The Journal. - The Deal to Hide Bad Actors in the Funeral Industry

Episode Date: February 15, 2024

Unethical funeral homes have exploited grieving customers for decades. What consumers may not know is that many of the industry’s bad actors have been hidden from the public thanks to a sweetheart deal struck between the Federal Trade Commission and the funeral industry more than 25 years ago. WSJ’s Dominique Mosbergen unpacks her multi-year investigation. Further Reading: - How the Funeral Industry Got the FTC to Hide Bad Actors  Further Listening: - FTC Chair Lina Khan on Microsoft Merger, ChatGPT and Her Court Losses  Learn more about your ad choices. Visit megaphone.fm/adchoices

A few years ago, our colleague Dominique Mossbergen was at a Fourth of July barbecue where she struck up a conversation with someone who's a funeral director. While everyone else was enjoying the Fourth of July festivities, this funeral director and I were in the corner and I was asking her all these questions about it. They talked a lot about her job and what it's like. And then the funeral director said something in passing that stoked Dominique's interest. You know, I remember her saying something about how the funeral industry has a bad reputation for price gouging customers and being notorious for certain unscrupulous practices. And that really sparked this question in my mind.

Is it true that many funeral homes are taking advantage of customers at moments of vulnerability? And I wasn't sure what the answer to that question was. And that sent Dominique on a multi-year journey. She spoke to grieving families and funeral directors. She went through thousands of pages of documents. And she found that there are bad actors in the funeral industry. And many of them have been hidden

from the public, thanks to a 25-year-old deal between the industry and regulators. Welcome to The Journal, our show about money, business, and power. I'm Kate Leinbaugh. It's Thursday, February 15th. Coming up on the show, how unethical funeral homes have exploited grieving families for decades. With Uber Reserve, you can book your Uber ride in advance. 90 days in advance. Perfect for all you forward thinkers and planning gurus.

Reserve your Uber ride up to 90 days in advance. Uber Reserve. See Uber app for details. Most people at some point in their lives are going to have to deal with making funeral arrangements. And it's a big expense. In the U.S., the median cost of a funeral exceeds $8,000. But it can be much higher depending on the cost of the casket and what services are provided. It's, you know, a really strange purchase because you're making it, especially if it's for the arrangement of a loved one, you're making it at a time when you're really vulnerable and grieving. And these purchases can be really expensive. and grieving. And these purchases can be really expensive. And so it seems like this really difficult combination of, you know, you're spending a lot of money at a time when you

kind of have grief brain and maybe you're not making the most sound decisions. As Dominique started looking into the funeral industry, she found that its bad reputation went back decades. And it got a lot of attention from a book that was published in the 1960s, titled The American Way of Death. The American Way of Death, about the rackets of the undertaking business, was a sensation. In an interview in the 1980s, the author Jessica Mitford talked about what set her on the journey to investigate funeral homes. And it started with some trade magazines. You know, I started reading these ones. I found a whole wonder world of the mortuary,

which I hadn't known existed. Her book showed that some funeral homes took advantage of grieving customers and upsold them. This prompted federal regulators, specifically the Federal Trade Commission, to start looking into the industry. And what they discovered was that there were at least some of these deceptive practices. And I think the FTC was very concerned specifically around price secrecy

and kind of a lack of price transparency in the industry. The FTC really believed that if customers were given as much information as possible about purchases, then those customers could make the best decisions for themselves. then those customers could make the best decisions for themselves. This led the FTC to take action. In 1984, it enacted the so-called funeral rule. Its purpose was to increase price transparency in the funeral industry, protect consumers from unfair and deceptive practices at funeral homes, specifically around pricing and information disclosures.

How does the FTC enforce the funeral rule? When the funeral rule was first put into effect, the FTC relied on customer complaints. And if they found that a funeral home was guilty of violating the funeral rule, they would in some cases send a warning letter or if it was more egregious, they could pursue some sort of civil litigation and basically sue the funeral home and fine them. them. The FTC would also send out undercover agents, like secret shoppers, who would check on compliance. And when they found violations, the FTC would sue the funeral homes. But the lawsuits were cumbersome and costly. And the funeral industry's main lobbying group, the NFDA, or the National Funeral Directors Association, felt these lawsuits were hitting their reputation. So in the 1990s, the lobbying group approached the FTC with an idea. And the NFDA said, why don't we come up

with some sort of arrangement that could benefit all parties? And that proposal was for the Funeral Rule Offenders Program. The Funeral Rule Offenders Program. That's like the penalty box. Yeah, absolutely. And I mean, it's pretty, it's pretty literal, the name. And the NFDA basically proposed to the FTC this program. And what they said was, you know, when a funeral home is found to have violated the funeral rule during the secret shopper investigations, instead of going through the litigation route, they would have the option to join this program that the NFDA itself would run. They would have the option to join this program that the NFDA itself would run. If a funeral home violated the rule, it would be given the option to make a payment to the government and take a training course that was run by the funeral industry group.

And if it completed the training, its violations wouldn't be made public. The benefit for the funeral home was then the FTC would not make their names public. And so, you know, the names of the funeral homes that violated the rule but that took part in this program wouldn't be disclosed publicly. Okay, so I'm just going to back it up a bit to make sure I understand this. You have the funeral industry's main lobbying group being the referee here. They're saying to the FTC, hey, you guys, we will take remediation out of your hands and we will get these guys, the offenders, we will mete out justice for these guys and we will train them up and show them the right way to be funeral directors. Yeah, that's right. I think one consumer advocate who I spoke to, the way she put it was, it's like foxes guarding the hen house.

So what has this funeral rule offenders program done to the industry? Has it reduced price gouging and bad behavior among funeral homes? Well, since 1996, when the program was first instituted, compliance has actually worsened and not improved the way that they thought the program would help improve compliance. And it seems like it hasn't done that. From 1996 to 2018, about 500 funeral homes have participated in the program. Over that time, the FTC inspected about 3,000 funeral homes out of more than 20,000 in the U.S. What does the FTC say about this program? The FTC told us that basically it thinks that the program has been helpful to consumers.

And so they say that, you know, it was a cost-effective way to improve compliance, the program that is. to improve compliance, the program that is. But I mean, I think the FTC also has said to us that this program isn't etched in stone and could be changed. So it'll be interesting to see if that is something that they're considering, though they have not made any statements suggesting that they are rethinking the program. Regardless, people still say that deceptive practices continue. Yeah, based on the reporting, it definitely seems like unfair and deceptive practices do continue in the industry. And what I've been hearing from consumer advocates and customers and from funeral directors themselves is that the Funeral Rule Offenders Program has allowed these unfair and deceptive practices to continue to flourish. Coming up, one woman's story about how hard it was to get clear price information for her mother's funeral. Seth and Riley's Garage Hard Lemonade.

A delicious classic with a vibrant taste of fresh lemons. The perfect balance of sweet and sour with a crisp, zesty edge. Welcome to The Garage, the place of refreshing hard lemonade. Available at the LCBO. Must be legal drinking age. Please enjoy responsibly. Put your hands together for Lady Raven. Dad, thank you.

This is literally the best day of my life. On August 2nd. What's with all the police trucks outside? You know, the butcher goes around just chopping people up. Comes a new M. Night Shyamalan experience. The feds heard he's gonna be here today. Josh Hartnett. I'm in control.

And Salika as Lady Raven. This whole concert, it's a trap. Trap, directed by M. Night Shyamalan. Only in theaters August 2nd. Courtney Stewart's ancestral home is in southwestern Virginia, in a town called Marion. in a town called Marion. It's a quintessential, picturesque, small town nestled in rural Appalachia, Virginia. It's the home of where Mountain Dew was invented.

It's a small town of cooperation where neighbors know each other. And when someone dies, you get lots of casseroles with names labeled on the Pyrex dishes so you can return them to the proper person. And it's just a wonderful little town, and I love it with all my heart. In 2012, Courtney's mother, who lived in Marion, passed away. And Courtney had a clear idea of the kind of funeral she wanted for her mother. What did you want? We wanted a simple cremation in a cardboard box.

We didn't want a viewing. We didn't want the funeral home services at all. We weren't going to use the building. We were going to do, after the church, everybody was going to come to our house. We were going to handle everything. All I needed was for them to cremate her. But when she went to meet with a funeral home, she felt like they were trying to sell her on extra products and services.

There was, you know, well, we can write the obituary and we can have thank you cards and we can have a guest book and we can, don't you need help with parking? You know, it was a little bit of a constant, here's all the services we offer. So I was very clear that that's all I wanted was just the cremation services. And how much did that cost? It ended up costing a little over $5,000, as I recall. And I thought that was a lot for what we were asking. Courtney paid the bill,

but she couldn't get rid of the feeling that it was too high. So she called up an advocacy group, the Funeral Consumers Alliance. The woman who answered told Courtney that there were cheaper options in the area. One of them offered something called direct cremation for about $1,000. I said, well, what's the address of that place? I drove up and down Main Street looking for the address, and it dawned on me that it's the same funeral home that cremated

my mother. The funeral director ran two businesses out of the same location, and Courtney went in to confront him. I said, what's going on here? Why didn't you give me that price? You have this service called direct cremation. And he said, well, you didn't ask for direct cremation. You asked for me and that I gave you my services. I said, but you have this thing called direct cremation. I didn't know I was supposed to ask for that. When you learned about direct cremation and you talked with your funeral director about it, how did that experience make you feel? I was frustrated. I felt that there was miscommunication. I felt that the, I even asked, where's the flyer on direct cremation here in your office? Where is it on the price list that you gave me?

Because if it had said direct cremation on that price list as one of my options, I would have said, oh, what's that? And I would have said, that's what I want. But I didn't know to ask for that. I want, but I didn't know to ask for that. So I was astonished that I wasn't offered that when that was exactly what I was describing that I wanted. Oh, you want direct cremation. After the confrontation, the funeral director gave her a refund of about $2,000. What do you think needs to change about how the industry operates? It's all about transparency.

I think that there needs to be a uniform price listing format, and I hope it changes. I hope there's more transparency and people know what their options are. I still think most people will continue to do elaborate funerals, and there's something beautiful about that as well. And maybe some people would disagree on how I handled my parents' end of life, but it was right for us. Courtney's experience with the funeral home in Marion happened decades after the funeral rule was passed. And Dominique found many cases where consumers today felt like they weren't given fair pricing information.

You know, I think a common story that I heard was that people felt that in the moment when they were working with a funeral home to make arrangements, they were in a bad place, understandably. They were really stressed and grieving and not in the best headspace, not necessarily in a space where they were making the best decisions. And many people told me that they felt very sometimes kind of guilt tripped into buying more than they wanted. I think a tactic that I heard of was people being told, well, your mom deserved this or your dad would have wanted this or something along those lines. And people express feeling like guilt was used in these conversations to

compel them to spend more. Some people said that they felt bullied into buying packages at the funeral home. Why is this so hard to fix? I think there's this sense that perhaps the funeral rule hasn't gone far enough to protect customers, that it's too outdated and too limited in scope to have really had a huge impact on consumers. And so two years ago, you set out on this reporting. What is your takeaway? I think, you know, there are a lot of funeral professionals who got into the business because they really want to serve people. And like in any industry, there are bad actors. And I think what's challenging in the funeral industry is that you have these especially and uniquely vulnerable customers. And so I think if there are bad actors, the impact can be quite immense for a customer. seem that the mechanisms that have been put in place to protect consumers or that are supposed to protect consumers aren't doing as good a job as, you know, the folks who put them in place

originally maybe had hoped. That's all for today, Thursday, February 15th. If you like our show, follow us on Spotify or wherever you get your podcasts. We're out every weekday afternoon. Thanks for listening. See you tomorrow.