Class action lawsuits are a crappy solution, but often better than the alternative, which is often nothing.
(In some cases, mass direct-action lawsuits are superior, but coordinating those also has substantially increased overhead, and they gave some of the same settlement incentives; OTOH, because they are positive approval rather than opt out, it's less likely that a small-fraction settlement gets approved.
I was referring to the alternatives available in the status quo legal system in the US, but I disagree that more powerful regulatory agencies are a complete replacement for class actions, though they are perhaps independently desirable.
> 'Doing nothing' is a false dichotomy unless you subscribe to libertarian/corporatist philosophy. (Which would, if it could, abolish the position of the attorney general.)
No, it wouldn't (at least, most libertarians and even more so pro-corporate types recognize a role for government and a role for AGs within that government, though a narrower role than the status quo for each.) It might eliminate state causes of action on behalf of consumers, but those aren't the whole (or even main) thing that AGs, who are the state or federal government's chief legal counsel and law enforcement officer, do.
(Also, you seem to be missing “corporatist” to mean “pro-corporation minarchist capitalist”; corporatism is a disinct politico-economic philosophy that is about as far from libertarianism/minarchism as possible.)
And looking at the American political landscape, there are far more dyed-in-the-wool anti-human corporatists holding power then there are libertarians.
Not to mention that the article offers data to refute this idea that only the lawyers benfit (from a study the author commissioned in 2010 while at the Consumer Financial Protection Bureau):
>Opponents also claim that the rule benefits lawyers rather than consumers. In reality, lawyers collect a small portion compared with consumers, and only if they succeed. For every $10 that a company pays out for wrongdoing, we found about $8 goes to consumers and $2 goes to pay legal costs. In any event, banks choose to hire lawyers to file class-action lawsuits, and ordinary people deserve to make the same choice.
>Consumers get only a tiny fraction of what they've lost.
But the whole point is that consumers have, individually, lost very little. If you were overcharged $20 and got $10, or $5, the company in aggregate has still been forced to pay out a lot. Any individual consumer isn't going to receive significant compensation even in a 100% win.
The article again offers data to refute this idea that consumers don't get fair compensation through class actions:
>First, opponents claim that plaintiffs are better served by acting individually than by joining a group lawsuit. This claim is not supported by facts or common sense. Our study contained revealing data on the results of group lawsuits and individual actions. We found that group lawsuits get more money back to more people. In five years of group lawsuits, we tallied an average of $220 million paid to 6.8 million consumers per year. Yet in the arbitration cases we studied, on average, 16 people per year recovered less than $100,000 total.
>Companies aren't deterred--they just treat the occasional payout as the cost of doing business.
This is true of any litigation, yet we don't usually see arguments against the very concept. It still at least forces companies to consider one more bar to abuse.
Until we have better regulation, this imperfect tool is something consumers have available to them to fight abuses of a type that normally wouldn't be addressed because of their nature. Without this tool, consumers would have no recourse. As the article says:
>As one judge noted, “only a lunatic or a fanatic sues for $30.”
>When a bank charges illegal fees to millions of customers and then blocks them from suing together, a result is not millions of individual claims, but zero. So the bank gets to pocket millions in ill-gotten gains.
Arguing against class actions makes no sense until we do have legislative or regulatory alternatives.
If you think of litigation in economic-theoretic terms, yes, that's the purpose of class actions. But while you're in that head space, you also need to consider the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble.... Where the claims are small and the class members are unsophisticated, the principals (the consumers) don't have sufficient incentive to control their agents (the lawyers).
That manifests in class action litigation in two ways. Class action lawyers are incentivized to bring cases that are marginal on the merits: http://www.abajournal.com/news/article/posner_opinion_blasts.... They also are incentivized to settle good cases for for a fraction of potential damages.
The end result is a system that doesn't do a great job of really anything. Consumers get only a tiny fraction of what they've lost. Companies aren't deterred--they just treat the occasional payout as the cost of doing business.