SoulCycle Hit With Potential Lawsuit Over 'Robbing Customers' Before IPO
Cycling hotspot and fitness trendsetter SoulCycle has been hit with a proposed class-action lawsuit recently, stating that the brand “robs customers” by forcing them to buy certificates to pay for each class that expires within “unreasonably short” periods of time.
This lawsuit is coming at a crucial time for the company, after having just announced an initial public offering, hoping to sell public shares in a moment when the company is on the upswing. However, this obstacle is only adding to the previous doubts many have had about SoulCycle’s IPO. According to Fortune, it’s always risky investing in a fitness company, because exercising trends are constantly changing. Add a lawsuit on top of that, and the offer may be even less appealing.
The case has been filed by California customer Rachel Cody, who accuses the company of a “relentless effort to maximize profits,” by charging customers $30 for a certificate that can be used for a future class. But with short expiration dates, says Cody, her certificate expired before she was able to use it.
Of course, SoulCycle gives you the option of buying certificates in more pricey packages, and those certificates have more lengthy expiration dates. But for those who have purchased one certificate at a time, they often have no choice but to take the loss.
Cody is not the only one finding these certificates problematic. With SoulCycle’s increasing popularity, many complain that securing a bike during peak times becomes very difficult. The more difficult it is to get into a class, the less likely you are to use your certificate, making wasted money a not-so rare occurrence.
Cody is also accusing SoulCycle’s certificate expiration date of violating the Credit Card Accountability and Disclosure Act, which states that businesses are required to “establish fair and transparent practices relating to the extension of credit under an open end consumer credit plan.”
The potential lawsuit states that by calling these class vouchers “certificates” means they must follow the rules of gift certificates, which, according to this law, are not allowed to have expiration dates shorter than five years.
According to Business Insider, customers are also taking to Yelp to complain about this company policy. One New York City customer wrote, “If you pre-purchase a single class or a series of classes, they will expire (single class expires within 30 days, series of five within 45 days). At $30 a class, I feel like there should be more of a notice before the classes expire, since we're all busy people who have to juggle various deadlines.”
The lawsuit’s aim is to refund all customers who have lost money from certificates that expired before they could use them. Business Insider also said that SoulCycle declined to comment on the suit in an effort to maintain the quiet period before their IPO. As for the $100 million they hope to raise in their upcoming IPO, time can only tell if this lawsuit will hinder growth of the new cult-like fad.