The High Court has ruled that thousands of gym and health club contracts enforced by membership management provider Ashbourne Management Services are unfair.
Following a four-day hearing, Mr Justice Kitchin agreed with concerns raised by the Office of Fair Trading and ruled that Ashbourne's business model was "designed and calculated to take advantage of the naivety and inexperience of the average consumer using gyms and health clubs at the lower end of the market."
The company currently draws up membership agreements, and then collects members' payments, for around 700 health clubs in the UK. OFT had initiated an investigation into Ashbourne's practices that included minimum membership periods of up to three years.
Justice Kitchin also lambasted Ashbourne's methods of dealing with payment defaulters, which included threats of damage to gym members' credit rating by referring the debt to a credit reference agency. OFT's records show that, as of July 2009, Ashbourne had registered nearly 17,000 defaults with credit reference agencies.
On its website, Ashbourne boasts that it "never writes off a debt" and that debts are "always pursued vigorously and relentlessly".
As a result of the ruling, the High Court has said that it will make an enforcement order against Ashbourne and its directors, granting injunctions preventing them from using or relying on their current standard contracts and from using unfair terms in the future.
This will provide further clarification that Ashbourne cannot enforce the unfair terms in its contracts against those consumers who are disputing them, or indeed against other gym members who have signed up to them.
The Fitness Industry Association (FIA) issued a short statement, saying that it is "considering the implications of the High Court ruling around the contract terms of Ashbourne Management Services and is currently liaising with the OFT on the matter.
A spokesperson added that the association always encourages its members to follow the OFT guidelines.
Jason Freeman, Director in the OFT Goods and Consumer Group, said:
"We have received many complaints about Ashbourne's contracts, and many consumers have felt pressured into paying sums of money that they believed they did not owe.
"We are pleased that the Court has confirmed that these practices are unlawful, and this should bring peace of mind to many people who have fallen into the trap of signing up to these lengthy gym contracts.
"Unfair terms that unreasonably bind consumers into long contracts they cannot leave, and heavy-handed collection techniques, have no place in businesses' dealings with consumers."
For the full OFT statement on the ruling, click here
