The Financial Conduct Authority’s has warned consumers to only buy a funeral plan from one of the providers or appointed representatives that it has authorised.
The City watchdog has taken pre-paid funeral plans under its remit from today (July 29), meaning all funeral plan providers will need to follow the FCA rules.
These include a ban on cold calling and commission payments, as well as changes to appointed representative permissions and high standards on governance and financial resilience.
Funeral plan holders will be able to refer complaints about a firm to the ombudsman and will be covered by the Financial Services Compensation Scheme, if their provider goes out of business.
Following legislation from parliament, the FCA has authorised 26 providers, who together hold approximately 1.6mn plans, making up 87 per cent of the market.
Last week the regulator published the list of unregulated providers, while a full list of authorised providers will be available from the FCA website from tomorrow.
The FCA has said 13 firms that applied before March 1, 2022, but have not been authorised, have until 31 October 2022 to transfer their plans to authorised firms or refund their customers.
These plans are not covered by FCA regulation, meaning there is no protection by the Financial Ombudsman Service and FSCS until they are transferred to authorised providers, the FCA has warned.
FCA executive director Emily Shepperd described the new authorisation process as “robust” and said the FCA has worked “tirelessly” to assess funeral plan providers.
“We are pleased that 87 per cent of the market is now under regulation. With our new rules in place, consumers will be better protected when they need it the most,” Shepperd said.
She added that it was unfortunate that a number of firms chose to exit the market, “leaving customers, who had sought peace of mind for their loved ones, understandably worried".
“It is a good outcome for consumers that some providers have stepped in to provide funerals for the customers of these providers at short notice. We also continue to engage with the industry while it works on a longer-term solution.”
These new regulations follow the confirmation of the FCA’s plans to introduce a consumer duty from July 2023, which will also apply to funeral plan providers.