San Ramon-based 24 Hour Fitness, Inc. was fined $1.2 million on Thursday after being accused of misleading customers by promising low lifetime annual renewal rates, but charging large up-front membership fees, prosecutors said.
In addition to the consumer protection settlement, the company must also pay $100,000 to Contra Costa and Orange counties, according to a statement issued on behalf of district attorneys in both counties.
24 Hour has more than 400 gyms spread out across 18 states. Of them, 140 are found in California.
"The allegations against 24 Hour Fitness state that between 2006 and 2009, 24 Hour sold pre-paid memberships in a false and misleading manner when 24 Hour sales representatives took large up-front fees for an initial 2 or 3-year membership period, with the promise that members would be guaranteed a low life-time annual renewal rate for life, as long as the member remained in good standing by paying their annual renewal fee on time," the statement says in part.
Members were asked to shell out fees ranging from $600 to $1,400 in exchange for fixed annual rates of $29 to $199, according to the statement.
In 2006, 24 Hour altered the language of its pre-paid membership contracts so as to permit annual rate increases.
However, the district attorneys said that "sales representatives continued to sell these post-April 2006 memberships with verbal promises that their annual renewal rates would be guaranteed fixed for life."
When the annual renewal rates jumped in 2015, consumers complained to 24 Hour Fitness and the Better Business Bureau, and began circulating an online petition opposing "the company's broken promises," the district attorneys said.
"The complaint alleges that 24 Hour refused to honor the verbal guarantees, so members who refused to pay the increased annual rate had their memberships terminated after having paid the large up-front fees or forced members to pay the increased rates," the statement continued.
24 Hour Fitness did not admit to any wrongdoing in Thursday's settlement, but will be made to allow pre-paid members nationwide to renew their memberships at the promised rate. For that, members are asked to submit claim forms, declaring that they were guaranteed a life-long low rate, the statement said.