HKMA’s response on payment arrangements in relation to recent closure of a gym chain

In view that the gym chain operator J.V. Fitness Limited is facing a winding up petition and has announced closure of all of its fitness centres, the HKMA is concerned that a considerable number of consumers are affected.  It has been closely monitoring the related developments and has reminded banks to assist the affected bank customers and handle their requests in a reasonable and pragmatic manner. 

Consumers may refer to how banks generally handle the four commonly used payment methods for services below: 

1. Direct debit authorisation (DDAs) instructions arranged through credit cards: As the merchant concerned has ceased operation already, consumers no longer can or need to contact it to request cancellation of the credit card DDAs.  We understand that the merchant acquiring bank already suspended collecting credit card DDA payment for the merchant.  However, consumers should note that, as the billing cycles of credit card accounts vary,  they should review the next credit card statements, and where any related transactions are noted, they should seek the card-issuing bank’s assistance in arranging any refund expeditiously.
2. DDAs arranged through bank deposit accounts: The authorisations for these DDAs are granted by consumers to the banks, and so consumers should contact the bank promptly to request cancellation of these DDAs authorisations.  Forms for cancellation of these DDA arrangements are available at bank branches.  Some banks, such as The Hongkong and Shanghai Banking Corporation Ltd and Bank of China (Hong Kong) Ltd, also accept customers’ instructions via internet banking services.  Most banks can effect such instructions within a few working days.
3. Lump sum prepayment for services with credit cards: Generally speaking, upon closure of a merchant, consumers may, in accordance with the relevant rules of the credit card associations, apply to the card-issuing banks through the credit card chargeback mechanism for a refund of their payments for the services that they are not able to enjoy because the merchant has gone out of business.  Consumers can check with their card-issuing banks about the application process and related details of the chargeback protection, for example the chargeback time limit within which customers must file the request.
4. Prepayment for services using credit card instalment payment plans: Under this arrangement, the bank concerned generally pays the merchant in full the prepaid amount and then charge the customer by instalments.  This by nature is a loan provided by the bank to the customer.  So even if the merchant has closed down, the customer still has the obligation to make monthly loan repayments to the bank.  In 2010, the consecutive closures of several yoga centres aroused concerns among consumers about instalment payment plans involving prepayment for services.  The HKMA issued a circular to banks in the same year, reminding banks to enhance transparency on credit card instalment payment plans, including when consumers sign these loan service agreements they can understand clearly the implication in case of merchant closures.

Hong Kong Monetary Authority
14 July 2016