Banks’ credit card scheme could help California Fitness clients get refunds

SINGAPORE — A little-known clause called the chargeback scheme may offer a recourse for some California Fitness customers seeking refunds following the fitness chain’s closure.

Offered by credit card companies like Visa, MasterCard and American Express, the scheme allows cardholders to claim money back if the goods and services they paid for do not arrive or are faulty or if the merchant has gone bust.

Three out of five banks contacted by TODAY said those who have used their credit cards to buy California Fitness packages are entitled to refunds, subject to varying caveats and administrative requirements.

Affected customers holding OCBC Bank credit cards will have to submit a credit card dispute declaration form along with a copy of their membership contract and credit card statement displaying the transaction with California Fitness.

“OCBC Bank will then help them raise a dispute through Visa/MasterCard to the merchant’s bank under ‘services not rendered’,” said a spokesperson.

While the chargeback amount is limited to the time frame of services not yet utilised, those with lifetime memberships are entitled to a full refund, he added, as it is not possible to gauge each customer’s lifetime accurately.

For Citibank cardholders, there is a 120-day limit on claims, starting from the day of transaction. Cardholders requesting chargeback must also satisfy requirements such as providing the bank with “relevant documents”, it said.

DBS said its cardholders are entitled to chargebacks “in most cases”, if less than 18 months have passed since the day they entered into a contract.

DBS customers who have taken up instalment plans, however, are to seek recourse with the Small Claims Tribunal.

In its latest advisory on the episode, the Consumers Association of Singapore (Case) urged affected customers to ask for chargebacks, but said this applied only to those with “month-to-month membership packages”.

“Consumers who have purchased pre-paid or fixed-term membership should note that they may still be liable to make monthly repayments to the bank if the bank had already paid California Fitness in full,” said Case.

There are currently no regulations here governing chargeback protection. The Association of Banks and the Monetary Authority of Singapore do not have guidelines for disputed credit card transactions.

Chargebacks are often “internal arrangements” administered to varying extents by different financial institutions, noted Dr Gary Low from the Singapore Management University’s School of Law. “It all boils down to the allocation of risk,” he said.

“While I believe consumers ought not to bear the risk of liquidation especially when not told to them, I also wonder whether it should instead fall on the shoulders of credit providers.”

He pointed to foreign jurisdictions such as the United Kingdom, which has legislated that both the bank and the merchant are liable if things go south in consumer transactions.

Under the UK’s Consumer Credit Act, the credit provider is jointly liable with the retailer for faulty or undelivered purchases, provided the product or service costs between £100 and £30,000.

Lawyer Daniel Chia from Morgan Lewis Stamford said chargebacks are a “good idea” because they pass risk on to “parties best suited to bear the risk”, such as financial institutions: “That’s what regulators should be looking at to minimise public harm.”

One customer, who wanted to be known only as Jeremy, hopes that more can be done to help customers left in the lurch,

“To say ‘caveat emptor’ isn’t very fair because that depends on whether you have the information needed to assess the risk,” he said.

“Up to the point it closed down, California Fitness was still coming up with all sorts of promotional activities ... And you have banks coming in to offer plans that waive admin fees. That just induces people to sign up.”

Banks have played a “significant role” in offering packages and facilitating California Fitness’ schemes, said the 28-year-old lawyer, who paid around S$4,000 for a year-long membership and physical training sessions at the Novena outlet about one month before it shut.

“(Banks) cannot have their cake and eat it, where you just collect the fees without taking responsibility for the marketing activities,” he said.

“I hope the banks do something that is right and, going forward, that MAS steps in because quite clearly, this forms a significant part of unsecured credit, which it really needs to regulate.”