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Companies that use high pressure tactics or intimidation to sell funeral plans could face fines and criminal prosecution, the government said.
The Treasury has announced proposals to regulate funeral service providers in the UK through the Financial Conduct Authority (FCA), providing protection to customers.
Evidence shows that some vendors have used deceptive sales tactics, costing vulnerable customers up to £ 5,000.
In 2018, approximately 177,000 pre-paid funeral plans were sold.
A spokesman for the Treasury said that there were "widespread concerns about the conduct of funeral service providers" and that the sales tactics used to "get customers to subscribe to the plans".
Suppliers who violate the regulations may also have their authorization revoked.
A consultation on the proposals is in progress.
City Minister John Glen said: "It is shameful that there are people who are looking to take people from them while they are in that often emotional state and vulnerable.
"That's why I made the decision to regulate pre-paid funeral arrangements so that people can have more confidence in the products offered to them and be confident that their business will be handled properly."
The funeral service industry grew by almost 200% between 2006 and 2018.
This comes from the fact that the Competition and Markets Authority (CMA) has stated that the essential costs of funerals have increased by 6% each year, over the last 14 years.
At present, funeral service providers may voluntarily subscribe to a sector regulator. Companies can also choose not to adhere to the rules.
According to the proposals, the FCA would oversee the regulation of the sector and clients would have access to the financial mediation service.
The funeral service provider, Dignity, has welcomed the call for stricter regulation, claiming that it would "protect consumers against misleading advertising and aggressive sales methods."
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