Take Notice: FTC Reports on Claims Rates and Settlement Notices

In September 2019, the Federal Trade Commission issued a staff report titled "Consumers and Class Actions: A Retrospective and Analysis of Settlement Campaigns." The FTC staff studied 149 consumer class action settlements and conducted an internet-based consumer research study to explore consumer understanding of class action notices. Among the salient findings were:

• The overall claims rate of the cases in the sample was less than 10%. Specifically, the median calculated claims rate was 9%, and the weighted mean was 4%.
• The claims rate varied depending on whether class members received notice by packets, postcards, or email.
  • If class notice was given in the form of a direct mail packet, including claim forms, the claims rate was approximately 10%.
  • Postcard notice resulted in a 6% claims rate, and email notice resulted in a 3% claims rate.
  • However, postcard notices that included a detachable claim form had claims rates more in line with the 10% rate for packet notices.
  • Less than half of the study respondents understood that an email pertained to a class action settlement rather than being for promotional purposes.
• Publication notice as a supplement to direct notice did not appreciably impact claims rates.
• Claims rates were higher when the notice used "plain English" language to describe available settlement payments.
• Objection and exclusion rates were miniscule. Only 0.01% of notice recipients opted out; 0.0003% objected to the proposed settlement.

These conclusions are not particularly surprising. Nonetheless, they provide objective confirmation of what most class action practitioners have intuitively known to be true. Thus, the FTC staff report provides helpful information for parties to use when deciding the form of settlement notice. It also can be cited to a court when seeking approval of settlements where claims rates exceed the averages.