Class actions: A vital consumer tool not fully understood by those who stand to benefit

Consumer Action devotes its latest issue of Consumer Action News to explaining the power and value of class action claims

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While class action lawsuits are designed to help right some of society’s wrongs and to compensate those who’ve been harmed, it’s not as easy as you might think to find and reimburse impacted consumers.

Many consumers never bother to file a claim or cannot be located to be compensated, according to a recent FTC study of 149 class action settlements, reported on in Consumer Action News.

In other class action cases, claimants may be deterred by meager restitution. Take the Equifax data breach case that affected 147 million Americans. A settlement was agreed to which entitles consumers to either four years of free credit monitoring or “cash” compensation that, by the latest estimates, will be a mere 14 cents per person!

For the class actions it studied, the FTC found that fewer than 10% of class members who were eligible to file a claim actually did. Consumers who went to the trouble to file a claim were more likely to cash the check. However, when a payment was sent directly to class members—without them having to file a claim—approximately 55% of the entire class cashed the checks. The FTC concluded that consumers seem not to understand the value of class action lawsuits and recommended educating consumers about the benefits of collective redress.

Class action cases more often change harmful corporate behavior than compensate harmed consumers. No one person—or attorney—would file suit for a small-dollar injury such as an errant $35 overdraft fee, but a case brought on behalf of thousands of consumers who were hit with a misapplied fee has both financial and policy impacts.

When all known victims have been compensated, or have chosen not to file a claim, refund dollars may remain undistributed. In this case, the court can decide to award the remaining funds to non-profit organizations that do work that relates to the lawsuit and “indirectly benefits” those who’ve been harmed. These awards are called cy pres funds. To learn more about these valuable distributions, read The great debate: Who is entitled to cy pres funds?

In an effort to raise awareness and increase participation in class action claims, Consumer Action has created a free class action database that includes settlements for which eligible consumers can submit claims. The popular database has been visited by 946,263 people so far in 2019.

 

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Through education and advocacy, Consumer Action (www.consumer-action.org) fights for strong consumer rights and policies that promote fairness and financial prosperity for underrepresented consumers nationwide. 

 

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