HD57 - The Business Practices of For-Profit Cemeteries
Executive Summary: House Joint Resolution No. 73, agreed to during the 1988 General Assembly Session, established a joint subcommittee to study the business practices of for-profit cemeteries, including preneed contracts. The subcommittee was asked to consider whether for-profit cemeteries should be regulated to a greater extent than they are currently and to review the use of preneed contracts by for-profit cemeteries. The subcommittee reviewed the current system of regulation of for-profit cemeteries. Under existing Virginia law, there is no single regulating body governing the operation of for-profit cemeteries. Commissioners of Accounts are given the responsibility of enforcing requirements applicable to perpetual care and preneed trust accounts. There is no central receptacle for handling or monitoring consumer complaints related to the cemetery industry. There are no training or licensure requirements for cemetery owners or others who provide cemetery related goods and services. There are no requirements that consumers receive an itemized list of perpetual care fees or charges for cemetery related goods and services such as the Federal Trade Commission requires for funeral goods and services. Chapter 3 of Title 57 contains the following provisions applicable to practices of for-profit cemeteries. Article 3.1 of Chapter 3 provides for endowment trusts for perpetual care of cemeteries. Is it unlawful to sell or offer to sell a cemetery lot and represent that it will be perpetually cared for unless adequate provision has been made for perpetual care. Any person who develops a cemetery must deposit a minimum of $25,000 in an irrevocable trust fund in a bank or savings and loan association in Virginia before any sale is made. Thereafter, ten percent of the receipts from the sale of lots, interment rights, crypts and niches must also be deposited in the account. If the trustee is not a qualified bank or savings and loan association, the trustee must furnish a fidelity bond of fifty percent of the value of the principal of the trust fund. The bond is deposited with the commissioner of accounts of the county or city where the owner, operator or developer of the cemetery has his principal place of business. The trustee is required to furnish a report to the appropriate commissioner of accounts annually. Cemetery owners are also required to provide to the commissioner of accounts annual reports of all transactions subject to the perpetual care trusting requirement. Article 6 of Chapter 3 governs preneed burial contracts. The article provides protection for purchasers of burial property or services when delivery of the property or services may be delayed 120 days. The article requires that 40% of the retail purchase price be placed in a special preneed trust account. The sale of graves, right of use, sepulcher or interment rights is not covered by the article. Sellers must keep detailed accounts of all contracts and transactions subject to the preneed trusting requirement and must submit reports annually to the commissioner of accounts in the county or city where the cemetery is located. A major difficulty in evaluating effectiveness of current cemetery regulations is the fact that there is no central receptacle for complaints. Consumers direct complaints to a variety of sources, including consumer offices, the Board of Funeral Directors and Embalmers, Commonwealth's attorneys, police departments, zoning and health boards, the Virginia Cemetery Association and the Cemetery Consumer Service Council. A number of these organizations refer complaints to each other, while some feel they are the proper receptacle for complaints. Registered complaints include alleged misleading advertising practices, lack of maintenance and vandalism of cemetery property, substitution of merchandise and hidden and increased fees and charges. At the time of this study, there were also two criminal cases pending against cemetery owners in Southwest Virginia for failing to properly trust funds. The joint subcommittee held six meetings, including a public hearing and a tour of a local cemetery. The subcommittee heard from numerous representatives of the cemetery industry. The Virginia Cemetery Association, a voluntary association representing sixty-six of the eighty-six for-profit cemeteries in Virginia, actively participated in the subcommittee's proceedings. The subcommittee studied the advertising and pricing practices of for-profit cemeteries and the operation of both perpetual care and preneed trust regulations. In addition, the subcommittee members reviewed cemetery laws in other states. The subcommittee noted that there are significant differences between the requirements for cemetery goods and services and funeral goods and services and determined that, because of the diversity between the two industries, parallel regulations were not appropriate. During its proceedings, the subcommittee heard from individual consumers and consumer groups, including the American Association of Retired Persons. The subcommittee determined that providing a receptacle for handling and monitoring consumer complaints was of primary importance. In addition, adequate disclosure provisions should apply to preneed purchases. The subcommittee determined that the current system of enforcing cemetery regulations through commissioners of accounts is not effective. The subcommittee distributed a questionnaire to all commissioners of accounts in the Commonwealth. Of the forty-five commissioners responding to the survey, approximately one-quarter felt the system was not effective, one half felt the system was effective and one quarter had no opinion. According to the results of the survey and statements of the commissioners of accounts who testified before the subcommittee, there is little consistency in how commissioners handle cemetery companies. A major problem is that commissioners do not know, and cannot easily determine, who is required to report to them. The handbook for commissioners does not mention duties related to cemeteries and some commissioners did not know that cemeteries were required to file reports with them. |
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