A.G. Schneiderman Secures Refunds For New Yorkers Who Paid To Join Fitness Clubs That Abruptly Closed Down

NEW YORK – Attorney General Eric T. Schneiderman today announced an agreement with Curves International, Inc. to reimburse New Yorkers across the state who prepaid for memberships only to find that the gyms had abruptly closed their doors. As part of the settlement, Curves International, a multinational health club franchisor, will set up a reimbursement fund for consumers who paid for health club services that were discontinued.

The settlement is the latest example of a common consumer issue that the Attorney General has highlighted as part of National Consumer Protection Week (see below for tips for consumers choosing a health club). Earlier this week, the Attorney General released a list of the Top Ten Consumer Frauds of 2010 with consumer-related services ranking third.

“If you do business in New York, then you have to play by the rules. Curves International – like any franchisor operating in the state – must refund the customers who prepaid for memberships they ultimately could not use,” Attorney General Schneiderman said. “My office will continue to ensure that consumers are treated fairly, and I encourage New Yorkers to learn their rights and report offenses to our office so that we can take action.”

Curves International did not honor its obligation to provide refunds when independently owned Curves Health Clubs franchises went out of business, some without reimbursing its members. Curves International will establish a restitution fund for the consumers who requested a membership refund from any Curves club that closed in 2009. Curves will pay up to $100,000 into a reimbursement fund, which will be overseen by the Better Business Bureau. It will pay an additional $60,000 to New York State for the costs of this investigation.

In 2009, 60 Curves health clubs across the state had also gone out of business, some without providing refunds to their members.  The Curves franchise club locations include:

The Attorney General launched an investigation following complaints that a Suffolk County Curves franchise had closed without notice. Since that club failed to secure a bond as was required by law and refused to provide refunds to its members, consumers sought refunds from Curves International – its franchisor. However, Curves International failed to immediately provide refunds, denying any responsibility for the independently-owned club.

New York State General Business Law states that any contract between a consumer and a franchised health club is also enforceable against the franchisor. Curves International refused to honor that legal obligation and failed to provide refunds to the consumers.

Consumers who believe they are entitled to a refund from Curves International should contact the Better Business Bureau at 212-358-2857 at 30 East 33rd Street, 12th Floor, New York, New York 10016.  New Yorkers who have had a similar experience with a different business and would like to file a complaint are encouraged to contact the Attorney General's Consumer Helpline at 1-800-771-7755.

Attorney General Schneiderman today provided tips to New Yorkers in the process of choosing a health club, which are strictly regulated to protect consumers:

• As with any service, consumers should shop around to compare prices, learn about the dues, hours of operations and other amenities. High-pressure tactics are no reason to join a club and should be reported to the Attorney General’s office.
• The New York Health Club Services Act protects New Yorkers from unfair sales practices, business and financing methods. Under the law, contracts cannot exceed $3,600 per year, or last for a term longer than 36 months.
• All health club contracts can be cancelled within three days of signing, or if the club stops offering the services listed in the contract, the consumers moves 25 miles away from any health club operated by the seller, and if a doctor orders that the consumer cannot receive the services stated in the contract. Refunds must be provided within 15 days of such a cancellation.
• A need-to-know requirement is that health clubs must file a bond or another type of financial security with the Secretary of State to protect New Yorkers who have prepaid for their members in the event that the club must close. Make sure your club has met this requirement before signing a contract.

More information on this and other consumer issues is available on our office’s website.

The case was handled by Alan Berkowitz, Acting Assistant Attorney General-In-Charge of the Suffolk Regional Office with the assistance of Dana Castaldo, Legal Intern.