FTC Will Study Effectiveness of Class Action Settlement Notice Programs

With billions of dollars in settlement money going unclaimed each year, the FTC hopes its project will shed light on both consumers’ understanding of class action notices and factors that influence individuals’ decisions to participate in or opt out of class actions.

The Federal Trade Commission (FTC) released a communication on November 14 announcing it will comprehensively investigate the effectiveness of procedures used to notify class members about class action settlements, as well as response rates to settlement notices.

Published on the agency’s website, the memo said the FTC handed down directives to claims administrators asking them to provide information on settlement notification procedures as part of its Class Action Fairness Project. The project “strives to ensure that class action settlements in consumer protection and competition matters provide appropriate benefits to consumers.”

The FTC uses its Class Action Fairness Project to closely monitor class actions to determine when it might be necessary for the agency to intervene. In these situations, the FTC may file amicus briefs—documents filed by parties not involved with a case that provide the court with additional relevant information they may want to consider—or coordinate with governmental or private-sector groups on important case issues.

Included in the Class Action Fairness Project are two proposed studies: the Notice Study, which will look at “consumer perception and understanding” of settlement notices and the options they provide to consumers; and the Deciding Factors study, meant to analyze what influences consumers’ decisions to participate, opt out of or object to a settlement. The result of the these studies, the FTC said, will play a role in the future of the Class Action Fairness Project.

Specifically, researchers will examine whether consumers who receive class action settlement notices “understand the process and implications for opting out of a settlement, the process for participating in the settlement, and the implications of doing nothing.” The study may utilize actual settlement notices sent to class members from various class actions that have already settled.

The agency notes the studies will be entirely Internet-based. The FTC estimates the questionnaire—which will be pre-tested by 100 people to gauge the difficultly of the questions—sent to participants will take roughly 20 minutes to complete. Potential participants will be contacted directly by the FTC and asked to opt in to join the studies.