According to the “2024 Digital Payments in Class Actions and Mass Torts” report by Western Alliance Bank and Digital Disbursements, fraudulent activity is on the rise in class action and mass tort claims, despite the growing prevalence of digital payments.

Analyzing data from 597 distributions spanning 2019 to 2023, the report reveals a staggering 400% increase in claims showing significant signs of fraud, surpassing 80 million in 2023, up from under two million in 2022. This marks a 19,000% surge compared to 2021 figures.

Jeff Richardson, CEO of Digital Disbursements, attributes this surge to a broader trend of escalating fraud across various sectors. He notes that fraudulent activities, whether involving digital or paper checks, have proliferated, citing instances like check washing and double deposits.

The report highlights specific indicators of fraudulent claims, notably a substantial increase in duplicate payment destinations, such as identical routing numbers or mailing addresses, which rose to 42 million instances in 2023 from nearly 8.9 million in 2022. Moreover, over 30 million claims were submitted using relatively new email addresses less than three years old, compared to around 7.4 million in 2022.

Richardson emphasizes the multifaceted approach his company employs to detect potential fraud, utilizing over 25 indicators. While certain indicators carry more weight, such as multiple claims directed to the same pay destination, others serve as lower-level signals. For instance, claims originating from the same IP address could suggest fraudulent activity but may also stem from legitimate sources like shared public Wi-Fi networks.

The report underscores that fraudulent claims extend beyond the U.S., with a significant rise observed in claims associated with international email addresses, totaling nearly 9.3 million in 2023 compared to under 1.4 million in 2022.

Despite these challenges, digital payments for class actions and mass torts are gaining traction in the U.S. The report reveals a nearly twofold increase in digitally processed claims, rising from 175 in 2022 to 323 in 2023. Digital payments boast a 98% success rate, surpassing checks both with (77%) and without (55%) a claims process.

Moreover, the overwhelming preference for digital remittance is evident, with 93% of payees opting for digital payments over paper checks in 2023. The efficiency, accuracy, and reduced fraud risk associated with digital payments are driving this shift.

California and Illinois courts lead in settlements featuring digital payments, with notable firms like Milberg Coleman Bryson Phillips Grossman and legal entities like BakerHostetler and Lewis Brisbois Bigsgaard & Smith LLP leading the charge on the plaintiff and defendant sides, respectively.

In summary, while fraudulent activities in class actions and mass torts are rising, the adoption of digital payments presents a promising solution, offering efficiency, security, and convenience for all parties involved.

Stay tuned for more updates!