“A contract is out on unfair gym memberships.

Fitness centres will be among the businesses reviewing the fine print in their agreements with customers as a ban on unfair contract terms becomes law for all Australian companies and after an official blitz on gyms found continuing problems.

The Australian Consumer Law passed in the Senate last month includes provisions barring unfair contract terms – clauses, often consigned to the small print, where the balance goes too far in the business’s favour.

The new law will apply to “standard form” contracts, the sort of contracts used by businesses such as gyms, where the terms are set in pre-prepared documents with only a few blanks to fill in.

Consumer Affairs Victoria (CAV) has handled about 200 complaints about gyms in the past 12 months and the State Minister for Consumer Affairs, Tony Robinson, says most of the complaints involve contractual disputes.

“This shows the importance of only signing contracts when you fully understand what it means,” Robinson says. “Many consumers may wrongly assume gym contract ceases at the end of the minimum term, however many gym memberships automatically continue to direct debit and consumers are left surprised when the money comes out of their accounts.”

Consumer regulator NSW Fair Trading receives about 350 complaints about gyms every year, most of them concerning cooling-off periods following the signing of a contract, membership cancellations and refunds.

Late last year, NSW Fair Trading targeted 60 gyms in a blitz dubbed Operation XTrainer, making on-site inspections, surveying customers and examining contracts.

It identified as key issues the disclosure of terms and conditions, bank accounts continuing to be debited after membership cancellation and attractive deals not living up to expectations.

“The contract review found many gym contracts were convoluted and written in fine print that effectively made consumers disinclined to read them,” says the NSW Minister for Fair Trading, Virginia Judge. “As a result, consumers were less likely to understand their rights and any onerous cancellation penalties and refund policies.”

Such conditions could potentially fall within the provisions of the new national unfair contracts legislation “and will need to be carefully reviewed by the industry upon its introduction to ensure compliance”, Judge says.

In Victoria, which introduced legislation to deal with unfair contract terms some years ago, CAV says it has already worked with operators such as Fitness First and Fernwood Women’s Health Club to introduce fairer membership contracts.

Industry consultant Justin Tamsett, a former president of then Fitness NSW and past gym owner, says 80 per cent of the industry has “enormous integrity” but the other 20 per cent tarnishes everyone’s reputation.

He acknowledges that consumers can experience the “hard sell” when they inquire about membership but says this is in the context of some fitness centres making as little as 5 per cent profit because of constant discounting, high rents and the cost of providing rows of $15,000 exercise machines.

A by-product is that the industry pays its sales people poorly, he says. Most would be on a base salary of about $28,000, “so they have to sell really hard to get the commission to survive”.

“I’m not taking the side of the health-club owner – I think the sales process we put people through is pretty poor and we could do it a lot better – but that’s the background,” Tamsett says.

Being locked into a contract is another bugbear with consumers, according to the 2010 Australian Fitness Industry Survey conducted by payment collection group Ezypay (founded by a fitness club owner in 1996).

Nearly half of the past and present gym members surveyed said being offered a contract with no minimum term would entice them to rejoin, while 47 per cent of gym operators regarded zero-term contracts as the biggest potential growth area for the industry.

Report co-author Celeste Kirby-Brown says 12.7 per cent of the clubs in the survey currently offer zero-term contracts. A prominent example would be the YMCA chain, which offers both contract and non-contract memberships, with the price being higher if you don’t sign up for a minimum term.

When it comes to problems with membership cancellation, the study’s panel says clubs need to take as much care with people who are cancelling as those who are joining.

However, she notes that 72 per cent of operators’ revenue comes from membership fees and that facilitating early cancellation – before a minimum term runs out – doesn’t make good business sense.

Dealing with direct debits

Many gyms require payment by direct debit but ending these arrangements can be problematic.

A direct debit doesn’t stop because your membership has expired and, conversely, cancelling a direct debit isn’t enough on its own to cancel your membership.

“Customers still often need to provide the gym with written notice to stop the direct debit,” says the state Fair Trading Minister, Virginia Judge. They should check what notice is required and how it has to be provided before they sign a contract. “If a membership is cancelled correctly under the terms of the contract, customers should ask for a refund of any additional payments deducted after this point,” Judge says. “If a fitness centre continues taking payments after membership is cancelled, customers should talk to their financial institution. If the matter is unable to be resolved, customers can lodge a complaint with NSW Fair Trading.”

If your gym is a member of Fitness Australia (fitness.org.au), you can complain there before going to your state consumer body.

Industry consultant Justin Tamsett doesn’t believe gyms deliberately continue direct debits. “They’re just being lazy,” he says. “In defence of clubs, people do ring and say, ‘I cancelled two, three, four months ago’ but they never checked the gym received the cancellation.”

That’s why he thinks you should deliver your cancellation in person.”

I have to confess that I was a member of a very, very large Australian wide Fitness chain for about 8 years.  After keeping my membership through my first pregnancy, the realities of sleep deprevation and a small child set in and I realised that my good intentions were not worth the fortnighly membership fees that I was paying for them.  So to cancel my membership (I was obviously out of term), I rang the club once a week for four weeks.  On my last call after having none of my messages answered I told the receptionist that if I had to come in to cancel my membership (which I was told I needed to do – even after no one had returned my three previous calls), then I would make a very big, and very loud fuss at a prime exercise time when as many of their current members could see and hear me.  Needless to say that within a couple of days I got a call from the Centre Manager who within two minutes had cancelled my membership. 

Did it really need to be that hard? Have you ever tried to cancel a membership?  What was your experience?