In January, the Treasury made legislation bringing the sale and administration of funeral plans within the FCA’s remit, following concerns raised in the media and by consumer groups about the conduct and financial soundness of some pre-paid funeral plan providers. This will happen from July 2022. The consultation lays out how the FCA will improve standards in the sector.
The FCA’s proposals intend to ensure that:
- products meet the individual needs of consumers – we will ban the sale of products which do not provide for funeral services in almost all circumstances on the individual’s death
- plans are sold fairly, including a ban on cold-calling to prevent consumers being pushed into taking out plans which may not be right for them
- the price of plans are fairly valued, with firms stopped from using additional fees to drive profits and a ban on commission payments to intermediaries
- consumers have access to the Financial Services Compensation Scheme and Financial Ombudsman Service from day one, should things go wrong
Sheldon Mills, Executive Director of Consumers and Competition said: ‘Pre-paid funeral plans can help people and their families to manage the costs of a funeral. It is vital that consumers have confidence that their plan will deliver the funeral they expect at a fair value.
‘The measures proposed today will help ensure that the industry serves consumers well.
‘It’s imperative the industry prepares now, ahead of its upcoming entry into financial services regulation.’
What firms must do to prepare
All firms in this sector now need to consider how FCA regulation impacts their business and begin to make the necessary preparations.
Over the coming months, the FCA will be providing a range of help and guidance to assist firms in preparing applications and getting ready to be regulated by the FCA.
They will need to:
- apply directly to the FCA for authorisation from September 2021 or, if appropriate, submit notification to become an Appointed Representative
- apply as soon as possible after the application gateway opens in September 2021 – applications made after 1 November 2021 may incur a higher application fee
- ensure they meet our standards to be authorised and, once authorised, follow our rules
- pay an application fee and then annual fees, based on turnover
Those funeral plan providers that cannot meet the FCA’s standards, set out in this paper, or those which are not authorised before July 2022, are expected to cease trading in relation to funeral plans in an orderly way. This should take place before FCA regulation takes effect. Carrying on regulated business without authorisation after rules take effect is a criminal offence.
The FCA anticipates that the Funeral Planning Authority will continue to regulate providers of prepaid funeral plans registered with them, until FCA regulation begins in July 2022.
The FCA is asking for feedback on the draft rules and is asking for responses by 13 April 2021.