24 Hour Fitness Sued For Charging Ex-Customers Fees

The gym chain made famous on NBC’s “Biggest Loser” is being sued for continuing to debit the bank accounts of customers who have canceled their memberships. The US Court of Appeals, Ninth Circuit, has given the green light to a class action lawsuit that says the chain is violating both the RICO Act and the Electronic Funds Transfer Act by keeping these zombie memberships active.

From the press release:

Friedman vs. 24 Hour Fitness USA, Inc., (Case # 06-06282), alleges that 24 Hour Fitness continues to deliberately take monthly payments out of consumer’s accounts after the member cancels membership. The case was filed in U.S. District Court, Central District of California.

The gym insists all members pay their monthly memberships by electronic transfer. It is estimated that 24 Hour Fitness is making $1.6 million a month that it is getting from former members’ bank and credit card accounts by defrauding such companies as Bank of America and J.P. Morgan Chase, which process payments via the national financial system networks for electronic fund transfers.

“24 Hour Fitness is the modern day Al Capone, using the electronic banking and credit card system as Al Capone and his mob used the Tommy gun,” says Los Angeles trial lawyer Robert L. Esensten of Wasserman Comden & Casselman. “This is exactly what the [Racketeer Influenced and Corrupt Organizations (RICO)] laws were designed to stop. Apparently 24 Hour Fitness’s annual revenues of over one billion dollars a year are not enough for its owners, despite the fact that today’s consumers are struggling to make every dollar count.”

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  1. rocketbear79 says:

    I’ve had issues with overcharging with almost every corporate gym I’ve been a member of. As a bodybuilder and one whose job moves him around a lot, that has been a lot of gyms: Gold’s, LA Fitness, World’s, Powerhouse, etc. The current gym I go to had a month to month option that cost $37 instead of the EFT $22 price. In my mind it is worth the extra $15 a month just for the piece of mind.

    Hope these people (the plaintiffs) score big.

  2. hahamaximus says:

    Costco sells a 2 year 24 Hour membership for about the same or less than a 1 year if purchased directly from 24 Hour. That would be one way of preventing them from having access to your bank info, assuming they don’t require C.C. to activate membership.

    I purchased a 1 year membership and it expired without renewing. No complaints, other than each of the 3 locations around me were -always- busy.

    • thebigbluecheez says:

      @hahamaximus: That is BRILLIANT. I’ve seen packs of $100 worth of Starbucks gift cards for $80 at Costco before, but that’s only 20% off. 50%+ off of a gym membership is great. That might almost make it a reasonable price for someone like me (an unemployed recent college grad)

    • JeffM says:

      @hahamaximus: Those are only for Sport clubs – you actually can get better deals on 3 year memberships (with super low recurring fees [<$100/year] after 3 years) during promotions at the clubs.

      • socalrob of the 24 and a half century says:

        @JeffM:
        My membership is up for renewal for a couple of days. I bought a 3 year membership for $500 bucks to all clubs, and now its only $29 a year to renew. My girlfriend has a membership to the same location and pays almost that a month.

    • bohemian says:

      @hahamaximus: After having some of these types of experiences with gyms in the past I used my c-card for my more recent gym membership. I had the option of EFT or c-card. I used my debit card as a c-card on the forms. That way I can block or dispute the charges with the bank if they try to pull this kind of thing after canceling.

      I found that community based gyms or those connected with hospitals or clinics to be less likely to pull membership tricks.

  3. GMFish says:

    Here’s a great summary of the facts from an earlier ruling in the case: Friedman v. 24 Hour Fitness USA, Inc., 580 F.Supp.2d 985 (C.D.Cal.,2008)

    II. FACTUAL ALLEGATIONS
    Defendant owns and operates more than 385 fitness centers in at least fourteen states, as well as overseas. Fourth Am. Compl. ¶ 15. It has over three million members and annual revenues of more than $1.1 billion. Id.

    *989 Defendant sells monthly memberships to its clubs. Id. ¶ 16. Within the last four years, Plaintiffs and putative class members signed a form contract containing the same material form language, which stated that they were entering into a monthly membership. Id. ¶ 17. These form contracts contain an integration clause. Id.

    Defendant requires each new monthly member to pre-pay the first and “Last Month’s Dues” at the time of enrollment. Id. ¶ 18. A consumer terminating a monthly membership owes no further fees upon cancellation because the “Last Month’s Dues” are always pre-paid. Id.

    Defendant requires that monthly dues be paid by Electronic Fund Transfers (“EFTs”). Id. ¶ 19. EFT allows Defendant to withdraw money from consumers’ accounts without the consumers’ active participation in effectuating payments. Id. ¶ 20.

    Using EFT, Plaintiffs allege, Defendant wrongly charged additional dues after cancellation of monthly membership. Id. ¶ 21. In each case, Defendant acknowledged cancellation, but subsequently made at least one unauthorized post-cancellation EFT “tap” against the (former) member’s bank account or credit card account. Id. ¶ 23.

    According to the Fourth Amended Complaint, by tapping consumers’ accounts after consumers cancelled their monthly memberships, Defendant has committed wire fraud and bank fraud in a manner rising to “an ongoing pattern of racketeering activity.” Id. ¶ 81. Defendant perpetrates this pattern of wire fraud and bank fraud through its “association-in-fact” with two outside payment processing companies, Paymentech and LaSalle. Id. ¶ 83. Defendant issues instructions to the payment processors on specific “tap” dates. Id. ¶ 92. These payment processors rely on Defendant’s representation in those wire instructions that Defendant is authorized to collect consumers’ money. Id. ¶ 94. This RICO enterprise, Plaintiffs allege, is controlled, managed and directed by Defendant “for the common purpose of making enormous illicit profits for Defendant with the unwitting complicity of [Paymentech and LaSalle].” Id. ¶ 88.

  4. oneliketadow says:

    Unfortunately the only ones who come out ahead in a class action are the lawyers. The affected members end up getting a coupon for the service they already canceled most likely. Mark my words, the settlement offer will be one free month of membership or a 24 hour fitness towel.

  5. halcyondays says:

    Don’t ever give anyone electronic access to your accounts ever – problem solved. If a business won’t take a check or a credit card, I won’t do business with ‘em.

  6. TechnoDestructo says:

    When will the Liberal California 9th Circuit stop interfering with the rights of businesses?

    • Nighthawke says:

      @TechnoDestructo: Only when the businesses realize they have no extra rights beyond what is granted to them by the Constitution.

      • swearint says:

        @Nighthawke: Common misconception, but the Constitution does not grant, bestow, or create any rights. If you read the amendments, they all contain language similar to ‘right shall not be infringed’. One of my favorite is:

        Amendment IX
        The enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people.

        Also, businesses don’t have any rights protected under the Constitution, just people. Businesses do have to operate within the law though.

        • Nighthawke says:

          @swearint: That is exactly what I was stating: They have NONE! They could surround themselves with lawyers and lobbyists, convince/pay/push enough pols into their corner then have them vote on anything they want to. But at what cost, alienating the public, ruining their image, go for broke big corps, I will want to be around when you topple.

  7. MickeyMoo says:

    They did this to me 20 years ago before I knew better – took 6 months and countless letters to corporate, and threatening small claims court till I got my refund. The Costco prepaid membership mentioned above is totally the way to go. Don’t sign anything before reading it completely – if steroid Ken interrupts threaten to walk out and loose him the sale if he does it again.

  8. Omali says:

    Shouldn’t America Online have about a thousand lawsuits running against it? It seems I can’t go a week without hearing about more people getting charged for zombie accounts they haven’t used in years.

  9. deniseb says:

    They did the same thing to me about 15 years ago. I notified them in writing that I was canceling, with 30 days notice (which is already extortion in my opinion, since it cost me an extra month), and when the time was up they invented a new requirement (not in the contract, of course) that memberships could only be canceled in person. I disputed the charges with my credit card company and when they ruled in my favor 4 months later, all 24-hour had to say was “OK, you don’t have to pay.”

    I never knew if it was corporate policy or just a couple of thugs at my local gym.

  10. mommy_dearest says:

    I had this problem about a decade ago. When we cancelled our account, we followed all the rules and kept getting the run around- “oh yes, it’s cancelled” or “we still need form X”. We asked the bank to stop the payments, but they told us they couldn’t unless the gym approved stopping it. In the end, we emptied our bank account and moved to another bank. It was the only way to get out of it. Now we never EVER do direct transfer payments like that.