SB-1378, As Passed Senate, November 9, 2010

 

 

 

 

 

 

 

 

 

 

 

 

 

 

SENATE BILL No. 1378

 

 

June 8, 2010, Introduced by Senators STAMAS, CROPSEY and CLARKE and referred to the Committee on Judiciary.

 

 

 

     A bill to amend 1986 PA 255, entitled

 

"Prepaid funeral and cemetery sales act,"

 

by amending section 12 (MCL 328.222), as amended by 2004 PA 21.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

     Sec. 12. (1) 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 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) For the first 12 months after the effective date of the

 

amendatory act that added this subdivision Before January 1, 2006,


 

60% of the funds received during that period from the sale of

 

cemetery merchandise pursuant to prepaid contracts.

 

     (b) For the thirteenth through twenty-fourth month after the

 

effective date of the amendatory act that added this subdivision

 

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) For the twenty-fifth through the thirty-sixth month after

 

the effective date of the amendatory act that added this

 

subdivision 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) For the thirty-seventh through the forty-eighth month

 

after the effective date of the amendatory act that added this

 

subdivision 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) For the forty-ninth month after the effective date of the

 

amendatory act that added this subdivision and thereafter After

 

December 31, 2008, 80% of the funds received from the sale of

 

cemetery merchandise pursuant to prepaid contracts.

 

     (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. A On cancellation, a

 

contract buyer upon cancellation is entitled to a refund as

 

provided in section 13(1) or (2).

 

     (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) In the case of 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 or more cemeteries registered and operated pursuant to 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.

 

     (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.

 

     (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.

 

     (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 7302 7803 of the estates and protected individuals code,

 

1998 PA 386, MCL 700.7302, 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 their an authorized

 

agents, 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 their an authorized agentsagent of a contract seller or

 

provider.

 

     (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.

 

     (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.

 

     (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.

 

     (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.

 

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

 

the majority interest is held by 250 or more funeral establishments

 

or by 30 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.

 

     (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 in

 

the event if the contract is canceled, and the name and address of

 

the escrow agent from whom additional information may be obtained

 

relative to 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.