full refund if they cancel a plan within 30 days of purchase, or pay only a reasonable charge later on.

The FCA also says from July 29, consumers will also be able to complain to the Financial Ombudsman Service.

If the issue happened before July 2022, they’ll still be able to refer it to the ombudsman service, as long as the firm was registered with the Funeral Planning Authority at the time the issue occurred.

Finally, consumers will finally have access to the Financial Services Compensation Scheme from the first day of regulation, so their money is protected if the prepaid funeral plan provider fails.

WILL ALL PROVIDERS FALL WITHIN THE REGULATION?

The FCA says any provider not authorised by July 29 must immediately cease to operate in the pre-paid funeral plan market.

It says that 42 of the known 66 providers have submitted applications but, to date, no authorisations have been granted

The FCA is also aware that some providers will not be submitting applications and will cease their activities in the market.

HOW CAN YOU FIND OUT THE STATUS OF YOUR PROVIDER?

Go to fca.org.uk/consumers/ funeral-plans/providers-list

WHAT IF A PROVIDER IS NOT AUTHORIZED BY JULY 29?

The FCA says for customers of providers who withdraw their application or don’t get authorised, a transfer to an authorised provider will be the best outcome to ensure they have the funeral they paid for.

It appears to me that this is still a bit of a grey area that needs further developing.

In this respect, the FCA says that it is working with the industry to find a longer-term solution for customers of providers which have not applied for authorisation or have withdrawn or been refused.

SHOULD CONSUMERS NOW WAIT UNTIL JULY TO BUY A NEW PREPAID FUNERAL PLAN?

The FCA has little power prior to the July date and is warning people not to buy plans from providers which have withdrawn existing applications or are yet to submit one.

My advice is to wait until the sector is regulated in July, as from this point you will clearly be far better protected.