Why Is My Class Action Payout So Much Smaller Than the Maximum?

The settlement said "up to $500." Your check was $12. What went wrong? Nothing, as it happens. You ran into the way most class action settlements actually divide their money, and the phrase "up to" was doing a great deal of quiet work.

How the money actually gets divided

Most consumer settlements create a single fund, say $10 million, and split it among everyone who files a valid claim. That is a pro-rata distribution, which means your share depends on how many other people file. The advertised maximum, however, is a ceiling, and it assumes a light turnout. When millions file, as they did in the big data-breach cases, the ceiling and the reality drift far apart.

Three things shrink the number between the headline and your check. First, the lawyers: courts routinely approve attorney fees of roughly a quarter to a third of the fund. Second, the costs of running the settlement, such as notifying the class, processing claims, and mailing checks, come out before anyone is paid. Third, and usually the biggest of the three, is the claims rate. The more valid claims filed, the thinner each slice.

Tiers, and the two kinds of settlement

Tiers matter too. Many settlements pay more to claimants who submit proof of purchase and less to those who file without it, and some cap the no-proof tier at a fixed low figure, regardless of what the fund holds. That, in essence, is why the same settlement can pay one person $100 and another $8.

Not every settlement works this way, however. Some are fixed-amount: everyone who qualifies gets the same set sum, and if the fund runs short the defendant tops it up. Others are reversionary, which means unclaimed money goes back to the company, an arrangement that quietly rewards low turnout. The claim notice tells you which kind you are dealing with, if you read the fine print on how the payments are calculated.

• "Up to $X" is a ceiling that assumes few people file — not a guarantee.
• Attorney fees (often a quarter to a third) and administration costs come out of the fund first.
• The more valid claims filed, the smaller each pro-rata share.
• A proof-of-purchase tier usually pays more than the no-proof tier of the same settlement.

The bottom line

So treat "up to $X" as marketing, rather than a promise. Filing is usually worth the two minutes, since a small check beats no check and you have, after all, already paid for it by being harmed. But budget for the floor, not the ceiling.

Related: how much can you make from settlements? · no-proof settlements explained · settlements open now · will a settlement affect your benefits? · can a settlement be garnished for debts?.