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Thursday
Dec222016

'Tis the Season for Gift Certificates... Health Clubs Beware!

This post was originally published in the IHRSA Advocate.

According to the National Retail Federation, Americans are expected to spend $27.5 billion on gift certificates this holiday season, making them the second most popular gift after clothing and accessories. Gift certificates are frequently used to sell everything from clothes and electronics to personal training sessions and classes. While gift certificates may be a great opportunity for health clubs to boost end-of-year revenue, there are traps for the unwary.

SoulCycle Washington D.C. (Picture P. Bedford)

SoulCycle has become embroiled in a potential class-action lawsuit—Cody, et al v. SoulCycle, Inc.—over its handling of classes sold in packages ranging from one class to 50. The cycling packages come with different expiration dates depending on the number of classes purchased. A single cycle class expires after 30 days, while 50 class packages are good for 12 months.

The customers suing SoulCycle claim that the class packages are actually gift certificates and the short expiration dates result in lost money for consumers and unjust gain for SoulCycle—in violation of state and federal law. Federal law prohibits the sale of gift certificates that expire in less than five years, while California Civil Code prohibits the sale of gift certificates with any expiration at all.

SoulCycle filed a motion to dismiss the case arguing that their class packages could not be applied toward the purchase of a more expensive good or service and therefore should not be treated as gift certificates. U.S. District Court Judge George King granted SoulCycle’s motion to dismiss the claim of a state law violation but denied the motion to dismiss the federal claim, meaning the class-action lawsuit will advance.  

While the ultimate outcome of the SoulCycle case will not be know for some time, it serves as a good reminder that if you sell gift certificates or are considering doing so, that while there may be no better time of year to sell them, make sure you know the rules of the road when doing so. For instance, some states mandate that merchants provide cash back when the gift certificate balance is low. In California, gift certificates with a cash value of less than $10 are redeemable in cash. It is important to be aware of the gift certificate laws where you operate. If you have questions or comments, please send them to gr@ihrsa.org.

Reader Comments (1)

Great article, important points to keep in mind for anyone offering gift certificates, thanks for sharing.

Team https://exercises.com.au :)
March 18, 2017 | Unregistered CommenterExercises.com.au

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