Health club members of three clubs that closed abruptly last April will be reimbursed for their pre-paid memberships. The Pennsylvania Attorney General's Office approved payments of $75,000 to the affected members almost a year after the Lehigh Valley Racquet Club and 24-7 Fitness Clubs closed.
"Consumers have rights when they sign a health club contract, and when those clubs close abruptly, we put the law to work for them," Kathleen Kane, Pennsylvania State Attorney General, says in a news release.
After the three clubs closed without any warning on April 8, the Attorney General's office urged the members to file a complaint with the Bureau of Consumer Protection. As a result, 124 complaints were filed against three clubs operated by Bethlehem Racquetball Club Inc., Racquetball Centers Inc., Racquetball Centers LP and Trexlertown Fitness Club LLC.
According to LehighValleyLive.com, court records stated that the members reported financial losses from $24 to $900 per individual. The records also stated that Pennsylvania health clubs must maintain an irrevocable letter of credit for $50,000 for each club location to "provide refunds in the event of bankruptcy or other disruption of service."
In the case of the Lehigh Valley Racquet Clubs, however, the founder filed for Chapter 11 bankruptcy protection in 2012 and reported having millions of dollars in debt. The Bank of Camden then took control of the clubs through an auction, and the Commonwealth filed a lawsuit to secure funds for members who prepaid for services they never received.
The State Attorney General's office stated that it determined the amount of $75,000 based on information related to club members and their membership contracts or payments, which were in possession of the clubs' receiver. Some consumers paid by credit card and received credits on their account for any prepayments. In other cases, members had automatic debits to their bank accounts, which were reversed. When computing the total of $75,000, the court-order receiver had already taken these cases into account.
"The refund amount is a broad range, in part, because for some consumers, the refund would be a month's pre-payment, and for others, the cost of a racquetball court rental for a time period," stated the Attorney General's Office in an email to Club Industry.
On her website, Kane cautions Pennsylvania health club members to know their rights when they sign a contract with a health club. Her office stated that "under the Pennsylvania Health Club Act, clubs and gyms are required to register with the Attorney General's office if they sell contracts that span more than three months. Those clubs must post financial security with the Bureau of Consumer Protection, which protects consumers. The law also outlines what terms health clubs must include in their contracts, including a consumer's right to cancel, or to receive refunds in certain circumstances."
Kane says some health club members who are eligible for a refund may have not yet filed a complaint but must do so by April 9.