Auckland gym Next Generation has been told by the Commerce Commission its membership contract could breach consumer credit law.
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The caution follows a complaint to the commission by Consumer member Mark Easton. Mark joined Next Generation last year, signing up for a 12-month term. He says he went to the gym for around six weeks until he injured himself while exercising. A subsequent operation meant he was out action for some time but still paying the $88 fortnightly membership fee.
The injury plus work-related travel and moving house meant Mark found it difficult to get back to the gym. He asked Next Generation twice whether he could end his membership but the answer each time was no.
Mark readily acknowledges he signed a 12-month contract but believes the gym was “hard-nosed” when his circumstances changed.
Next Generation’s contract is one of the most restrictive we’ve seen. Gym members can’t end their membership in the first 12 months and must give a lengthy three months’ written notice to cancel if paying by instalment. Next Generation doesn’t allow membership to be transferred, so Mark didn’t have the option of selling the unused portion of his 12-month term either.
After Mark complained to the commission, it told the gym the contract could breach the Credit Contracts and Consumer Finance Act (CCCFA). The commission believes gym contracts that are paid by instalment and which include extra fees or interest are likely to be credit contracts. This means the gym must inform customers when they sign up about their statutory right to cancel as well as the full cost of membership. Mark wasn’t given this information.
The commission warned gym owners over two years ago that failure to comply with the CCCFA could make their contracts unenforceable. Gyms also risk prosecution under the Fair Trading Act if they mislead consumers about their rights.
When we got in touch with Next Generation, general manager Carlos King told us the membership contract is being amended to comply with the law. Next Generation says it acted immediately to get the contract reviewed when it received the commission’s advice. The gym has also met with Mark and refunded him $625.
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