A different kind of class action reform
Ever see Office Space, or Superman III? Those movies both feature a computer “virus” that steals fractions of a cent from millions of bank transactions. Individually, the transactions are meaningless. But combined, the transactions add up to hundreds of thousands of dollars.
Imagine you were the victim of such a virus; you discovered that someone embezzled 3/5ths of a cent from your checking account. Would you go to the trouble of filing a lawsuit to recover it? Probably not – your time is worth more than a fraction of a cent. But if the author of such a virus embezzled fractions of a cent from millions of citizens, a class action lawsuit would be the proper remedy. In such a scenario, you would do little more than sign a piece of paper, and some time later, you’d get your 3/5ths of a cent back. The embezzler would refund all of the ill-gotten gains, plus be forced to pay hefty attorneys’ fees to the class action lawyer.
Not surprisingly, there’s been a call from the business community to “reform” class action lawsuits. Rather than argue that class action lawsuits aren’t good for companies that rip off consumers, “reformers” argue that class action lawsuits aren’t fair to consumers that get ripped off.
Several years ago, I visited FreeCreditReport.com to view my credit reports and scores. I read the disclaimer that informed me that I would receive 60 days of the service for free, and after that I would be charged $79.95 to be enrolled in the yearly service. If I didn’t want to be charged, all I had to do was cancel the free service. I understood that, even though the disclaimer wasn’t really obvious.
I proceeded to enroll in the service, but ran into a snag. I was asked a series of “security questions” to verify I was the person I claimed to be. I failed the security questions, and the site informed me I couldn’t be enrolled in the service. The site specifically told me that my credit card would not be charged.
Lo and behold, some months later I incurred a series of overdrafts on my checking account because I *was* charged $79.95 for a service I never received. I straightened things out with my bank, and contacted FreeCreditReport.com for a refund. They refused to give me a full refund, and instead gave me a “pro-rated” refund that took into account the portion of time I supposedly had a membership. I tried explaining to them that I never had access to the service, as they couldn’t identify me. They wouldn’t budge, so I did the only logical thing: I spent a couple hundred dollars in filing and service fees to sue them to recover my $12.00 they wrongfully kept. In the end, we were able to resolve our differences amicably.
I documented this story on Corpreform.com, and to this day, the second most popular series of articles are those dealing with my FreeCreditReport.com lawsuit. Lots of people have apparently had similar problems with bogus refunds.
The other day, I received notice of a class action settlement for people who were also ripped off by FreeCreditReport.com. I threw it away because I had already resolved my differences with FreeCreditReport.com, and didn’t give it another thought until a lawyer contacted me regarding the class action settlement.
He described it as bordering on “collusive” between the plaintiff’s attorneys and FreeCreditReport.com, and I can see why. Those who opt-in to the settlement can receive either: (a) Their credit score from Experian, or (b) Two months of free credit monitoring service. If you opt for (b), you have to again provide your credit card number to FreeCreditReport.com for them to charge at the end of 60 days. You know – the exact same behavior that got them into this lawsuit in the first place. Oh, and the attorneys handling the suit get over $2 million in fees.
This “settlement” is offensive. Rather than getting their money refunded, class members get either a meaningless credit score (no report comes with it to find errors and such) or the opportunity to once again get ripped off by FreeCreditReport.com. The company already proved it can’t be trusted to properly bill individuals for its service – why on Earth should the settlement give them the opportunity to defraud consumers again? It’s entirely possible that enough people will either forget to cancel the service or be improperly charged that FreeCreditReport.com will make money from this settlement. Unacceptable.
This settlement makes me think class action reform is in order. Perhaps something along the line of requiring any ill-gotten gains be returned with interest to consumers. Or not allowing a settlement that costs the company nothing more than attorneys’ fees. Maybe even requiring the company to put in place policies and procedures to correct the problem in the first place. At the very least, prohibiting settlements that require class members to give credit card information to the defendant.
The attorney who used the phrase “collusive” suggested he has evidence showing FreeCreditReport.com has made “hundreds of millions of dollars” by improperly charging consumers. If he’s off by even a factor of ten, this settlement is still a travesty of justice. I plan on objecting to this settlement and may even attempt to appear and speak at the settlement conference.
What worries me the most is that this settlement will become another exhibit in the “reform” lobby’s effort to reduce class action lawsuits. Real reform wouldn’t make it harder to file class action lawsuits or to get them certified, but would force settlements to exceed the cost of attorneys’ fees. At the very least, it would preclude settlements that help the defendant make money by engaging in the same behavior it was sued over.
I welcome discussion on this topic – especially if you think I’ve got it wrong and this settlement is fair.