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  1. #1

    Question California Refund Law for Prepaid Services

    My question involves business law in the state of: California

    Hello There-

    I own and operate a small business where we provide exercise services for our clients. A client from 2017, who worked with a staff member who is no longer with us, emailed me today asking a refund for his purchase of the package of 16 sessions since he only used the first session. Our company policy is that we offer refunds for the remaining sessions within the first year but honor the usage of those sessions beyond the year. What makes this complicated my previous staff member did not acquire signature that outlines this policy. We of course reached out to him to schedule his future appointments but he never responded to any of our phone calls and emails.

    So I eventually called him back, said the exercises were not working (which he never expressed to us) and he claims he is entitled to a refund due to California laws for prepaid services. I cannot find any such law or legislature to show that he is correct. Does anyone here have any knowledge regarding prepaid services law in California and refund policies? Thank you for your help in advance.

  2. #2
    Join Date
    Mar 2013
    Posts
    17,612

    Default Re: California Refund Law for Prepaid Services

    Quote Quoting johnny5alive11
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    What makes this complicated my previous staff member did not acquire signature that outlines this policy.
    I assume, from that, that you have no written contract with the customer.

    Quote Quoting johnny5alive11
    View Post
    he claims he is entitled to a refund due to California laws for prepaid services. I cannot find any such law or legislature to show that he is correct.
    All I can find is this:

    http://leginfo.legislature.ca.gov/fa...ectionNum=1723.

    Which seems to apply to retailers of goods but not services.

    My advice: Call the customer and say "Please show me the statute."

    Then stop talking.

  3. #3
    Join Date
    Oct 2014
    Posts
    7,710

    Default Re: California Refund Law for Prepaid Services

    Quote Quoting johnny5alive11
    View Post
    My question involves business law in the state of: California

    Hello There-

    I own and operate a small business where we provide exercise services for our clients. A client from 2017, who worked with a staff member who is no longer with us, emailed me today asking a refund for his purchase of the package of 16 sessions since he only used the first session. Our company policy is that we offer refunds for the remaining sessions within the first year but honor the usage of those sessions beyond the year. What makes this complicated my previous staff member did not acquire signature that outlines this policy. We of course reached out to him to schedule his future appointments but he never responded to any of our phone calls and emails.

    So I eventually called him back, said the exercises were not working (which he never expressed to us) and he claims he is entitled to a refund due to California laws for prepaid services. I cannot find any such law or legislature to show that he is correct. Does anyone here have any knowledge regarding prepaid services law in California and refund policies? Thank you for your help in advance.
    You may have a potential problem here. California Civil Code 1812.82 requires that health club contracts be in writing. Your failure to get the customer's signature on the contract is a problem as that would mean you likely don't have a written contract. And that's a problem because if you violate any of the rules in California's law for health clubs the contract is void. California Civil Code 1812.91. If the contract is void then you may need to refund everything the customer paid you. In that case, refunding what the customer is asking may be a good idea. The one thing that may help you in this situation is that it is possible that the applicable statute of limitations (SOL) for the customer to sue to get his refund may have passed.

    While I don't see any law on prepaid services that expressly says what the customer said, the details of how you structured the prepaid services does matter. If they look a lot like prepaid gift certificates or otherwise are set where the amount paid is tied to a specific amount of sessions various federal and California prepaid card/gift laws may apply.

    I suggest you see a California business attorney about this particular request and more generally how you structure your prepaid contracts, preferably an attorney familiar with the provisions of California Civil Code 1812.80-1812.98, which are the rules that apply to contracts for fitness/health club services. You can read a summary of these laws that apply to fitness/health club businesses from the California Department of Consumer Affairs (DCA).

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