Upset as gym chain sends email to current and former customers notifying them of direct debit changes

Customers have been left fuming as the messy fallout from a gym’s collapse continues to wreak havoc for all involved.

EXCLUSIVE

Customers have been left fuming as the debacle continues from a major gym brand that went into administration several months ago owing $15 million to a number of creditors.

News.com.au previously reported that mixed martial arts gym chain UFC Gym Australia had gone into administration after becoming embroiled in a messy $5 million court case with three disgruntled franchisee owners.

News.com.au can reveal that current and former members of the company received an alarming email last week informing them that there would be changes to their direct debit processing for future charges.

This was particularly concerning as one customer had never been a member of that particular gym, and had not been involved with UFC for three years.

“I am unsure why the gym would be retaining my details post the completion of my gym membership,” Ryan* told news.com.au.

Some current customers are also upset as their membership was automatically transferred to a gym in a different suburb with no consultation, due to a relocation.

The brand’s Sydney-based Gregory Hills venue appears to have shut down, with existing members moved to the nearest gym in Macarthur Square, which has been taken over by the Gregory Hills franchisee.

It’s the second time something like this has occurred since the company appointed administrators.

The email past and present customers received earlier this month.

“We’re writing to inform you about some important changes to your Direct Debit Request (DDR) with UFC GYM Wetherill Park,” the email read.

“As part of our commitment to continuously provide you with the best possible service, we’ve updated our payment processing system.

“Your bank account ending in (redacted) will now be debited through Stripe, one of the world’s most trusted and secure payment processors.

“Your next payment of 1.000 will be debited on 2019-10-22. Your payments will continue as scheduled.”

The customer, Ryan*, said he had never been a customer of the Wetherill Park gym. He had previously worked out at the Parramatta Gym from 2018 to 2020.

At the crux of the issue is that UFC Gym has switched direct debit providers.

They previously used a service called Fat Zebra but have switched to another provider called Stripe.

News.com.au asked Fat Zebra why they had rescinded their services and if it was due to non-payment. They did not respond to requests for comment.

UFC Gym Australia went into voluntary administration earlier this year.

A UFC Gym spokesperson said it was the fault of a third party, and not them, for the customer confusion.

“The company has transitioned to an alternative payment services provider, Stripe. Stripe is a highly credentialed payment platform,” the spokesperson told news.com.au.

“Regarding the emails, the company’s third party CRM provider made a processing error which has since been corrected.”

A correction was also sent out to customers apologising over the mixup.

“We are writing to bring your attention to an email that was mistakenly sent to you on behalf of UFC Gym Wetherill Park over the weekend,” it read.

“Unfortunately, due to a technical issue, this email was inadvertently sent to both current and inactive members of the gym, including you.

“Please be assured that if you are an INACTIVE member of UFC Gym Wetherill Park/Parramatta, the details mentioned in the weekends email DO NOT PERTAIN TO YOU.

‘There are NO pending debit charges or changes to your banking information.

“We deeply apologise for any confusion or stress this may have caused you.”

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A number of UFC Gym Australia branches have shut down, both from franchisees and head office-run venues.

After no consultation with customers, the UFC Gym brand also closed its doors for one location while moving customers elsewhere in a relocation, automatically transferring memberships in the process.

Over the weekend, UFC Gym’s Gregory Hills franchise, in Sydney’s south west, revealed it was moving to Macarthur Square.

“UFC Gym Gregory Hills will be closing its doors at its current location at 10:00pm on Wednesday 30 August 2023 and making the move,” its social media post read.

“Your membership at UFC Gym Gregory Hills will be transferred to UFC Gym Macarthur Square with operations to continue in a seamless transaction.”

The Macarthur Square venue used to be privately owned by a franchisee but this gym collapsed into liquidation earlier this month.

The master franchisor took over the location, and it now appears that they have reached an agreement with the Gregory Hills franchisee to in turn take over the premises.

A head office spokesperson told news.com.au “The Gregory Hills franchise partner has taken over the operations of the Macarthur gym and sees an opportunity to combine the two clubs and expand the range of services offered to members with even more equipment”.

A similar occurrence happened several months ago when the Parramatta gym shut its doors and automatically passed those members onto the nearest UFC gym, in Wetherill Park, without any consultation.

Parramatta gym members claim they were informed they would have to serve a 30-day notice period if they wished to leave the Wetherill Park branch, which will mean continuing to pay the $30 a week fee until then.

A customer, who did not want to be named, told news.com.au at the time they felt “ripped off” and had made a complaint to NSW Fair Trading.

“All of a sudden it (the Parramatta gym) just shut. Within a day or two the whole premises were empty,” he said.

The Wetherill Park gym “is too far away” for him and yet the company offered him “no refund”, instead automatically transferring his membership there.

“They made you cancel, they left it up to you. They should be cancelling it for you.”

Customers are not impressed.

In early May, Justice Tom Thawley from the Federal Court of Australia ruled in favour of the three disgruntled franchises — Balcatta in Perth, and Castle Hill and Blacktown in Sydney — after a four-year legal battle against the master franchise holder of UFC Gym Australia and New Zealand.

He ordered UFC Gym Australia to pay $5.8 million to the franchisees, finding that the company and its directors had “engaged in misleading and deceptive conduct” during the process of selling said franchises to them.

The Balcatta gym was awarded total damages of $1.7 million while the Blacktown one’s total payout came to $1.9 million. The Castle Hill gym was granted $2 million in damages.

One of the directors is appealing this court judgement.

Unfortunately, all but one of those gyms has ceased to operate due to financial pressures.

The Blacktown gym shut down shortly afterwards while the owner of the Balcatta franchise, Karim Girgis, told news.com.au he had also decided to throw in the towel in mid-August.

“It’s not easy going through litigation. Not just the financial strain, it’s debilitating, it’s constantly on your mind,” Mr Girgis previously said.

An administrator’s report lodged with ASIC and obtained by news.com.au shows that according to the appointed administrators, Rajiv Goyal & Christopher Johnson of insolvency firm Wexted Advisors, the UFC Gym Australia master franchise owes $15,654,000 to unsecured creditors.

Aside from the $5.8 million owed to the three franchisees, $160,000 is owed to the NSW department of revenue.

There is a total of 62 creditors, according to proof of debt forms lodged with the administrators.

An additional $42,000 is owed to 10 employees for unpaid wages.

The Commonwealth Bank remains a secured creditor for a $670,000 debt.

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