Charleston, South Carolina – In a dramatic shift, an increasing number of class members and plaintiffs involved in class action and mass tort settlements are opting for digital payments instead of traditional check payments. According to a recent report titled “Digital Payments in Class Actions and Mass Torts,” 170 settlements in 2022 utilized digital payment methods, compared to only two settlements in 2019. The report analyzed 267 settlements from 2019 to 2022, which were distributed by Digital Disbursements, a subsidiary of Western Alliance Bank.
Jeff Richardson, the co-founder and CEO of Digital Disbursements, highlighted the significant surge in cases offering digital payments, stating that a rapid digitization of settlement payments is currently taking place. The report revealed that 91% of class members and mass tort plaintiffs in 2022 opted for digital payments when given the choice, a notable increase from 83% in 2021 and 72% in 2020.
This trend reflects a growing interest among legal professionals to utilize digital payments. Lawyers believe that digital payment methods are more effective in reaching younger class members and individuals without bank accounts, commonly referred to as the “unbanked.” The preference for digital payments was a prominent topic of discussion at the Class Action Law Forum held in collaboration with the University of San Diego School of Law.
Contrasting a 2019 report by the Federal Trade Commission (FTC), the recent report indicated that 98% of digital payments in settlements achieved success, compared to 77% success rate for checks. While the FTC report analyzed 149 settlements and focused on email notices, the new report provides updated insights into the increasing utilization of digital payment methods.
PayPal emerged as the preferred digital payment option among class members, although alternatives such as Venmo, Zelle, digital Mastercard, and direct deposit were also popular choices. The report emphasized that different methods suit different individuals, highlighting the importance of offering a variety of options to achieve widespread acceptance.
Milberg Coleman Bryson Phillips Grossman, a plaintiffs’ firm, topped the list in terms of the number of cases involving digital payments, with 16 settlements. On the defense side, Lewis Brisbois Bisgaard & Smith led with 12 settlements. Harper Segui, a partner at Milberg, highlighted the benefits of digital payments, including reduced administrative costs and increased convenience for class members, ultimately resulting in higher participation rates.
The report further revealed that judges in the Northern District of California were the most receptive to digital payments in class action settlements. Other popular venues included the Southern and Eastern Districts of New York, the District of New Jersey, and the Northern District of Texas. However, various California courts, including the Central District of California, San Diego County Superior Court, and Los Angeles County Superior Court, also gained recognition for their adoption of digital payments.
Although digital payments have gained significant traction, some judges still express concerns about certain methods. Todd Hilsee, a class action notice expert, discussed questions raised by judges regarding the unused funds loaded onto digital Mastercards and their redistribution to class members. Despite these concerns, the overall consensus in the legal community is that digital payments have proven to be more effective and desired by class action members.
As this trend continues to reshape settlement payments, it is expected that courts and lawyers will increasingly embrace digital payment methods. With further advancements and scrutiny, the future will provide greater clarity regarding the leaders in this digital payment movement. In conclusion, the era of traditional check payments is rapidly fading, making way for a new era of digital payments in class action and mass tort settlements.