Offering Payments Or Credit At Your Funeral Home? Do Your Homework…
Article from: Jeff Harbeson, Funeral Finance, LLC
Companies are appearing on the funeral industry radar screen offering payment programs or credit to consumers paying for their deceased loved one’s funeral goods and services.
The FTC Funeral Rule does not have any issue with such offerings, however there are numerous other Federal and State regulations outside the FTC that are to be considered. According to a Creditfix debt advice article, for example, the Retail Installment Credit Act requires that if a consumer is charged interest rates, the offering entity must provide the consumer with a Truth In Lending Statement which provides the consumer with the exact interest rate being paid, the amount of credit calculated for the transaction over time, the total of the combined credit and principal, etc.
If you have ever purchased a car or a house, you may remember this document. The interest rates and regulations vary between States…for example North Carolina consumers pay different interest rates according to the amount of the credit offered; Tennessee has a maximum interest rate of 11.75%; States like Virginia and Pennsylvania have no interest rate caps, and so on.
Speaking of regulations, be advised that your funeral home may need to be registered with your particular State to offer credit sales. South Carolina, Texas and Maryland are some of the States that require registration along with fees to register before you can offer credit or a payment program that charges interest rates. The fees can range from as little as $10 to over $2,000 annually. Violations of these regulations bring substantial fines and possible closure of the businesses that violate such regulations.
Checking credit on the families you are serving? Make sure you know the regulations that accompany inquiries to the credit bureaus and what your firm must do if the credit score is below what you are willing to accept. Speaking of credit scores, again do your homework. Most companies offering credit to funeral consumers do not extend credit to those with credit scores less than 640. Think about it, if a consumer has a credit score over 640, they can pretty much get credit anywhere. However; consumers with what’s known as “sub-prime” credit generally will not qualify for unsecured credit. Statistics are that 25% of American consumers are considered financially “sub-prime” and financially living pay check to pay check with little availability to credit and cash. That means for every 10 families that walk through your funeral home door for services, about 2 of them have serious financial issues and they are facing challenges to pay for your goods and services.
So what does all this mean? Do your homework if your firm is considering offering credit or payment programs; whether internally or with an outside firm. Are you going to create a Truth In Lending statement or is the outside firm you are using requiring your consumers to sign the document when making a transaction at your funeral home? Is your funeral home in a State that has regulatory issues regarding offering credit to your families?
If you are working with an outside firm, is that firm training you with all of the regulatory requirements and documents? Since the 2008 financial crash, all the the regulations surrounding offering credit have become more stringent and regulated. If your funeral home is going to jump into offering credit and payment programs, do your homework.
Read the small print…outside firms that are offering credit and payment programs have varying fees and requirements such as equipment purchases or monthly service fees, even if you do not perform a transaction. Also, firms are offering “No Recourse” to your funeral home, however; with some check cashing or payment programs using a check cashing machine, you may be personally endorsing the consumers and subject to being responsible for the non-payment or balance. Thoroughly read the contract offered by the company extending credit or payment programs to your families or have your attorney review for you. Once again, do your homework.
Finally, the experience of offering a family some type of payment program for your funeral goods and services, and rejection because of their credit score, creates even more tension in the already stressed emotional situation of the family. If you are offering credit (whether through your firm or an outside firm) and the family is rejected, be prepared to meet the Federal regulatory requirements of notification for rejected credit. The gamble is that you will never know what credit score a family may have before submitting a credit application, so be sure you are working with a company that will regularly offer credit to consumers with credit scores under 640.
Offering credit or a payment program to your families is very serious business…make sure and do your homework. After all, making mistakes in the field of consumer credit and payment programs could bring major “discredit” to your reputation and business.
Jeff Harbeson is a founder and developer of Family Choice Funerals & Cremations™, TouchPoints ™ (a funeral service operating platform), Preferencia Familiar™, and a former Batesville Casket Sales Representative. Jeff is the Executive Vice President and Chief Operating Officer of Funeral Finance, LLC. [email protected] , Twitter: twitter.com/funeralfinance, Facebook:http://www.facebook.com/funeralfinancellc
Jeff is also a featured expert for ConnectingDirectors.com’s “Ask the Expert” column.