Funeral plans market will soon be regulated, but victims of cowboys in the sector must be compensated, says JEFF PRESTRIDGE
It will not be long before the funeral plans market is regulated by the Financial Conduct Authority. July 28, start day, can’t come soon enough – for those wishing to buy a plan with confidence that it is not built on a false promise.
Providers proud of the value-for-money products they sell, too, will welcome the much-needed change.
If I’m reading the runes correctly, the FCA will issue a list of plan providers it is minded to authorise in the next couple of weeks. It is doing this to assure the public that there are reputable plan companies that can be trusted.
Heartbreak: It’s imperative a compensation scheme for victims of funeral plan cowboys is put in place
When published, the list should bring a degree of order to an industry whose reputation has been mired in scandal in recent months.
The biggest offender, by a country mile, is Wakefield-based Safe Hands Plans that has left 47,000 customers with near worthless plans. Their money was meant to be invested in a ring-fenced trust fund, ready to be released when it was time for the funerals promised to be honoured.
But, as The Mail on Sunday has reported in recent weeks, it now appears most of the trust’s assets are either near worthless or have disappeared offshore, probably never to be seen again. This is despite the fact that independent trustees were meant to ensure customers’ money was safeguarded.
What has happened at Safe Hands looks like fraud. If so, I trust that those responsible will feel the full force of the law. It’s about time the courts started treating financial crime as seriously as it does other forms of theft. Robbing the elderly is a despicable crime.
While Safe Hands will probably turn out to be the worst example of a funeral plan provider abusing its position of trust to cheat customers, there is no doubt that other dubious companies will fall by the wayside before July 28.
Last week, the FCA issued a consumer alert warning people not to buy plans from providers Empathy and Unique.
Empathy, it says, will not be allowed to sell plans from July 28 without committing a criminal offence.
Already, as happened with Safe Hands, Empathy customers are complaining that they are not being allowed to withdraw their money, despite a guarantee given when they bought their plans.
Based in Sale, Greater Manchester, the director behind this company has previous form. According to our sleuth columnist Tony Hetherington, they were behind a claims management company that was shut down by regulators.
Unique Funeral Plans, the FCA says, has been misleading buyers of its plans (more than 15,000 of them) by claiming their money is automatically put into a trust fund overseen by Sterling Trust Corporation. It’s a lie, as Sterling has confirmed.
Given that Unique has not applied for FCA authorisation, its accounts are overdue (the brand is owned by an outfit called Fox Milton & Co), the outlook for customers is bleak.
According to the FCA, 33 out of 65 plan providers on its database are waiting to be authorised. A further 16 are in the process of transferring their book of customers to a company that will continue to trade after July 28. Five have not sought authorisation.
That leaves 12 that have withdrawn applications to be authorised. These companies are unlikely to be selling funeral plans after July 28.
Two outcomes are likely. One, their existing plans are taken over by a rival company which will be regulated. If so, that is a reassuring outcome.
Or, they go out of business because the firms are not fit for purpose, the trust fund does not have sufficient assets to meet all the promises made to customers, and no rival wants to buy the plans. All very worrying.
How many companies are in this second category remains to be seen. But some of the big plan businesses are already looking at ways to mitigate any damaging fall-out.
They are scheduled to meet in just over two weeks with a view to devising a compensation scheme for those people with broken plans.
It’s imperative such a scheme is put in place. Otherwise, shamefully, confidence in the funeral plans market will remain fractured.