It would seem that the government has not learnt any lessons from the fallout caused by the sudden demise of gym chain California Fitness in Singapore. Nearly 2 years on, quite a number of its former members still have not seen a penny of their prepaid membership fees repaid. I wonder why the government has not in the last 2 years done more to refine the Consumer Protection (Fair Trading) Act to ensure that Spring Singapore has greater power to prevent a fall out rather then prosecute after the fall out has already occurred.
The recent pull out of OBike in Singapore has led to many Singaporeans losing out on their prepaid membership fees – a similar situation to the victims of the now defunct California Fitness.
In recent years, the Office of Fair Trading in the UK had launched an investigation into gym memberships in the UK which has led to among other things limiting gym contracts to no more than 12 months. Guidelines were issued which has now become market standard practice. I wonder why Singapore’s comparative agency has not taken similar measures and allowed California Fitness to offer 5 year prepaid memberships! 5 years is a long time and it seems shocking that this is even permitted!
While “the practice of collecting prepayments, which often leads to discounts for consumers, is common across businesses such as travel agencies, beauty parlours, fitness chains and hair salons. The problem is with ailing businesses that continue to collect payments in advance up to the point they shut, often without warning.” And how do you stop that? I would counter that only the government can. A lone consumer will never have the knowledge to challenge this situation.
Take California Fitness for instance. It was a huge established chain in Singapore and there was a certain level of trust in its branding. Consumers who parted with their cash parted with it in the belief that the business was sound. How would they know otherwise? In the first place, how can a 5 year upfront membership prepayment even be legal?
While amendments in the Consumer Protection (Fair Trading) Act (CPA) gives government agency Spring Singapore wide-ranging powers to investigate and take enforcement action against errant retailers, it does not prevent the occurrence of negligent or unfair practices in the first place. What is the point of trying to mop up milk that has spilled? Isn’t it better to prevent the spill in the first place? Besides what powers do Spring Singapore have against a trader that has left Singapore?
The current CPA makes it far easier to catch individuals as opposed to large entities and it is the large entities that pose a bigger danger.
Perhaps the government should start by issuing guidelines in relation to the collection of prepayments. Perhaps prepayments for more than a year should not be allowed or perhaps there should be some form of guarantee or deposit if the prepayments add up to more than a certain amount?
In fact, that was what Non-Constituency Member of Parliament, Dennis Tan raised in Parliament back in 2016.
Mr Tan said, “May I ask if the Minister has considered amending legislation to require a secured payment mode such as customers making payment to a reliable third party or body who can then dispense payment to the retailers as each of the session is utilised by the customers, or by use of a performance bond? This may already be in place by a voluntary or more limited basis than I am thinking here, but Madam, we really should do more to prevent retailers from looking to bulk payments for packages as quick and easy solutions for business cashflow and to give consumers peace of mind when they sign up for term subscription packages.”
In response to Mr Tan and other MPs who have raised their concern over membership plans, Dr Koh Poh Koh, Minister of State for Trade and Industry, however, said that it would be “very challenging to impose a broad-based measure on all businesses to protect consumers against loss of prepayments from business closures” and noted “overseas jurisdictions including those in the European Union, Australia, Hong Kong also recognise the challenges and do not impose broad-based measures against prepayment per se.”
Given that we already have victims from both California Fitness and OBike. This area is ripe for regulation. Perhaps we should focus more on this where there is real harm to a significant number of people rather than “fake” news which hitherto has not really affected anyone in Singapore.
