23 CAR § 111-109. Sales contracts

(a) Disclosures. The seller shall disclose to the contract beneficiary of the prepaid funeral benefits contract or in a separate statement provided before the signing of the prepaid funeral benefits contract all of the following: (1) The prepaid funeral benefits contract shall be: (A) In writing; (B) In clear and understandable language; and (C) Printed in at least eight-point type; (2) The prepaid funeral benefits contract shall identify the seller's: (A) Name; (B) Address; and (C) Telephone number; (3)(A) The prepaid funeral benefits contract shall identify the purchaser's: (i) Name; (ii) Address; and (iii) Telephone number. (B) If the purchaser is not the contract beneficiary, the prepaid funeral benefits contract shall also contain that information for the contract beneficiary. (C) The prepaid funeral benefits contract shall also contain the Social Security number of the contract beneficiary so as to properly identify the contract beneficiary; (4) The prepaid funeral benefits contract shall list all of the funeral goods and services purchased with such specificity as is required by state or federal law or regulation; (5) The prepaid funeral benefits contract shall: (A) Be signed by both the purchaser and seller; and (B) Identify the date and place of execution of the contract; (6) The seller shall be required to give a copy of the contract to the purchaser within fifteen (15) days of execution of the contract; (7) The prepaid funeral benefits contract shall disclose whether it will be funded by insurance, an annuity, or trust funds; (8) If the prepaid funeral benefits contract proceeds are used by the seller to purchase an insurance policy, certificate, or annuity contract, or if the purchaser elects to purchase an insurance policy, certificate, or annuity contract to fund the prepaid funeral benefits contract, a copy of the insurance or annuity application shall be attached to the prepaid funeral benefits contract; (9) If the prepaid funeral benefits contract is funded by a trust, the contract shall disclose the name, address, and phone number of trustee/financial institution receiving the trust deposit; (10) If the prepaid funeral benefits contract is funded by a trust, the contract shall disclose when the prepaid funeral benefits contract trust funds will be deposited with the trustee/financial institution; (11) If the prepaid funeral benefits contract is funded by a trust, the contract shall disclose that one hundred percent (100%) of the contract proceeds will be deposited into the trust fund; (12) If the prepaid funeral benefits contract is funded by a trust, the contract shall disclose who will be responsible for taxes generated by earnings on the trust account; (13) If the prepaid funeral benefits contract is funded by a trust, the contract shall disclose if trustee fees or other administrative charges will be deducted from earnings of the trust funds; (14) The prepaid funeral benefits contract shall disclose that if the price of the funeral goods and services provided in the contract is guaranteed, all funds in the trust account or the proceeds of the insurance policy, certificate, or annuity contract used to fund the prepaid funeral benefits contract shall be paid to the seller at the time of death if the prepaid funeral benefits contract so provides, consistent with Arkansas Code § 23-40-122; (15) The prepaid funeral benefits contract shall disclose that even if the price of the funeral goods and services are guaranteed, there may be additional expenses that would not be covered by the contract; (16)(A) The prepaid funeral benefits contract shall disclose how the purchase price is to be paid and, if the price is paid in installments, a disclosure to the consumer regarding what constitutes default under the installment contract and the consequences of the default. (B) The prepaid funeral benefits contract shall disclose that if the purchaser is in default then the actual cost of the funeral goods and services shall be determined at the time of death; (17) The prepaid funeral benefits contract shall disclose that a purchaser can exercise the right to cancel or transfer the contract to a substitute provider pursuant to Arkansas Code § 23-40-122 by sending an accurate and complete copy of Form AID-FI-C3 to the seller along with a signed copy of the notice described in Appendix A of this part and otherwise by complying with the requirements in this part; (18) If the prepaid funeral benefits contract is revocable, the contract shall disclose the right of the consumer to cancel the prepaid funeral benefits contract and how the consumer may exercise that right; (19)(A) The prepaid funeral benefits contract shall disclose under what circumstances cancellation fees will be imposed and how much those cancellation fees will be to the extent permitted under subdivision (d)(1) of this section. (B) If a fee is permitted to be charged, the contract shall disclose that cancellation fees are in addition to amounts specified as payable to the seller under Arkansas Code § 23-40-122; (20) If the prepaid funeral benefits contract is irrevocable, the contract shall disclose that the purchaser does not have a right to cancel the contract and receive a refund of the amounts allowed in Arkansas Code § 23-40-122 but may transfer the contract to a substitute provider under Arkansas Code § 23-40-122 and the procedures in this part; (21) In order to make a prepaid funeral benefits contract irrevocable, the contract shall require a conspicuous notice that the contract will be irrevocable; (22) The prepaid funeral benefits contract shall disclose that if the seller is unable to perform the prepaid funeral benefits contract due to the seller's financial condition, the consumer shall be entitled to a full refund of the contract proceeds; (23) The prepaid funeral benefits contract shall disclose that the funeral provider may substitute goods and services of equal: (A) Quality; (B) Value; and (C) Workmanship; (24) The prepaid funeral benefits contract shall disclose that complaints regarding the prepaid funeral benefits contract may be made to the State Insurance Department's Pre-Paid Funeral Section at 1 Commerce Way, Ste. 502, Little Rock, Arkansas 72202, (501) 371-2640; (25) The prepaid funeral benefits contract shall disclose that if the funeral benefits are insurance or annuity funded, the contract beneficiary shall be entitled to know: (A) The name of the insurance company; (B) The amount of the policy or annuity; and (C) Whether there are any ownership rights retained by the contract beneficiary; (26) The prepaid funeral benefits contract shall disclose the current price list value of the funeral benefits provided for in the prepaid funeral benefits contract; (27) The prepaid funeral benefits contract shall disclose any discounts or credits against the price; and (28) The prepaid funeral benefits contract shall disclose that Arkansas Code § 23-40-122 provides that the seller may retain amounts, if any, in excess of the premiums paid by the purchaser or the original face amount of the policy or annuity in the event of a cancellation or transfer. (b) Prohibited prepaid funeral benefits contract terms and practices. The following are improper trade practices and shall not be allowed under the terms of a prepaid funeral benefits contract: (1) A seller's failure to maintain the amount of proceeds paid into trust account, if applicable, except by decline in value of investments; (2) A seller's failure to maintain a policy or certificate of insurance or annuity contract in the amount stated in the prepaid funeral benefits contract in full force and effect, so long as the: (A) Prepaid funeral benefits contract requires the seller to do so; and (B) Contract beneficiary has complied with his or her obligations in the prepaid funeral benefits contract; (3) A seller's failure to notify the consumer that the contract is in default and the seller is not intending to be bound by the prices stated in the contract either: (A) In the terms of the prepaid funeral benefits contract; or (B) By a notice of default; (4) Prepaid funeral benefits contracts cannot be funded with insurance in an initial face amount that exceeds the contract price unless the excess is payable to the buyer; (5)(A) All proceeds paid by a buyer must be placed in a trust fund or be paid as premiums on a policy of insurance or annuity. (B) Nothing in this part shall prevent insurance companies or annuity providers from paying the seller a commission for the sale of an insurance policy or annuity; and (6)(A) No prepaid funeral benefits provider shall retain funds in excess of the amount specified in the prepaid funeral benefits contract after completion of performance of the prepaid funeral benefits contract, unless the keeping of such excesses is authorized by: (i) The Arkansas Prepaid Funeral Benefits Law, Arkansas Code § 23-40-101 et seq.; or (ii) This part. (B) In the event funds received by a prepaid funeral benefits provider exceed the amount of the prepaid funeral benefits contract after completion of performance of the prepaid funeral benefits contract, the provider shall refund the excess to the appropriate party within thirty (30) days of completion of the contract. (c) Funding of contracts. There are three (3) authorized options to fund a prepaid funeral benefits contract: (1) Trust-funded contracts. The contract proceeds may be deposited into a trust account by the seller until such time as those funds are needed to pay for the benefits specified in the prepaid funeral benefits contract; (2) Funeral contract life insurance. The contract proceeds may be used by the seller to purchase a life insurance policy or certificate on the life of the contract beneficiary that names the seller as the beneficiary of said insurance policy, the indemnity from which shall be used to pay for the funeral benefits specified in the prepaid funeral benefits contract, or the purchaser may elect to purchase a life insurance policy or certificate directly from the insurance carrier and then either name the seller as beneficiary or assign the death benefits to the seller in order to fund the prepaid funeral benefits contract; and (3) Funeral contract assigned annuity. The contract proceeds may be used by the seller to purchase an annuity contract that names the seller as the beneficiary of said annuity contract, the proceeds of which shall be used to pay for the funeral benefits specified in the prepaid funeral benefits contract, or the purchaser may elect to purchase an annuity contract directly from the insurance carrier and then either name the seller as the beneficiary or assign the death benefits to the seller in order to fund the prepaid funeral benefits contract. (d) Cancellation and transfer of prepaid funeral benefits contracts. (1) A seller or insurer funding the prepaid funeral benefits contract may not charge a fee for cancelling or transferring the prepaid funeral benefits contract to another funeral service provider unless otherwise provided in Arkansas Code § 23-40-122. (2) A purchaser may cancel or transfer a prepaid funeral benefits contract as provided under Arkansas Code § 23-40-122, whether revocable or irrevocable, or whether cash funded or funded by insurance or an annuity, at any time prior to performance of the contract by the seller, subject to the following conditions: (A) In the case of a cash or trust funded prepaid funeral benefits contract: (i) Prior to the death of the contract beneficiary, if the prepaid funeral benefits contract is revocable, the purchaser shall be entitled to receive a refund of not less than one hundred percent (100%) of all sums paid to the seller by the purchaser, not to exceed the contract price; (ii) After death, if the prepaid funeral benefits contract is revocable, the purchaser or his or her representative shall be entitled to receive one hundred percent (100%) of the amount paid to the seller by the purchaser, not to exceed the contract price; or (iii) If the prepaid funeral benefits contract is irrevocable, the purchaser shall not have the right to a refund of any funds paid by him or her or proceeds paid to the seller, but shall have the right to change the provider of the contract services and merchandise to a substitute provider, in which event the seller shall transfer to the substitute provider not less than one hundred percent (100%) of the amount paid to the seller by the purchaser, not to exceed the contract price; (B) In the case of a prepaid funeral benefits contract funded by life insurance: (i) Prior to the death of the contract beneficiary, if the prepaid funeral benefits contract is revocable, the purchaser shall have the right to receive not less than one hundred percent (100%) of the cash surrender value of the policy used to fund the prepaid funeral benefits contract, not to exceed the premium paid by the purchaser; (ii) After the death of the contract beneficiary, if the prepaid funeral benefits contract is revocable, the purchaser or his or her designee shall be entitled to receive not less than one hundred percent (100%) of the policy proceeds paid to the seller, not to exceed the original face amount of the policy; or (iii)(a) Prior to the death of the contract beneficiary, if the contract is irrevocable, the prepaid funeral benefits contract purchaser shall not have the right to a refund of any funds paid to the seller but shall have the right to change the provider of the prepaid funeral benefits contract services and merchandise to a substitute provider, in which event the seller shall assign or transfer to the substitute provider, as directed by the contract owner, the life insurance policy used to fund the prepaid funeral benefits contract or funds in an amount not less than one hundred percent (100%) of the cash surrender value of the policy used to fund the prepaid funeral benefits contract, not to exceed the premium paid by the purchaser. (b) After the death of the contract beneficiary, the seller shall transfer to the substitute provider not less than one hundred percent (100%) of the policy proceeds paid to the seller, not to exceed the original face amount of the policy; or (C) In the case of a prepaid funeral benefits contract funded by an annuity: (i) Prior to the death of the contract beneficiary, if the prepaid funeral benefits contract is revocable, the purchaser shall be entitled to receive a refund of not less than one hundred percent (100%) of the annuity value, not to exceed the premium paid by the purchaser for the annuity funding the prepaid funeral benefits contract; (ii) After the death of the contract beneficiary, if the prepaid funeral benefits contract is revocable, the purchaser or his or her designee shall be entitled to receive not less than one hundred percent (100%) of the annuity proceeds received by the seller, not to exceed the premium paid by the purchaser; or (iii)(a) Prior to the death of the contract beneficiary, if the prepaid funeral benefits contract is irrevocable, the purchaser shall not have the right to a refund of any funds paid to the seller but shall have the right to change the provider of the prepaid funeral benefits contract services and merchandise to a substitute provider, in which event the seller shall assign or transfer to the substitute provider, as directed by the contract owner, the annuity policy used to fund the prepaid funeral benefits contract, which shall be in an amount of not less than one hundred percent (100%) of the annuity value, not to exceed the premium paid by the purchaser. (b) After the death of the contract beneficiary, the seller shall transfer to the substitute provider not less than one hundred percent (100%) of the annuity proceeds received by the seller, not to exceed the premiums paid by the purchaser. (3) 23 CAR § 111-106(d) sets forth the procedures that must be followed if a purchaser desires to cancel or transfer a prepaid funeral benefits contract under Arkansas Code § 23-40-122.