Gym memberships will be under the microscope with the launch of the Unfair Contract Terms legislation. Jessica Black reports.

Convoluted gym exit rules will be targeted by the new legislation, which is in effect as of 1 July. Image: LocalFitness.com.au

Unfair gym membership contracts and exit conditions are under scrutiny under the Unfair Contract Terms legislation which came into place on July 1.

The legislation aims to protect consumers from contracts which are deemed unfair, whilst also taking into account the clarity of the clauses in “terms and conditions” contracts.

Spokesperson for Choice Consumer Magazine, Brad Schmitt, says that problems arising from contract clauses have been a long-standing characteristic of gym memberships.

“The gym industry has a history of using emotive and often aggressive tactics to recruit new members, though by far the most common complaints have been about the tortuous exit rules they impose.”

Worldwide health operator Fitness First made waves last year when consumer complaints brought to light the difficulty members underwent whilst terminating their membership.

Rules were changed to allow for cancellations to be made over the phone, voiding the previous requirement that they be made at the gym in person. However, it seems that the amendment is yet to be applied across the board by the gym, which plans to expand to 100 outlets in Australia.

Having been asked to come onto the gym premises to perform the cancellation in person earlier this year, Erica Budd, 21, was presented with an additional step when it was confirmed that not she, but the credit card holder (her mother) would have to terminate the membership.

“About a week after that my mum told me that they were still taking money from the account, so that’s when I ended going in one night with my boyfriend to cancel the membership once and for all,” she says.

“They then got frustrated and a little scared with me and my boyfriend, and printed some piece of paper out to show me that the lady on the phone told me that there were two more payments to go before it was to be cancelled. It wasn’t the lady I (initially) talked to.”

Fitness First’s Marketing Director Andy Mallinson said Fitness First has nothing to worry about with the legislation changes, however, he conceded that the complaints detailed in this article did ring alarm bells.

Simplifying the termination process has been an important part of the changes which have been underway for the past 18 months. Mallinson has been working for the gym company for this same period.

“I’m the first to put up my hand and say that actually our reputation around cancellation has been very poor in the past. One of the reasons I joined this business was to help change that and to make it more of a member-centric business, and I think in the last 18 months we’ve absolutely done that.”

Something the gym has taken into particular consideration is the effectiveness of communication between its headquarters to individual branches and staff.

He Chenweng is another former Fitness First member who was forced to physically go into the gym after trying to cancel over the phone. After failing to cancel her membership within the one week trial period, she found herself paying full membership fees.

“Nobody actually asked me or [texted] me [to say] that I automatically joined in the Fitness First, until I found out they get the money from my account every week even though I didn’t go there once,” she says.

To Schmitt, this serves as a reminder to consumers to stay on the alert.

“Last year Fitness First took steps to address these criticisms, so it is disappointing to hear complaints of this nature are ongoing and the onus remains on consumers to know their rights.”

“If you want to terminate your membership once you are out of a contracted period, we suggest cancelling your direct debit with your bank immediately,” he says.

Other complaints have also come to light, which point to issues besides contract termination.

Sophie Gray, 19, had had operations to both her feet when she entered into a contract with Fitness First to only use its pool in 2009.

Presented with a bill for use of all facilities, Sophie was told they had no proof she had not taken advantage of general use equipment.

“After showing proof to them that I couldn’t have been using anything of the other equipment – because I was still on crutches and couldn’t even walk on my own – they refunded me the money, which was great, but I won’t ever be using Fitness First again from all the fuss and misunderstanding,” she says.

University of Technology Sydney Law lecturer David Thorpe said that longer-term contracts might well have been put in place by gyms looking to cover the cost of a high drop-out rate.

“Gym owners appear well aware that the initial anticipation coming with membership is soon confronted with the reality of hard work. A long-term contract is the means of avoiding an inevitable loss known to follow the human disinclination to train hard,” he says.

“Where a consumer, for bona fide reasons, indicates his or her wish to terminate the contract, a simple and practical method terminating payment at the same time needs to be provided in the legislation – it appears not to be. A small loss the consumer might be happy enough to bear is converted into a continuing financial imposition.”

Mallinson stressed that Fitness First had only recently turned its focus to the naturally “seasonal” nature of gym membership, and had not previously taken it into consideration.

This has led to changes around the “incentivisation of the membership base” (the number of joiners or leavers to and from the branch), whereby individual staff will no longer be able to block a member’s cancellation of their membership, nor will there be a fallout for that staff member.

“The processes that we have now put in place means that the impact of that [the membership base data] is far, far less because if a member wants to leave, a member wants to leave, so it’s impossible for a member of staff to actually change that so you can’t affect someone’s commission based on that,” he said.

However “incentivisation” does remain.

To Thorpe, the balance between consumer and business rights is a delicate one.

“Businesses, such as gyms, are entitled under the legislation to protect their legitimate business interests – this includes taking account of the business’s cost structure and the mitigation of risk; interests which may well legitimise contracts of a few weeks’ duration but probably not extending over a few months,” says Mallinson.

“The difficulty the legislature faces is to protect honest businesses from dishonest consumers whilst protecting honest consumers from exploitative businesses.”

When presented with the above scenarios, spokesperson for the Australian Competition and Consumer Commission (ACCC), Lin Enright, says the organisation was unable to comment on individual cases or contracts.

“The ACCC will be seeking compliance with the UCT provisions through a range of measures, including the review of standard form consumer contracts where consumer harm is evident. Ultimately, however, the ACCC cannot endorse or ‘approve’ a term in a standard consumer contract.”

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