There’s a catch to prepaid services - Law For Everyone | The Star Online


There’s a catch to prepaid services

SINCE True Fitness Malaysia closed all its True Fitness and True Spa outlets here last weekend, members are complaining that they cannot work out or be pampered at the venues which they chose and which were promoted to them. Employees also found themselves in the lurch.

However, there is also the loss of money by those who have paid in advance. It appears that apart from there being fees paid yearly in advance, there were also offers to others to hold VVIP membership costing RM8,000 to RM9,000 and Gold Class membership, and even life membership for much more.

As reported, some members feel that there is an urgent need to wind up the company. Others want to air their grievances and discuss an action plan. And out of a lack of any alternatives, others want to make police reports or “community police reports”. However, unless the company has plans and resources to refund what has been paid, the situation looks very ominous for members who have paid in advance for a year.

There are many fitness centres that provide opportunities for individuals to exercise. Basic or middle-range centres are run with the collection of monthly or quarterly fees. When such centres close down, the loss to members is minimal.

The posh and upmarket outlets are visually impressive in terms of the facilities displayed, and the sweet talk by the well-trained and very pleasant personnel bowl over many an applicant.

The prospective member is immediately impressed by the ambience. All that he has to do is to use his credit card once and then he is confronted with documents that are full of fine print. He signs them, planning to read them later. Now when the centre closes, the bank member must still pay!

Once a card transaction is performed, especially if it is for a year, the total sum is paid by the bank to the fitness centre. When the member sees his credit card statement, he thinks that he is paying the monthly fee for the outlet. Actually, it is the repayment of the loan to the bank. How the bank profits is a matter of its arrangement with the fitness centre.

Readers will get a better picture when they think about electronic items or other items they have purchased from stores. Sometimes there is an offer to receive payment for the item purchased through a credit card.

Here, too, the bank actually advances the money, less what is payable to itself, in a lump sum. The individual, when he gets his credit card statement, thinks he is paying an instalment for the purchase.

In such a situation, however, generally the purchaser is comparatively safe because he has already obtained custody of the goods – except in rare cases where the goods turn out to be of no use at all. But that is another matter and there can be a remedy against the merchant.

Those who have paid huge sums for VVIP membership and Gold membership must be persons who can afford to make such payments. And if anyone is able to and happily pays a huge sum in advance for services, it is such a person’s right and privilege to do so.

Furthermore, a fitness centre is a place for people to make use of the facilities to keep fit and to exercise. So what is the advantage of a Gold or VVIP membership? Clearly, for such people, it is a matter of announcing their VVIP status or Gold Card status.

Older members will remember that in 1980 the first posh and upmarket fitness centre was Clark Hatch Fitness Centre.

I think they were well funded to start with. They did not raise money through advance fees to help with the capital requirements, directly or indirectly. The fees that they charged were monthly and for those who so chose, quarterly or annually.

So even if there were to be losses, these would have been minimal. Problems arise when some centres developed schemes of collecting huge sums in advance, in the name of fees, for which there could not be assurances.

A clause in the agreement that the True Fitness management must give 30 days’ notice of closing is merely ink on paper and of little value. It merely constitutes the fitness centre’s liability to pay. Worse still, they have said they will not be paying anybody. Instead, customers will be able to transfer their membership to CHi Fitness.

The question of fraud has been raised but it would be difficult to sustain it. A few members who enrolled very near the closing date and who paid in advance might have some chance of success.

This perhaps requires the attention of the authorities who, it may be hoped, would sniff out such situations where deposits are being collected in the guise of advance fees.

At the same time, the people also need to be sensible to protect themselves and carefully consider the risks where money is paid in advance but services provided in the future.

Any comments or suggestions for points of discussion can be sent to The views expressed here are entirely the writer’s own.

Bhag Singh , columnist