This is why class action members don’t bother to collect, says the FTC

Class action notice is one of those thorny problems that in-house lawyers have to occasionally face. How do you tell people that they may be entitled to an award? And the why don’t most people in the class respond?

The Federal Trade Commission recently took a look at . that, and published a preliminary staff report on two studies it conducted to understand the effectiveness of class action settlement notices. While the report highlights its findings relating to low refund claim rates by class members, say two Seyfarth Shaw attorneys in a client note, lawyers may be more interested in the research conducted to evaluate how email sender names, subject lines, and email formats can influence a consumer to successfully complete steps to file a claim.

The FTC’s Internet-based consumer research study found that recipients’ understanding of both the nature of the email itself and the next steps needed to receive their refund was low overall. Only about 38 percent of respondents understood the nature of the email when viewing it in their inbox and that number rose to slightly less than half when viewing the actual email. Only around 40 percent actually understood the steps required to receive a refund, write Tracee Davis and Heather Murray.

The agency found that how an email subject line is phrased affects perceptions to a greater degree than the sender name does. For example, the inclusion of a $100 refund amount in the subject line made respondents 12 percent less likely to understand the nature of the email, with some erroneously believe that the email is a scam. Respondents were correspondingly 4 percent less likely to even open the email if the refund amount was listed in the subject line.

In the other study covered by this report, the FTC found in analyzing data from 149 consumer class actions that the median refund claims rate in these cases, regardless of the form of notice, was low at an abysmal 9 percent. For class action members who only received email notices of their refunds rather than traditional mailings, the median claims rate dropped to 2 percent, say Davis and Murray.