The FCA has confirmed the rules funeral plan providers will have to follow when they come under regulation from 29 July 2022. The rules (currently still in draft form) mean:
- funeral instalment plan products will always deliver a funeral (after a moratorium period) as the FCA will be banning those that don’t guarantee this;
- cold calling will be banned and new standards on advertising will be implemented to ensure plans are sold fairly;
- commission payments to intermediaries will be banned to ensure products represent fair value; and
- those selling funeral plans are subject to full checks on their fitness to operate to improve governance standards and oversight.
The FCA is asking for feedback on the draft rules by 31 August 2021.
The FCA has also warned consumers that they will not be able to make a complaint to the Financial Ombudsman Service nor have any protection from the Financial Services Compensation Scheme (FSCS) should their provider fail prior to 29 July 2022.
For firms wishing to continue conducting funeral plan activities after regulation, the FCA says they should prepare now so that they can apply for authorisation as soon as possible after the application gateway opens in September 2021. When it comes to applying for authorisation, the FCA expects funeral plan firms to be able to demonstrate they meet the Threshold Conditions at the point of application. Funeral plan firms must be able to demonstrate:
- location of offices – they have a UK presence with their decision-making body in the UK;
- effective supervision – they have the capability to be effectively supervised by the FCA (for example, they are effectively organised to carry out regulated activities in a compliant manner);
- appropriate resources – they have the appropriate resources for undertaking funeral plan activities (they must also demonstrate that they have appropriate resources, including financial, management, staff, and systems and controls);
- suitability – they have competent and able senior management, and their affairs are conducted in an appropriate manner regarding the interests of consumers; and
- business model – they have a viable and sustainable business model that is suitable for their regulated activities and is compliant with the FCA’s rules.
Separately, Treasury is consulting on proposals to ensure that the FSCS operates effectively if a regulated pre-paid funeral plan provider fails.