Whether you’re selling fitness classes individually or as a package, one of the many things to consider when putting the parameters in place is an expiration date. But what you may not realize is that, in addition to factoring in what works well for your students and your studio in terms of the shelf life, there are also laws that govern how soon pre-paid services of a business can expire.
Take, for example, the recent lawsuit filed against SoulCycle for unlawful class expiration dates. Because these classes are pre-purchased as a series, prosecutors are arguing that the classes should be considered gift certificates under the law. Federal laws state that gift certificates can’t expire in less than five years — but these laws also vary by state.
While the jury is still out on this case, here are a few things to keep in mind when deciding on class expiration dates — including how laws vary depending on where you’re doing business.
Expiration Ground Rules
No matter where you’re based, one general rule of thumb that will help keep studio owners out of hot water is to make sure that the expiration date you’re putting in place is fair to your students. In the case of SoulCycle, the pre-purchased class expired within 30 days at a busy location where classes often book up — all of which was used as evidence of the expiration date being unlawful.
Additionally, make sure that your customers are aware of the expiration date being put in place. The plaintiff in the SoulCycle case says she was given no warning about the expiration date upon purchasing it, which was another point brought against the company in the suit.
Even if you have a customer coming to you with an expired class, it’s in your best interest to work with them to allow them to use it. Return customers are the most valuable customers — especially at a fitness studio — so while you don’t want to have class members coming in years later trying to redeem a one class certificate, making exceptions and encouraging students to come back for more after they’ve cashed in their outstanding class is only going to benefit both of you.
Know Your State’s Laws
Federal law states that pre-paid services cannot expire in less than five years — but each state also has it’s own state laws that dictate additional criteria. You can easily access this information by going to your state’s .gov page and searching under the “consumer protection” section. Below are a few outlines of states that are major hubs for fitness studios.
As pointed out in the SoulCycle case, the state of California does not allow expiration dates on pre-paid certificates. Studio owners in California will need to honor any pre-paid classes purchased as long as their business is still in operation.
Pre-paid services are good for up to seven years. If classes do not have a clearly marked expiration date, they’re considered valid forever. While old laws used to dictate that these prepaid goods could be subject to the “abandoned property law” after five years of inactivity, new laws state that these do not fall under that category, and can be inactive for up to seven years. If a member of your studio uses 90% or more of the class package purchased, you’re required to give them the choice between receiving cash or maintaining the remaining balance.
In the state of Georgia, expiration date law follows the federal law in that pre-paid services can’t expire in less than five years. State law also dictates that it’s illegal to charge an inactivity fee if classes aren’t used over a certain period of time.
Illinois follows suit with Georgia in sticking to the less than five year expiration rule, as well as the law that no post-purchase fees can be tacked on to the package due to inactivity over an allotted period of time.
Previously, New York had laws in place that allowed vendors to charge fees as early as the 13th month of inactivity. But a recent bill passed to increase that number to 25 months of non-use before a fee can be charged.
After one year of inactivity, charges can be issued for pre-paid services in Texas. Laws also state that the terms of the inactivity fee must be clearly stated and printed on the receipt at the time of purchase in order for the vendor to collect on it.
Visit your own state’s .gov page to learn more about specific rulings.