Gyms warned off Act-breaching contracts
The Commerce Commission is warning gyms that their contracts may be breaching consumer credit law.
Hot Topic
Long reads
The Commerce Commission is warning gyms that their contracts could be breaching consumer credit law.
During recent Commerce Commission investigations of 13 New Zealand gyms, it was found that all but one had gym membership contracts for membership payments by installment that did not comply with the Credit Contracts and Consumer Finance (CCCF) Act.
The contracts did not tell customers that they had the statutory right to cancel the contract. They also did not disclose the initial unpaid balance that would be due under the contract (the full cost of the membership for the minimum period).
Disclosure was also necessary about the payments themselves. Payment by installments at a gym can add up to more than a one-off payment.
A Commission spokesperson said this difference was likely to be due to additional fees or interest, possibly due to the additional administration needed to process the weekly or fortnightly payments. She said the gym was obliged to disclose these additional charges to the consumer.
Commerce Commission competition branch manager Graham Gill said it was fundamental to consumers’ rights to be given full information when they sign up for a credit contract.
“Often people will enter a gym membership contract just wanting to get started on their new passion for fitness. However they need to be made aware of the true cost of the contract, so they can make an informed decision about whether to go ahead and sign.”
Failure to comply with the disclosure provisions of the CCCF Act can make the contract unenforceable. Any attempts to enforce a legally unenforceable contract may also breach the Fair Trading Act.
Mr Gill said thousands of people throughout the country might have entered into gym membership contracts that breached the CCCF Act.
“We have encouraged the gym industry to seek legal advice and put this matter right urgently. If they don’t do so, the Commission may take enforcement action in the future.”
Charlotte Woodfield
Mon, 01 Aug 2011
Mon, 01 Aug 2011
© All content copyright NBR. Do not reproduce in any form without permission, even if you have a paid subscription.
Gyms warned off Act-breaching contracts
16132