Settlement will also include costs and restitution for misleading customers by falsely promising guaranteed annual renewal rates to obtain up-front fees
MARTINEZ, California — Contra Costa District Attorney Diana Becton, in conjunction with Orange County District Attorney Tony Rackauckas, announced that on November 1, 2017, the District Attorney’s Consumer Protection Divisions reached a consumer protection settlement of $1.2 million in civil penalties against 24 Hour Fitness, Inc. The company must also pay $100,000 in costs to the County of Orange and Contra Costa, as well as pay restitution to the members who were misled by the promises of a low lifetime annual renewal rate in exchange for large up-front membership fees.
24 Hour Fitness is headquartered in San Ramon, Contra Costa County, California and has 400+ membership fitness gyms in 18 states, of which 140 are located in California. The allegations against 24 Hour Fitness state that between 2006 and 2009, 24 Hour sold pre-paid memberships in a false and misleading manner when 24 Hour sales representatives took large up-front fees for an initial 2 or 3-year membership period, with the promise that members would be guaranteed a low life-time annual renewal rate for life, as long as the member remained in good standing by paying their annual renewal fee on time. The up-front fees ranged from $600 to over $1400 with a promise of a fixed annual renewal rate between $29-$199 a year.
In 2006, 24 Hour made changes to the language of their pre-paid membership contracts that allowed for annual rate increases, but the District Attorneys alleged that 24 Hour sales representatives continued to sell these post-April 2006 memberships with verbal promises that their annual renewal rates would be guaranteed fixed for life. Consumers also believed they were misled by the verbal representations and in 2015, when 24 Hour began increasing annual renewal rates, they complained to the Company and the Better Business Bureau. They also started an on-line petition protesting the company’s broken promises.
The complaint alleges that 24 Hour refused to honor the verbal guarantees, so members who refused to pay the increased annual rate had their memberships terminated after having paid the large up-front fees or forced members to pay the increased rates.
The Settlement requires that 24 Hour Fitness allow pre-paid members to renew their memberships at the promised low annual lifetime renewal rate, if the member submits a claim form and declaration that they were told by a 24 Hour sales representative that their annual rate was guaranteed to remain the same for life. All past and present 24 Hour Fitness members, who purchased post 2006 pre-paid membership contracts, or were updated to these contracts, and either paid the increase or were terminated for failure to pay the increase, will be sent a notice with instructions on how, where and when to submit their forms and declarations.
The District Attorney’s Offices want to make it clear that, if you receive a notice, it means you have one of the new contracts that allows for the increase, even if your rate has not yet been increased. It is important, that if you were promised a lifetime guaranteed annual renewal rate you must fill out the claim form and declaration to preserve or reinstate your guaranteed annual renewal rate. The restitution provisions of this settlement extend to qualifying pre-paid members nationwide.
24 Hour Fitness admitted no wrong-doing in the Settlement Agreement.
Deputy District Attorney Michelle Cipolletti from the Orange County District Attorney’s Consumer Protection Unit and Deputy District Attorney Dodie Katague from the Contra Costa Consumer Protection Unit prosecuted this case.
For further information, please contact DDA Dodie Katague at 925-957-8604.
