Is there hope? Investor advocate Ken Kivenko recently hailedclass-action plaintiffs as agents for addressing abuses in the financial-services industry while politicians, securities commissions, [self-regulating organizations] and [ombudsmen] look on.
Class actions may well be the channel thatgets a better deal for consumers of financial services. But I just came across a rather revealing article on class-action lawsuits in The Lawyers Weekly, entitled Class action conundrum. I don’t think it has any negative consequences for class actions as a tool for change but some of the inner workings of class- action awards do give pause for thought on other counts.
The main theme is that class-actions rarely lead to big payouts for consumers. The article says only a low proportion of the members of a successful class action may actually claim the compensation. Perhaps more surpirsing is that unclaimed funds arereturned to the defendants when they retain a revisionary right to the sums not claimed by class members, which in Canada amounts to at least half of the class action settlements.”
The exact amount being left on the table is not known, However, extrapolating from the class actions where awards are handed out as coupons, the amounts appear to be substantial. The article says redemption rates for the coupons average between 3% and 13%.
Why are take-up rates so low for class-action rewards? Several reasons are offered:
claimants cant be bothered doing the paperwork for the typically paltry amount often the notices are indecipherable, replete with legalese notices are published in the back pages of newspapers and not distributed by modern channels such as email
Although individual consumers may not get much, the lawyers get a sizable share of the award. It would appear their incentive should drive class actions forward as a tool for redressing abuses.