Here’s a common scenario,
“Ron is interested to join a gym which newly opened near his home. The gym offers him an attractive package – pay a lump sum upfront for a whole year’s membership in order to get a discount. Ron signs up for the package and pays the membership fees for the whole year. Things go great but after 3 months, Ron finds out that he is being transferred to Canada. He tries to cancel his gym membership but is informed by the gym staff that there are no refunds and no cancellations allowed.”
The above situation is quite common in Malaysia as businesses find it more lucrative to collect payment upfront for services yet to be rendered. This is known as a “future services” contract. Aside from gym memberships, this is a popular business model for beauty and health treatments (eg: spa packages, manicure and pedicure, etc),
Problems usually arise when the consumer is unable to utilize the package completely and tries to get a refund. A standard response would be for the business to quote the “no refund and no cancellation” policy.
However, TAKE NOTE!
The “no refund and no cancellation” policy for future services contract violates the Consumer Protection Act 1999 (“CPA“).
Consumers are entitled to a refund for the unused portion of the package according to S 17 CPA
Section 17 of CPA 1999
- The business owner is required to refund any extra payment by the consumer within 14 days from cancellation
- a cancellation of the future services contract may be communicated by “words or conduct”, – it is not necessary to put the termination in writing (unless there is a special provision in the contract which says that a notice of cancellation must be in writing).
[Note the categories falling under the definition of future services contract according to the Consumer Protection (Future Services Contract) (Amendment) Order 2014]
Conclusion
It is vital for consumers to realise that there is a difference between a future services contract and a deposit or a booking fee, which is usually an initial payment to demonstrate the earnest intention of the buyer and may be non-refundable depending on the terms of the contract. It is different from a future services contract which requires consumers to pay an upfront fee for services or goods which have yet to be rendered / delivered.
Consumers should not assume that whatever that is stated in a contract is binding and legal. Consumers should always be aware of their rights under the Consumer Protection Act 1999.
