Second Annual Report Highlights Magnitude of Growing Fraud Problem
While fraudulent claims have always existed in class action and mass tort settlements, the problem has grown exponentially worse over the last two years, according to exclusive research by Digital Disbursements, part of Western Alliance Bank’s Juris Banking Group. The just-released Second Annual “Digital Payments in Class Actions and Mass Torts” report found more than 80 million settlement claims submitted in 2023 included significant indicia of fraud–an increase of 19,000% since 2021.
“The surge in fraudulent claims is one of the most dramatic developments in our industry,” said Jeff Richardson, Co-Founder of Digital Disbursements. “The decades-long mantra that is better to allow ten ineligible claims than to turn away one legitimate claim is being re-examined by judges, lawyers, and settlement administrators. While it remains absolutely critical that actual class members and mass tort victims receive their settlement benefits, the scale of the fraud—more than 80% of claims in some cases—poses a significant risk of diluting those settlement benefits.”
As with last year’s inaugural report, Digital Disbursements’ large market share allows its data to serve as a reasonable proxy for the industry. The data for this year’s report comes from 597 class action and mass tort distributions awarded to Digital Disbursements from 24 different settlement administrators between 2019 and 2023. The number of distributions is almost double that of last year’s report and represents the acceleration of the active transition away from check-only distributions to settlements that offer a menu of different payment options.
As the report describes, Digital Disbursements is using technology, including real-time screening and fraud scoring, to help its clients identify and prevent bad actors from harming legitimate payees. Based on insights from handling more than 200 million payment selections during the past few years, Digital Disbursements also has developed a multi-layered verification process that can be used during the claim review/deficiency phase to parse the subset of claims that are “close calls.”
Along with the data on fraud, this year’s report also found that digital payments continue to be far more effective than paper checks, and that the pace of digitization of settlement payments is still accelerating.
● The payment success rate for digital payments in cases that offer a broad pay menu remained steady at 98%
● When digital payments are offered alongside paper checks, payees select digital payments 93% of the time
● The rise in use of digital payments continues, with the number of cases roughly doubling at top firms and courts
“Our report also shows that digital payments continue to be favored by a growing percentage of class members and mass tort victims. To ensure a harmony between fulfilling justice and preventing fraud, we are working tirelessly with our clients to leverage our technology and the findings in the Second Annual ‘Digital Payments in Class Actions and Mass Torts’ report,” said Francesca Castagnola, Senior Managing Director of the Juris Banking Group at Western Alliance Bank. “It will take the entire class action and mass tort settlement ecosystem, including courts, lawyers, and administrators to ensure that settlement funds are directed to those who deserve them.”
Get access to the report to learn more about the essential findings and how these fast-moving trends can shape the future of class actions and mass torts: Download Today
Western Alliance Bank, Member FDIC.
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