A community coalition led by First Nations groups has released an open letter to the major political parties calling for action to prevent Aboriginal and Torres Strait Islander families being denied the dignity of a culturally appropriate funeral and grieving period due to the collapse of Youpla funeral funds.

The Save Sorry Business Coalition, including more than 125 organisations, says the next federal government must provide urgent assistance for people who have recently passed away or who are in the final stages of their lives, and a plan is needed to meet the needs of affected families.

The coalition says the Aboriginal Community Benefit Fund (ACBF), trading as Youpla, aggressively sold poor value funeral plans for almost 30 years, preying on the culturally significant practice of Sorry Business.

Four ACBF funds were placed into liquidation last month, leaving policyholders unable to meet costs and without the ability to recover premiums paid. Community organisations and financial counsellors say they have been inundated with hundreds of calls a day.

Financial Counselling Australia Financial Capability Coordinator Lynda Edwards, a Wangkumara/Barkandji woman, says government and regulators have failed to step in despite numerous opportunities to take action.

“The trauma caused to First Nations People by the collapse of Youpla is a disaster that will leave families and community in severe hardship,” she said.

“We are calling on whoever forms government after the election to set up a compensation scheme to alleviate the hardship and trauma that is already being felt in First Nations communities across Australia.”

The letter, addressed to Treasurer Josh Frydenberg and Labor Shadow Treasurer Jim Chalmers, says Youpla’s practices were exposed during the Hayne royal commission and harm created reflects an inadequate regulatory framework.

Youpla misled policyholders into believing they were dealing with an Aboriginal owned or controlled organisation run for the benefit of First Nations people, it had sold policies to children and young people, charged unfair premiums and had evolved its business model to avoid regulation, the letter says.

The Australian Financial Complaints Authority has received more than 700 complaints about the funeral plans, but has had to pause work on the issues due to the funds being placed into liquidation.