Attributed to: Sophie Condie, Chief Operating Officer at Shieldpay
Class action lawsuits represent a pivotal component of the modern legal landscape, allowing groups of individuals with similar grievances to collectively seek justice and compensation for wrongdoing. These lawsuits serve as a formidable instrument for holding corporations and large institutions accountable.
While class action lawsuits offer consumers the advantage of unity in numbers, they are not without their challenges. One major hurdle is the sheer complexity and scale of such cases. Class action lawsuits can be expensive to litigate meaning legal teams need to invest significant resources and time which can be both financially and emotionally taxing for those involved.
Fast forward to recent technological advancements,. this has aided the legal landscape in future-proofing their offering. Law firms are now able to leverage innovative technology to outsource the task of handling class action distributions. This automated process not only reduces financial complications but also enables law firms to handle these tasks with greater accuracy and speed, making this a mutually beneficial practice for all parties involved.
The realities and complexities of class action payouts
Managing payments on behalf of clients is resource-intensive and can take its toll on law firms that have to increase costs to meet these demands. A contributing factor to the level of workload is also ensuring compliance is top of the agenda due to the client account rules put in place by the Solicitors Regulation Authority (SRA).
The UK legal regulator is encouraging firms to better manage the risks of holding client funds because it is becoming increasingly complex and they aren’t sufficiently equipped to undertake prudent management of the accounts. For law firms which do work with traditional banks to hold the funds in a Client Account, there are long, drawn-out processes laden with paperwork to open the account; receive, hold and disburse funds in a compliant manner.
Then there’s the intricacies of data management Law firms need to collect, verify and hold personal information from every claimant they are paying out to. Collating data represents an enormous amount of time-consuming and manual work, especially when there are compliance requirements. This is exacerbated by the fact that data breaches are one of the most common motives for group legal action, putting pressure on firms to ensure they are not causing concern for their already mistrustful claimants.
Law firms need to deal with personally identifiable information (PII) to complete the payments. This is high-risk data. To comply with regulations, such as GDPR, and mitigate the risk of compromising this information, firms must have processes in place to efficiently, safely and securely gather it. This is no easy feat, however, without the right talent, tooling and partner in place.
A key part of this data collection stage is the verification process. While painstaking, it’s vital that law firms do their due diligence and undergo sanction checking, as well as AML checks and appropriate ID verification to mitigate the risk of fraud and involvement in illegal activity.
Impact on client satisfaction
Given all the administrative and risk-related drawbacks, it’s easy to overlook a more evident pitfall associated with manual payment processes: client dissatisfaction. Consumer expectations are evolving in alignment with the rapid pace of technological advancements in every aspect of life.
Now, consumers expect instant, transparent, automated payments; the last thing they want, or anticipate, to do after a hard-fought legal battle is to jump through hoops to receive what they’re owed.
So why are law firms still relying on manual client account processes? The simple answer is that lawyers aren’t payment experts. While there is increasing technology adoption in the industry, payment transformation has been overlooked as a key area for driving efficiency.
But, now, with increasing complexity in managing the funds and pressures from all angles to improve their processes, law firms can no longer afford to ignore this key challenge. They need to take action.
Automation with a transformative impact
In the legal sector, a fast-developing area is class actions, making it ripe for innovation. As a practice area of law that is still in development, with new changes to the regime still taking place in jurisdictions around the world, such as CAT in the UK and the new European Directive, law firms should be looking to build and develop their legal services in tandem with their use of technology.
Fortunately, payment solution providers have stepped up to address these challenges. Innovative tools are emerging to automate every stage of the payout process, significantly cutting down the time and resources needed to distribute compensation funds. This not only decreases the financial burden on law firms but also allows them to boost their billable hours by allocating more time to higher-value legal tasks.
For example, new tech platforms have been developed that allow law firms to collect and verify claimant data at scale. By leveraging the power of open banking technology, payment processors can verify claimant bank account information in a matter of seconds. This reduces the risk of money being paid to the wrong person, cuts down on manual errors and keeps firms compliant with regulatory demands.
Law firms can further support their compliance requirements by partnering with a payment solution provider which holds funds in safeguarded accounts, known as a Third-Party Managed Account by the SRA. These accounts are compliant with the SRA Accounts Rules and can result in cost savings, such as a reduction in PII premiums.
Enhanced visibility leads to heightened competitiveness
The transition from manual payment methods to automated, digital payment technologies empowers law firms to effortlessly process large volumes of payments with just a few clicks, swiftly transferring funds directly to claimant bank accounts.
Another advantage of partnering with technology-driven payment solutions is the enhanced visibility they offer throughout the entire transaction process. Real-time access to data points like verification and payment status streamlines reporting, with readily available data that can be downloaded at any moment. This liberation of internal resources enables firms to tackle more substantial cases than they would typically handle, allowing them to maintain a competitive edge in the market.
Automation does not entail sacrificing care and quality. It enhances them. Modern digital tools are continuously being developed to eliminate time-consuming, non-billable tasks, freeing legal professionals time and allowing them to focus on delivering a high-quality service.
Time is money and law firms cannot afford to let administrative tasks take up their valuable time – automation is key to accelerating growth and ensuring that firms are well-prepared for the future.
