Low numbers of class members coming forward with claims has always been an issue in class action settlements. Take-up rates, as they are known, are especially low in cases involving hundreds of thousands or millions of class members, each with a low-value claim.[1] Lawyers, courts, and claims administrators have tried to increase take-up by making claiming easier, in an attempt to increase access to justice and (if it is a claims-made process) behaviour modification. Such efforts have included online claims submissions, direct deposit into bank accounts, and allowing claims without proof of purchase.2]
However, attempts to make the claims process easier and more automated are backfiring. In the past 18 months, claims administrators in both Canada and the US have seen an unprecedented upswing in take-up rates in many cases, but these claims have not been submitted by humans: they are the work of bots.[3]
Allowing claims without proof of purchase has become a generally accepted way of processing low-value claims, because the likelihood of fraud on such claims used to be minimal – why bother committing fraud for $5? However, with advances in technology and minimal to non-existent evidentiary requirements, that $5 can be multiplied by tens or even hundreds of thousands of claims, creating potential for substantial profit[4] and the perfect environment for bots to thrive.
Recent stories from the US indicate that, in some class action settlements, the number of fraudulent claims may be up to half of all claims made.[5] A report released in April 2024 by Western Alliance Settlement Services, which provides banking services to the claims administration sector, stated that the number of claims in US class actions with significant indicia of fraud had increased by more than 19,000% in just two years, from just over 400,000 in 2021 to just over 80 million in 2023.[6] The problem is the most severe in consumer and competition cases, which are more likely to require minimal or no proof of eligibility.
This trend is also appearing in Canada. In an interview with the author, a senior vice president (SVP) at a leading Canadian class actions administrator said that the advent of digital payments has worked “like gasoline on a bonfire.” The SVP said that, in one recent case involving low-value claims with no proof requirement, more than 10 million users tried to access the administrator’s website in one day.
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