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