The Missouri State Board’s proposed exam handbook places a new emphasis on tracking consumer payments to funeral homes.  There are two elements to the Board’s strategy: confirming the consumer’s funds make it to the appropriate funding agent, and that those funds are remitted to that funding agent within the time periods required by Chapter 436.  The State Board’s main challenge will be detecting funeral directors that keep a consumer’s funds and never remit them to a preneed funding agent.  Funeral homes that cheat and keep consumer payments are not likely to report the contract or the consumer payments.   The State Board’s best chance at detecting a cheater may be the documentation required when the preneed consumer returns to the funeral home for the prearranged funeral.

Both Federal and Missouri law require that a funeral home issue a written statement of goods and services (the “Statement”) to each purchaser of a funeral.  The Statement is a contract between the funeral home and the consumer that sets out the price of goods and services, and how the funeral bill is paid.  Missouri law further states that a preneed contract cannot be used in lieu of a Statement.   Accordingly, a Missouri funeral home must prepare a Statement for each preneed contract it performs.  The preneed purchaser (or his/her legal successor) can best determine if the Statement has been prepared consistently with the terms of the preneed contract.

As required by Missouri law, and the FTC’s Funeral Rule, the Statement must set out the form of payment.  The preneed exam handbook contemplates that payment explanation should reference the preneed contract and its funding agent.  To find a cheater, the State Board’s exam handbook would have the auditor review the funeral home’s Statements for preneed payments and then match those Statements  to funding agent records for contract listings and performance disbursements.  If there is no corresponding record of the preneed contract or the payment, then the cheater has some explaining to do.

Even when a cheater is exposed by its Statements and lack of funding agent records, a county prosecutor may still be reluctant to pursue fraud charges.  A fraud prosecution requires financial injury to the preneed contract purchaser.   When the contract has been performed by the funeral home without additional payment, there has been no injury to the consumer.   So long as a funeral home can hang on and perform preneed contracts, the State Board and the prosecutor are held at bay from bringing fraud charges.  Criminal charges are frequently deferred until the funeral home has failed and gone out of business.  That is too late for consumers who have outstanding preneed contracts.

Instead, cheaters can be prosecuted under Chapter 436 provisions that require timely deposit of consumer funds.  Depending on the form of funding, Missouri law requires that funeral homes remit consumer funds to the funding agent with a specific number of days (joint accounts are 10 days, insurance requires 30 days and trust funding requires 60 days).   Per Section 436.465 it is the seller’s duty to maintain adequate records to show compliance with the law.  By making receipt and transmittal records a fundamental element of preneed exams, the State Board can begin establishing recordkeeping standards for sellers that prosecutors can rely upon when pursuing the cheaters.