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Four firms give the OFT undertakings about selling gym membership

125/09    15 October 2009

Four firms have agreed to make changes in the way they market and sell gym membership agreements. Millennium Experience (Direct Marketing) Ltd Matters Consulting Ltd, Millennium Experience Ltd, and Fitlife Ltd, along with their directors, have agreed to change their practices relating to the promotion and selling of gym membership through credit agreements and their subsequent pursuit of payments.

Consumers received unsolicited leaflets from Millennium Experience (Direct Marketing) Ltd informing them they had won a 'free' gift from a local business. They were asked to contact a second firm, Matters Consulting Ltd, who told them they had won a gym membership and invited them to attend a local gym to collect their gift. 

At the gym, consumers met a representative of a third company, Millennium Experiences Ltd, who told them that although their membership was 'free' there was a 'service charge' of approximately £4.11 per week. Some customers deciding to subscribe thought they were signing a standing order mandate but they were actually entering into a two-year credit agreement with a fourth firm, Fitlife Ltd.

Consumers signing up to the gym membership should have been given the right to cancel within a few days of signing. However the companies failed to do this.

In particular, in many cases the credit agreements did not comply with the Consumer Credit Act 1974, because 'pre-contact information' was not properly supplied to enable consumers to assess what the credit agreement actually entailed. Further, consumers also had a right to cancel the credit agreements within a few days after signing, and the credit agreements should have included a section setting out that right to cancel and how it could be exercised.

The failure to meet these requirements makes credit agreements unenforceable without a separate court order. Many consumers were subsequently pursued for unpaid fees and threatened with court proceedings or follow-up action from debt collection firms.

The companies, and their named directors, have given undertakings which include that they will, as appropriate to their role in the business practices:

• not describe a product as 'gratis', 'free' or 'without charge' if the consumer has to pay any costs  other than anticipated ones
• make clear to consumers where they are required to sign a credit agreement in order to receive any product.
• provide cancellation rights in future, where the law requires this
• not instruct debt collectors to pursue consumers for unpaid fees in circumstances where the credit agreements are unenforceable without a court order.

Under the Enterprise Act 2002 if these undertakings are breached the OFT can apply to the courts for an injunction, which, if disobeyed, could result in proceedings for contempt of court.

Consumers who may have a credit agreement with Fitlife Ltd and were not given prior information on cancellation rights should seek legal advice, or contact Consumer Direct or their local authority Trading Standards Service as their agreement may be unenforceable.

Jason Freeman, Legal Director, in the OFT's Consumer Market Group, said:

'It is vital that businesses provide clear, honest and upfront information to consumers at all stages of a transaction, from advertising to collecting payments. People must be able to assess whether what they are signing up to is a good deal for them, and the law provides cancellation rights to support this.'

NOTES
1. The OFT approached these companies and their directors under the Enterprise Act 2002 to secure undertakings under the Consumer Protection From Unfair Trading Regulations 2008, Consumer Credit (Advertisements) Regulations 2004, Consumer Credit (Disclosure of Information) Regulations 2004, Consumer Protection (Cancellation of Contracts Concluded Away From Business Premises) Regulations 1987 and Cancellation of Contracts Made in the Consumer's Home or Place of Work etc Regulations 2008. 

2. Millennium Experience (Direct Marketing) Ltd, Matters Consulting Ltd and Millennium Experience Ltd's registered offices are at Victoria House, 1 Gloucester Road, Cheltenham, GL51 8LN.  Fitlife Ltd's registered offices are at 53c Manor Road North, Itchen, Southampton, SO19 2DT.  These undertakings require companies and their directors to stop misleading consumers. 

3. The directors of each company are: Millennium Experience (Direct Marketing) Ltd:  David Black and Peter Farnell.  David Black is also the Company Secretary. Matters Consulting Ltd: Peter Farnell.  Amanda Phillips is Company Secretary. Millennium Experience Ltd:  David Black.  Peter Farnell is Company Secretary. Fitlife Ltd:  Alphons Petrus Smit and Doriana Smit.

4. The Consumer Credit (Disclosure of Information) Regulations require specified information to be provided to the borrower before a regulated agreement is made. Essentially, this is the same information as is required in the credit agreement.

5. The Consumer Protection from Unfair Trading Regulations 2008 prohibit unfair commercial practices and, in particular those which constitute misleading actions, misleading omissions and aggressive commercial practices. The Regulations implement the EU Unfair Commercial Practices Directive in the UK, and came into force on 26 May 2008. For more information see Consumer Protection from Unfair Trading Regulations 2008

6. The Cancellation of Contracts Made in the Consumer's Home Regs 2008 require businesses to give consumers cancellation rights in a number of circumstances where consumers are not in a good position to shop around - such as where they have been invited to somewhere other than the trader's own business premises or are approached in their own home.  

7. The Consumer Credit Act 1974 provides for similar rights of cancellation where there are oral representations made to the consumer, and he or she signs the credit agreement away from the creditor's, supplier's or negotiator's business premises.

8. Consumer Direct is the OFT managed advice service offering information and advice on consumer issues. Consumer Direct is funded by the OFT and delivered in partnership with local authority Trading Standards Services. For information or advice contact 08454 04 05 06 or see www.consumerdirect.gov.uk

9. The full undertakings will be available shortly.

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