6 Things To Know About Class-Action Lawsuits
Settlements from class-action lawsuits may be worth millions, but your share — not so much.
- (opens in new tab)
- (opens in new tab)
- (opens in new tab)
- Newsletter sign up Newsletter

1. There’s strength in numbers. Consumer class-action lawsuits allow a person or a small group of people to sue a company on behalf of a larger group with similar claims. The cases, which often allege fraud or product defects, usually end in a settlement instead of going to trial.
For example, AT&T paid a $45 million settlement in response to consumer complaints that they had received unsolicited automated cell-phone calls. Automakers Hyundai and Kia have agreed to pay $395 million following allegations that they inflated fuel-economy data. Cases involving consumer privacy, such as the 2013 Target data breach, have become even more common.
2. But don’t expect a windfall. Settlements in recent years have averaged $56.5 million, according to NERA Economic Consulting. But individual class members rarely see a fat payday. For example, the proposed Target settlement is $10 million (separate lawyers’ fees total $6.75 million). If all 40 million people who had a debit or credit card compromised file a claim, each one could receive just 25 cents, assuming none of them can document their financial losses. However, Hyundai owners will receive an average of $353, and Kia owners will receive an average of $667.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
3. Get in on the action. Potential class members may be notified directly or by way of an ad or in-store posting after the court approves the case as a class-action lawsuit or after a preliminary settlement is reached. Think you might be a class member in a suit but haven’t been contacted? Web sites such as www.consumer-action.org (opens in new tab) provide snapshots of current cases and settlements. You will probably also find a link to a Web site that has been set up to provide updates and additional details. If the terms are still not clear, or you’re concerned that a notice might be fraudulent, contact the consumer protection division of your state attorney general’s office.
4. Know your options. In most cases, you will be included automatically in a class unless you opt out. Joining the class means you’re eligible for compensation, but you waive the right to file a separate lawsuit. If you think you can prove that you have been harmed more than other consumers, consult a lawyer before excluding yourself from the class.
5. Don’t hold your breath. There are several opportunities for people and organizations to object to or appeal a settlement, and the settlement must receive final approval from the court. Assuming there are no further appeals, class members generally receive payment about six to nine months after a settlement agreement is submitted to the court for preliminary approval, says Stuart Rossman, director of litigation at the National Consumer Law Center.
6. Take the money. If you think filing for a minuscule settlement isn’t worth your time, or you don’t think you suffered sufficient financial harm for a case, take the money anyway and donate it to charity. Otherwise, the money may go to another class member or be donated to a charity chosen by the plaintiffs and the company. The money you receive is usually considered taxable income, but if you donate it and you itemize, you may take a tax deduction.
Related content
- Massive LastPass Hack Affects 30 Million Users. Is Your Data at Risk?
- T-Mobile Data Breach: You Could Claim Up to $25K — But You'll Need to Do it Soon
- Yahoo Reaches Data Breach Settlement
-
-
Can My Pension Trigger a Retirement Tax Bomb?
Key planning strategies like asset location and Roth conversions can dramatically reduce the taxes you pay throughout retirement and your heirs’ tax liability.
By David McClellan • Published
-
Being on a First-Name Basis Can Make Everything Better
This story of a doctor’s entitled spouse illustrates how establishing a friendly connection can sometimes resolve a spiraling situation with an unreasonable customer.
By H. Dennis Beaver, Esq. • Published
-
Best Cash Back Credit Cards March 2023
Smart Buying Looking for the credit card that pays the most cash back? These lenders may pay hundreds of dollars, with minimum hassle.
By Lisa Gerstner • Last updated
-
I-Bond Rate Is 6.89% for Next Six Months
Investing for Income If you missed out on the opportunity to buy I-bonds at their recent high, don’t despair. The new rate is still good, and even has a little sweetener built in.
By David Muhlbaum • Last updated
-
What Are I-Bonds?
savings bonds Inflation has made Series I savings bonds enormously popular with risk-averse investors. How do they work?
By Lisa Gerstner • Last updated
-
Your Guide to Open Enrollment 2023
Employee Benefits Health care costs continue to climb, but subsidies will make some plans more affordable.
By Rivan V. Stinson • Published
-
Watch Out for Flood-Damaged Cars from Hurricane Ian
Buying & Leasing a Car In the wake of Hurricane Ian, more flood-damaged cars may hit the market. Car prices may rise further because of increased demand as well.
By Bob Niedt • Last updated
-
What You Need to Know About Life Insurance Settlements
life insurance If your life insurance payments don’t seem worth it anymore, consider these options for keeping the value.
By David Rodeck • Published
-
Best Travel Rewards Credit Cards March 2023
credit cards Business road warriors and leisure travelers can use travel rewards credit cards to turn miles logged into other things — including more travel.
By Lisa Gerstner • Last updated
-
What Is APR?
Even for those who pay off their credit card balances every month, knowing your APR is part of keeping good credit habits.
By Rivan V. Stinson • Last updated