Ashbourne Management Services: unfair gym membership contracts

Office of Fair Trading (OFT) closed consumer enforcement case.

From:
Competition and Markets Authority
Published
1 August 2011
Case type:
Consumer enforcement
Case state:
Closed
Market sector:
Recreation and leisure
Outcome:
Consumer enforcement - court order
Opened:
1 September 2005
Closed:
1 August 2011

Case information

Case reference number: CRE-E/17562

The case was closed on 12 August 2011 when the Enforcement Order (pdf 300kb) was sealed in the High Court, following a hearing on 24 June 2011.

Summary of work/background 

On 2 March 2010 the OFT issued High Court proceedings against Ashbourne Management Services ('Ashbourne'), a company that provides services to gyms, following concerns about its compliance with consumer credit law and the fairness of its contract terms and business practices.

Ashbourne's business is focused on collecting payments on behalf of gyms, usually where the gym has used one of Ashbourne's standard contracts.

The OFT was concerned that Ashbourne's contracts were unfair in a number of key respects (particularly around the minimum contract term), that they may involve the provision of credit, and that some of Ashbourne's payment collection practices were unfair.

The case involved consideration of 13 standard form contracts that Ashbourne has recommended to gyms clubs to use over a number of years. These were referred to as 'contracts 1 to 13' in the court case. We believe that only contracts 1 to 10 have actually been used with consumers, but it is possible that some consumers may have been given contracts 11 to 13. All of these contracts can be read under 'related documents' below.

Where a term in a contract is unfair, it is not binding at all on the consumer, and the trader is not allowed to enforce it or otherwise rely on it in existing contracts, or include it in future contracts.

Where consumers were behind with payments that Ashbourne alleged were due, Ashbourne had a practice of reporting the consumer to a credit reference agency.

Proceedings were heard between 8 - 11 March 2011 in the High Court, sitting in Birmingham.

Judgment was handed down on 27 May 2011.

The Court held:

  • various terms of Ashbourne's standard form agreements are unfair contrary to the Unfair Terms in Consumer Contracts Regulations 1999. In particular:

    • Terms in contracts 1 to 10 which required consumers to pay in full for the remainder of the minimum membership period if they wished to cancel during this period. This was both because the minimum term operated as a "trap" for consumers who overestimate the use they are likely to make of the gym, and also because the contracts unfairly gave Ashbourne the right to demand too much in payment;

    • Terms in contracts 11 to 13 which tie consumers in for more than 12 months. The judge indicated that if there is a longer period it would be unfair unless the consumer could give 30 days notice to cancel, and pay a modest sum in compensation. The court was willing to accept a 12 month minimum period in contracts 11 to 13 because they contain more circumstances in which the consumer can suspend or terminate their membership for stated reasons.

    • Terms in contracts 6, 8, 9 & 10 which require the consumer to give cancellation notices to Ashbourne rather than the gym. In fact the contracts were between the gym and the consumer, and so the consumer should be able to deal directly with the gym. 

  • The judge also held that in contracts 1 to 8 it was not sufficiently clear who the consumer was contracting with -Ashbourne or the gym, and contracts 9 to 13 were only sufficiently clear if the name and address of the gym was entered in full on the contract. 

  • The judge also ruled that none of Ashbourne's contracts entitle the gym (or Ashbourne) to demand payment of sums which have not already fallen due where the consumer is less than 3 months behind with payment (and then only when the consumer is given a month to pay). He also ruled that the consumer cannot be required to pay where it is the gym that has seriously breached the contract.

  • Ashbourne has engaged in unfair commercial practices contrary to the Consumer Protection from Unfair Trading Regulations 2008. In particular:

    • Including contract terms that do not properly set out the consumer's rights -for example because they are unfair or otherwise poorly drafted.

    • Demanding payments which are not due -either because the contract, when read properly does not provide for them, or because the term is unfair.

    • Reporting or threatening to report sums to credit references agencies where the sum owed was unfair, merely a claim for damages, otherwise not due or was disputed by the consumer.

  • The Judge also noted that Ashbourne had already undertaken to the OFT not to:

    • exaggerate the significance or consequences of reporting sums to Credit Reference Agencies;

    • threaten to report consumers to credit reference agencies without also informing them of their rights to access and correct their records;

    • send letters from a 'litigation department' that does not exist, or otherwise threaten legal proceedings when it has no intention to issue such proceedings.

Published 1 August 2011

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