Phoenix, AZ – The dramatic surge in fraudulent claims across class actions and mass torts has highlighted the escalating need for enhanced scrutiny and the potential for digital payment solutions to mediate concerns, suggest findings from a recent report by Western Alliance Bank and Digital Disbursements. The study, analyzing over 597 payouts from 2019 to 2023, reveals a 400% jump in fraud-indicative claims last year alone, totaling 80 million instances, compared to under two million in the preceding year.
Jeff Richardson, co-founder and CEO of Digital Disbursements, commented on the trend, noting that this surge mirrors broader economic fraud trends. Fraudulent activities range from duplicate check cashing to manipulated electronic payments across various sectors. Despite the medium of disbursement, whether digital or traditional checks, the proportions of fraud remain consistent.
According to the report, certain types of fraud were more prevalent than others. For instance, last year saw 42 million cases where claims directed payments to repeated routing numbers or addresses, a significant increase from 8.9 million in the prior year. Similarly, claims made through newly established email accounts under three years old spiked to over 30 million, from 7.4 million the previous year.
Richardson explains that Digital Disbursements uses over 25 different indicators to assess the legitimacy of claims. While some indicators heavily suggest fraudulent behavior, like multiple claims to the same bank account or email address, others may not be as directly indicative of fraud. For example, numerous claims could potentially originate from a common IP address without fraudulent intent, such as shared networks in public spaces.
The global dimension of fraudulent class action and mass tort claims was also underlined, with the study pointing out an increased involvement from international actors. In one striking detail, 16 non-U.S. countries reported over 100,000 fraudulent claims each in 2023, a powerful indicator of the worldwide scope of the problem.
Furthermore, the adoption of digital payment methods in class action and mass tort claims has been gaining popularity, driven by their higher success rates and preference among recipients. Digital transactions succeeded in 98% of cases, substantially higher than the 77% for checks tied to claims processes, and only 55% for checks without a claim process. A whopping 93% of payees in 2023 chose digital methods over traditional checks, drawn by their speed, accuracy, lower fraud risk, and traceability.
Richardson lauded the technological advancements that have made digital payments more accessible. He stated that the efficiency and secure features of digital transactions advocate for offering them as a choice in settlements.
The analysis revealed that California and Illinois’ courts have been pioneers in integrating digital payments into their settlement processes. The Northern District of California, Central District of California, Northern District of Illinois, and the Cook County Circuit Court in Illinois observed notable numbers of settlements opting for digital payment solutions.
On the law firm front, Milberg Coleman Bryson Phillips Grossman, PLLC, emerged as a leader in facilitating settlements with digital payments, while on the defense end, firms like BakerHostetler, Lewis Brisbois Bigsgaard & Smith LLP, and Mullen Coughlin were prominent, each processing a significant number of claims digitally.
The trend underscores a pivotal shift towards technology-driven solutions in the legal sector, aimed at curtailing fraud while enhancing efficiency and efficacy in claim settlements. The increasing reliance on digital platforms demonstrates a significant transformation in how legal claims processes are managed and executed, marking a significant development in the broader shift towards digital integration in various sectors.