Gym Merchant Accounts: Cancellation Laws, Recurring Dues and Chargebacks

A gym sells something most members intend to use and many stop using. The member signs up in January, comes three times, and in April sees the monthly charge on a card statement. If cancelling means finding the one manager who handles it, during the hours that manager works, the next call is often to the card issuer. That call becomes a chargeback, and enough of them put a gym's merchant account at risk.

This guide is for health clubs, boutique studios, martial arts schools, personal training studios and multi-location gym operators. It covers how the card networks classify a gym, the dispute rule behind cancellation chargebacks, what Visa requires of any business billing dues on a stored card, how state health club laws in California and New York limit gym contracts, and what the FTC's case against LA Fitness tells an underwriter. Rules and laws are cited as they stood in early October 2026.

Where gyms sit in the card network rules

Every merchant account carries a merchant category code. Visa's Merchant Data Standards Manual (April 2026) places gyms under MCC 7997, Membership Clubs (Sports, Recreation, Athletic), Country Clubs, and Private Golf Courses. The manual describes it as covering sports and recreation facilities that require membership, such as exercise, athletic and health clubs, and lists fitness clubs among the merchants included.

The code says little about risk on its own. What an underwriter looks at is the billing model. A gym that sells day passes and drop-in classes at the front desk looks like a retailer. A gym that signs members up online for 12 or 24 months of dues on a stored card looks like a subscription business that also has to deliver a service in the future, and it is underwritten that way.

The dispute behind cancellation chargebacks

When a member says they cancelled and the gym kept charging, the issuer files Visa dispute condition 13.2, Cancelled Recurring Transaction. Under Visa's Core Rules and Product and Service Rules (18 April 2026), the issuer can use it when the cardholder withdrew permission to charge the card for a recurring transaction, or when the merchant had been told the account was closed before the charge was processed. The key terms:

• Time limit. The issuer has 120 calendar days from the transaction processing date to file.
• Amount. The dispute is limited to the unused portion of the service, so a member who cancelled mid-month cannot claw back time they had already used.
• Evidence from the issuer. The issuer certifies the date the cardholder withdrew permission and how they contacted the merchant, such as an email address, phone number or physical address.
• A new limit in the merchant's favour. For disputes processed on or after 18 April 2026, a 13.2 dispute is invalid where the cardholder's cancellation came after the date of the transaction. A charge made before the member cancelled is no longer disputable under this condition.

The rules also list what answers a 13.2 dispute. A merchant can show that the cardholder asked to cancel from a different date and was served until then, that the gym bills after services are provided and the member received them up to the cancellation date, or that the member kept using the service after the date they withdrew permission. Visa's own example treats the cancellation date as the last day the cardholder is allowed to use the service, so a member who cancels on the 22nd and keeps access until the 30th has a cancellation date of the 30th.

Every one of those answers depends on records. A gym that cannot show when a cancellation request arrived, what the member was told about their last billing date, and whether they scanned in afterwards will lose disputes it could have won.

Mastercard handles the same situation under its cardholder dispute chargeback, message reason code 4853, which lists a recurring transaction cancelled prior to billing among the cardholder's grounds (Chargeback Guide, Merchant Edition, 19 May 2026).

What Visa requires of a gym billing dues on a stored card

Monthly dues charged to a card kept on file are recurring transactions under Visa's rules, which define one as a transaction in a series that uses a stored credential and is processed at fixed, regular intervals. Table 5-21 of the rules sets requirements for every merchant that bills this way. The merchant must:

• Provide a simple cancellation procedure, and, if the cardholder's order was first accepted online, at least an online cancellation procedure.
• Include the fixed dates or intervals on which the transactions will be processed.
• At least seven days before the charge, notify the cardholder by email or another agreed method when a trial, introductory offer or promotional period is about to end, with the amount, the date of later charges and a link or other simple way to cancel online or by text message.

The online cancellation rule matters for gyms in particular. Under Visa's rules, a member who joined on the website or app must be able to cancel online, so a club that takes online joins but routes every cancellation through the front desk or the post does not meet it.

Visa's 13.2 condition does not apply to every way of billing. Among the transaction types the rules list as invalid for a 13.2 dispute outside Europe are installment transactions, which Visa defines as a series of charges over a fixed period for a single purchase, and cardholder-initiated transactions. How your gateway flags each transaction therefore affects which dispute rules apply to it. Ask your acquirer how your membership plans should be set up, rather than choosing a flag to avoid a dispute right.

State health club laws

On top of the card network rules, some states regulate gym contracts directly. California and New York are two examples, and New Jersey has its own Health Club Services Act. Check the law in every state where you have clubs or sell memberships.

California

California's Contracts for Health Studio Services law (Civil Code sections 1812.80 to 1812.98) applies to contracts for exercise instruction, the use of a gym or membership in a fitness club. Among its rules:

• Term. A contract may not run longer than three years, and payments or financing may not extend past the end of the term (1812.84(a)).
• Cooling-off period. The buyer may cancel before midnight of the fifth business day of the health studio after signing, excluding Sundays and holidays, and the contract must say so in at least 10-point boldface type near the signature line. Money paid must be refunded within 10 days of the cancellation notice, less payment for any services received (1812.85(b)).
• Longer windows for larger contracts. A contract requiring $1,500 to $2,000 in payments can be cancelled within 20 days of signing, $2,001 to $2,500 within 30 days, and $2,501 or more within 45 days (1812.85(d)).
• How members can cancel. Whenever cancellation is allowed, the buyer can cancel in person, by email from an address on file with the gym, or by first-class mail (1812.84(c)).
• Death, disability and moving. Contracts must release a member who dies or becomes disabled, as verified by a physician, from paying for services not received, with a refund of anything prepaid. A member who moves more than 25 miles away and cannot transfer to a comparable facility must also be released, although the contract may charge a fee of up to $100, or $50 after more than half the contract term has passed (1812.89).
• Price cap. No contract may require total payments above $4,400, including initiation fees and excluding interest or finance charges (1812.86).
• Presales. Money taken for a gym that has not opened yet must be held in a trust account, unless it is covered by a bond or the seller meets an exemption for established multi-site operators (1812.96).

A contract that does not comply is void and unenforceable (1812.91), and a member injured by a violation can sue for damages, with judgment for up to three times actual damages plus reasonable attorney fees (1812.94).

New York

New York's Health Club Services article (General Business Law sections 620 to 631) is stricter in some respects:

• Term and price. A contract may not run longer than 36 months or require payments over more than 37 months, and may not require more than $3,600 a year (section 623).
• Cooling-off period. Every contract must allow cancellation within three business days of the buyer receiving a copy, with all money refunded within ten business days (section 624(2)).
• Other grounds to cancel. A member may also cancel for a significant physical disability lasting more than three months, a move of more than 25 miles from any club the seller operates, or the club ceasing to offer the services in the contract. The member's estate may cancel on death (section 624(3)).
• Renewals. The club must accept cancellation of an annual renewal requested within fifteen business days after the renewal takes effect, and of a monthly renewal within three business days (section 624(4)(b)).
• How members can cancel. The club must accept cancellation by methods including website, email, telephone, mail or in person, and a club that lets members sign up through a website must accept cancellation through that website (section 624(4)(c) and (d)).

New York also requires most health clubs to file a bond, letter of credit or certificate of deposit with the Secretary of State before selling contracts: $50,000 for contracts up to 12 months, $75,000 for terms up to 24 months and $150,000 up to 36 months, with additional amounts for clubs with three or more locations (section 622-a). There are exemptions, including for clubs whose total payments from a buyer do not exceed $150, and for clubs that offer a monthly dues option of no more than $150 for each plan, disclosed alongside the annual option before signing, provided the paid-in-full price is not discounted by more than 10 percent, neither option runs longer than 12 months and the contract does not automatically renew. Money collected before a new club is fully operating must generally be held in escrow, unless the club demonstrates financial responsibility to the Secretary of State instead (section 622).

An underwriter will treat a long prepaid contract and a bond or escrow obligation as signs of future-delivery exposure. If the gym closes, members who prepaid will want their money back, and some will ask their card issuer for it.

The FTC's case against LA Fitness

On August 20, 2025, the FTC sued Fitness International, LLC and Fitness & Sports Clubs, LLC, the operators of LA Fitness, Esporta Fitness, City Sports Club and Club Studio, in the US District Court for the Central District of California. The Commission voted 3-0 to file the complaint. The FTC alleges the gyms violated the FTC Act and the Restore Online Shoppers' Confidence Act (ROSCA) by making it exceedingly difficult for more than 3.7 million members to cancel. According to the FTC:

• Members could cancel in person only with one specific employee during limited hours, or by mail, by printing a form from the website or sending written notice by certified or registered mail.
• Members who tried to stop the charges through their bank or card company found they were rebilled, often under new account numbers.

These are allegations, not findings. LA Fitness disputes the case, and in April 2026 it asked the judge to reconsider a tentative order refusing to dismiss it. According to reports of the hearing, the tentative order noted that for many years the gym offered no online cancellation option, which the FTC contrasts with its online sign-up. LA Fitness says it now offers online cancellation. The FTC also listed LA Fitness among its negative option cases in its March 2026 advance notice of proposed rulemaking on negative option marketing, the process that restarted after a federal appeals court vacated its click-to-cancel rule in July 2025.

The lesson for a gym is the same whatever the outcome. The gap between how easy it is to join and how hard it is to leave is what regulators and card issuers look at, and it is what an underwriter will test by reading your website and membership agreement. Our guide to free trial and subscription billing rules covers ROSCA and the state automatic renewal laws in more detail.

What an underwriter will ask a gym

• Your membership plans: monthly, annual, paid-in-full and multi-year terms, initiation fees, and what share of revenue is prepaid.
• How members join (front desk, website, app) and every way they can cancel, including whether online joins can cancel online.
• Your cancellation records: how requests are logged, timestamped and confirmed to the member.
• Which states you operate in and how your contracts meet each state's health club law, including any bond or escrow you hold.
• Your dispute and refund history, and your billing descriptor.
• For new clubs, presale volumes and the expected opening date.

Keeping membership disputes winnable

1. Let members cancel the same way they joined, and at least online if they joined online. Visa's rules and New York's law both require it.
2. Send a written confirmation of every cancellation with the date it takes effect and the last date the member can use the club. That date is the cancellation date for a 13.2 response.
3. Keep check-in records. Use of the club after a claimed cancellation date is evidence Visa's rules accept.
4. Stop billing a member once they have cancelled, including on an updated card number. Rebilling members who tried to stop charges through their bank, often under new account numbers, is among the FTC's allegations against LA Fitness.
5. Put the term, renewal terms and cancellation rights in the contract in the form your state requires, and send the seven-day notice before any introductory rate ends.
6. Use a billing descriptor that matches the name on the gym's sign and app, so members recognise the charge.

Gyms are underwritten as higher risk because their revenue depends on members paying for a service they may stop using, and because cancellations that are hard to complete turn into disputes. A gym that can show simple cancellation, contracts that meet its state's law and records that answer a 13.2 dispute gives an acquirer reasons to approve it on workable terms. PayKings works with gyms and fitness studios and can help you present that file to an acquiring bank. We do not give legal advice; how a state health club law applies to your contracts is a question for your counsel.