Health Club Consumer Protection Laws
Many states have health-club specific consumer protection laws designed to safeguard consumers from financial and other losses. There are several ways in which consumer protection laws affect health clubs:
Many states have health-club specific consumer protection laws designed to safeguard consumers from financial and other losses. There are several ways in which consumer protection laws affect health clubs:
(1) automatic renewal
(2) “cooling off” periods
(3) price caps on membership contracts
(4) bonding
1. Automatic renewal Automatic renewal is the automatic extension of a member’s contract once it has expired. Automatic renewal is beneficial to health clubs because it reduces the cost associated with renewing already existing members.
2. “Cooling off period” A cooling off period is a set number of days (e.g. 3-5 days) following the signing of a health club agreement during which a new health club member has the right to cancel the agreement without penalty. It gives the consumer time to decide if the facilities and services are desirable, and whether they want to commit to their membership.
3. Price caps on membership contracts Three states (California, Illinois and New York) have supported price caps on membership contracts.
4. Bonding States require bonding primarily to protect consumers from financial losses due to a club's closing or failure to open. Currently, about 50% of states require some form of bonding for clubs selling memberships prior to opening. Approximately 25% of states require clubs to have a bond after opening.
IHRSA's Position
IHRSA supports consumer protection legislation that safeguards the public against fraud, deceit and financial hardship while fostering and encouraging competition, fair dealing and prosperity in the fitness club industry.Automatic renewalIHRSA supports automatic renewal provisions that allow for contract continuation at the end of the original term on a month-to-month, at-will basis. Provisions that allow for automatic renewal offer consumers the greatest choice and flexibility because clubs are not forced to sell long term contracts in order to avoid the costly process of renewing existing members.BondingBonds do not safeguard the consumer. Since bonds rarely cover potential consumer losses dollar-for-dollar, consumers are given a false sense of security. Also, bonds create a barrier to entry into the market (because many smaller clubs cannot meet the requirements for a bond) and thus limit the number of health clubs available to consumers. Solid consumer protection legislation—not bonding—will best protect health club users.“Cooling off period”IHRSA believes that a 3-5 day cooling off period provides a sufficient window of time during which the consumer can decide if the facility and services are desirable. Extended cooling off periods simply invites abuse of the benefit (NOTE: a survey of state and federal cooling off periods from all industries shows that 3 days is the required cooling off period for almost all industries).Price caps on membership contractsThree states (California, Illinois and New York) have supported limits on costs for membership contracts.
Outlook
Due in part to IHRSA clubs' participation in the lawmaking process, recently enacted consumer protection legislation has generally been more equitable and more appropriate.
