SPRINGFIELD, IL – The Legislature gave final approval today to stronger regulations proposed by Comptroller Dan Hynes that are designed to protect consumer investments used to pay for funeral and cemetery goods and services.

The Senate approved the measure 58-0 sending it to the Governor. The House approved the legislation earlier in the week.

Hynes said the legislation (SB1682) is needed to help prevent shortfalls similar to the one that occurred with a trust fund intended to pay for consumer funerals that was used by hundreds of funeral directors and administered by the Illinois Funeral Directors Association. It modernizes and strengthens oversight of consumer funds and increases the amount of information consumers receive about their investments. AARP Illinois and Citizen Action/Illinois have endorsed Hynes' legislative proposal. It is sponsored by Sen. Deanna Demuzio, D-Carlinville, and Rep. Lisa Dugan, D-Bradley.

"While a number of regulatory actions are continuing to move forward, it is important that these stronger regulations are put in place to protect consumers," Hynes said. "I want to thank members of the General Assembly who put consumer interests above special interests in approving this legislation."

Illinois funeral homes which allow consumers to prearrange for their funeral goods and services are required to place up to 95 percent of the funds from the sales in trust until the money is needed for those goods and services. Sellers of these pre-need contracts, including funeral homes, are licensed through the state Comptroller's Office, and that requirement would remain in place.

The new legislation requires consumer dollars from pre-need funeral sales to be held in trust by an independent trustee regulated as a corporate fiduciary by appropriate state or federal authorities, such as the Illinois Department of Financial and Professional Regulation, or the federal Office of Thrift Supervision or the Comptroller of the Currency. Funeral home operators no longer could act as their own trustee regardless of the size of their trust. The legislation imposes higher investment standards, reasonable trustee fee requirements and strengthens auditing and notification requirements.

The legislation also would ensure better communication between the fund's trustee and consumers, Hynes said. Contracts purchased by consumers would have to clearly identify the trustee's name, address and regulator; and if funded by life insurance, the contract would have to identify the life insurance provider and regulator. Consumers would receive annual statements of their investments from the fund's trustee including receipts, disbursements, and an explanation of any fees or expenses charged, the purchasers right to a refund, if any, and identification of the trust regulator. In addition, a new consumer protection fund for funeral preneed sales would be created, similar to the one currently in place for cemetery preneed sales.

Hynes said his office will push for additional reforms in cooperation with the Funeral and Burial Pre-Arrangement Investigation Task Force recently created by the House, but that his current proposal most directly addresses issues related to the IFDA Preneed Trust, overseen by IFDA Services, Inc., a subsidiary of the Illinois Funeral Directors Association.

He also noted that additional regulatory and investigatory efforts by his office and several other government agencies are ongoing to address the shortfall in the IFDA PreNeed Trust, first identified in an investigation by Hynes' Office in 2005. Among those actions are the following:

Hynes is demanding the return of nearly $10 million in excess fees taken by the IFDA subsidiary, IFDA Services, Inc., in its administration of the consumer trust fund. An audit by Hynes' office determined the entity took more than the legally allowed amount of fees from 2000 to 2006.

Funeral homes that wish to take part in an $18 million settlement agreement between the Department of Financial and Professional Regulation and Merrill Lynch Life Agency Inc. must commit to honoring nonguaranteed as well as guaranteed consumer contracts. The settlement, which will be maintained in a separate fund, can only be used to fulfill those consumer contracts and the Comptroller will be monitoring those settlement funds to ensure they are properly entrusted in the consumers' names. If funeral homes do not agree, a share of funds would be given directly to their consumers holding nonguaranteed contracts.

In addition, the Secretary of State's Office is taking regulatory action against a Springfield-based Merrill Lynch investment advisor involved with the trust fund.

During his tenure as Comptroller, Hynes has been a strong advocate for consumers. He's held public meetings around the state to hear consumer concerns about the funeral industry and he has continuously pushed for stronger industry regulations and consumer protections that have become state law.