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FTC seeks information on class action claims rates

Posted in Arbitration, FTC

The FTC has announced that to study the effectiveness of various class action settlement notice programs, it has issued orders to eight claims administrators requiring them to provide information on their procedures for notifying class members about settlements and the response rates for various methods of notification.

It is anticipated that such information will demonstrate that only a very small fraction of class members who must file claims to participate in a settlement fund actually do so.  Such information would provide support for critics of the CFPB’s proposed arbitration rule and serve as further evidence that the CFPB’s premise that consumers obtain more meaningful relief through class actions than in arbitration is incorrect.

The CFPB’s own arbitration study included data showing that even class members entitled to benefits frequently fail to obtain them.  The study found that in “claims made” class action settlements, the unweighted average claims rate was 21 percent and median was 8 percent.  The weighted average claim rate was only 4 percent.  Moreover, claims rates fell nearly 90 percent if documentary proof was required.  Presumably, the funds not distributed to the class members either reverted to the company or were used for a cy pres distribution

For more information on the FTC’s announcement, see our legal alert.