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AG Prevents Peak Fitness from Selling Prepaid Memberships

RALEIGH, NC -- Peak Fitness has reached another settlement with North Carolina Attorney General Roy Cooper, agreeing to secure required bonds before collecting prepaid memberships and similar fees.

Cooper filed a lawsuit against the troubled North Carolina-based chain last Wednesday. The result was a consent judgment signed the following day by Wake County Superior Court Judge Paul Ridgeway. Under the agreement, Peak Fitness and its owner, Jeffrey Stec, are not allowed to sell prepaid memberships until the company gets bonds for each health club. In the meantime, Peak Fitness can continue to operate but can only collect money from customers who pay month to month for their memberships.

Cooper’s office was notified in March that Peak Fitness’ bonding company was cancelling all of Peak Fitness’ bonds on May 12. Peak Fitness has not been able to secure replacement bonds, which are required by state law to reimburse members if the club closes and the company does not have the money to refund customers who paid in advance. Also in March, Peak Fitness failed to fulfill a requirement by not submitting sworn statements for all Peak Fitness clubs. The company understated its liability by approximately $2 million in the statements that were submitted.

In January, Cooper’s office and Peak Fitness reached a settlement in which the company agreed to alter its business practices. The settlement stemmed from a 2006 lawsuit Cooper filed against Peak Fitness after the company had acquired the Beyond Fitness clubs.

Since the January agreement, Peak Fitness has closed North Carolina clubs in Charlotte, Garner, Knightdale, Raleigh and Winston-Salem. Also, Peak Capital Holdings LLC, a subsidiary of Peak Fitness that operates four Raleigh clubs, filed for Chapter 11 bankruptcy in April.

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