Mastercard: £45 payout to class members
Law firms working on collective action cases face a growing lack of trust amongst consumers who fear genuine claims could be online scams, according to research.
Concerns that genuine collective actions could be online fraud is now the main reason why people do not come forward to claim compensation when companies break competition laws.
Previously, consumers held back because of worries about privacy.
But in a survey of 2,003 people carried out by Thorndon Partners for the report Beyond Dispute, 36% of consumers said they would “actively avoid” making a collective action claim in case it was a scam.
Its report on how consumers engage with class action compensation showed how more could be encouraged to claim compensation – described in the report as “free money” – if the court provided the information about it (28% said they would consider this a trusted source).
Consumers also saw lawyers as one of the most trusted sources of information about claims and compensation – with 23% trusting the claimant’s law firm above anyone else to inform them about the case.
The consumer expert Martin Lewis was the most trusted source, with 46% of consumers happy to rely on the journalist for details about claims.
Only 10% of consumers trusted class representatives. The report said: “Class representatives have an important role to play. However, they are typically not well known to the public.”
A Thorndon spokesperson said: “Based on these stats, we have suggested that a centralised accreditation system could be advantageous in getting more people involved with the process, through instilling greater trust and credibility.
“The government has a clear role to play here. With numerous law firms and claims management companies engaging consumers, a centralised accreditation and ‘trust-mark’ would have clear advantages.”
The findings come at a time when the market is waiting for the outcome of the Department for Business and Trade’s call for evidence last summer on the collective action regime, which only applies to competition law breaches in the Competition Appeal Tribunal (CAT).
In April, the Law Commission launched a new project to consider whether a consumer class action regime should be introduced for non-competition claims.
The research showed the vast majority of consumers were not aware of the current collective action cases, against the likes of Google Play, Facebook and Apple, compared to 42% who knew of motor finance claims.
Thorndon said this lack of awareness “is a serious constraint on take-up rates”.
“The distribution phase should, in theory, be about convincing people to take action – specifically, to apply for compensation. However, low awareness before this phase even begins makes any action far less likely.
“The good news is that awareness is the easiest variable to change when determining take-up rates.”
Further, low-income households were the least likely to engage with collective actions, “even when they are the most likely to be impacted by overcharges”.
Since 2015, hundreds of millions has been spent on legal fees in collective action cases but while there have been some settlements,
However, most cases are settled out of court and the CAT has yet to make an award following a trial.
In May 2024, the CAT approved the settlement of the claim against Stagecoach South West Trains for up to £25m, with an estimated 1.4m rail passengers potentially eligible for a share. However, only £216,500 was claimed by class members.
A failure to address distribution was among the reasons the CAT refused to grant a collective proceedings order in April over an alleged salmon production cartel, as a likely low take-up would leave lawyers and funders the main beneficiaries.
The landmark Mastercard case has settled for £200m; while around 44m people were in the class, the claim administrators expect just 2.2m to ask for their payment of £45.
The research found that people would not be discouraged from claiming even if the payments were low, contrary to a common critique by opponents of the regime.
When it came to unclaimed damages, by far the largest group of people (37%) wanted it to go to an organisation which would distribute the money to charity.
Tara Flores, co-founder of Thorndon Partners and co-author of the report, said: “Collective actions increasingly operate in an environment where consumers are trained to be suspicious of unsolicited communications, unfamiliar websites and requests for personal information.
“The challenge is no longer simply making people aware of compensation. It is convincing them that the process is legitimate.
“Our findings show that it is not how much money is offered, but how the offer is made. Trust, credibility and behavioural design are becoming just as important to collective actions as the legal process itself.”
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