FTC corrects 'cash advance' ruling
by ICFA General Counsel Robert M. Fells, Esq.
In early July, the Federal Trade Commission published an eagerly anticipated advisory opinion letter that responded to the question of whether a Texas trial court is correct in ruling that "all goods or services purchased from a third-party vendor, even though not included on the contract, are cash advances" under the Funeral Rule. The court's ruling has the potential for making all funeral home contracts unlawful if they are inconsistent with the court's interpretation. The FTC letter emphatically advised that the court's interpretation of cash advances "is incorrect" and "sweeps far too broadly."
In the litigation, Hijar v. SCI Texas Funeral Services Inc., an El Paso circuit court held that all goods or services obtained by a funeral home from a third party must be treated as "cash advance items" under the Funeral Rule, and the markup for each item must also be disclosed (see the December 2004 Washington Report).
The items the court held to be cash advance items when purchased from a third party and resold to persons arranging funerals include "direct cremation; immediate burial; forwarding remains; receiving remains; embalming; refrigeration; other preparation; transportation; casket/cremation casket; alternative container; outside enclosure; clothing/shroud; memorial booklet; service folders/prayer cards; acknowledgement cards; flowers; shipping container; crematory services; crucifix; escorts; certified copies; public transportation; outside funeral director's expense; vault installation; clergy/religious facility; musicians or singers; hairdressing; and permits."
The FTC said it "believes the court is incorrect in ruling that all goods or services purchased from a third-party vendor are cash advance items. This interpretation sweeps too far broadly, potentially bringing within its scope every component good or service that comprise a funeral. This was not and is not the commission's intention in the 'cash advance' provisions of the rule. In our opinion, the term 'cash advance item' in the rule applies only to those items that the funeral provider represents expressly to be 'cash advance items' or represents by implication to be procured on behalf of a particular customer and provided to that customer at the same price the funeral provider paid for them."
The FTC advisory opinion further stated that the provisions of the Funeral Rule "require a funeral provider who is charging a customer more for a cash advance item than the funeral director paid for it to disclose that material fact (i.e., the existence of a markup, but not the amount) to the customer on the statement of funeral goods and services selected by the customer. ... The commission believes that reasonable consumers generally understand that the price charged by a retail seller-including funeral providers-includes profit."
In discussing the issue of disclosing the funeral provider's markup, the FTC advisory opinion stated: "It is worth noting that the text and structure of the rule overall reflect the fundamental distinction between cash advance items and non-cash items. For items that are typically non-cash advance items, the rule requires disclosure of the retail price of specified goods and services offered for sale by a funeral provider. An obvious example is the rule's treatment of caskets, for which it requires a separate price list containing only the funeral provider's retail price."
In other words, the Funeral Rule requires only the disclosure of the retail price of non-cash advance items, and only a disclosure if a service fee has been added to a cash advance item-not the amount of the fee itself. The FTC advisory opinion affirms the funeral profession's longtime understanding that in no instance does the Funeral Rule require the disclosure of the amount of the markup added to any goods or services.
The ICFA has been the most proactive among the national trade associations in urging the FTC to clarify the requirements of the "cash advance" provisions of the Funeral Rule, not only due to the Texas litigation, but also as the result of three class action lawsuits filed in California alleging the same erroneous interpretation of the Funeral Rule. The complete text of the FTC advisory opinion can be viewed on the FTC Web page at www.ftc.gov/os/2005/07/050707funeralruleadvoopin.pdf
New junk fax law helps businesses
On July 9, President Bush signed into law S. 714, the Junk Fax Prevention Act of 2005, which blocks new regulations by the Federal Communications Commission that would have prohibited businesses from sending fax messages to their customers without prior written permission.
Under the new law, unsolicited fax messages may be sent when the there is an "existing business relationship" between the parties, a term broadly interpreted. However, the fax message must also contain a conspicuous notice on its first page stating that the recipient may request not to be sent any additional faxes. Opting out must be "cost free" and businesses must be able to receive opt-out requests 24 hours a day, seven days a week. Once notified, an organization is prohibited from sending unsolicited faxes to a party that has opted out.
In addition, fax numbers must be obtained either directly from the recipient or from a published directory, advertisement or Internet site where the recipient has listed his or her fax number. The FCC regulations, first proposed in 2003, were opposed by a broad range of over 600 businesses and trade associations, including the ICFA, which joined the "Fax Ban Coalition" to reverse the FCC regulations.
It is important to note that sending unsolicited faxes to parties where there is no business relationship is still illegal under the Telephone Consumer Protection Act of 1991. The new law requires the FCC to report annually to Congress regarding complaints, and permits the FCC to initiate a rulemaking proceeding to establish time limits on the definition of the "established business relationship" exemption.