Gym Class Dismissed: Monthly Gym Memberships Not Governed by TILA

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As anyone who has ever seen laundry draped on an unused treadmill can attest, there is a big difference between investing in exercise equipment and investing the time to actually use the equipment. The same holds true for gym memberships. Not surprisingly,  there are many people who join gyms with the best intentions to exercise regularly who then later regret signing a long term contract to belong to a gym they no longer use. Also, not surprisingly, most states have some sort of consumer protection law on the books protecting consumers by requiring things like a reasonable “buyer’s remorse” provision, limits on the length of the contract, and even the ability to cancel the contract due to certain defined hardships. Notwithstanding these established consumer protections, there has been a fair amount of litigation — including attempted consumer fraud class actions — challenging  standard monthly gym membership agreements. This post discusses the results in one recent New Jersey case in which a consumer sought to certify a class of aggrieved gym members under the Federal Truth in Lending Act (TILA), 15 U.S.C. § 1601 et seq.

TILA was established with the purpose of disclosing certain information to consumers involved in credit transactions. While it was primarily intended to target credit cards and consumer loans, the plaintiffs in a New Jersey class action suit recently tried to attack the validity of monthly, recurring gym memberships as a violation of TILA. The New Jersey District Court wisely struck the effort down.

In McCarthy v. Equinox, the plaintiffs signed up for a 12-month gym membership, paid for on a month-to-month basis. The contract identified the monthly cost owed by the member, but did not stipulate the total amount obligated under the 12-month term. The plaintiffs claimed that this violated TILA, which requires lenders to set forth in clear and unambiguous terms the total amount that will be due in the consumer credit transaction.

The gym argued that the fitness membership is not a consumer credit transaction – the gym is not a creditor and the member is not a debtor – under the defined terms of TILA.  Accordingly, there can be no consumer credit transaction without a creditor and a debtor.  Further, the members pay for their services at the beginning of each month, and they cannot use the facilities if the payment is not received. Therefore, no “credit” of any kind has been extended to the member. The court agreed, stating that “at no point does any Plaintiff receive the benefit of its bargain while deferring a debt.” Based on this analysis, defendants were able to dismiss the claims, in full, at an early stage in the litigation.

There are many regulations that apply on a state-by-state basis to gym and fitness memberships (See NJ Health Club Act). Nearly every state has some specific health-club law to monitor the consumer affairs practices of gym memberships. And while some federal governance may also apply, a close analysis of class action claims may identify successful defenses early on in the case to protect against fruitless actions, such as set forth in this case.

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