Most Funeral Homes Escape Red Flag Regulations Under New Bill
by: T. Scott Gilligan,NFDA General Counsel
Posted January 7, 2011
Last month, Congress passed Senate Bill 3987 that will relieve most funeral homes from having to comply with the FTC Red Flag Regulations took effect January 1, 2011.
The Red Flag Regulations, as proposed by the FTC, currently require any business that regularly enters into deferred payment arrangements with consumers to adopt and implement an Identity Theft Prevention Program. This would include any funeral home that routinely sets up or accepts installment payments for preneed or at-need funeral services. In anticipation of the January 1, 2011 enforcement date, many NFDA member implemented Identity Theft Prevention Plans using NFDA's sample plan that is available on NFDA Faxback.
Senate Bill 3987 restricts coverage of the Red Flag Regulations only to those businesses that:
- Obtain or use credit reports in connection with credit transactions;
- Furnish information to consumer reporting agencies in connection with credit transactions; or
- Advance funds to or on behalf of a consumer with the understanding that the consumer will repay the business.
Although this third test looks like it would include funeral homes that pay for cash advance items on behalf of funeral consumers, the bill specifically excludes funds that are advanced for expenses incidental to a service provided by the business. Therefore, simply because a funeral home advances cash advance payments in connection with a funeral, it would not be covered by the Red Flag Regulations.
As a result of Senate Bill 3987, funeral homes will not be covered by the Red Flag Regulations unless they use credit reports when extending financing to consumers or they furnish information to credit reporting agencies.
As a benefit of membership, NFDA members may contact Gilligan at 513-871-6332 for a free legal consultation.
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