FCA Funeral Plan Regulations

The Financial Conduct Authority (FCA) has confirmed the rules funeral plan providers have to follow when new regulations take effect from 29^th July 2022.

The new rules will introduce high standards in the funeral plans market and will enhance protection in the funeral plans market.  Firms are required to ensure that plans are sold fairly, perform as expected and provide value for money.

Under the new rules:

• Those who sell funeral plans are subject to full checks on their fitness to operate to improve governance standards and oversight.
• Commission payments to intermediaries will be banned to ensure products represent fair value Funeral instalment plan products will always deliver a funeral (after a moratorium period) as we will be banning those that don’t guarantee this
• Funeral instalment plan products will always deliver a funeral (after a moratorium period) as we will be banning those that don’t guarantee this
• Cold calling will be banned and new standard on advertising will be implemented to ensure plans are sold fairly

Consumers and Competition Executive Director at the FCA Sheldon Mills commented on the new rules “The new rules will drive up standards and ensure funeral plans provide customers with comfort and certainty that their affairs are in order.

Consumers should receive a product matching their needs and expectations.  Banning of all commission payments to intermediaries will make sure products offer fair value as the harm of cold calling has raised much awareness”.

Under Government legislation consumers must be aware that funeral plan providers will not come under the regulation until 29^th July 2022, so they will not be able to make a complaint should their provider fail to the Financial Ombudsman Service (FOS) or be protected from the Financial Services Compensation Scheme (FSCS) before that date.

Consumers should still be aware should they receive any cold calls before the funeral plans ban comes into force as high-pressure sales tactics can result in consumers taking out products not suitable for their needs.

Consumers that are looking into buying a pre-paid funeral plan before the regulations should carefully decide on the options and whether the product is right for them. Prior to paying, consumers should understand what their plan does and doesn’t provide and any extra charges that maybe applicable.

Firms should be preparing for authorisation now and those that are wanting to continue conducting funeral plan activities after the regulation should start to prepare now so they can apply for authorisation as soon as possible after the gateway application opens in September 2021.

Applications made after November 2021 will be subject to an increase of 40% to the application fee.

Firms that are not authorised or do not become Appointed Representatives by 29^th July 2022 before the FCA regulation takes effect will be required to cease trading in relation to funeral plans.  It will be a criminal offence for plan providers to carry out funeral plan contracts without authorisation from 29^th July 2022.

If funeral plan providers are not to apply for authorisation or withdraws its application or an application is refused, should stop selling new plans from that point in time.

Any providers in this position before 29^th July 2022 must, transfer their existing books of business or wind down in an orderly way.

It is unacceptable and maybe unlawful for plan providers to sell new plans which they will not be able to deliver once the regulation has taken effect as they are not authorised to do so.

The FCA is now consulting the outcome for consumers in the even of a film failing to compile with the new regulation.

The new proposed rules are aimed to minimise harm to consumers and should a regulated funeral plan provider fail by ensuring a contract can be transferred to a new provider where possible , and that the FSCS can arrange continuity of funeral plan contracts or pay compensation if a firm is not able to meet its liabilities.

The proposals aim to reduce impact on FSCS levy payers by providing the FSCS additional power to help recover costs from failed firms.

Feedback has been asked for by the FCA on the draft rules by 31^st August 2021.

Funeral plan firms will have to adhere to the FCA’s high standards when they apply and once, they are regulated the FCA will ensure firms maintain these high standards through ongoing supervision.

After the industry has had time to adapt to the changes the FCA will evaluate the new regulatory regime.  The evaluation will examine the experience of consumers to determine whether the regime is delivering results.