The gym industry is under fire for its cancellation practices. If a new U.S. Federal Trade Commission ruling named “Click to Cancel” stands, all businesses using the subscription/recurring payment model will be required to make quitting their service just as easy as signing up, among other actions.
This consumer regulation attempts to protect individuals from unscrupulous companies who profit from convoluted, difficult cancellation procedures.
What does the new “Click to Cancel” rule include?
The core intention of this rule is to provide consumers with straightforward methods for canceling their subscriptions and clearer information on how to do so. The ruling applies to all subscription-based industries but may uniquely affect the gym business.
- Simplified cancellation process: This rule rests on the basic idea that the cancellation process should be as easy as the sign up process. Whether the sign up was in-person or online, the company must provide a direct and simple method for cancellation that is as easy as the initial sign up process — for example, a telephone call to cancel an in-person contract or an email to stop an online subscription.
- Full disclosure: Companies cannot misrepresent any material facts in their marketing. All the essential information about terms, charges, and possible changes are to be disclosed before collecting billing information. This includes material facts about intended purposes, effectiveness, or any health or safety information. Language and details should be written in clear, simple terms.
- Informed consent: Companies must receive consent from the consumer and acknowledgment that they are aware of the recurring payments and of all the terms associated with the billing.
- Recordkeeping: Businesses must keep the consent document for three years.
How are consumers protected with the Click to Cancel rule?
The new ruling ensures consumers understand exactly what they are signing, when agreeing to a subscription or recurring payment. They are protected against misleading practices and statements. When considering a subscription, the consumer will now know all the key terms associated with the agreement, including full pricing, additional fees, and cancellation options. Beyond these obvious features, any other “material facts” are to be reported, such as the agreement’s “intended purpose or effectiveness … or any health or safety information.”
Additionally, companies won’t be allowed to “hide” cancellation options by placing them in obscure sections on a website, or by requiring customers to divulge excessive information, endure mandatory waiting periods, or call a customer service center. According to a piece published in Reuters, if a person signs up for a service via an app or a website, they cannot be forced to go through a chatbot or agent to cancel.
When does the Click to Cancel gym membership rule start?
It will go into effect 180 days after its publication in the Federal Register, which is published daily. The provisions regarding misrepresentations take effect 60 days after publication. Penalties for noncompliance are as high as $51,744 for each violation.
How can my gym get ready for this new ruling?
Our expertise is never extended as far as to give legal advice, but this is what we can suggest. Gym Insight is fully digital. Our Sales Guru software solution provides ample space for uploading documents detailing your gym’s procedures regarding sign ups and cancellations. The forms are easily read and approved by your prospect before they provide a credit card. Once completed, these documents are immediately uploaded and saved in the client’s file.. This may take care of two issues – documentation and record keeping.
The rest is up to you. We suggest reviewing your cancellation policies and procedures with your advisory team, including an attorney if you retain one, and informing and training staff members.
What created the need for this policy?
Well, every company that sells a subscription, from cable providers to the fitness industry. The policy is an update to the FTC’s Negative Option Rule, established in 1973. At the time it was meant primarily to curtail magazine and book subscription abuses.
Move forward 50 years and now we’ve got all types of digital services offering easy-online memberships. But — when we decide to cancel — it’s like asking raccoons to leave a trashcan.
Often, the companies that run these services are not nice, and many times they embed hidden cancellation terms into their contracts. A national gym once required one of our employees to send a certified letter to cancel his membership.
So many levels of bad there, beginning with – who mails anything any longer?
Your gym probably does none of this, we know. You’re a Gym Insight customer and we encourage nice behavior. However, we want to give you a heads-up on the ruling and what it will look like for your gym.
What is a negative option program?
It’s a method of billing a customer. If a customer signs up for a service and does not cancel or opt out of the service – think free trials – that inaction is considered consent to keep billing them. It is common in recurring payment programs.
How soon should I worry about the Click to Cancel rule?
It’s always a good idea to be prepared. However, we can say an industry group representing cable and internet providers almost immediately filed suit in the 5th Circuit Court of Appeals to try and block Click to Cancel. So, there is a chance it may be sidelined due to legal challenges.
Here are several sources for more information on Click to Cancel:
- Health & Fitness Association: Click to Cancel Impact Alert.
- Federal Trade Commission: Press Release for Click to Cancel Announcement.
- JDSupra: Legal News Click to Cancel.
In the interim, educate yourself on the ongoing ruling and its legal actions while adapting your company to the newer, more transparent subscription environment. Good luck!
Gym Insight
We are a gym management software company offering solutions for every size fitness center, boutique, and health club. The industry leader in customer service, product affordability, and easy user interface, we make running your club profitably simple and enjoyable. Our team writes all our software in-house. We use no third-party applications. That means every component of your gym software works together smoothly and intuitively. For a free demonstration of our software, call 855-367-4967 (1-855-FOR-GYMS) and ask for Anthony or Natalia.