Unfair gym contracts common

CHOICE reveals the pressure tactics gyms use to lock you into their contracts.
 
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  • Updated:29 Apr 2009
 

01 .Introduction

Punching bag

In brief

  • We found the gym industry is efficient at signing up new members, but far less vigilant in explaining the price, contract and cancellation terms.
  • Unfair practices and other traps can make it very difficult for consumers to cancel their memberships if they’ve had enough.

It’s a common scenario: you decide it’s time to do something about your health and fitness and head to the nearest gym, keen to change some bad habits. The sales people are charming, the gym looks good, and before you know it you’re sitting down with the paperwork and a salesperson who can’t wait to lock you – and your bank details – in.

But should you decide to quit, the gym’s sense of urgency suddenly evaporates. You’re forced to jump through the most outlandish hoops just to cancel a membership you should have every right to terminate over the phone. Yet despite an avalanche of complaints about aggressive sales tactics, elastic pricing, confusing contracts and overcrowded classes, gyms are big business in Australia.

To get an insight into what a typical consumer might encounter when they front up to a gym, CHOICE sent out two shadow shoppers to the major chains, posing as potential customers. Their experiences confirmed what the grapevine has been telling us – that emotive sales techniques, complicated contracts and unclear pricing structures abound.

Please note: this information was current as of April 2009 but is still a useful guide today.


Gyms in Australia

In Australia, although there are many smaller gyms, the industry is dominated by a handful of big chains.

  • UK-owned Fitness First has 89 outlets nationally and more than 360,000 current members.
  • The up-market women-only chain Fernwood has 77 outlets and 80,000 members.
  • Women-only gyms Curves and Contours are very basic, circuit-based franchise operations with 400 and 160 outlets respectively.
  • Virgin Active, which opened its first gym in Sydney in December 2008 (with another set to open in Melbourne). While more expensive than their competitors, these gyms are undeniably flash, with 'pay-as-you-go' and flexible contracts.

CHOICE verdict

The best protection you can have against pressure sales tactics is to know your rights and be aware of the psychology that drives gym tactics. Don’t sign up until you’ve taken the time to fully understand the price, terms of your contract and conditions. If you choose to end your gym membership once your contract has expired, you don’t need to explain why.

Similarly, you – and not the gym – hold the right to authorise your bank to cancel your direct debit arrangements at any time as long as you are no longer under a contract. See CHOICE can help, to find out how.

 
 

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Signing under pressure

CHOICE has received complaints about the aggressive sales tactics used by gyms to recruit new members – feeling pressured to sign up on the spot is all too common. While you can’t silence the gung-ho sales talk, consumers who are prepared stand a much better chance of making an informed decision, rather than buckling under pressure and regretting it later.

Most gyms insist on a sit-down interview with potential customers to gauge their goals and expectations. Dr Paul Harrison, a consumer behaviour specialist and senior lecturer at Deakin University, cautions customers to see these sessions for what they are. “Gyms want to develop a personal relationship with you – you are emotionally vulnerable and by sharing goals and aspirations it can feel like a relationship. Don’t be fooled into thinking it’s anything but fiscal.”

The British media reported more than 80% of gym members who sign up in the New Year stop going after six months, which goes a long way to explaining why many gyms are keen to lock their customers into 12-month contracts with a monthly direct debit.

Your rights under direct debit

In a recent survey by the Consumer Action Law Centre (CALC) in Victoria looking at direct debit issues across several industries, gyms came out on top for consumer complaints. CALC’s Carolyn Bond advises consumers to be on the lookout for cases where the gym membership has been cancelled, but direct debits continue. “We’ve had people who have had debits coming out of their accounts for months or even a year after they think they are no longer a member of the gym,” she warns.

Under the Code of Banking Practice, consumers hold the right to cancel any direct debit arrangements by contacting their bank directly. If you want to terminate your membership once you are out of the contracted period, Bond suggests cancelling the direct debit with the bank immediately – no argy-bargy with the gym required. However, if you are still under contract and looking to get out, cancelling your direct debit could be seen as a breach of contract, so it’s best to deal with the gym directly – but the sooner the better. As the experts we spoke to point out, it’s not in the gyms’ interests to solve your problems quickly while they are still receiving your payments every month.

Getting out of contract

By far the most common complaint about gyms is the tortuous exit rules they impose. Many gyms capitalise on the sense of shame that so often hangs over a “quitter”. While it should be possible to cancel membership over the phone or in writing, many people told us their gym insists they make an appointment to come in to cancel.

According to Harrison, these appointments give the gym a window of opportunity to retain their customer, as well as the strategic advantage of drawing out direct-debit payments as long as possible. “It’s an emotional marketing tactic,” he says. “If you have to say you don’t want to be a member anymore it’s much more difficult face to face, as we have to admit in person that we aren’t consistent.” Fitness First is notorious for this tactic, according to the vast body of anecdotal evidence CHOICE gathered, but is certainly not alone.

Fernwood’s Jo Stagg says her company encourages customers to come into the gym to cancel because they want to check their customers’ health and wellbeing, but it isn’t a requirement. She does concede, however, that a face-to-face meeting is an opportunity to “remotivate” customers who might be considering breaking their contract to avoid the cost of cancellation and to help them achieve their original goals.

National Operations Manager Michele Harding told CHOICE Fitness First amended its policy at the beginning of 2008, allowing members to cancel their membership over the phone as long as they confirm the request in writing. Despite her assurances, however, we have received plenty of anecdotal evidence that Fitness First members are being made to jump through the same old hoops.

Harding conceded from time to time requests are mismanaged and any members who are told they must come in person to cancel their contract can assert their right to cancel by phone and written confirmation. If the customer experiences any opposition they should contact their club general manager to resolve the issue. Failing that, she says, they should contact Harding herself or Rebecca Davies at head office, who “will assist with the resolution immediately”.

While it is heartening that Fitness First has taken steps to address criticisms and amend its policy, it’s disappointing the new rules are obviously not rigorously enforced and the onus remains on consumers to know their rights.

Are the contracts fair?

Making it difficult for consumers to end a gym membership after the initial contract period is unfair. New federal unfair contracts legislation, due to be in place for 2010, may help where the problem is a harsh cancellation clause, otherwise it’s unlikely that these laws will stop unfair practices designed to prey on consumers’ ignorance of their rights and other problems endemic to the industry – namely, pressured sales tactics and arbitrary pricing.

The NSW Department of Fair Trading has received 344 complaints in the last 12 months from unhappy gym goers, 149 of which related to cancellations and cooling-off periods. It is this controversial area of gym contracts – the onerous terms around cancelling that often favour the gym – that new legislation may go some way to addressing.

At present, only Victoria has unfair contract laws. Carolyn Bond says it may take time for the new laws to effect change. “Gyms have been a problem for years,” she says. “Unfair contract terms should prevent some of the problems we see, but some problems are due to a bad culture within some of the industry. Some businesses appear prepared to do whatever it takes to keep consumers trapped in their contracts.”

For more information on how to spot unfair contract terms, visit the Consumer Affairs Victoria website, and follow the links.

Our two shadow shoppers each visited nine Sydney gyms separately – two gyms each from Fitness First, Contours, Fernwood and Curves in two different socioeconomic areas, as well as the new Virgin Active gym. A total of 18 gym visits.

Neither shadow shopper who visited the Virgin Active gym or the two Fernwood gyms felt any pressure to sign up immediately. While one reported slight pressure to sign on the spot at one of the Contours and one of the Curves gyms, our shadow shoppers were unanimous that nothing rivalled the heavy sales tactics encountered at Fitness First.

Fitness First, consumers last

Of the two Fitness First gyms visited by our shadow shoppers, one in particular stood out for the salesperson’s intensity. “He couldn’t believe I didn’t want to sign,” reported one of our shoppers. “When I said I needed to speak with my husband, he said, ‘I thought you said he was supportive of you being here’. He said it was only $35 today and if I go it may not be available when I call back.”

Our second shadow shopper said: “He just kept asking me what the problem was.” At two of the four visits to Fitness First outlets, our shadow shoppers reported difficulty in ending the consultation – something they did not experience at any of the other gyms.

Creative pricing

One thing most of the gyms had in common was a creative approach to pricing. Some had printed prices, others handwritten only, but ultimately all seemed to have flexibility in the discounts and incentives they offered. Costs such as joining and administration fees were magically waived or halved as an incentive for our shadow shoppers to sign up.
Pricing
One Curves consultant and one at each Fitness First outlet even asked leading questions to ascertain how much our shadow shoppers could afford to pay. In the case of one Curves outlet, one shopper was told she couldn’t take the handwritten prices away with her, as a matter of “company policy”.

Fitness First National Operations Manager, Michele Harding, concedes the pricing structure varies from club to club, depending on customer demographics and location. Fernwood Sales Manager, Jo Stagg, says prices across the Fernwood network also differ depending on location, as franchise owners set their own prices.

Our shadow shop revealed that while both Curves and Contours had consistent pricing across their outlets, there were variations in what was waived or charged in terms of joining and administration fees. One Curves outlet quoted a joining fee of $30, while at another it was $199 but a $99 discount was offered.

At a Contours gym, one of our shadow shoppers was quoted a “set-up” fee of $195 for a 12-month contract which was reduced to $95, then an “admin fee” further reduced to $45 during the consultation. At the same gym, our other shopper was told this joining fee would be waived totally if she joined before a certain date. At the second Contours gym, a set-up or administration fee was not mentioned to either shopper and they were both told that the “joining fee” would be waived if they signed a 12-month contract.

Cancellation

Few of the sales assistants at the gyms volunteered information about to how to cancel or put membership on hold. Of the five chains, Virgin Active, followed closely by Fernwood, were the most thorough in providing cancellation information, with one of the two Virgin Active consultants covering every aspect of cancellation or placing membership on hold. Curves and Contours addressed holds or cancellations to some degree, while neither Fitness First gym volunteered any hold or cancellation information.

Don’t succumb to high-pressure sales tactics.

Take time to shop around and carefully consider the memberships on offer at each gym.

Rights and responsibilities

Read your contract carefully and be fully aware of your rights and responsibilities. Don’t be afraid to question anything in the contract that you don’t like and/or understand.

Check the cancellation terms of the contract.

Can you get out of it if you move house, get sick, lose your job or simply decide to give up? Don’t assume your contract finishes at the end of 12 months Check your contract to see how to cancel your membership (and direct debit) if you no longer want to attend.

Don’t assume your direct debit will be cancelled when you cancel your gym membership.

If you have any doubts, contact your bank directly and request an immediate cancellation of the direct debit. Although, if you have any outstanding debt you will need to arrange to pay this by cash or cheque.

Tales from the fitness frontlines

“I could hardly ever get on equipment because it was so overcrowded and spent a lot of my time just waiting to go on machines. I don’t actually recall getting a locker, so I’m sure one was never available. When I wanted to break my contract, they wouldn’t let me do it over the phone. They charged me $100 to cancel and were very reluctant to do it.”

Rejinder – Fitness First

“Towards the end of my pregnancy I wanted to cancel my gym membership as I was giving up work and wouldn’t be in the area any longer. Their response was, ‘we’ll suspend your membership for six weeks only; you’ll need the gym even more once you’ve had the baby’. I didn’t have the energy to argue that the last thing I would want to do with a newborn baby is travel halfway across town to use their gym, so I ended up paying the contract out.”

Kerry – Fernwood

“When I read the fine print on my contract I discovered I could only cancel my contract if I had a doctor’s certificate or moved 30km from the closest outlet. I moved suburbs and I don’t drive; did they really expect me to ride my bike almost 30km just to get to the gym? Two months ago when I tried to cancel I was told it would be faster to come into the gym to cancel in person. The girl at the front desk said that while I was welcome to write a letter to cancel, the process was slow – she showed me some of the cancellation requests on her desk, some of which were up to three months old.”

Victoria – Fitness First

How to exit your gym membership

If you’ve decided to “break up” with your gym but you’re finding it difficult to get the message through to your club, you’re probably not alone. Our investigation has found that some gyms use tricky tactics to keep you locked into contracts, even after the minimum term has expired (see, Tales from the Fitness Frontlines).

CHOICE has checked out Fitness First’s customer contract. At our request the Consumer Action Law Centre has provided a cancellation letter that allows you to end your relationship with Fitness First legally, and with no fuss. If you’ve decided you want to leave, here’s what to do:

Step 1. Check if your minimum term has expired.

You would have signed a contract with either a 1 month or 12 month minimum period. Breaking the contract before the minimum period ends can land you with hefty penalties. If you have exceptional circumstances, such as illness, contact Fitness First.

Step 2. Complete the Fitness First Cancellation Letter.

  • If the minimum period has already ended, use the Cancellation letter (Word). Simply fill in the details and post it or deliver by hand to your gym.
  • If the minimum period isn’t yet over but you’d like to cancel the contract at the immediate conclusion of the minimum period, use the future cancellation letter (Word).

Download the contact details of all Fitness First gyms (PDF).

Step 3. Cancel your direct debit arrangement.

The standard letter requests that Fitness First terminates your authorisation to direct debit your account. However, it’s also a good idea to contact your bank, credit union or credit card scheme directly to cancel the direct debit yourself.

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