Investigations and controversies
Bally Total Fitness has been the subject of controversy over its sales and membership cancellation practices, with some customers claiming they were misled into signing loans with terms up to three years using documents containing uncommonly-used language such as "Retail Installment Contract". Customers alleged that they subsequently found themselves dealing with collection agencies.[22]
In April 1994, Bally paid $120,000 to settle Federal Trade Commission charges of illegal billing, cancellation, refund, and debt-collection practices. Consumers have complained, however, that little has changed over the years.[23] From 1999 to 2004, over six hundred customers complained to the New York Attorney General's office, leading to an investigation and subsequent agreement by Bally Total Fitness to reform their sales tactics in February 2004.[24]
In 1997, Bally’s became the subject of a pioneering type of website that published consumer complaints. Bally’s club members Drew Faber and Ryan Meyer believed they were subjected to a bait and switch marketing scheme by Bally’s, so they decided to create a website called “Bally Sucks.” On it, Faber and Meyer put Bally’s trademark with the word “sucks” printed across it. The website also collected complaints from Bally’s customers and published them.[25]
Bally’s sued Faber and Meyer for trademark infringement, trademark dilution, and unfair competition. A federal district court, however, ruled in favor of Faber and Meyer, concluding that there is no likelihood that consumers would confuse Faber’s and Meyer's mark, which is critical of Bally’s, with Bally’s actual trademark. The court also held that Faber and Meyer did not dilute Bally’s trademark or engage in unfair competition.[26] After the court’s decision, Bally’s and Meyer agreed to a settlement. But the case had already rendered a roadmap for consumer complaint websites. The settlement included confidentiality and nondisparagement provisions, so Meyer was forced to decline all media requests for interviews.[25]
Bally has been the subject of at least one federal investigation, in addition to the aforementioned probe into consumer complaints against Bally, conducted by the New York State Attorney General, regarding the firm's sales practices. In April 2004, Bally disclosed the U.S. Securities and Exchange Commission (SEC) was investigating its accounting practices, and in February 2005, the U.S. Justice Department joined the probe.[27][28] The company eventually restated its financial statements for 1997 through 2003.
On February 28, 2008, the SEC filed financial fraud charges against Bally Total Fitness. The SEC alleged that in 2001, Bally overstated its originally reported stockholder's equity by roughly $1.8 billion (over 340%), and that Bally underestimated its 2003 net loss by $90.8 million (or 845%).[29][30][31][32]
In 2010, Texas Attorney General Greg Abbott announced that the company had mailed over 11,000 fake past-due notices to former members. The Attorney General charged that Bally had urged consumers to immediately pay their late fees and that the conduct was part of a scheme to get consumers to re-join the club.[33]
