Contracts at Bannatyne Fitness, David Lloyd Leisure and Fitness First deemed ‘unfair’ by OFT
Three of Britain’s biggest gym chains have had to change their contracts to make it easier for people to cancel, after the Office of Fair Trading ruled their terms and practices were unfair.
Bannatyne Fitness, David Lloyd Leisure and Fitness First have all been forced to change their contracts after they were found to be making it difficult or impossible for people who were injured or made redundant to exit their gym agreements early.
Members of the gym groups are now able to cancel their contracts early should their circumstances change in a way that makes attendance at the gym difficult or unaffordable.
The gym groups have also had to reduce the notice period needed to cancel contracts that are longer than one year, and will no longer be able to describe membership as being of a fixed duration if the contract automatically continues on a rolling basis after the initial membership period has expired.
Bannatyne’s was also singled out for chasing gym-goers with “misleading” debt collection letters that sometimes threatened recipients with what appeared to be official-looking court documents, or making other unsubstantiated claims about action that had been taken. It will now stop sending these letters and is reviewing its other debt collection letters.
“Millions of people are members of gyms, and a membership contract can easily be a financial commitment of more than £500 per annum,” said Cavendish Elithorn, senior director of the OFT’s goods and consumer group. “We were concerned that contracts could unfairly lock people in if their circumstances changed, forcing them to continue paying even if they had lost their job.
“We welcome these changes from Bannatyne’s, David Lloyd and Fitness First. As well as making contract terms clearer, the revised contracts also grant members, and prospective members, more flexibility.”
The action taken against the three gym chains is part of an ongoing investigation the OFT started in January 2012, and stems from a court case involving Ashbourne Management Services, which draws up agreements and collects payments for gyms.
The judge in that case concluded a contract was unfair if it ran for longer than 12 months and did not allow the consumer to cancel with 30 days’ notice and a moderate penalty. The OFT is looking at gym contracts in light of this ruling. It confirmed it is continuing its investigation into some other companies, believed to include LA Fitness, and will provide an update in the next few weeks.
In January 2012, LA Fitness caused a storm of protest after an article in the Guardian told the story of Hannah, a reader from Billericay in Essex, who was seven months pregnant and wrote to the paper after her husband lost his job, leaving the couple living on benefits.
Hannah and her husband, who were about to move 12 miles away from their nearest gym, had been LA Fitness members for seven years and asked the gym chain to reconsider their two-year contract. But the gym insisted the couple pay the remaining 15 months, a total of £780. A protest by thousands on Twitter helped persuade the company to back down, and raised further questions about the fairness of long-term gym contracts.
Some gym chains made changes to their contracts once the OFT investigation started. The watchdog closed its investigation into Virgin Active in April 2012 after the company relaxed some of its terms.
A spokesperson for Bannatyne’s said: “Bannatyne Health Clubs are uniformly operating under contracts that meet the OFT recommendations with regard to length of contracts and provisions relating to cancellation due to illness.
“As a major national operator we have never used external debt collecting agencies and our contracts have never been greater than the 12-month maximum term proposed by the OFT.”
David Lloyd Leisure said: “Following extensive discussions with the OFT, DLL introduced improvements to the flexibility of its membership contract terms and conditions from December 2012.
“Primarily, DLL simplified – and further clarified – the ability for members to join either with short- or longer-term commitments and to switch between the two, as well as expanding those circumstances in which membership can be suspended or ended.”
A Fitness First spokesman said: “We have happily accepted all recommendations from the OFT to make contract terms more transparent, allowing more flexibility for our members.”
Customers who paid Redress Claims to get PPI money find they are out of pocket
The letters are depressingly similar:
London RT of London was cold called by a company called Redress Claims which promised to reclaim mis-sold payment protection insurance for her on a no-win no-fee basis. “I paid £450 for them to look into potential claims on each credit card and was told I’d get the money back if the claim was unsuccessful. I’ve never received any claim money, or a refund.”
AB of Humberside paid Redress Claims £1,700 in 2011 after being cold called. “We trusted them, as we are desperate financially. They did obtain £958 for mis-sold PPI on a mortgage for which they charged an additional fee of £287. And £1,419, £608 of which they pocketed despite the promise in their terms and conditions that they would deduct no more than 25%.”
SG from Coventry found that £3,855 had been removed from her credit card after a cold caller from Redress Claims gave her a hard-sell in April 2011. “I never received any bill or acknowledgement of this payment and they’ve since demanded further payments,” she says.
PR of Southport, Merseyside paid a similar upfront fee which he was told was refundable if his six claims were unsuccessful. One claim was won but he was told to pay an extra £149 per claim to a company called Credit Clear Services to have the outstanding five resolved.
R E-H found £3,245 removed from his account, £590 of it for invalid claims. “I made more than 20 attempts to get the £590 back but none of my messages was replied to. They managed to get me £120 back from one credit card issuer and £32 on another and charged me £100 fee for each. Now I’ve had a letter from Credit Clear Services telling me my contract has passed to them and I must pay £99 for them to proceed.”
After a long overdue investigation by the Ministry of Justice, Redress Claims’s licence to trade was suspended last month due to breaches of the code of conduct. “We will take further action if breaches are not corrected,” says an MoJ spokesman.
Given that a suspension can be lifted after three months if a company gets its act together, and given that Redress Claims will have made a consoling profit in the 18 months it has been allowed to operate, this is unlikely to pain its director, Naman Hussain.
Suspension does not stop companies dealing with refund requests from customers whose cases are pending, and the MoJ recommends they write asking for one.
Simon Helliwell, director of Credit Clear Services, which provided “auditing and legal services” for the company, declares that Hussain will be pursuing “other interests” and would not seek to reinstate the licence when the three months is up.
“We’ve agreed to take the thousands of unresolved Redress Claims’ cases off them for no extra charge and will proceed on a no-win no-fee basis,” says Helliwell, who insisted that “in comparison with many in the market Redress Claims was not that bad”.
He was vague, however, about what percentage of any claim would be deducted in fees. “We’ll abide by Redress Claims’s terms and conditions,” he says and admitted he didn’t know what percentage these specified.
As compensation claims for mis-sold PPI can be made for free with a form provided by the Financial Ombudsman Service, anyone who paid Redress Claims by credit card should consider applying for a refund from their card issuer, which is held jointly liable under section 75 of the Consumer Credit Act. Some debit card companies also offer chargeback if a company is in breach of contract.
Sadly, though, many are likely to be left out of pocket and will have learnt never to hand bank details to a company that cold calls.
Protecting consumers ought to be the priority and it is hard to believe HMV’s fate would have been different had it been obliged to tell Christmas shoppers it couldn’t sell them vouchers
Administrator Deloitte has studied HMV’s business and, thankfully, decided that gift vouchers can be honoured after all. The saga, though, feels unsatisfactory. It is clearly deeply unfair that consumers, who cannot be expected to monitor the financial health of high street names, are put in the position of unsecured creditors when administration happens.
It is also a nonsense that HMV, which warned before Christmas of “material uncertainties facing the business” and a probable breach of banking covenants, could be free to continue selling vouchers.
The law should be changed to stop the latter abuse in future. The only serious objection is that vulnerable retailers might hasten their demise by advertising their frailties and, potentially, losing custom.
Yes, that’s a risk but protecting the consumer ought to be the priority. In HMV’s case, the outstanding vouchers are worth £6m-£7m. It is hard to believe the fate of the company would have been any different if it had been obliged to tell Christmas shoppers: sorry, it couldn’t sell them a voucher at that time.
My passport says I’m Thomas, but I booked the flight as Tom; surely the airline should not make me buy a whole new ticket
I booked flights to Chile via Brazil and used the name Tom, whereas my passport bears the name Thomas. This was not a problem on the flight out to Rio, but when I checked in for the Rio to Santiago leg I was told that since the names didn’t match I would have to buy a new ticket at an extra cost of £330. I work in fraud detection and would never make an issue over such a discrepancy. TF, London
Airlines have, for obvious reasons, become increasingly neurotic about security. They are free to set their own policy about how precisely names on tickets and passports match up, according to the International Air Travel Association, which is why one waved you through and the other didn’t.
“We therefore recommend that the name on the ticket should match the name on the passport to minimise the likelihood of being denied boarding,” says a spokesman. Under US rules, however, tickets have to bear the exact name, including any middle names, as it appears on your passport. Nicknames are all very well at home, but it’s best to leave them behind and travel formally when taking to the skies.
If you need help email Anna Tims at firstname.lastname@example.org or write to Your Problems, The Observer, Kings Place, 90 York Way, London N1 9GU. Please include an address and phone number. Unfortunately we cannot respond to emails individually.
Groceries Code Adjudicator vows to crack down on large supermarkets which abuse their power
Large UK supermarkets which abuse their power in the marketplace and treat suppliers “unfairly” could be fined by a new watchdog under changes announced by the Department for Business.
In a U-turn hailed by campaigners, ministers have bowed to pressure from MPs and groups lobbying on behalf of farmers and other food suppliers to toughen up the new Groceries Code Adjudicator (GCA).
The proposed legislative framework originally specified that the adjudicator should have only the power to “name and shame” any stores which flout the code. The business secretary, Vince Cable, reserved the right to introduce fines at a later date if the system did not work.
But the competition minister, Jo Swinson, announced on Tuesday that the adjudicator would have the power, from the start, to fine supermarkets which abuse their power in the marketplace – for example by forcing down wholesale prices to below cost levels in a move that would penalise suppliers.
Swinson said: “Where supermarkets are breaking the rules with suppliers and treating them unfairly the adjudicator will make sure that they are held to account.
“We have heard the views of the stakeholders who were keen to give the adjudicator a power to fine, and recognise that this change would give the adjudicator more teeth to enforce the Groceries Code.”
The Groceries Code applies to the 10 UK retailers with a turnover in the groceries market in excess of £1bn.
The watchdog will be able to arbitrate disputes between retailers and suppliers, investigate complaints from direct and indirect suppliers, and hold to account – and if necessary fine – retailers who break the rules.
The GCA bill is in the final stages of its passage through parliament, which has been far from an easy ride.
The issue of fines dominated its second reading in the House of Commons in November as MPs from all parties lined up to demand that the government added powers to the GCA to impose financial penalties as soon as it was set up.
The level of fines are still to be agreed, however, and will be determined by Cable in the coming weeks.
Charities welcomed the government’s decision to give the watchdog “teeth”.
Murray Worthy, supermarkets campaigner for the anti-poverty charity War on Want, said: “We welcome the government’s announcement that its supermarket watchdog will have the power to impose fines for bullying suppliers.
“This breakthrough has only come through dedicated campaigning, with members of the public across the country pushing MPs for action to curb supermarkets’ excessive power.
“It is a great step towards securing fair treatment for workers around the world who pick, pack and grow our food.”
Paul Chandler, chief executive of charity Traidcraft, added: “We are delighted that the government has agreed that the supermarket watchdog should have the power to fine.
“It will reassure farmers in developing countries that it is worth protesting if supermarkets make unreasonable demands on them, such as changing the price or the amount ordered at the last minute.”
He said the charity’s campaigners had been “pressing the government for months – and the minister herself praised our supporters for their ‘tireless campaigning’ – even taking our tiny ‘toothless watchdog’ to the House of Commons to illustrate the point.”
Unauthorised overdrafts tend to cost more, but borrowers who repay a payday loan may face a high price later
Cash-strapped borrowers who are tempted into taking out a payday loan to avoid the astronomical costs of an unauthorised overdraft could face even worse problems later on, the Financial Ombudsman has warned.
Research by consumer advice website watchmywallet.co.uk shows it is cheaper to take out a small short-term loan with Wonga at a rate of 4214% APR than go into an unauthorised overdraft with any of the major banks. The website replicated the situation of someone running out of cash just before their payday by comparing the cost of borrowing £11 for two days from Wonga, and through an unauthorised overdraft with six high street banks. While the Wonga loan would cost £5.83, RBS and NatWest would charge £12, Santander would charge £20, Barclays £22 and HSBC £25. Only Lloyds TSB comes anywhere near Wonga, charging £6.
The figures support claims by Wonga that using an APR or annual percentage rate calculated over an entire year to show how much its loans cost is unrepresentative, because the loans last a maximum of 30 days.
Watch My Wallet editor Sean O’Meara said: “This research just goes to show how excessive bank charges are. We certainly don’t recommend Wonga loans as a reasonable or cost-effective way to manage your debts, but the fact that a 4214% interest-rate loan can be cheaper than going £11 over your overdraft for just a few days is something that we believe should be brought to people’s attention This is the small print at the bottom of bank statements that people rarely read – and it’s the kind of thing that can drive people further and further into debt if they’re not careful.”
However, those who use payday loans to avoid unauthorised overdraft fees could have other problems. The Financial Ombudsman Service told The Observer that while it has had few complaints about the loans, it has seen evidence mortgage lenders discriminate against payday loan borrowers.
“The number of complaints we receive about payday loans is relatively low but we have had a number of inquiries from consumers who have been told by their lender that previous payday loans they have taken out – and paid off on time – have and will continue to have a detrimental impact on their credit rating,” said a spokesman for the service.
Credit reference agency Experian lists payday loans separately rather than including them in a general overview of borrowing history. James Jones, head of consumer affairs for the agency, said that while some lenders do not differentiate between payday loans and other forms of credit, “some high street lenders might see the fact that you’ve resorted to payday credit as a sign that your finances are under pressure … if a particular lender’s experience is that customers who take out payday loans are more likely to miss their repayments, this will be reflected in their credit scoring”.