Bill Text: MI HB5080 | 2011-2012 | 96th Legislature | Introduced

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Bill Title: Cemeteries and funerals; prepaid contracts; condition of cancellation of prepaid contract with cemetery; modify, and make other miscellaneous changes to the prepaid funeral and cemetery sales act. Amends secs. 12 & 13 of 1986 PA 255 (MCL 328.222 & 328.223).

Spectrum: Partisan Bill (Republican 1-0)

Status: (Introduced - Dead) 2011-10-19 - Printed Bill Filed 10/19/2011 [HB5080 Detail]

Download: Michigan-2011-HB5080-Introduced.html

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HOUSE BILL No. 5080

 

October 18, 2011, Introduced by Rep. Lori and referred to the Committee on Regulatory Reform.

 

     A bill to amend 1986 PA 255, entitled

 

"Prepaid funeral and cemetery sales act,"

 

by amending sections 12 and 13 (MCL 328.222 and 328.223), section

 

12 as amended by 2010 PA 327 and section 13 as amended by 2004 PA

 

21.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 12. (1) Except Before January 1, 2012, and except as

 

otherwise provided in subsection (2), all funds received in

 

connection with a prepaid contract shall be held in escrow by an

 

escrow agent. for the benefit of the contract beneficiary.

 

     (2) Funds Before January 1, 2012, funds received by a cemetery

 

registered under the cemetery regulation act, 1968 PA 251, MCL

 

456.521 to 456.543, for cemetery merchandise may, in lieu of

 

subsection (1), be escrowed as follows:

 

     (a) Before January 1, 2006, 60% of the funds received during

 

that period from the sale of cemetery merchandise pursuant to

 

prepaid contracts.

 

     (b) After December 31, 2005 and before January 1, 2007, 65% of

 

the funds received during that period from the sale of cemetery

 

merchandise pursuant to prepaid contracts.

 

     (c) After December 31, 2006 and before January 1, 2008, 70% of

 

the funds received during that period from the sale of cemetery

 

merchandise pursuant to prepaid contracts.

 

     (d) After December 31, 2007 and before January 1, 2009, 75% of

 

the funds received during that period from the sale of cemetery

 

merchandise pursuant to prepaid contracts.

 

     (e) After December 31, 2008, 80% of the funds received from

 

the sale of cemetery merchandise pursuant to prepaid contracts.

 

     (3) After December 31, 2011, 50% of the funds received from

 

the sale of funeral services or cemetery services shall be held in

 

escrow by an escrow agent.

 

     (4) After December 31, 2011, an amount of funds received from

 

the sale of merchandise described in section 4(1)(k) equal to 130%

 

of the cost to the provider of the merchandise shall be held in

 

escrow by an escrow agent.

 

     (5) (3) A prepaid contract may authorize the contract seller

 

or provider to charge an additional commission of not more than 10%

 

of the contract price which shall not be subject to the depository

 

requirements of this section. If the contract price is paid in

 

installments, the commission retained by the contract seller or the

 

provider shall not exceed the rate of the commission charged in the

 

prepaid contract for each installment. On cancellation, a contract

 

buyer is entitled to a refund as provided in section 13(1) or (2).

 

     (6) (4) Only the following persons may serve as the escrow

 

agent of funds under this section:

 

     (a) If the prepaid contract is a nonguaranteed price contract,

 

the contract seller or provider of that nonguaranteed price

 

contract.

 

     (b) If the prepaid contract is either a guaranteed or

 

nonguaranteed price contract, a depository, a trust company, or a

 

Michigan nonprofit corporation or association, in which the

 

majority interest is held by 250 or more funeral establishments

 

licensed under article 18 of the occupational code, 1980 PA 299,

 

MCL 339.1801 to 339.1812, or a Michigan nonprofit corporation or

 

association, in which the majority interest is held by 30 20 or

 

more cemeteries registered and operated pursuant to under the

 

cemetery regulation act, 1968 PA 251, MCL 456.521 to 456.543. If

 

the prepaid contract is a guaranteed price contract, the contract

 

seller or the provider shall not serve as the escrow agent.

 

     (7) (5) If the escrow agent is not the contract seller or

 

provider of a nonguaranteed price contract, the escrow agent shall

 

be selected as follows:

 

     (a) If the prepaid contract is a nonguaranteed price contract,

 

the escrow agent may be selected by either the contract seller or

 

the provider.

 

     (b) If the prepaid contract is a guaranteed price contract,

 

the escrow agent shall be selected by the provider who has been

 

designated to furnish the funeral services. If the prepaid contract

 

does not include funeral services, the escrow agent shall be

 

selected by any provider.

 

     (8) (6) If the escrow agent is a person other than the person

 

to whom the funds have been paid by the contract buyer, the funds

 

shall be deposited with the escrow agent within 30 days after the

 

receipt by the person to whom the funds are paid.

 

     (9) (7) Funds held by an escrow agent shall be held and

 

invested only as specified in the prepaid contract. A prepaid

 

contract may authorize investments only as follows:

 

     (a) If the prepaid contract is a nonguaranteed price contract,

 

the funds shall be invested in 1 or more interest-bearing accounts

 

in a depository.

 

     (b) If the prepaid contract is a guaranteed price contract,

 

the principal and income may be invested only in accordance with

 

section 7803 of the estates and protected individuals code, 1998 PA

 

386, MCL 700.7803, except that funds shall not be invested in a

 

company owned by, operated by, or affiliated in any way with a

 

contract seller or provider or an authorized agent of a contract

 

seller or provider or in loans to any person directly connected

 

with or employed by a contract seller or provider or an authorized

 

agent of a contract seller or provider.

 

     (10) (8) Income shall be held and invested by the escrow agent

 

in the same manner as the principal except that the income may be

 

utilized to pay reasonable fees and expenses of the escrow agent in

 

addition to other costs specifically authorized by this act. The

 

expenses and fees paid to the escrow agent shall not exceed 1% of

 

the aggregate balance of principal and prior earned income from

 

each account annually. If a fee is charged for reasonable expenses

 

for the administration costs under an escrow agreement, the amount

 

may be paid to the escrow agent periodically or may be accumulated

 

in the account and paid at the time of death or upon cancellation

 

of the contract. A cemetery that has elected the escrowing option

 

for cemetery merchandise provided in subsection (2) may provide by

 

written agreement with the escrow agent to be paid accumulated

 

income generated solely by the investment of funds received for the

 

cemetery merchandise. Such payments to a cemetery may not be made

 

more frequently than once in a 12-month period and shall not exceed

 

the net amount of income earned in the previous 12 months less any

 

amounts paid to the escrow agent for expenses and fees described in

 

this subsection and an amount equal to any increase in the Detroit

 

consumer price index.

 

     (11) (9) Amounts of principal and income held by an escrow

 

agent other than the contract seller or provider of a nonguaranteed

 

price contract may be commingled with principal and income derived

 

from other prepaid accounts. However, a separate accounting of

 

principal and income shall be maintained for each prepaid contract

 

under the name of the contract beneficiary.

 

     (12) (10) The escrow agent shall send to the contract buyer a

 

notice stating the date, amount of the deposit, and the name of the

 

escrow agent with whom the funds are deposited.

 

     (13) (11) Upon the death of the contract beneficiary and upon

 

performance by the provider of its obligation to furnish

 

merchandise or funeral or cemetery services pursuant to the prepaid

 

contract, funds held by the escrow agent shall be disbursed as

 

follows:

 

     (a) If the prepaid contract is a nonguaranteed price contract,

 

the principal and income shall first be disbursed by the escrow

 

agent to the provider of the merchandise or funeral or cemetery

 

services in payment of all reasonable charges. Thereafter, not less

 

than 90% of the remaining balance of principal and income, if any,

 

shall be disbursed to the person, other than the provider or the

 

contract seller, designated in the prepaid contract or authorized

 

by law to receive the surplus, and the remainder, if any, shall be

 

disbursed to the provider as final compensation for its services.

 

The amount paid to the person entitled to receive the surplus shall

 

be as follows:

 

     (i) If no commission has been charged pursuant to this section,

 

at least 90% of the remaining balance of principal and income in

 

the escrow account.

 

     (ii) If a commission of 5% or less of the contract price has

 

been charged, at least 95% of the remaining principal and income in

 

the escrow account.

 

     (iii) If a commission of greater than 5% of the contract price

 

has been charged, 100% of the remaining principal and income in the

 

escrow account.

 

     (b) If the prepaid contract is a guaranteed price contract,

 

the principal and income held by the escrow agent shall be

 

disbursed to the provider, its designee, or its successor.

 

     (c) If the escrow agent is notified that there is a dispute as

 

to whether the provider has performed all its obligations under the

 

prepaid contract, the escrow agent shall file an action for

 

interpleader or shall obtain an impartial arbitrator to determine

 

the rights of the parties. Expenses of arbitration shall be shared

 

equally by the parties unless otherwise ordered by the arbitrator.

 

     (14) (12) A Michigan nonprofit corporation or association, in

 

which the majority interest is held by 250 or more funeral

 

establishments licensed under article 18 of the occupational code,

 

1980 PA 299, MCL 339.1801 to 339.1812, or by 30 20 or more

 

cemeteries registered and operated under the cemetery regulation

 

act, 1968 PA 251, MCL 456.521 to 456.543, may be designated as the

 

escrow agent under this section only if the contract buyer has

 

expressly authorized that designation in writing. If the contract

 

buyer authorizes the appointment as escrow agent of a Michigan

 

nonprofit corporation or association in the prepaid contract, the

 

authorization shall be set forth in a separate paragraph which

 

shall not be effective unless separately signed or initialed by a

 

contract buyer and which shall state that the contract buyer may

 

elect to require that a depository or a trust company be designated

 

as the escrow agent.

 

     (15) (13) If a prepaid contract is canceled, the escrow agent

 

shall disburse the principal and income in accordance with section

 

13.

 

     (14) At least annually, unless waived in writing by a contract

 

buyer, a contract buyer shall be furnished a statement indicating

 

the current balance, the fees or expenses charged since the last

 

statement, the amount of the refund to which a buyer is entitled if

 

the contract is canceled, and the name and address of the escrow

 

agent from whom additional information may be obtained about the

 

account. The cost of the statement required by this subsection may

 

be paid from the income and may be in addition to any other fee or

 

charge authorized by this act.

 

     Sec. 13. (1) A For all nonguaranteed prepaid contracts and for

 

those guaranteed prepaid contracts entered into before January 1,

 

2012, a contract buyer may cancel a prepaid contract at any time

 

before the death of the contract beneficiary upon 30 days' prior

 

written notice to the contract seller of a nonguaranteed price

 

contract or to the provider designated to furnish merchandise or

 

funeral or cemetery services pursuant to a guaranteed price

 

contract. The contract seller or provider shall promptly notify the

 

escrow agent of the cancellation and of its effective date, if the

 

escrow agent is other than the contract seller or the provider.

 

After receipt of the notice of cancellation, except as otherwise

 

provided in subsection (2), the escrow agent shall disburse not

 

less than 90% of the principal and income in the escrow account to

 

the contract buyer pursuant to this subsection and shall disburse

 

the remainder of the principal and income, if any, to the contract

 

seller or the provider. The refund to the contract buyer shall be

 

determined as follows:

 

     (a) If no commission has been charged pursuant to section

 

12(1), 12, at least 90% of the remaining balance of principal and

 

income in the escrow account or held by the trustee.

 

     (b) If a commission of 5% or less of the contract price has

 

been charged, at least 95% of the remaining principal and income in

 

the escrow account.

 

     (c) If a commission of greater than 5% of the contract price

 

has been charged, 100% of the remaining principal and income in the

 

escrow account.

 

     (2) In the case of funds received for cemetery merchandise by

 

a cemetery that has elected the escrowing option in section 12(2),

 

the escrow agent shall disburse the principal and income in the

 

account to the cemetery and the cemetery shall disburse to the

 

contract buyer 100% of the amount of the contract price paid by the

 

contract buyer plus an amount equal to any increase in the Detroit

 

consumer price index since the contract was executed.

 

     (3) For guaranteed prepaid contracts entered into after

 

December 31, 2011, a contract buyer may cancel the guaranteed

 

prepaid contract until 12 midnight of the third business day after

 

the day on which the buyer signed the guaranteed prepaid contract.

 

Cancellation occurs when the contract buyer mails or hand-delivers

 

the notice of cancellation to the seller at the address of the

 

seller listed on the guaranteed prepaid contract. A contract buyer

 

may not cancel the guaranteed prepaid contract if the seller in

 

good faith has made a substantial beginning of performance of the

 

contract before the contract buyer gives notice of cancellation.

 

Upon proper cancellation, all funds paid by the contract buyer to

 

the contract seller and the contract provider shall be returned to

 

the contract buyer within 3 business days.

 

     (4) (3) A contract seller of a nonguaranteed price contract or

 

a provider designated to furnish merchandise or funeral or cemetery

 

services pursuant to a guaranteed price contract entered into

 

before January 1, 2012 may cancel a prepaid contract only if the

 

contract buyer of a guaranteed price contract is more than 90 days

 

delinquent in making any installment payment or partial payment, or

 

the contract buyer is otherwise in default as to any other

 

obligation under the contract. Upon cancellation, the contract

 

buyer shall receive a refund as determined pursuant to under

 

subsection (1).

 

     (5) (4) After For all nonguaranteed prepaid contracts and for

 

guaranteed prepaid contracts entered into before January 1, 2012,

 

after the death of the contract beneficiary, the contract buyer or

 

the contract buyer's estate may cancel the prepaid contract only

 

where there are no remains of the deceased; where the remains of

 

the deceased cannot be recovered; or where a prepaid contract was

 

not utilized due to lack of knowledge by the person or persons

 

entitled to make funeral arrangements of the existence of the

 

prepaid contract. After such a cancellation, the contract buyer or

 

the contract buyer's estate shall receive a refund in accordance

 

with subsection (1) or (2) within 30 days after receipt by the

 

contract seller or the provider of a request for payment from the

 

contract buyer or the contract buyer's estate. Contracts may be

 

upgraded after the death of the contract beneficiary by a person on

 

behalf of the contract beneficiary's estate or by a person entitled

 

to make funeral or cemetery arrangements. This subsection does not

 

prevent the transfer of a contract from 1 provider to another

 

provider upon the request of those entitled to make funeral

 

arrangements.

 

     (6) (5) Prior to the death of the contract beneficiary and in

 

the case of a prepaid contract or multiple prepaid contracts

 

containing any of the merchandise or services escrowed under

 

section 12(1) together with cemetery merchandise escrowed under

 

section 12(2), the buyer may cancel that portion of the contract

 

pertaining to the cemetery merchandise alone, without canceling the

 

remaining portions. Such cancellation is subject to refund pursuant

 

to section 13(2).under subsection (2).

 

     (7) (6) A contract seller or a provider that assigns or

 

transfers its obligations under a prepaid contract to another

 

provider shall notify the contract buyer of the assignment in

 

writing. If the contract buyer cancels the contract within 30 days

 

of the notification of the assignment, the buyer shall be entitled

 

to a refund of 100% of the remaining principal and income plus the

 

commission, if any, charged in accordance with section 12(1) or

 

(2). An assignment or transfer of a provider's obligations under a

 

prepaid contract that is made in connection with the sale of a

 

business is subject to this subsection only if more than 50% of the

 

ownership interest in the business is transferred to another person

 

or persons within a 12-month period. Upon sale of the business, the

 

notice requirement of this subsection is the responsibility of the

 

purchaser. This subsection does not apply to an assignment of a

 

financial interest in an installment contract to a financial

 

institution. At the time that the contract seller or provider

 

receives payment in exchange for selling or assigning its financial

 

interest in an installment contract to a financial institution, the

 

contract seller or provider shall be required to place in escrow

 

the amount required by this act. This subsection does not apply to

 

burial rights or other land interests, crypts, inscribed grave

 

memorials, or niches. , for which no refunds are available.