An Empirical Look at Compensation in Consumer Class Actions
27 Pages Posted: 15 Mar 2015 Last revised: 24 Oct 2015
Date Written: March 6, 2015
Consumer class actions are under broad attack for providing little in compensation to class members. One response to this charge is the argument that one of us has made elsewhere: consumer class actions should not be measured by their compensatory value, but by their deterrence value. But here we take up this critique of consumer class actions on its own terms: can they serve a meaningful compensatory role? Scholars have taken up this question before, but they have been stymied by the lack of available data. In this article, we present original data on the distribution of class action settlements in fifteen related small-stakes consumer class action lawsuits against some of the largest banks in the United States. We obviously can make no claim that these settlements are representative of most consumer class actions. Nonetheless, we believe our findings support the notion that, under certain circumstances, consumer class actions can indeed serve a meaningful compensatory role: when they eschew claim forms in favor of automatic distributions, and when they rely on standard-sized checks (rather than the cheaper, postcard-sized variety) and especially direct deposits to make those distributions. We believe these circumstances will only grow in the future as the "big data" revolution continues to unfold and electronic banking continues to evolve.
Keywords: Class actions, consumer law, empirical studies, compensation, distributions
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