The Government has published the legislation that will add regulation of pre-paid funeral plans to the Financial Conduct Authority’s ever-expanding remit.
The FCA says it welcomes the commencement of the legislative process, and although it doesn’t expect its responsibilities for supervising the funeral plan sector to commence until summer 2022, the regulator will still be publishing information about funeral plan regulation on its website in the coming weeks.
The FCA will consult in spring 2021 on its proposed rules and its approach to regulating the sector, before publishing the final rules in the latter part of next year.
There will be two principal activities for which firms will need to apply for authorisation:
- ‘Entering into’– selling and arranging a funeral plan
- ‘Carrying out’ – administration of a funeral plan, including claims and delivery
When describing its priorities for the funeral plan sector, what the FCA says will sound familiar to firms who are already authorised for other activities:
“Our rules will aim to achieve good outcomes for consumers in this sector. For example, that consumers receive the product they’ve paid for, and that customer funds are looked after and used responsibly.”
Offering funeral plans without FCA authorisation will be a criminal offence, so the FCA calls on firms who do not intend to continue to operate after summer 2022 to start the process of planning to wind down their business in an orderly fashion.
The legislation will also allow funeral plan complaints to be considered by the Financial Ombudsman Service.
FCA regulation of funeral plans has been introduced in response to concerns over misleading sales practices by a number of firms. Some consumers have reported discovering that their plan doesn’t provide enough to cover the full cost of their family member’s funeral. Transparency over cost disclosure has been identified as another area of concern.
At present, the sector is subject to voluntary regulation by the Funeral Planning Authority (FPA), and around 95% of the sector has signed up to its Code of Practice and its Rules. However, the FPA does not have the power to stop an errant firm from trading – it can merely suspend the firm’s membership of the Association, or impose a fine of no more than £5,000, and these powers have never actually been used.
John Glen MP, Economic Secretary to the Treasury said:
“I’m appalled by the lengths that some dishonest salesmen have gone to in order to sell a funeral plan. It breaks my heart to think that our oldest and most vulnerable are being pressured into funeral plans that leave their grieving families out of pocket.
“There are thousands of pre-paid funeral plans bought each year, and most providers are fair and legitimate. But tougher regulation will ensure robust standards are enforced for all plan providers and protect individuals and their families if things go wrong.”
The information shown in this article was correct at the time of publication. Articles are not routinely reviewed by Scott Robert and as such are not updated. Please be aware of the facts, circumstances or legal position may change after publication of the article.