Expert: Timmy Chou - 10/5/2010

Question
I am not sure if your the man to ask, but your bio looked like the jack of all trades, so here we go. I have recently cancelled a membership to a fitness gym. They had been charging me for almost 12 months after I had cancelled verbally over the phone. I should have got it in writing, but I didn't. So in an attempt to explain my situation I contacted, or should say attempted to contact their "accounting department". I left 7 messages for the person and never received a call back. I then physically went into the place and got a signed contract saying that I cancelled. In the fine print it says that I have to be current on payments and pay an additional 2 months. I signed so I could start the process. I then sat with the manager on duty, explained the situation to him and asked him to have the accountant call me. I have heard nothing from this company so I called my Credit Card and cancelled the payment and they also reimbursed me for a previous 4 months. I recently received a call from a creditor trying to collect for a balance. Once again I attempted to call and have received no response. I am worried they they have not actually closed my account and will continue to charge me for monthly dues and late fees, since my account was not current for the full 60 days after I physically signed the contract. I would like to know what recourse I may have i.e. BBB, over sight committee, court system. I know the easy way out would be to pay, but I am not looking for the easy way out. They are in the wrong.

Answer
Thank you for your question!

As I always mention, Mediators act as neutral third parties to disputes and never "get involved" in judging the merits of conflict, but merely use special techniques to help the parties decide how to negotiate their own settlement.

The case you describe here is far too typical.  I am not a lawyer and cannot mediate this with you alone but I can respond to your question from my business consulting experience.

Note that this issue may have legal ramifications and you may wish to consult an attorney.

IMO you are entirely in the right, but as you have seen, no one cares.  You appear to have complete documentation of your position, but again, no one cares.

You have to remember that these gyms (and many other large bureaucracies from hospitals to utilities) are just large machines with small people just doing their best to clear their desks and make their quotas.  Its not personal.

Nevertheless, they are in the wrong, but their are no incentives in the system for anyone to do anything but continue to try and get money from you.  This is especially true for collectors, who are just trying to whine you into a payment. So don't bother with it anymore.  If it has been assigned to collections it is off the radar for the gym company and they cannot deal with you since they have given the rights to someone else.

Here's your next step.  A final certified letter to the company and the collector saying:

1. That you dispute this collection.  Cite your reasons.  Make sure you mention that company reps agree with your position.
2. That the company cease and desist from collection contacts and calls.
3. That the company company comply fully with the provisions of the Fair Debt Collection Practices Act (which forbids calls and notes on your credit file for disputed claims)
4. That any notation or entry on your credit file will not be acceptable and will generate a complaint to your state's consumer protection office.
5. That you will grant the collector fifteen business days to either produce evidence refuting your position, or you will consider the matter closed and any further attempt to harass or intimidate you will not be tolerated.

Mail this certified, both to the collector and the company, copy your state's consumer protection office, your attorney (if you have one), and the Federal Trade Commission.  Be sure to have the copied groups listed at the end of your letter so the collection agency knows you are serious about your threats.

If anyone calls you, do not engage them on the subject of the debt, but ask them for their name, the name of their supervisor, and then ask them if they are aware that you have disputed the debt and that they have just violated the FDCPA by contacting you. This is the only thing to talk about with them, if you want to talk at all.

You should be able to get rid of this problem.  Be sure and double check your credit file to make sure you were not dinged.

If the company is convinced that: 1) you are not backing down; 2) you are going to raise hell and tell everyone; and 3) it will likely cost more money to deal with you than it would to settle with you; than they will make a business decision and forget about you.

Don't be surprised if you get contacted later by another collection agency.  They often sell of their "problem" accounts to each other.  If this happens you write again to all the above and report that your account was "kited" from Company A to Company B in violation of the FDCPA.  This may just hang out there for a long time, but as long as it does not appear on your credit file you cannot be harmed.

These are some ideas.  Feel free to follow up with additional questions.

For your information, the pros and cons of the types of dispute resolution methods follows.

GOOD LUCK!

Arbitration, Mediation, and Litigation

Arbitration: the referral of a dispute to one or more impartial persons for final and binding determination outside of the judicial system

Benefits of Arbitration:

  Confidential, no public record
  Limited exchange of documentation, information
  Quick, don't have to wait for a court date
  Arbitrators have expertise in the subject matter and are trained in conflict resolution
  Cheaper than litigation
  Preserves business relationships

Negatives of Arbitration

  It's a compromise, no %100 winner
  Complex arbitration can be costly
  If not satisfied, may litigate the arbitration procedure
  Poor results with an unskilled arbitrator
  Both parties must agree to cooperate in the process

Mediation: the process by which parties submit their dispute to a neutral third party (the mediator) who works with the parties to reach a settlement of their dispute.

Benefits of Mediation:

  Neutral mediator can objectively suggest alternatives not considered before
  Parties are directly engaged in negotiating the settlement
  Can be quicker than litigation
  Less costly than litigation
  Preserves business relationships
  85% of American Arbitration Association cases mediated find successful solutions

Negatives of Mediation

  may not reach a binding decision
  unskilled mediator

Litigation: using the judicial system to resolve disputes

Benefits of litigation:

  a clear winner and loser
  uses a prescribed set of procedures
  more predictable outcomes
  is final

Negatives of Litigation:

  waiting for court dates can do more harm
  usually more expensive than mediation and arbitration
  part of the public record