Agreement To Protect Health Club Members

Attorney General Spitzer today announced an agreement with the world's largest gym chain to protect consumers who pre-pay for health club memberships.

Gold's Gym Franchising, Inc., headquartered in Venice, California, agreed to compel its 32 local outlets across New York State to post performance bonds as required by state law, something many have failed to do.

"Compliance with bonding requirements is essential in protecting consumers from loss in the event a health club closes down," Spitzer said. "Since 1999, my office has intervened on behalf of consumers on at least six occasions to obtain judgments and settlements recovering more than $213,000 for approximately 1,800 individuals throughout the state. However, these legal actions would not have been necessary if the health clubs had complied with the law and had posted appropriate performance bonds."

Spitzer's investigation discovered that only three of the 32 Gold's Gym locations in the state had posted performance bonds. Also, Spitzer's office raised concerns about clauses in some of Gold's Gym franchisee contracts that altered or limited the consumer's three day right to cancel under the law. Under the terms of the agreement, Gold's Gym will act to ensure that its outlets provide, at a minimum, the required opportunity for cancellation.

In addition, Spitzer's office raised concerns about provisions in Gold's Gym contracts that attempted to disclaim franchiser liability in the event that services were not provided as promised.

In settling the case, Gold's Gym agreed to pay $50,000 as costs and penalties to New York State and to monitor all of its 32 franchises in New York State for compliance with the law that requires performance bonds and to compel any future franchises to comply with the bonding law.

This case was handled by Assistant Attorney General Doris K. Morin under the supervision of Assistant Attorney In Charge Gary Brown of the White Plains Regional Office.

Individuals with questions about laws protecting them when joining a health club are encouraged to contact the Attorney General's consumer help line at (800) 771-7755.

New York Health Club Services Law

New York State law requires that most health clubs post a performance bond to protect their members against breaches of contract. Specifically, the law requires bonds in the following denominations: $50,000 for health clubs that sell contracts for no more than 12 months; $75,000 for health clubs that sell contracts of one to two years; and $150,000 for health clubs that sell contracts of two to three years. Health clubs with multiple locations are required to post additional amounts up to $200,000.

Health clubs are exempted from this requirement: (a) if they do not offer memberships worth more than $150; or (b) for health clubs that require longer term commitments, if monthly dues do not exceed $150, paid-in-full fees are not discounted by more than ten percent, memberships do not exceed one year, and the contract does not contain an automatic renewal provision.

New York State Health Club Services Law covers contracts for instruction or training in bodybuilding, exercising, weight reduction and figure development, martial arts (including judo, karate and self-defense), or other types of physical training and contracts for health and sports spas and tennis and racquetball clubs. Specifically, this law provides the following protections:

  • Limits health club contracts to $3,600 per year (excluding tennis and racquet ball facilities) and to terms no longer than 36 months;

  • Provides consumers with a three-day right to cancel the contract after signing;

  • Provides the right to cancel a contract at any time for any of the following reasons: if the health club ceases to offer the services stated in the contract; if the consumer moves 25 miles from any health club operated by the seller; or if upon a doctor's order, the consumer cannot receive the services as stated in the contract because of significant physical disability for a period in excess of six months;

  • Requires health clubs to provide refunds within 15 days of cancellation; and

  • Provides aggrieved consumers the right to sue in small claims court and receive an amount of not more than three times the actual damages plus reasonable attorneys fees.

Consumers also are encouraged to consider the following tips when signing a health club contract:

  • Become an educated consumer and visit or call at least two other health clubs to learn about dues and when they must be paid, hours of operation, variety and frequency of classes and ability to use multiple locations;

  • Do not give in to high pressure sales tactics or feel obligated to sign a contract immediately;

  • Tell the health club representative you need time to think about joining the club and ask for free passes to determine if the club is right for you. Talk to other members; and

  • Check to see if a health club is bonded or has filed the proper financial security to protect you against losses of pre-paid membership dues. To verify a club's compliance with these requirements, consumers can call (518) 474-4429, fax (518) 473-6648 or write to the New York State Department of State, Division of Licensing Services at 84 Holland Avenue, Albany, New York 12208.
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