Health clubs are one of a group of consumer-service agreements under which services are provided over a period of months after the consumer is enrolled. Such agreements often call for some enrollment or initiation fee for the following reasons: There are start-up costs associated with providing services to each new customer and the consumer has broad cancellation rights, making it impossible to determine how long the business relationship will last and therefore impossible to amortize the start-up costs over the term of the contract.
IHRSA’s position:
IHRSA does not believe in regulating initiation fees. Recognizing that many health club statutes incorporate such provisions, however, the association recommends a maximum initiation fee of 12 times monthly dues to be allowed. This level allows clubs to recoup up-front costs while letting market forces determine the exact level of fees charged.
Explanation:
The law is ill equipped to gauge the nature and extent of market forces, which generally will dictate the maximum multiple of dues any club can charge as an initial or enrollment fee.
Limiting initiation fees may also limit the services clubs are able to provide to consumers, especially important one-time services that will not be repeated, such as a fitness consultation.
Legislative Action:
New Hampshire recently signed House Bill 506 into law, which allows the initiation fee to be as much as 100% (up from 25% ) of the annualized monthly fee.
