Contents

Chapter 17
The case for reform

Lack of transparency in funeral service pricing

17.42During our consultation, the greatest number of complaints we heard from the public about funeral directors related to their methods of communicating the costs of funeral services. Many funeral directors do not advertise funeral prices on their websites or in advertising material but rather will advise on costs after meeting with a client to discuss their needs. Some will provide a quote, but many provide an estimate.

17.43Those funeral directors who advertise pricing on their websites or in other promotional material usually provide the price for various funeral packages. The individual components of these packages are described but not the price of each individual component. Within an estimate or a quote, some funeral directors will provide a breakdown of the costs of each component of the funeral service offered, but many only partially do so or do not do so at all.

17.44Most funeral directors incorporate a significant portion of their charges into a generic service fee or professional services charge. This usually encapsulates things such as the time spent by the funeral director and other staff collecting and transporting the deceased; meeting with the family to discuss the funeral service; arranging and attending at the funeral service; arranging the death notice; and completing and registering documentation for the Registrar-General of Births, Deaths and Marriages. It also includes overheads such as vehicles, buildings and equipment and the fact that funeral directors are on call 24 hours a day.

17.45The complaints we heard about the lack of specification of component prices included that:

17.46Many consumers are very unhappy with the generic “professional service fee” commonly charged by funeral directors. A number of people believed that extra charges or unwanted work (for example, embalming of the body when this was not requested) were hidden in this fee. Instances have been cited to us of extra costs being included in the professional services fee without itemisation or approval, including in a submission from the Citizens Advice Bureau. One example mentioned was of a funeral that cost almost double the estimated price. It transpired that the cost of employees serving the catered food was the source of the extra cost. However, the funeral director had not informed the client of this cost beforehand and nor was it itemised in the invoice.

17.47Another common complaint was that sometimes funeral service providers were charging a mark-up on disbursements (goods or services provided by a third party and then claimed back from the consumer) without disclosing that they were doing so. Some consumers felt that this practice was unfair.

17.48Through our consultation, we tried to gauge the extent of this problem. We concluded that, while the number of reported problems with funeral sector pricing is low, they were still significant and are likely to be under reported. Consumer New Zealand advised that it receives about one complaint a month from its membership regarding funeral directors, with complaints generally related to costs and invoicing.352 The Citizens Advice Bureau estimates that approximately one or two complaints a month relate specifically to funeral directors. Most of these complaints are related to costs. Some community law centres told us they have sporadic cases relating to funeral directors’ costs, but most cases concerned problems with paying funeral invoices.

17.49These groups indicated that the number of known cases probably did not reflect the extent of the problem because consumers reported that it was difficult to complain when they were grieving. It is also likely that the relatively low levels of reporting could be due to the absence of a comprehensive and accessible complaints process. We note that FDANZ does not deal with cost complaints as part of its internal disputes process. This leaves the Disputes Tribunal as the only forum for resolving complaints of a cost nature. The Ministry of Justice does not record whether complaints filed with the Disputes Tribunal relate to funeral services.

17.50Currently there is no legislation specifically regulating contracts for funeral services. Therefore, the price the consumer pays for a funeral is governed by general contract law and other generic consumer protection statutes as we described above, such as prohibitions on providing misleading information or engaging in anticompetitive behaviour.

Submissions

17.51In Issues Paper 34 we asked whether funeral service providers should be required to proactively disclose the costs of different components of their services.353 Apart from those in the funeral sector, the overwhelming majority of submitters were in favour of component price disclosure. They cited reasons of transparency, consumer options (being able to pick and choose the services required) and consumer protection. Many submitters wanted funeral service providers to disclose which parts of a funeral service package were required by law and which were not so that they had more information to inform a choice to have only some component parts of a funeral service.

17.52Of the 39 submissions from the funeral sector to this question, the responses were equally divided for and against disclosure of prices for the components of a funeral. Many interpreted the question to mean that they would need to provide a fixed quote, which they believed would be too difficult since each funeral is individualised and is specifically based on what the family wants. Even those who were in favour of disclosure noted that people changed their minds, often with little notice, and it was therefore difficult to give a fixed cost. Most funeral service providers in the industry, including the organisations NZIFH, FDANZ and NZEA, suggested instead that a firm estimate should be given to people once the funeral service provider had met with the family and become aware of what they wanted. Most funeral sector submitters said they already did this.

ConclusionTop

17.53Currently, the lack of legislation concerning commercial aspects of the funeral industry indicates an assumption that consumers in this industry will have sufficient information and bargaining power to contract for the services they want at a fair price. However, we have concluded that this market has some unique characteristics that make consumers particularly vulnerable. That vulnerability means that the balance of power and information is tilted away from the consumer and warrants some form of legislative control.

17.54Consumers of funeral services may be particularly vulnerable for the following reasons:

17.55Research commissioned by the Office of Fair Trading in the United Kingdom concluded that buying a funeral is a classic “distress purchase”.356 Jessica Mitford, a United States author, calls it an impulse purchase due to necessity.357 We agree with these researchers that consumers of funeral services are different to those in other markets and therefore need specific protections.358
352Consumer NZ membership comprises over 80,000 people: Consumer NZ “Learn more” Consumer <www.consumer.org.nz/general/learn-more-2>.
353Law Commission, above n 8, at 173, q 11.
354Mark Lino “The $3,800 Funeral” American Demographics (New York, July 1990) as cited in Terrance G Gabel, Phylis Mansfield and Kevin Westbrook “The Disposal of Consumers: an Exploratory Analysis of Death-Related Consumption by Terrance G Gabel, Phylis Mansfield, and Kevin Westbrook” (1996) 23 Advances in Consumer Research 361. “Direct disposal,” which typically means a cremation without any additional services, may be available in some areas for $2,000 to $3,000. A Work and Income New Zealand funeral grant of about $1,900 is sometimes available. In 2011/12, the grant was provided in respect of one in every 5.5 deaths.
355Expert Advisory Group on Solutions to Child Poverty Problem Debt and Poverty (Children’s Commissioner, Working Paper no 13, August 2012) at [22].
356Office of Fair Trading Funerals: A report of the OFT inquiry into the funerals industry (Government of the United Kingdom, OFT346, July 2001) at 43 and 50. Research conducted by the International Institute of Health and Ageing, University of Bristol.
357Jessica Mitford “The Undertaker’s Racket” The Atlantic (online ed, Washington (DC), June 1963).
358Jessica Mitford The American Way of Death Revisited (Vintage, New York, 2000) as cited in Victorian Government National Competition Policy Review of the Cemeteries Act 1958 (31 December 2000) at 11; Office of Fair Trading, above n 356; and Family and Community Development Committee Inquiry into Regulation of the Funeral Industry (Parliament of Victoria, Parliamentary Paper 175, November 2005).