When do FTC refund programs require an active claims process versus direct mailings to known customers?
Executive summary
The Federal Trade Commission sends refunds directly by mailing checks or electronic payments when it has a reliable list of eligible recipients with current contact information; when that information is missing or insufficient the agency runs an active claims process requiring affected people to apply [1] [2]. Claims processes cost more, rely on outreach and validation, and typically produce widely varying response rates, so the FTC chooses the method that best matches the data it has about victims and the court’s order governing distribution [1] [2] [3].
1. How the FTC decides: list availability is the deciding factor
The FTC’s public guidance is blunt: if the agency “obtains a reliable list of eligible recipients,” it will mail checks or send electronic payments directly to those people; if it “doesn’t have all the data it needs” the agency will use a claims process that requires individuals to apply [1] [2]. The central operational metric is whether the FTC has defendant- or company-provided customer data that includes contact details and payment-eligibility information; success in directly getting money to people “depends principally” on having that reliable list and related spend data [2].
2. What “direct mailing” looks like in practice and how often it’s used
When mailings are possible the FTC moves quickly: in calendar year 2024 the agency used defendant data to send checks or electronic payments in 26 cases and in other reporting the FTC cites multiple rounds of mailed checks as its default in cases with lists [1] [2]. The agency reports that in matters where it mailed checks using company data an average of 64% of people on the list got a check and cashed it—evidence the direct-mail route can reach many intended recipients when the list is sound [2].
3. Why an active claims process is often necessary and what it costs
A claims process is required when names, addresses, or sufficient identifiers are missing; in those situations “the people affected must apply for a refund” and the FTC conducts outreach—media campaigns and paid ads—to drive claim submissions [1] [2]. The agency acknowledges claims programs typically raise administrative costs and that claims rates vary widely—“generally, the FTC receives claims from 5% to 50% of potential claimants”—which affects per-person payouts because amounts depend on how many people file [1] [2].
4. Validation, fraud controls, and the lifecycle of a refund program
Whether through mailings or claims the FTC employs checks: unique identifiers to track potential claimants, independent staff review of distribution lists, audits on closed cases, and analytic tools to detect false claims when a claims process is used [2]. After distributions the agency tracks which payments actually reach consumers and uses change-of-address checks against the National Change of Address system before mailing, illustrating that direct payments still require data hygiene and post-distribution validation [1] [2].
5. How court orders and specific settlements shape the choice
The FTC develops a distribution plan after judgments are final and defendants have paid, and court orders can restrict how leftover funds are treated—unspent money may be returned to the U.S. Treasury if the court requires it—so the contours of the settlement itself influence whether the agency pursues broad claims outreach or targeted mailings [3]. Recent examples show both approaches: the FTC announced a claims portal for NGL users to submit refunds because eligibility required specific purchase windows and age verification (claims necessary) [4], while large settlements like the Amazon matter have combined automatic refunds for known eligible Prime customers with a follow-up claims process for those who did not receive automatic payments [5] [6].
6. Practical rule-of-thumb and reporting limits
In short, the practical rule is straightforward: reliable customer lists and contact data = direct mail/electronic payments; incomplete or absent lists = active claims process with outreach and verification [1] [2]. This summary is based on the FTC’s public materials and recent program announcements; reporting is limited to the agency’s descriptions and case-specific notices, so details about internal threshold tests or unpublished heuristics the FTC may use when deciding borderline cases are not available in the cited sources [1] [2] [3].