End of the pre-paid funeral rip-offs: Industry faces ban on cold calling amid concerns over pressure selling
Funeral plan providers face a major crackdown and a ban on cold calling amid concerns over pressure selling.
A pre-paid funeral plan allows you to lock into a set price so you are protected against soaring costs.
It is estimated that customers have bought more than 1.4 million funeral plans worth £4 billion, with 165,200 sold in 2019 alone.
It is estimated that customers have bought around 1.4 million funeral plans worth £4 billion, with 165,200 sold in 2019 alone
But an investigation by the City watchdog has exposed evidence of mis-selling, high-pressure sales tactics and unfair charges.
Its report revealed that some third-party firms are pocketing as much as £900 in commission for each plan they sell.
There are also high fees for paying in monthly instalments, which can hike the overall cost by up to 26 per cent.
Some payment terms run for 25 to 30 years, with firms refusing to pay out unless relatives cover the remaining balance when the customer dies.
The regulator also raised concerns around the financial soundness of some providers, which could mean families are at risk of losing their money.
And there is a growing number of ‘orphan’ plans left unclaimed because loved ones didn’t know about them.
The Financial Conduct Authority has now said that the funeral plan market, which is currently unregulated, will come under its remit from July 2022.
The regulator plans to enforce new rules to prevent customers being bullied into purchasing unsuitable plans, with a ban on commission payments to third parties.
It will also outlaw cold calls and ensure prices are set more fairly. Fees must reflect the true cost of a service and not be used to boost profits.
Customers will also be able to refer complaints to the Financial Ombudsman Service.
And they will be able to claim their money back from the Financial Services Compensation Scheme if their provider goes bust.
There are around 60 providers, with up to 3,000 middle-men firms selling the plans on their behalf. The companies that do not meet the FCA’s standards will be ordered to cease trading.
The proposals are a victory for Money Mail, which has long campaigned for regulation after exposing how customers are being let down by misleading sales practices.
James Daley, of Fairer Finance, says: ‘Much of the bad practice that we identified four years ago is still prevalent at the margins of the sector, so these new rules can’t come soon enough.
‘The FCA’s consultation is an important step forward — and we’re pleased that they are planning to clamp down on the enormous commissions that have been prevalent in recent years.’
Sheldon Mills, the FCA’s executive director of consumers and competition, says: ‘Pre-paid plans can help people and their families manage the cost of a funeral. It is vital that consumers have confidence their plan will deliver the funeral they expect at a fair value.’