Emma RadmoreTreasury is consulting on how to deal with pressure sales of pre-paid funeral plans. Most of the sector is subject to voluntary regulation only through the Funeral Planning Authority. There is an increasing demand for the product and increasing evidence of disreputable sales practices.
While entering into a funeral plan contract as provider has been a regulated activity subject to authorisation under FSMA for some time, there are a number of exclusions for products that were regarded as giving sufficient consumer protection. The upshot is that no entity has been authorised as a funeral plan contract provider, although plans have developed in such a way that some providers are authorised because of the nature of the underlying product and activities. Overall there was lack of understanding about the scope of FSMA and evidence of poor selling practices as well as concerns about the ongoing ability of some providers to meet their liabiities.
The Government now wants to bring all providers within FCA’s remit. and proposes to amend the RAO by removing the current exclusions in Article 60 RAO, so as to require all who enter into a funeral plan contract as provider to be authorised, and to introduce a new regulated activity of “carrying out” a contract as provider. This will apply to all plans from the date the changes take effect. The effect of the changes will also bring intermediation activities within the scope of the relevant regulated activities.
It is clearly also necessary to regulate intermediaries in the market, but the Government recognises it may be disproportionate to require funeral directors to be fully authorised. So it proposes to enable them to do so under the AR umbrella, probably with the funeral plan provider as principal.
Consultation closes on 25 August. Once the new rules are made, Treasury plans an 18 month implementation period.
