AUSTIN, TX — Neither Bally Total Fitness, Chicago, nor the Texas Attorney General's office provided updates last month into the lawsuit filed by Texas Attorney General Greg Abbott claiming that Bally attempted to mislead former members into paying past due memberships that they did not owe.
According to Abbott, whose office investigated Bally between the summer of 2009 and March 2010, Bally allegedly mailed more than 11,000 “past due” notices to former members. More than 1,000 Texans made payments to Bally after receiving the past due notices, the attorney general says. Bally operates 24 clubs in the Dallas, Houston and San Antonio areas.
One industry source suggests that Bally was in compliance with its membership agreement and likely will not be found at fault in this case.
“Bally is too smart and has gone through way too many headaches to purposely bill someone when the money wasn't due,” according to the source.“[Either] the money was due, the member is misunderstanding or [the members are] just trying to get out of their contract. Why would a company bill people who don't owe them money? It just doesn't make any sense. You're going to get caught. You just don't do something like that.”
In the past three years, Bally has gone through two bankruptcies, reached a settlement on a lawsuit with the Securities and Exchange Commission (SEC) and had its former accounting firm agree to pay the SEC $8.5 million in a settlement stemming from Bally's alleged accounting fraud in the early 2000s.
According to documents filed by the state of Texas, Bally's notices claimed that recipients owed at least one month's overdue fees for which the notice demanded immediate payment. Some of Bally's past due notices also claimed that failure to remit a payment could result in a negative entry on the former members' credit reports.
Bally representatives who were contacted by past members about past due notices acknowledged that the notices were an attempt to get former members to renew their memberships, according to Abbott.
“While we review the terms of the lawsuit, we are working with the attorney general's office to reach a swift and amicable resolution,” Bally said in a statement that it released last month. “Bally prides itself on being a consumer-centric organization, and we continue to implement new procedures that will enhance communications with our members.”
Abbott's office is seeking civil penalties of up to $20,000 for each violation of the Texas Deceptive Trade Practices Act as well as payment to Bally's former members who suffered financial harm in this case. Abbott also charged Bally with violating the Texas Finance Code by misrepresenting debt to past members.