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Mitigating Fraudulent Claims in Class Action Settlements

Fraudulent claims filed in class action settlements potentially waste settlement money, which impacts both sides of the aisle and in the end negatively effects class members. Combating fraud requires a mix of technology and strategy. It’s important to keep in mind that the claims process should still be as simple as possible for class members but taking the steps to mitigate fraud ensures a fair and secure process.

1. Use technology to prevent claims submitted by bots

It’s no industry secret that the internet is full of fraudsters looking for the next scam, and the class action space is no different. But there are certain tools you can put into place that mitigate risk and protect your settlement from these autonomous programs that pretend to behave like humans.

It’s likely most class members submitting a claim online will have already encountered reCAPTCHA somewhere on the internet. The program asks the user to complete a human task, such as distinguishing a simple image code of letters and numbers that would be invisible to a bot. It’s used to automatically weed out the machine. The word is actually an acronym for “Completely Automated Public Turing test to tell Computers and Humans Apart.”

A step as simple as adding reCAPTCHA can significantly decrease the number of fraudulent claims that were submitted.

2. Use unique claimant ID numbers

Depending on the size of your class and the type of class action settlement, it may work well to provide unique claimant ID numbers for easy identification. This can be particularly beneficial in consumer and indirect antitrust class action settlements.  Unique ID numbers require class members to register before filing a claim. After registration, the class member is verified and emailed a unique class ID that can be used to file a claim.

This method works well on a few fronts. First, class members can’t access their ID number unless they provide a valid email, which means the data collected from class members using this method is current and clean. If the user provides a fake or old information, their claim can’t go any further and the potentially fraudulent activity is effectively removed.

Second, this method makes it much more difficult for users to submit duplicate claims. Duplicate claims take manpower to identify and remove, so any layer that automates the process saves both time and money.

An additional benefit of this process is that the administrator now has a verified email that can be used for future communications regarding the settlement and/or the claim that was filed. Generally speaking, the cost of sending an email is .01 cent vs the 0.50 cents it takes to mail communications. Having verified email addresses has the potential to cut down costs during the settlement administration process.

3. Be strategic about claim form fields and required information

Required fields on a claim form is a very important part of claim analysis. The strategy will be different for each case, but setting requirements is an important way not only to save time and money in the verification process but to also ensure the settlement reward is reaching the right people.

Required fields also allow the settlement administrator to spot duplicate claim filings and in some cases questionable claims. Required fields save time and money in the verification process and helps to ensure the settlement proceeds are reaching the right people.

Household caps are sometimes incorporated into the settlement agreement. In those cases, required fields ease the administrator’s burden when identifying household addresses. The settlement agreement should spell out any limitations regarding the number of claims per household allowed, and the claim form should automatically follow that logic.

4. Leverage your settlement administrator’s expertise to further combat fraud

It’s also equally important to not falsely flag legitimate claims. When analyzing claims based upon IP address, administrators should take the extra step to analyze things such as timestamps. For example, if an administrator is solely using IP addresses to flag fraudulent claims, it could be discounting situations such as class members sharing devices with family or friends. There are several layers that should be examined by an experienced administrator before marking a claim as fraudulent and in order to satisfy due process.

In today’s technology-driven world, fraud is becoming more and more prevalent across all industries. It’s important to constantly evaluate and refine security measures when it comes to class action administration to stay ahead of the curve.  At Heffler, it’s been our experience that having the proper layers of security in place is the best way to mitigate potential risks. When developing your class action settlement administration program, it’s important to involve your settlement administrator early in the process to help ensure the proper fraud prevention steps are in place at each stage. 

Interested in a free consultation for one of your upcoming settlements? Please feel free to contact us.

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James Prutsman
James (Jim) Prutsman has more than 20 years of experience in the administration of some of the highest profile class action settlements in the United States. He is a recognized expert with extensive experience in the planning, development of systems, process and procedures for the successful administration of hundreds of matters.


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