How effective are class action settlement notice programs? The Federal Trade Commission intends to take a closer look.

The agency's Class Action Fairness Project "strives to ensure that class action settlements in consumer protection and competition matters provide appropriate benefits to consumers," the FTC explained. As part of the project, the agency monitors class actions, intervenes in appropriate cases or files amicus briefs, monitors legislation and class action rule changes, and coordinates with state, federal, and private groups on important class action issues.

Now the agency has issued orders to eight claims administrators requiring them to provide information on the procedures used to notify class members about settlements and the response rates for the various methods of notification.

Already included in the project are two studies on different aspects of consumer class actions. The Notice Study, an Internet-based consumer questionnaire, will examine consumer comprehension of the options conveyed by a class action notice and the implications of each option for the respondent. Specifically, the study will explore "whether respondents receiving class action notices understand the process and implications for opting out of a settlement, the process for participating in the settlement, and the implications of doing nothing," according to the Federal Register notice.

The second investigation, the Deciding Factors Study, will consider what factors influence a consumer's decision to participate in a class action settlement, to opt out of a class action settlement, or to object to the settlement. The Commission plans to seek up to 8,000 respondent answers to a questionnaire in order to weigh the impact of factors such as consumer comprehension of their options, the amount they expected to receive in the settlement, and the complexity of the settlement process.

To read the FTC's announcement, click here.

Why it matters: The orders seeking data on the procedures used to notify class members about settlements and the response rates for the various methods of notification were based on the FTC's studies into class action notices and the factors used by consumers to decide whether or not to participate in a settlement.