OFT claims that 3-year gym membership contract with no get-out right was unfair on consumers and therefore unenforceable

The Office of Fair Trading is taking legal action against Ashbourne Management Services for AMS’s gym membership contracts that provided no opportunity for members to terminate before a minimum three year period expired (except if they pay up their membership for the remainder of the term). The OFT considered that such a term was unfair and therefore unenforceable, contrary to the Unfair Terms in Consumer Contracts Regulations 1999, which seeks to protect consumers against unfair contract terms. The OFT is also concerned that AMS’s practices are aggressive and misleading, contrary to the Consumer Protection from Unfair Trading Regulations 2008, and in particular its practice of reporting 17,000 people to credit reference agencies if they refused to pay up the remainder of the term.

Paul Gershlick, a Partner at Matthew Arnold & Baldwin LLP and editor of www.Upload-IT.com, comments: ‘This case impacts on anyone who deals with consumers for long-term contracts. The impact is serious. The OFT has clearly taken the view here that three year terms without the right to cancel are too long. The business in question presumably thought it had a debt owing and sent the matter to debt collectors. However, since the OFT considered the clause to be unfair, its tactics in pressurising the consumers to pay up was deemed to be aggressive. Breach of the 1999 Regulations only mean that a term is unenforceable, whereas breaching the 2008 Regulations would amount to a criminal offence. For now, we don’t know what a court will decide – only that the OFT doesn’t like what AMS has done – so it will be worth watching the outcome from the courts.’