The Class Action Coupon Settlement Scam

At some point, we’ve all gotten one in the mail – a notice of our inclusion in a class action lawsuit, details of which are laid out in thousands of tiny, tiny words. To be part of the lawsuit (and the presumed award), we are asked to do nothing. To opt out (and get nothing), we must fill out and mail in paperwork.

If this sounds backwards, it is because these mailings are handled by plaintiffs’ attorneys. The more plaintiffs in a class action lawsuit, the more money the attorneys get. Plaintiffs’ attorneys are counting on people to do what the vast majority of us do – set the letter aside and forget about it, or simply throw it away.   

In doing nothing, you’ve just allowed yourself to be used in a lawsuit for a product or service you may not have ever purchased and from which you most likely never suffered any damages. By not “opting out” you are adding to the law firm’s total award. 

The class actions that end in coupon settlements are usually contrived, manufactured lawsuits created by personal injury lawyers to enrich themselves, not help the consumer. The lawyers rack up millions of dollars in fees and leave the consumer with a near worthless coupon where they generally have to spend more money with the company that allegedly wronged them in the first place in order to realize any benefit. 

Since the law firm works on a contingency fee basis, their fees are generally based on the full value of the coupon to every class member. But on average, only 2% of coupons are ever redeemed. In one case where 96,754 were issued, only two coupons were ever redeemed.

Today, class action lawsuits typically follow this “M.O.”:  Plaintiffs’ lawyers look for any small infraction by a business – so small that usually no individual consumer even bothers to lodge a complaint. They find a friend or colleague to be the representative plaintiff in the case in a city or county where a judge is likely to allow the case to proceed, called “certifying” the lawsuit, which allows it to proceed.

One way to bring these bogus lawsuits to a screeching halt is to base attorney’s fees on the number of coupons redeemed. As former FTC Chairman Timothy Mûris observed, "If . . . the result for the consumers is largely valueless . . . then the result for the attorneys who produced it should be largely valueless.” Unfortunately, it would have to pass out of a legislative committee packed with lawmakers elected with plaintiff bar campaign contributions. See the dilemma? 

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