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Key Takeaways
- Class action settlements can provide extra cash, but payouts are typically small and unpredictable.
- Most settlements pay under $50 per person, and only a small percentage of cases benefit the average claimant.
Year after year, millions of Americans receive unexpected payouts from class action lawsuits, sometimes without ever setting foot in a courtroom. From faulty products to data breaches, these settlements can offer a welcome cash boost for those who qualify. But what about those endless emails in your junk box saying you can join a class-action lawsuit? Can they become a reliable source of passive income?
As more people hunt for “free” class action money online, it’s worth understanding how these cases work, what you can expect, and the risks involved before you start chasing every settlement.
How Much Money Can You Actually Make from Class Actions?
Class action lawsuits allow groups of people harmed by the same company or product to seek compensation together. If the case settles, eligible class members can file a claim for a share of the payout.
“Class action settlements can be a way for people to obtain a few extra unexpected payments,” Christopher E. Roberts, a class action attorney at Butsch Roberts and Associates, told Investopedia. “However, class action settlements should not be considered a good source of passive income.”
That’s because “payments are not typically large, and the class actions that people are part of are not consistent in frequency or the amounts that are paid out,” he said. Most people receive only one or a handful of settlements per year, and the average payout is often less than $50 per claim.
Fast Fact
The percentage of eligible people who file claims to receive money from a class action settlement are low, and the rates vary dramatically by how people get the news: a 2019 Federal Trade Commission report found that mailed notices have 16% claim rates while email notices drop to just 3%. Claims requiring documentary proof see rates fall by almost 90%.
Is It Worth Your Time? The Pros and Cons of Chasing Class Action Money
Class actions offer several benefits. They provide consumers with access to justice, spur collective bargaining, and can result in compensation for harm that might otherwise go unaddressed.
“Settlement moneys are distributed among hundreds, with lawyers getting 20%-46% first,” Mark Hirsch, a personal injury attorney at Templer and Hirsch, told Investopedia. He noted that many class actions are dismissed before settling, and claim rates remain extremely low even for successful cases.
In addition, while lead plaintiffs may earn more, but for most, the process involves long waits, small payouts, and the risk of “coupon settlements” or payouts in the form of discounts rather than cash.
Avoiding Class Action Scams
If you want to see what kind of income you can derive, start by monitoring reputable sites like Top Class Actions, Claim Depot, and classaction.org for active settlements you may qualify for, Roberts suggested.
File claims quickly and honestly, and never submit claims for cases you’re not part of (that’s illegal). In addition, Hirsch recommends that you “check settlement databases for fresh cases, file claims quickly to avoid risk exclusion, and check court papers for validity to prevent scams.” Transparency and realistic expectations are key.
Warning
While social media makes class action “hunting” look lucrative, the math tells a different story. Even dedicated participants typically earn less than $500 per year, and many settlements take years to pay out. This isn’t a reliable income stream—for most, it’s occasional pocket change.
The Bottom Line
Class action settlements can provide occasional windfalls. If you’re already organized and enjoy the process, filing legitimate claims when you qualify makes sense. As Roberts and Hirsch both noted, class action suits are designed to provide compensation for actual harm, not to be a side hustle.
In most cases, the real “passive income” from class actions goes to the lawyers—who typically receive 25-33% of settlements—not the class members relative few scouring their email inbox for the latest offers.
