Bally's Health and Tennis Corp., whose 29-state sports and exercise chain operates 11 Holiday Spas in Maryland, has agreed to pay $120,000 in penalties and offer refunds to %J thousands of current and former members, the Federal Trade Commission said yesterday.
Bally's, the nation's biggest health-club chain with some 4 million members, charged members' credit cards or bank accounts without authorization, used harassment and misrepresentation to collect membership fees and made it effectively impossible to quit its health clubs and get refunds called for in its contracts with members, investigators for the Federal Trade Commission found when they looked into complaints received both at the FTC office in Washington and at state consumer-protection offices.
"To avoid a trial on the FTC charges -- but without admitting any wrongdoing -- Bally's has agreed to follow strict standards for future billing and cancellation practices," Christian White, acting director of the FTC's Bureau of Consumer Protection, said yesterday. "Bally's will also refund money to potentially thousands of its customers," he said.
"The board of directors dismissed the prior management three years ago and brought in new management that completely ended these ways of doing business," Michael Kempner, a spokesman for the company, said yesterday.
Mr. Kempner said that the company had stopped the practices more than 18 months ago.
At the Maryland attorney general's office, complaints about Bally's have continued since the time of the management change and increased in 1993 compared with 1992, Rebecca Bowman, of the Consumer Protection Division, said yesterday.
"We received about 60 complaints about Bally's in 1993 and about 40 in 1992," she said.
Of the about 100 complaints over two years, 31 alleged refusal or failure to cancel memberships, 22 alleged billing problems and 19 alleged misrepresentation of material facts, she said.
Because some of Bally's nationwide operations, including Great American Financial Corp., a collection affiliate, are located here, complaints come to the Maryland office "from all over the country," though they also include "substantial numbers of Marylanders," Ms. Bowman said.
Mr. Kempner said refunds will be offered to "some fraction of 1 percent" of the company's 4 million members nationwide.
The company's practices included collection letters designed to mislead customers into believing they were from an independent bill collector when in fact they were from Bally's.
"This may be a very effective debt collection tactic, but it is a clear-cut violation of federal law," Mr. White said. Customers who were unjustifiably reported to independent credit-reporting services also are entitled to require Bally's to clear their names with those agencies, he added.
Bally's customers who believe they have a claim under the agreement may telephone the FTC settlement hot line in Washington at (202) 326-3341 or write to the state Consumer Protection Division at 200 St. Paul Place, Baltimore 21202.