WASHINGTON, April 14, 2000 - Tougher state and federal regulation of the funeral industry is likely following a Senate hearing that exposed a small but alarming pattern of corruption and consumer fraud.

Sen. Charles E. Grassley (R-Iowa), chairman of the Senate Select Committee on Aging, said the "pre-need" area - paying for funerals in advance -- is especially troubling. With the huge number of baby boomers nearing retirement age, Grassley said Congress and the states need to move quickly to head off a massive increase in consumer fraud.

One Florida funeral home director testified high-pressure sales tactics are common and said he knew of an 81-yer-old woman who wound up paying $132,000 for her funeral arrangements.

Testifying from a California prison, where he is serving six years on a grand theft conviction, Erwin Karp said he simply took for his own use thousands of dollars of consumers' money that was supposed to be invested in trust funds to pay for funerals and related services. He suggested that pre-need salesmen be licensed and subject to regular inspections.

It's estimated that at least one-third of the two million funerals performed in the United States each year are pre-paid. But often survivors are told they must pay additional costs, even though they thought everything had been paid in advance.

Often, retirees who have pre-paid plans have trouble getting their money back if they move and sometimes their survivors must pay unexpected fees if a person dies out of state.

Grassley said he hoped Congress would adopt model legislation that states could use to ensure that pre-need payments actually go into a trust fund and to establish a mediation process to resolve disputes.

While there are relatively few consumer complaints about the funeral industry, testimony before the committee suggested many problems may go unreported. A California official said his state has only two inspectors to keep tabs on 890 funeral homes.

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