At the 2025 Angeion Mega Summit, a group of the class action industry's leading attorneys gathered to discuss one of the most persistent, fastest growing, and complex challenges in the field—fraud prevention. As they exchanged insights on the various and complex types of fraud currently impacting settlements, shared war stories from the field, and discussed both the consequences of programmatic fraud and the importance of prevention, one deceptively simple question sparked a thoughtful and unresolved debate: who should pay for third party fraud prevention?
To understand the debate, it helps, first, to understand what the term “claim fraud” means in today’s day and age. “Claim fraud” now refers to sophisticated, large-scale technology-based fraud that, literally, attacks settlement websites and programmatically files millions to tens of millions of fraudulent claims. That type of fraud requires a multi-faceted fraud solution, such as the “Anti-Fraud Triangle” that combines tools used by settlement administrators, digital payment providers, and sophisticated data-based fraud detection technology, and, accordingly, costs money above and beyond a standard administration fee.
Second, it’s important to revisit how common fund settlements are typically broken down. The total settlement amount is allocated across multiple buckets, including: attorney’s fees, case expenses, settlement administration costs, and the net settlement fund, which is ultimately distributed to class members. At an initial look, fraud prevention doesn’t fit neatly into any one category, which leaves its proper place in the settlement structure unclear.
The problem starts with the bidding process. Administrators are typically selected through competitive proposals, where lowest cost often wins. As a result, enhanced fraud prevention measures are excluded up front. Once bids are finalized and the administrator is selected, there’s often no remaining budget allocated for fraud prevention. When fraud inevitably surfaces, defense and plaintiff counsel are left to debate how to handle both the problem and the cost. Defense sees it as outside the scope of their post-agreement obligations. Plaintiff counsel doesn’t view it as their responsibility to fund from their fees. And all parties worry that using the net settlement fund will raise concerns at final approval, since that amount is meant to be distributed in full to the class under the terms approved at preliminary approval.
The result is a predictable accountability gap. Everyone agrees that protecting the class from fraud is critical, but no one has a clear mandate—or budget—to pay for it:
- Administrators can't absorb the cost without undermining their competitive bids.
- Defense is reluctant to add new expenses after the settlement amount is finalized.
- Plaintiff counsel generally sees fraud prevention as outside the scope of what their fees were intended to cover.
Fraud prevention, despite being widely recognized as necessary, ends up orphaned.
The entire conversation changes when you stop calling fraud prevention an "expense," and start thinking about it as an investment on behalf of the class that has a measurable ROI. On average, for every $1.00 spent on proper fraud detection, over $20.00 is recovered from claims that would otherwise have been fraudulently paid. Said differently, fraud prevention delivers a 20x return—or a 1,900% gain on investment. That’s not just efficiency, it’s fairness. It’s money returned to real class members who deserve it. Rather than diluting value, this investment increases the net benefit to the class.
The most equitable and transparent place to fund fraud prevention is from the net settlement fund itself.
- It doesn’t penalize the defendant beyond the agreed settlement.
- It doesn’t reduce attorney compensation.
- It doesn’t distort the settlement admin bidding process.
Most importantly, it directly benefits the people that all parties are here to protect.
All stakeholders in a class action—plaintiff, defense, and admin—share one obligation: serve the class with fairness, transparency, and diligence. When fraud threatens that fairness, investing in prevention isn’t optional. It’s a duty.
So let’s stop asking who should pay. Let’s start talking about how to ensure the class receives the maximum benefit they’re entitled to.
To learn more about ClaimScore’s approach to high-accuracy, AI-powered fraud prevention, visit claimscore.ai
