Article's Authored by Mr. Rianda

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Claims Filing Companies

The pending settlement of the VISA and MasterCard class action case has spawned a new type of company- the third party claims filing company. As with most new ventures, there is some controversy how this new model markets its business In fact, the court and counsel for the plaintiffs in the above referenced case have tried to modify some marketing activities used by these new players. Below we will discuss what these companies do and the recent attempts to regulate them by the court.

As a result of the pending settlement of the Visa and MasterCard class action case related to interchange paid by merchants, a pool of billions of dollars has been created that will eventually be distributed to merchants in the class. Companies have been organized to assist merchants to navigate that process and assist them in filing the necessary forms for their share of the settlement. These companies are perfectly legal and the court has acknowledged such is the case. The issue is that some of the companies have been marketing their services in ways that counsel for the plaintiffs in the case find objectionable.

In late 2013, counsel for the plaintiffs began sending various third party claims filing companies letters objecting to their marketing techniques. One of the objections was that some of the companies made statements like “you have to register to be included” in their marketing materials or otherwise inferring that the merchant must take some sort of action now or lose their right to any part of the settlement.

However, like most class action settlements, counsel for the plaintiff usually get most of the information about who is supposed to be part of the class from the defendants. During the discovery process, the plaintiffs’ counsel requests information that allows them to identify class participants including their addresses. So most of the people that have a claim will be identified in that manner. If you want to make sure you are included in the class as a merchant, there is a place available on the official court approved website where you can provide your name and contact information to make sure you are included in the list.

Another issue raised by counsel for the plaintiffs was that some of the marketing alleged that the process of actually determining how much each merchant was entitled to would be a difficult to determine by merchants themselves. However, that appears to be contrary to the anticipated procedure which, seems to indicate that the settlement amount will actually be calculated and provided to the merchants in the claims form itself. Counsel for the plaintiffs state it “expects that for the vast majority of the merchants, the process will be easy, with a claim form provided that the merchants can simply sign off on and return.”

Papers have been filed with the court asking it to address the marketing activities of the third party claims filing companies. As a result, in an order filed December 20, 2013, the court “determined that certain solicitations of class members regarding third-party claims filing services has been misleading” and ordered that certain disclosures be made to merchants when they are solicited. The court indicated that it hoped this would “prevent” further issues instead of having to address these matters on a case by case basis. In addition, the court ordered that the third party claims companies send a letter to each merchant that they had already signed up that would be approved by counsel for the plaintiffs allowing the merchant to opt out of the claims filing services if the merchants felt they were misled.

However, the court did allow attorneys representing the third party claims filling companies to provide some input as to the wording of the required disclosure. Specially, the court ordered that the parties draft a specific disclosure that will be required to be placed on any solicitations used by the claims filing services. The disclosure is to contain the following:

  • “a. A statement that claims forms are not yet available.
  • b. A statement making clear the class members need not sign up for a third-party service in order to participate in any monetary relief and explaining that no-cost assistance will be available from the Class Administrator and Class Counsel during the claims filing period.
  • c. Information directing class members to the Court-approved website for additional information.”

Counsel for the class has submitted their proposed disclosure to the court for approval. One would assume that the final disclosure will also form the basis for the letter that will eventually be sent out to all the merchants that have already signed up for the service but that remains to be seen.

The impact of all this on third party claims filing companies is certainly problematic. It may result in any company having to submit to the court their solicitation material before being allowed to file claims on behalf of merchants. The court has made clear that it “intends to permanently enjoin any entities that have made false or misleading communications to class members from involvement of any kind in claims-processing services with respect to this case.” One can assume the court would also pursue any companies that make such false or misleading communications in the future.

I liken this to the recent number of Federal Trade Commission’s actions against our industry. It appears that there is increasing scrutiny being placed on the bankcard industry and especially industry marketing activities. We have not seen much, if any, regulation in this business for a long time but that appears to be changing at a fairly rapid rate. And the ramifications for companies engaging in misleading or false advertising could be severe, including in the more egregious cases literally being put out of business.

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