Rising Fraudulent Claims Submitted to Class Action Settlement Funds Heighten Settlement Risk

Rising Fraudulent Claims Submitted to Class Action Settlement Funds Heighten Settlement Risk

Consumers frequently receive only a paltry fraction of class action settlement funds, which are instead doled out to plaintiffs' lawyers, cy pres recipients, and administrators. 

Now this problem is compounded by a recent development: an explosion in fraudulent claims submitted to claims administrators. One claims administrator recently reported that it received 80 million fraudulent claims in 2023, an increase of 19,000% since 2021. This disturbing rise correlates with a transition from paper processing systems to digital systems using vendors such as Zelle, PayPal, and Venmo. Fraudsters appear to be using bots operating in foreign countries and other methods to submit fictitious claims. In several instances, this has resulted in claim numbers far exceeding the estimated class size. 

In light of these developments, defendants must take measures to mitigate risk. We propose several strategies. First, use capped settlements to protect against runaway costs and claims that far exceed estimated class size. Second, employ a sophisticated claims administrator with verifiable fraud control systems. Third, negotiate risk-shifting terms in the administrators' agreement. Fourth, include provisions in the settlement agreement enabling the parties and administrator to identify and reject claims with significant indicia of fraud.

Read the White Paper.

Insights by Jones Day should not be construed as legal advice on any specific facts or circumstances. The contents are intended for general information purposes only and may not be quoted or referred to in any other publication or proceeding without the prior written consent of the Firm, to be given or withheld at our discretion. To request permission to reprint or reuse any of our Insights, please use our “Contact Us” form, which can be found on our website at This Insight is not intended to create, and neither publication nor receipt of it constitutes, an attorney-client relationship. The views set forth herein are the personal views of the authors and do not necessarily reflect those of the Firm.