2046135 Second Notice of Proposed Rulemaking to provide for the regulation of pre-need funeral contracts and services by funeral services establishments

DEPARTMENT OF CONSUMER AND REGULATORY AFFAIRS

 

SECOND NOTICE OF PROPOSED RULEMAKING

 

The Director of the Department of Consumer and Regulatory Affairs, pursuant to the authority set forth in section 22a of the District of Columbia Funeral Services Regulatory Act of 1984, effective October 3, 2001 (D.C. Law 14-28; D.C. Official Code § 3-420 (2007 Repl. & 2011 Supp.)) and Mayor’s Order 2007-216, dated October 5, 2007, hereby gives notice of the intent to adopt the following amendments to chapter 31 (Funeral Services Establishments) of title 17 (Business, Occupations, and Professions) of the District of Columbia Municipal Regulations to add a new section 3117 and to amend section 3199 in not less than thirty (30) days from the date of publication of this notice in the D.C. Register. 

 

The proposed rules provide for the regulation of pre-need funeral contracts and services by funeral services establishments. These rules include provisions for the types of pre-need funeral contracts, contents of valid pre-need funeral contracts, recordkeeping requirements, reports to the Board of Funeral Directors, cancellation of contracts, pre-need funeral contract funding, deposit of pre-need funds, and definitions.

 

This Second Notice of Proposed Rulemaking supersedes a previous Notice of Proposed Rulemaking that was published in the D.C. Register on December 9, 2011, at 58 DCR 10360.

 

Title 17, BUSINESS, OCCUPATIONS, AND PROFESSIONS, of the District of Columbia Municipal Regulations is amended as follows:

 

Chapter 31, FUNERAL SERVICES ESTABLISHMENTS, is amended by adding the following section:

 

3117                PRE-NEED FUNERAL CONTRACTS

 

3117.1             No person shall offer or sell a pre-need funeral contract, or make or offer such a contract, unless licensed by the Board as a funeral director and acting on behalf of a licensed funeral services establishment.  A licensee that offers such contracts shall be subject to the provisions of this section.

 

3117.2             All pre-need funeral contracts shall be in writing and substantially conform to the model set forth on the Department’s website (dcra.dc.gov, then clicking the “Licensing/Registration” tab, then choosing “Professional Licensing”), and shall contain all disclosures required by District and federal law.  A pre-need funeral contract shall:

 

(a)        Be written in clear, easily understandable language and state that it is not an insurance product;

 

(b)        Identify the funeral services establishment, its license number, the pre-need funeral contract purchaser, and the pre-need funeral contract beneficiary, if other than the pre-need funeral contract purchaser;

 

(c)        Clearly state whether the contract, or any portion thereof, is guaranteed or non-guaranteed as defined in § 3199.1;

 

(d)       Clearly disclose a complete list of services or supplies purchased;

 

(e)        State, if funds are to be placed in an escrow account, the amount to be deposited, the name of the financial institution holding the escrow account, the disposition of the interest, the fees, expenses, and taxes that may be deducted from the interest, and the contract purchaser’s responsibility for any taxes owed on any interest accrued;

 

(f)        State that the Board handles consumer complaints and list the name, address, telephone number, and email address of the Board;

 

(g)        State the terms of pre-need funeral contract termination, including that a portion of the funds may be retained as outlined in § 3117.6;

 

(h)        Provide that, if the services or supplies contracted for cannot be provided, the funeral services establishment shall furnish those services or supplies in substantially similar style and quality and that, pursuant to § 3117.6, the contract purchaser has the right to cancel the contract or consent to any services or supplies that will be substituted;

 

(i)         Disclose any penalties or restrictions, including geographic restrictions or the inability of the funeral services establishment to perform, on the delivery of goods, services, or pre-arrangement guarantee;

 

(j)         Specify the source of funding for the pre-need funeral contract;

 

(k)        Comply with all disclosure requirements required by the Board;

 

(l)         When applicable, contain an appointment by the contract purchaser of a person to assist with the pre-need arrangements, which appointment shall be reduced to a written appointee agreement, be signed by the funeral director and the contract purchaser, and be attached to the pre-need funeral contract as a valid part of the contract;

 

(m)       Contain the signatures of the licensed funeral director acting as an agent of the funeral services establishment and the contract purchaser and the date the contract was executed; and

 

(n)        Be provided to the contract purchaser, along with all other related executed forms and agreements.

 

3117.3             A licensee that offers pre-need funeral contracts shall:

 

(a)        Within ten (10) days of receipt, deposit all pre-need funds in a federally-insured interest-bearing escrow account;

 

(b)        Keep accurate accounts, books, and records of all pre-need transactions;

 

(c)        Keep a chronological listing of all pre-need funeral contracts. The listing shall include the name of pre-need purchasers, the name of contract beneficiaries, the date of the contract, how the contract was funded, whether any funeral goods or supplies are stored for the contract purchaser, and, if stored, a description of the funeral goods or supplies;

 

(d)       Retain all pre-need funeral contracts and reporting documents, including all insurance information and copies of filed or certified death certificates, for at least three (3) years after the death of the pre-need funeral contract beneficiary; and

 

(e)        Make all records related to pre-need funeral contracts available for inspection by the Department.

 

3117.4             Each licensee shall:

 

                        (a)        Within one hundred eighty (180) days of the effective date of this rulemaking, submit to the Board, on a form prescribed by the Board, the following information:

 

(1)        The total number of non-guaranteed and guaranteed pre-need funeral contracts maintained by the funeral establishment;

 

(2)        A list of the names of all individuals who have pre-need funeral contracts with the licensee; and

 

(3)        Any other information related to pre-need funeral contracts that is requested by the Board; and

 

(b)        No later than (30) days after the creation of a new pre-need funeral contract or the transfer, cancellation, or execution of an existing pre-need funeral contract, notify the Board of the name of the pre-need funeral contract beneficiary and whether any new contract is guaranteed or non-guaranteed.

 

3117.5             A licensee shall provide the pre-need funeral contract purchaser with a receipt for all monies received.

 

3117.6             A person who purchases a pre-need funeral services contract may terminate the contract before any services or supplies are furnished. Refunds shall be made in accordance with the following schedule:

 

(a)        If the pre-need funeral contract is terminated within thirty (30) days of the date of the contract, the entire amount paid, plus any interest accrued, shall be refunded; or

 

(b)        If the pre-need funeral contract purchaser terminates the contract more than thirty (30) days after the date of the contract, the pre-need funeral contract purchaser shall be refunded:

 

(1)        At least ninety percent (90%) of all consideration paid or delivered on nonguaranteed items;

 

(2)        At least ninety percent (90%) of all consideration paid for guaranteed items; and

 

(3)        All interest or income accrued on the contract.

 

3117.7             A pre-need funeral contract purchaser shall have the right to change the contract provider before the furnishing of the services or supplies contracted for under the pre-need funeral contract. However, if the pre-need funeral contract purchaser wishes to change the contract provider, the pre-need funeral contract must first be terminated and a new pre-need funeral contract must be executed.

 

3117.8             If a funeral services establishment sells its business to a new owner, the funeral services establishment shall notify the Board and file with the Board a list of all its pre-need funeral contracts and all corresponding bank records to account for all monies collected from the sale of the pre-need funeral contracts. The funeral services establishment shall also notify each pre-need funeral contract purchaser of his or her option of continuing the pre-need funeral contract or obtaining a refund under § 3117.6. 

 

3117.9             A funeral services establishment shall establish an individual escrow account for each pre-need funeral contract or a common escrow account for all pre-need funeral contracts.

 

3117.10           A funeral services establishment may transfer an escrow account from one federally-insured financial institution to another federally-insured financial institution. Within thirty (30) days of a transfer, a funeral services establishment must provide the new escrow account information to each pre-need funeral contract purchaser.

 

3117.11           Pre-need funds shall be subject to the following provisions:

 

(a)        With written permission from the pre-need funeral contract purchaser, the funeral services establishment may remove funds deposited and use the funds to purchase individual or group insurance coverage or establish a trust account;

 

(b)        Any interest or dividends earned by an individual escrow account shall accrue to the benefit of the pre-need funeral contract purchaser and shall be used only for the performance of the contract; and

 

(c)        The funeral services establishment shall not withdraw the pre-need funds from the escrow account, unless:

 

(1)        The services and goods have been provided to the pre-need funeral contract purchaser as agreed to in the contract; and

 

(2)        A copy of a filed or certified death certificate is obtained by the funeral establishment and filed in accordance with § 3117.3(d); or

 

(3)        The pre-need funeral contract purchaser, appointee, or his or her legal representative, submits a notarized statement and withdrawal request stating that the funeral services establishment may:

 

                        (A)       Cancel the prepaid contract; or

 

                        (B)       Transfer the monies to a named substitute; or

 

(4)        The funds are removed in accordance with paragraph (a) of this subsection.

 

3117.12           The Board shall investigate any violation of this section. A licensee found to be in violation of this section shall be subject to disciplinary action pursuant to section 9 of the Act (D.C. Official Code § 3-408 (2007 Repl.)) and the penalties provisions of section 18 of the Act (D.C. Official Code § 3-417 (2007 Repl.)).

 

3117.13           Nothing in this subsection shall be construed to prohibit the use of group or individual insurance coverage, or any other mechanism to fund a prearranged funeral, where monies do not come into the possession of a funeral director or funeral services establishment prior to the death of the beneficiary.

 

 

Section 3199, DEFINITIONS, subsection 3199.1 is amended by adding the following terms and definitions in alphabetical order:

 

Escrow account – a bank account held in the name of a funeral services establishment that is returnable to the pre-need funeral contract purchaser or paid to a third person on the fulfillment of specified conditions.

 

Federally insured – a bank account insured by the Federal Deposit Insurance Corporation or by the National Credit Union Administration.

 

Guaranteed pre-need funeral contract – a pre-need funeral contract for funeral services and goods that protects the purchaser from future price increases.  This type of contract may allow the funeral services establishment to retain all escrow funds deposits and insurance proceeds after performance of the pre-need funeral contract.

 

Licensee – a funeral services establishment licensed by the District of Columbia.

 

Non-guaranteed pre-need funeral contract – a pre-need funeral contract for funeral services and goods that does not protect the purchaser from future price increases.

 

Pre-need funds – monies received to pay for a pre-need contract.

 

Pre-need funeral contract – a contract, agreement, or mutual understanding, or any series or combination of contracts, agreements, or mutual understandings, which has for its purpose the furnishing or performance of funeral services, or the furnishing or delivery of personal property, goods, or services of any nature in connection with the final disposition of a dead human body, to be furnished or delivered at a time determinable by the death of the person whose body is to be disposed of, and are paid for in advance of the death of the pre-need funeral contract beneficiary, but does not mean the furnishing of a cemetery lot, crypt, niche, or mausoleum. A pre-need funeral contract can be either guaranteed or non-guaranteed.

 

Pre-need funeral contract beneficiary – the person upon whose death the pre-need funeral contract will be performed; this person may also be the purchaser of the pre-need funeral contract.

 

Pre-need funeral contract purchaser – a person who purchases a pre-need funeral contract.

 

Trust account – a bank account, usually interest bearing, in which a funeral establishment deposits money belonging to a client.

 

 

All persons desiring to comment on these proposed regulations should submit comments in writing to Helder Gil, Legislative Affairs Specialist, Department of Consumer and Regulatory Affairs, 1100 Fourth Street, S.W., Room 5134, Washington, D.C. 20024, or via e-mail at [e-mail], not later than thirty (30) days after publication of this notice in the D.C. Register.  Copies of the proposed rules can be obtained from the address listed above.  The agency can be reached by telephone at 202-442-4400. A copy fee of one dollar ($1.00) will be charged for each copy of the proposed rulemaking requested. Free copies are available on the DCRA website at dcra.dc.gov by going to the “About DCRA” tab, clicking “News Room”, and clicking on “Rulemaking.”