In the last couple of weeks, I have had friends deal with funeral arrangements. We started talking about how expensive they are and how many scams there are out there regarding funerals, every day getting a phone call or literature in the mail. So I contacted our partner James Marshall, public affairs specialist in the FBI Miami Office to please educate us so that we don’t fall for any scams.
Below is the information he provided:
Never underestimate the desire of a scam artist to earn a dishonest buck. Fraudsters know that one of the best ways to rip-off consumers is when they are most vulnerable – such as when they are preparing for their final expenses. Recently, the FBI shut down a $450 million multi-state prepaid funeral fraud scheme that victimized some 97,000 customers in 16 states.
According to the Federal Trade Commission, millions of Americans contract to prearrange their funerals and prepay some or all of the expenses involved. Laws regulate the industry to help ensure that these advance payments are available when they’re needed. However, protections vary widely from state to state, sometimes providing a window of opportunity for unscrupulous operators.
In the case mentioned above, James “Doug” Cassity and his Missouri-based company called National Prearranged Services Inc. (NPS) defrauded purchasers of prearranged funeral contracts from about 1992 to 2008. Here’s how it worked:
What NPS told its customers: After discussing what the customer wanted, a price would be agreed upon and payment accepted. NPS would make arrangements with the customer-designated funeral home. Then a third party would put the transacted funds into a trust that could be only used for safe investments in the name of the customer.
What NPS didn’t tell its customers: The company didn’t put all of the customer’s funds into a trust or life insurance policy, but instead brazenly altered application documents (changing deposit amounts, naming itself as a beneficiary, converting whole life insurance policies to term life) and used the money for unauthorized purposes such as personal enrichment. Additionally, NPS routinely lied to state regulators about its practices. The complex case began in 2008 and ended in November 2013, when six co-conspirators were finally brought to justice.
How do you protect yourself? Before entering into any contract, do your due diligence on the other party. Get references, check with the Better Business Bureau, etc. The Federal Trade Commission offers advice before prepaying for funeral goods and services:
• Know what you are buying — is it just merchandise, like a casket, or are you purchasing funeral services as well?
• Find out what happens to the money you’ve prepaid.
• Ask what happens to the interest income on money that is prepaid.
• Find out if you are protected if the firm you are dealing with goes out of business.
• Can you cancel a contract and get a full refund if you change your mind?
• What happens if you move to a different area or die while away from home?
• Tell your family about your plans and where your documents are located.
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Thank you, Mr. Marshall, for your assistance. God only knows how many seniors have been hit with this issue of prepaying so that their children wouldn’t have to deal with that expense.