When the State Board approved a new “adequate seller records” rule on April 25th, there wasn’t much discussion of the documents or reports to be maintained for performed and canceled preneed contracts. In a sense, the Board may not need to expand beyond the FTC’s statement of goods and services requirement. If a funeral home services a preneed contract and completes the statement of goods and services without reflecting payment, the statement could be evidence that the consumer’s preneed funds were never deposited to trust or with the insurance company. But finding such fraud through an examination of a sampling of performed contracts would be similar to searching for a needle in a haystack. If the Board had reason to suspect a funeral home has not been depositing funds, the examiner would need to review all serviced records for a pattern of ‘unfunded’ services.
In seeking disbursement records from banks and insurance companies, and selecting a sampling of serviced contracts, the Board staff’s agenda may have been to confirm whether funeral homes were honoring their preneed contracts. Funeral directors have good grounds for challenging the staff. First, there is nothing in SB1 to suggest this was a priority for the Legislature. Second, performance records are not sufficient to explain why or when families decide to change the funeral arrangements. When discrepancies are found between the preneed contract and the statement of goods and services, someone will be required to provide an explanation. Pursuing such issues would be time consuming, and an inefficient use of the consumer’s $25 contract fee.