OFT to re-investigate gym contracts - 21 Feb 2012
The Office of Fair Trading (OFT) has opened an investigation under the Enterprise Act 2002 into a number of companies that operate gym and fitness club chains or who provide management services to gyms.
In a statement the watchdog said, "This investigation is at an early stage and it should not be assumed that the parties involved have breached any consumer protection legislation."
Read more here OFT to re-investigate gym contracts
High Court rules that thousands of gym contracts are unfair and unenforceable 31 May 2011
Gym Memberships
Gyms make a significant proportion of their money from members who join but who rarely use the facilities. Long termination or ‘notice’ periods keep membership levels high because it makes it more difficult to cancel. Most clubs require a minimum 12 month initial contract and follow with a 3 month notice period required to cancel. It’s obvious why clubs want these clauses in the contracts, but increasingly the Office of Fair Trading (OFT) are finding against them and the question remains – are the contracts enforceable in court?
If you give notice to quit and cancel your direct debit, expect considerable harassment, initially from the club and then from aggressive letters and phone calls from debt collection companies and so called legal firms. If you deny or dispute the debt these actions could be classed as harassment so make sure you lay down your case clearly and understand your rights.
The consumer has certain rights as detailed under the OFT Debt Collection guidelines, in particular 2.6h and 2.8k. You may also wish to look at 2.2 c, according to how the firm chasing the alleged debt contacted you.
Another useful reference is the Credit Services Association (CSA) Debt Collection Guidelines
You can also see their member list here, Credit Services Associations (CSA) List of Members
If you’ve hit financial difficulties, let’s say you’ve used the gym but not met your payments, your rights are limited because they are collecting payment for a service already rendered.
Breach of Contract
Your membership agreement will probably state that there is a notice period. If you give notice and do not honour the notice period they will probably chase you for the months specified in the notice period.
The problem is they can’t do this. If they say you’ve breached your contract, they can only claim for their losses and they need to prove these losses; they must also try to minimise these losses.
If you stopped paying they’d probably stop you from using the club, in which case they’re definitely not entitled to try and make you pay for it.
Quality of Service and Standards
The OFT recently found that many gym agreements were unenforceable under the Unfair Terms in Consumer Contracts Regulations. This doesn’t make the whole agreement unenforceable, just the sections that are unfair. See our article on OFT V Total Fitness.
If however you could argue that the standards fell below an acceptable level that either didn’t justify the fees charged or meant you were unable to use the club then you stand on even stronger ground.
Examples could include a change in opening times meaning you couldn’t use the club at a time you used to, a reduction in facilities or staff levels. These would all be good reasons to terminate the contract without providing further notice.
Penalty Charges and Debt Collection Agents
Whatever happens if it gets to a debt collection agency, write to them and tell them that any fees they try to apply are not legally enforceable. The only costs they would be able to add to the ‘debt’ are county court fees – they cannot add legal fees in the small claims court.
Enforceability
Read the leatest news article dated 31 May 2011 - High Court rules that thousands of gym contracts are unfair and unenforceable
As good a game as these people talk it is very rare for these cases to actually end up in court. They’ll do their damndest to scare you and cause you so much stress that you give in and pay up. If more of these get to court the gyms are all too well aware that the obvious flaws in their contracts will make case law and they’ll not even be able to try and scare ex-members with their bullying tactics.
What should you do?
It’s really not our place to give legal advice, although this article should give you some grounding – do your own research and stand your ground. If more people stood up for their rights it won’t take long for the clubs to amend their contracts and the cowboys will go out of business.
Bearing in mind that you’re likely to get hassle by phone it might be an idea to make sure the telephone numbers they have on file for you are changed to ones they won’t be able to harass you on … not that we’d suggest giving false phone numbers…
Write to the club and broadly tell them why you are leaving (generally because standards have consistently fallen) and that you give notice with immediate effect. This should be sent by recorded delivery or similar to guarantee postage, then you can trace the letter on the Royal Mail website.
- There’s no reason why you can’t email in either – as long as they acknowledge it.
It is your decision whether or not to cancel a direct debit, if you don’t you’ll have to start proceedings against the club to get your money back. Do not acknowledge a notice period or refer to your membership agreement in your correspondence.
- Assuming the club doesn’t accept your immediate termination they’ll write and tell you how much money they think you owe them. Refuse to talk to them on the phone and insist everything is put in writing.
Write back and say that you don’t recognise their agreement and ask for proof of the agreement and any specific terms they feel you are in breach of. There is no need to say any more.
- If they provide a copy of your signed agreement ask them to break down specifically what they feel you owe and why. Say the debt is disputed.
- If they ask simply for 3x months of membership fees write back and ask them whether your membership was suspended during this period (whether they’d have allowed you in to the club to use the facilities) or not. Say you gave them notice of immediate cancellation and they cannot charge the fees and that if they didn’t then they definitely can’t charge the fees because they have not provided a service.
What we are trying to get them to do is accuse you of breaching the contract. If they do this their case will become complex and they’ll have to use real solicitors rather than the pretend ones employed by debt collection companies. Remember they can’t claim back legal fees in small claims court.
- Whatever their response is write back and tell them they have no legal grounds to continue pursuing you for the money and that remedy is likely to be through the courts.
- They will probably have gone away long ago by now, but if they’re still going, they’ll have to provide you with notice of legal proceedings and that they intend to proceed with county court proceedings.
- You may get a county court claim in the post. If you didn’t receive notice of legal proceedings and they can’t prove you were served with it, respond simply that the claim is denied in full because they didn’t provide notice.
The claim will get thrown out by the court and they’ll have wasted their court fee.
- If they apply again (we’d be gob smacked if it got this far) or they did serve notice of proceedings respond and say that:
That their claim relates to missing membership fees when you had provided notice of immediate cancellation (include a copy of your letter). If they are claiming you breached your contract, deny the claim relating to the membership fees on the basis that this was not the losses they incurred.
Deny any costs and penalties for late payments/bounced direct debits because they are penalty charges that are unenforceable or legal fees that cannot be claimed.
Ask for a 1 hour hearing in the small claims track.
Ask for the case to be struck out.
- The claimant will be invited to respond, which they probably won’t and it’ll be struck out.
If they do, the case will have to be transferred to a court local to you and they will have to either turn up in person or send a solicitor. When you add the costs of preparing the case, travel time and time in court they’ll be up to £500+ of costs that they’ll not be able to recover.
The worst case is you get the satisfaction that you’ve cost them a small fortune, upset a whole load of people and it’s cost you a relatively small sum in court fees plus a few letters and half an hour in court. At least it’d be a moral victory.
Your credit file
Finally, ensure your credit file has not been marked down as non payment as you may never hear from them again but they may have put something detrimental on your file. You may need to check this on a regular basis, we show you how to do this here. How to see your credit file.
You would be the first person we’d heard of that had ended up in court.
