SW Legal studies in Business

Class Action Settlement of Coupons for Customers for Alleged Fraud Is Adequate
Description Appeals court upheld a class action settlement of a suit against money wire transfer companies. The settlement of coupons to give discounts to future customers had little cost to the defendants, but the charges of fraud were dubious, so the settlement is sufficient.
Topic Consumer Protection
Key Words Class Action; RICO; Settlement; Coupons
C A S E   S U M M A R Y
Facts Western Union and other companies advertised "Send $300 to Mexico for $15." Plaintiffs in a class action sued contending that the $15 claim was fraudulent because customers not only paid $15 but also the difference between the wholesale and the retail rate on currency exchanges, which allowed the companies to collect an additional $25 on these transactions that was not revealed to customers. The class action suit sought treble damages under the Racketeer Influenced and Corrupt Organizations Act (RICO) and state anti-fraud laws. Over the years of operation, there could have been billions of dollars involved. A settlement was proposed that would clarify the terms of the money transfers to customers and offer coupons to class members for $6 off future wire transfers, up to $400 million worth of such coupons, plus attorney fees and other costs. The district court accepted this settlement. Some members of the class objected to the settlement and appealed.

Affirmed. The use of coupons does raise suspicions, "especially because coupons serve as a form of advertising for the defendants, and their effect can be offset (in whole or in part) by raising prices during the period before the coupons expire." Nevertheless, the coupons have real value to the many customers who wire money to Mexico several times a year. While the cost to the defendants of the coupons is less than the face value of $400 million, the credibility of the suit is marginal. The money wire business is competitive. Small sums of dollars for pesos exchange at a rate less favorable than the large dollar rate Western Union and other large traders obtain. For vendors to collect the difference between wholesale and retail is normal business practice, not fraud. Few businesses explain all of their background costs to their customers. "Nothing in this transaction smacks of fraud, so the settlement cannot be attacked as too low."

Citation In re Mexico Money Transfer Litigation, F.3d (2001 WL 1172697, 7th Cir., 2001)

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