STAND

STAND. COM. REP. NO. 736

Honolulu, Hawaii

, 2005

RE: S.B. No. 60

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-Third State Legislature

Regular Session of 2005

State of Hawaii

Sir:

Your Committee on Commerce, Consumer Protection, and Housing, to which was referred S.B. No. 60 entitled:

"A BILL FOR AN ACT RELATING TO CEMETERY AND FUNERAL TRUSTS,"

begs leave to report as follows:

The purpose of this measure is to allow a consumer to cancel a pre-need funeral contract at any time before the death of the contract beneficiary and to receive a total refund of properties transferred incident to a perpetual care fund and almost a total refund of payments made under the contract.

Testimony in support of this measure was received from AARP Hawaii, Funeral Consumers Alliance Hawaii, and numerous individuals. Testimony in opposition to the measure was submitted by Hawaiian Memorial Life Plan, Ltd., Dodo Mortuary Life Plan, Inc., Hawaii Allied Memorial Council, Hosoi Life Plan, Inc., Mililani Group, Inc., Ballard Family Mortuaries, Paradise Acquisition Corp., and numerous individuals. The Department of Commerce and Consumer Affairs (DCCA) presented comments.

This measure authorizes a purchaser to cancel a pre-need funeral contract at any time before the death of the beneficiary of a perpetual care fund or pre-need trust, and entitles the purchaser to a total refund of properties transferred as part of the perpetual care fund and a total refund of payments made on the contract, less amounts expended for merchandise delivered to the person. This measure also requires that all payments received by the cemetery or funeral authority be deposited in the pre-need trust and does not allow the retention of "acquisition costs" by the funeral authority.

Your Committee finds that current law requires perpetual care funds to be placed in trust separately from moneys received for funeral and interment purposes, and no offsets are allowed therefrom. Withdrawal of perpetual care funds are allowed only for the care and maintenance of the cemetery. This measure would permit a reduction of the perpetual care fund trust upon the cancellation of a pre-need funeral contract.

Your Committee further finds that there is general agreement that the cemetery and funeral trust law should provide consumers with certain consumer protection rights regarding cancellation of a contract, notification of cancellation due to default, and an opportunity to cure any default. However, opinions differ as to what amounts are reasonable for a cemetery or funeral authority to retain to recover its costs. Accordingly, your Committee has amended this measure:

(1) To delete references to perpetual care funds:

(2) To allow a purchaser of pre-need funeral or interment services to cancel the contract in writing at any time before services have been rendered;

(3) To require a cemetery or funeral authority to provide written notice of default to a purchaser before terminating the contract and to require that the notice describe the nature of the default, amounts owed on the contract, and how the default can be cured, and advise the purchaser of the purchaser's rights upon default;

(4) To allow a purchaser a minimum of ninety days to cure the default and to receive a statement of payments made and owed, upon request;

(5) To require the cemetery or pre-need funeral authority, if the contract is terminated upon the request or default of the purchaser, to refund the purchaser's payments, less acquisition costs, within fifteen days of receipt of the purchaser's written notice of cancellation or termination due to default;

(6) To require the contract to disclose in plain and clear language the name and address of the contract beneficiary, if someone other than the purchaser; the location of the plot, crypt, or niche; the total purchase price and payment terms; trust-related information, including amounts to be retained and not deposited; cancellation and default rights, duties, and procedures; that the parties' rights and duties under the law may not be waived; how interest income is to be disposed of; and the purchaser's liability for taxes on earned income; and

(7) By replacing the thirty per cent ceiling on acquisition costs that may be retained by a cemetery or funeral authority with an unspecified cap.

As affirmed by the record of votes of the members of your Committee on Commerce, Consumer Protection, and Housing that is attached to this report, your Committee is in accord with the intent and purpose of S.B. No. 60, as amended herein, and recommends that it pass Second Reading in the form attached hereto as S.B. No. 60, S.D. 1, and be placed on the calendar for Third Reading.

Respectfully submitted on behalf of the members of the Committee on Commerce, Consumer Protection, and Housing,

		____________________________ RON MENOR, Chair