Advisory opinion on the lawful construction of the term “cash advance item” as used in the FTC’s Funeral Rule, 16 C.F.R. § 453.1(b)

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Commission Advisory Opinion
The Honorable Dan Flynn
Texas State Representative
House District 2
P.O. Box 2910
Austin, TX 78768-2910
Dear Representative Flynn:
This responds to your letter dated April 12, 2005, in which you
request a Commission opinion on the lawful construction of the
term “cash advance item” as used in the FTC’s Funeral Rule, 16
C.F.R. § 453.1(b) (“the Funeral Rule” or “the Rule”).
Specifically, you question whether a Texas trial court is correct in
ruling that “all goods or services purchased from a third-party
vendor, even though not included on the contract, are ‘cash
advances’” under the Funeral Rule.1 Correct interpretation of the
1 It is our understanding that your request is prompted by the
May 2004 decision granting partial summary judgment in Hijar v.
SCI Texas Funeral Services, Inc., No. 2002-740, Order Granting
Plaintiff’s Motion for Partial Summary Judgment and Establishing
Issues Under Rule 166a(e), T.R.C.P. and Denying Defendants’
Second Motion for Summary Judgment (County Court at Law No.
3, El Paso, May 21, 2004), in which the court held that the
defendant violated the cash advance disclosure provision of the
Funeral Rule by failing to disclose each fee charged to the plaintiff
for the cost of advancing funds on behalf of the plaintiff for goods
and services purchased from third parties and resold to plaintiff.
The Court in Hijar based its holding on an interpretation of the
term “cash advance item” that would include the following items,
when purchased from a third party and resold to persons arranging
funerals: “direct cremation; immediate burial; forwarding
remains; receiving remains; embalming; refrigeration; other
preparation; transportation; casket/cremation casket; alternative
container; outside enclosure; clothing/shroud; memorial booklet;
service folders/prayer cards; acknowledgment cards; flowers;

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term “cash advance item” is important because it determines the
breadth and impact of certain substantive provisions of the
Funeral Rule that employ that term.
The Commission believes that the court is incorrect in ruling
that all goods or services purchased from a third-party vendor are
cash advance items. This interpretation sweeps far too broadly,
potentially bringing within its scope every component good or
service that comprise a funeral. This was not and is not the
Commission’s intention in the “cash advance” provisions of the
Rule. In our opinion, the term “cash advance item” in the Rule
applies only to those items that the funeral provider represents
expressly to be “cash advance items” or represents by implication
to be procured on behalf of a particular customer and provided to
that customer at the same price the funeral provider paid for them.
This conclusion is based on the analysis set forth below.
Analysis
The Funeral Rule2 defines the term “cash advance item” as
follows:
[a]ny item of service or merchandise described to a
shipping container; crematory services; crucifix; escorts; certified
copies; public transportation; outside funeral director’s expense;
vault installation; clergy/religious facility; musicians or singers;
hairdressing; and permits.”
The Commission promulgated the original Funeral Rule on
September 24, 1982, making it fully effective on April 30, 1984.
47 Fed. Reg. 42260 (Sept. 24, 1982). The Commission amended
the Rule in 1994, following a lengthy review proceeding, and that
1994 amended Rule continues to be in effect. 59 Fed. Reg. 1592
(Jan. 11, 1994). All references to “the Funeral Rule” or “the
Rule” are to the 1994 amended Rule, currently in effect.
References to the 1982 Rule are to “the original Rule.”

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purchaser as a “cash advance,” “accommodation,” “cash
disbursement,” or similar term. A cash advance item is also
any item obtained from a third party and paid for by the
funeral provider on the purchaser’s behalf. Cash advance
items may include, but are not limited to: cemetery or
crematory services; pallbearers; public transportation; clergy
honoraria; flowers; musicians or singers; nurses; obituary
notices; gratuities; and, death certificates. 16 C.F.R.
§ 453.1(b).
The first sentence of this definition quite clearly states that any
item a funeral provider describes expressly using the words “cash
advance” item (or similar words or phrases) is, in fact, a cash
advance item for purposes of the Funeral Rule. The second
sentence broadens the definition to cover situations when a funeral
provider purports to act “on behalf” of a particular customer, more
as that customer’s procurement agent rather than as a retailer
serving the general public. The third sentence merely provides an
illustrative list of the various types of goods or services that
funeral providers typically may treat as cash advance items.
Certain substantive provisions in the Funeral Rule employ the
defined term “cash advance item.” Specifically, §§ 453.3(f)(1)(ii)
and 453.3(f)(2) require a funeral provider who is charging a
customer more for a cash advance item than the funeral director
paid for it to disclose that material fact (i.e., the existence of a
mark-up, but not the amount) to the customer on the statement of
funeral goods and services selected by the customer.3
3 Also, the statement of goods and services that the funeral
provider must give to the customer at the conclusion of the
discussion of funeral arrangements must itemize any cash advance
items that are part of the agreed-upon funeral arrangements, and
must state the price, or if not known, the estimated price, of those
items. The Rule states: “(These prices must be given to the
extent then known or reasonably ascertainable. If the prices are
not known or reasonably ascertainable, a good faith estimate shall

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The Commission included these “cash advance” disclosure
provisions in the Rule to address a practice in the marketplace that
the Commission had identified as being harmful to consumers.
Specifically, some funeral providers misrepresented that they
would obtain goods or services for their customers at cost, when
in fact these funeral providers profited by marking up the price of
the items.4 The Final Staff Report on the original Funeral Rule,
which is part of the rulemaking record on which the Commission
relied in adopting the Rule, succinctly describes the problem:
Cash advance charges are completely separate from, and
additional to, the funeral director’s own charges. They
usually appear on the funeral bill under such headings as
be given and a written statement of the actual charges shall be
provided before the final bill is paid.)” 16 C.F.R.
§ 453.2(b)(5)(i)(B).
This mark-up was achieved both directly and indirectly. As
noted in the Final Staff Report, “[s]ometimes, [the mark-up] has
been accomplished by simply inflating the amount of the charge
on the customer’s bill. In other instances, the same effect has
been achieved by the funeral home securing some form of
kickback or rebate from the supplier of the cash advance item
after charging the customer the full price.” Final Staff Report
(June 1978) at 249. Marking up cash advance items was not an
uncommon practice. The Commission noted, in adopting the
original Rule, that “the evidence demonstrates that many
individual funeral providers do charge mark-ups for cash
advances. In a 1976 survey of California funeral directors, 12% of
the 291 respondents admitted charging ‘in excess of the amount
actually advanced for any items of service labeled as ‘cash
advances’ or ‘accommodation items.’ [The National Funeral
Directors Association’s] annual survey of funeral homes indicates
that, on a national level, funeral homes are receiving a 5% mark-
up on cash advance items. . . .” 47 Fed. Reg. 42279 (Sept. 24,
1982).

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“accommodations,” “cash disbursements,” and “cash
advanced for your convenience.” This terminology clearly
indicates the basic conception, both by the funeral home and
the consumer; that is, that the family is simply reimbursing
the funeral director for cash outlays. The traditional use of
such terms, as well as the obvious fact that these items are
being provided by the third party, create the expectation that
the amount billed is the same as that paid or owed. . . . Our
investigation revealed, however that some funeral homes
have generated extra revenues by charging their customers
more for cash advance items than the funeral home actually
paid out.5
Based on the record evidence of this problem, as summarized and
analyzed in the Final Staff Report, the Commission adopted
§ 453.3(f) to remedy it. As noted in the Statement of Basis and
Purpose issued by the Commission when it adopted the original
Rule, § 453.3(f) is intended to prevent consumers from being led
to believe, incorrectly, that the cost to the consumer for a
particular item is the same as the cost to the funeral provider:
[C]onsumers believe that items labeled “cash advances” . . .
are being provided at cost. There is an implicit
representation that the cash advance transaction involves
merely a forwarding of cash by the funeral provider and a
subsequent dollar-for-dollar reimbursement by the consumer
. . . . The use of this term in connection with items such as
flowers, obituary notices, etc., which the consumers could
easily obtain from a third party, creates the expectation that
the amount billed the consumer is the same as the amount
paid by the funeral provider. Given this expectation, the
failure to disclose the existence of a mark-up is a deceptive
practice.6
5 Final Staff Report (June 1978) at 249.
6 47 Fed. Reg. 42278-42279 (Sept. 24, 1982).

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The Commission found that, in describing a particular item to a
customer, a funeral provider’s express use of the term “cash
advance item” (or alternative formulations such as
“accommodation” or “cash disbursement”) implies that the cost
to the customer for that item is the same as the cost to the funeral
provider. Thus, in cases where a funeral provider describes an
item in this manner, yet charges the customer more for it than the
funeral provider paid for it, the Commission requires a corrective
disclosure to prevent the customer from being deceived.
Specifically, in such a circumstance, the Funeral Rule requires
that the following disclosure be placed on the statement of funeral
goods and services selected: “We charge you for our services in
obtaining: (specify cash advance items).”7 This is the scenario
addressed by the first sentence in the “cash advance item”
definition.
The second sentence of the definition, indicating that “[a] cash
advance item is also any item obtained from a third party and paid
for by the funeral provider on the purchaser’s behalf,” is in the
nature of a “fencing-in” provision.8 The Commission’s intention
in including this sentence is to bring within the ambit of § 453.3(f)
any situation where a funeral provider might, without using the
specific term “cash advance,” offer to obtain an item for a
particular customer that the customer could obtain on her own –
purporting to act “on behalf” of that customer, more as that
customer’s procurement agent than as a retailer serving the
general public. Specifically, the purpose of this fencing-in aspect
of the definition is to deter the less scrupulous funeral provider
from evading the Rule by eschewing express description of an
7 16 C.F.R § 453.3(f)(2). The Rule also specifically prohibits
this type of affirmative misrepresentation. 16 C.F.R
§ 453.3(f)(1)(i).
8 Under the “fencing-in” doctrine, the FTC may frame a
remedy which extends beyond the precise illegal conduct found.
Bristol-Myers Co. v. FTC, 738 F.2d 554, 561 (2d Cir. 1984).

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item as a “cash advance item” (or alternative formulations), yet
nevertheless conveying to a customer acting reasonably under the
circumstances that obtaining the item involves merely a
forwarding of cash by the funeral provider and a subsequent
dollar-for-dollar reimbursement by the customer. The
Commission’s intention, in sum, is that this part of the “cash
advance item” definition function to foreclose funeral providers
from attempting to sidestep the strict letter of the Rule by using
implied misrepresentations rather than express ones.
In the absence of either the funeral provider’s express
representation that an item is a “cash advance item” or implied
representations that the item is procured for a particular customer
at the funeral provider’s cost, a consumer, acting reasonably under
the circumstances, would not believe that the amount he or she is
billed for an item is the same as the amount the funeral provider
pays its supplier. Indeed, such a belief would be contrary to a
reasonable consumer’s most elementary experience in the
everyday marketplace. In these circumstances, the funeral
provider is generally acting like any retailer who purchases goods
or services from third parties for resale to consumers.
The Commission believes that reasonable consumers generally
understand that the price charged by a retail seller – including
funeral providers – includes profit.9 Thus, the corrective
disclosure about cash advance items that § 435.3(f)(2) requires is
unnecessary when the funeral provider does not mislead the
customer through either express representations that the item is a
“cash advance item” (or alternative formulations), or implied
representations that the customer is paying no more for an item
than the amount the funeral provider paid for it.
9 As the Commission noted in the Statement of Basis and
Purpose for the original Rule, “The Commission does not suggest
that it is improper for funeral providers to profit on items obtained
from third parties. It is clear that it is wholly proper for providers
to do so.” 47 Fed. Reg. 42278 (Sept. 24, 1982).

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It is worth noting that the text and structure of the Rule overall
reflect the fundamental distinction between cash advance items
and non-cash advance items. For items that are typically non-cash
advance items, the Rule requires disclosure of the retail price of
specified goods and services offered for sale by a funeral
provider.10 An obvious example is the Rule’s treatment of
caskets, for which it requires a separate price list containing only
the funeral provider’s retail price.11 Therefore, items that must
appear on a funeral provider’s price list12 would not trigger
10 Funeral providers must “[i]nclude on the [general] price list,
in any order, the retail prices (expressed either as the flat fee, or as
the price per hour, mile or other unit of computation) and the
other information specified below for at least each of the
following items, if offered for sale . . . .” The rule then lists:
forwarding of remains to or receiving remains from another
funeral home; direct cremation; immediate burial; transferring
remains to the provider’s premises; embalming and other
preparation of the body; use of the provider’s facilities and staff
for viewing, for a funeral ceremony, or for a memorial service; use
of the provider’s equipment and staff for a graveside service; the
use of the provider’s hearse or limousine; and the provider’s basic
services fee. 16 C.F.R. § 453.2(b)(4). (Emphasis supplied.)
11 “The funeral provider must offer the [casket price] list upon
beginning discussion of, but in any event before showing caskets.
The list must contain at least the retail prices of all caskets and
alternative containers offered which do not require special
ordering, enough information to identify each, and the effective
date for the price list.” 16 C.F.R. § 453.2(b)(2)(i). (Emphasis
supplied.)
12 Section 453.2(b)(4)(i)(C) of the Rule sets forth the
minimum information that must be included on a funeral
provider’s general price list. These items include: caskets; outer
burial containers; forwarding of remains to or receiving remains
from another funeral home; direct cremation; immediate burial;

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the cash advance disclosures unless the funeral provider expressly
represents the items as “cash advance items” (or alternative
formulations) or represents by implication that items can be
procured on behalf of the particular customer and provided at the
same price the funeral provider paid for them.
Accordingly, the Commission wishes to be clear that the term
“cash advance item” does not apply to every good or service that a
funeral provider obtains from a third party. This overbroad
interpretation, which potentially brings within its scope every
component good or service of a funeral, does not comport with the
Commission’s intention in promulgating the “cash advance”
provisions of the Rule. Rather, based on a review of the original
Rule and the rulemaking record, the Commission finds that the
term “cash advance item” in the Rule applies only to those items
that the funeral provider represents expressly to be “cash advance
items” or represents by implication to be procured on behalf of a
particular customer and provided to that customer at the same
price the funeral provider paid for them.
transferring remains to the provider’s premises; embalming and
other preparation of the body; use of the provider’s facilities and
staff for viewing, for a funeral ceremony, or for a memorial
service; use of the provider’s equipment and staff for a graveside
service; the use of the provider’s hearse or limousine; and the
provider’s basic services fee.