Writing an article on martial arts school scams

[Tortoise]

In NH, it is not legal to REQUIRE a long term contract. You have to offer a month to month option.

http://doj.nh.gov/consumer/documents/chapter-358-s.pdf

Many martial arts schools in NH state in their advertising that "No Long Term Contracts Required!" as though this is not the norm.

Just an example for your paper. Not quite the level of fraud, but not right for businesses who claim to be all about integrity.

 

[Balrog]

Hello everyone. I'm a martial arts instructor (TKD) and also am an attorney. Last week I was asked by a friend to help out with an issue concerning a martial arts contract and was incredibly disturbed by what I saw. I'm surprised not to see more information about what might be a system in which an increasing number of martial arts schools may be run (and concerns long term contracts) -- and I don't mean in a positive straightforward way.

I can't speak for other schools, I can only speak for mine. I know several school owners who do things in a similar manner to me, but the details are different for each school.

I start everyone off with a free intro lesson so that they can see our teaching style and what we have to offer. I then sit down and explain all our programs, but unless someone insists on going directly to a long-term program, I sign them to our Basic program. If they want some time to think it over, I'll schedule them for a second free lesson and conference.

Basic is six months long and is non-renewable. It is intended to give the student sufficient time to evaluate our school and decide if this is where they want to make the long-term commitment to earning their Black Belt. I call it the "stick-the-toe-in-the-water" program. Most folks will upgrade within the first two months.

The upgrade paths from there are to the Black Belt Club or Leadership. On each of them, I offer a 12 month option with a higher monthly rate or a 36 month option at a lower monthly rate. We use membership agreements and a billing company, so that we don't have to waste time being bookkeepers and can concentrate on teaching.

Our membership agreements clearly state that if the student moves more than 20 miles from the school, or if there is injury or illness to the point that they can't continue, we automatically cancel the membership. If they quit for any other reason, there is a termination penalty equal to three months monthly payments and then they are out. The agreement is not intended to be ironclad so that we can hound them forever for money. It is intended to protect both of us.

As far as suggestions on what to look for when searching for a school...I would have a checklist, somewhat like this:

1. Does the school offer a free intro lesson, or a short-time intro at low cost, such as 4 weeks for $49 or something similar?
2. Will the school allow you to observe classes and speak with the students / instructors?
3. Are they open about answering questions?
4. Do they immediately go to a hard sell, long-term contract, or do they offer non-restrictive terms similar to what I described above? The hard sell is a red flag to me.
5. Is the school clean and well-maintained? Is the equipment in good shape? Are the instructors and students wearing clean, well-matched uniforms? This can be a red flag.
6. Are the policies and procedures of the school explained in detail, such as testing fees, attendance requirements, etc.? Are the testing fees only for rank promotion or is there a fee for each stripe? That would be a red flag to me.
7. Are the instructors certified under a standardizing organization, or is this just one guy with his own made-up style? Not that that is a bad thing, but having a standardizing organization implies that there is "quality control" in the ranks and certifications.
8. Do some due diligence. Read the online reviews from several sites. Check with the Better Business Bureau for excessive complaints, etc.
9. Last but not least, is the school convenient in location, and are the class times workable for you? If neither of those is true, you won't come to class like you should and your experience will not be a good one.

There's probably more I can add, but the cat is biting my toe so that I will get up and feed her.

 

[sadan]

Great conversation and contributions. This has been most enlightening and a learning experience for me to hear from so many of you. Thank you.

I don't like insurance companies for this reason, so I definitely wouldn't want it in my hobby. I make sure that the schools are managed and own by the Sifu. For Jow Ga the system isn't based on a third party. Sifu's retain full control of their schools. We have a Jow Ga Kung Fu association but they don't handle any of the finances or billing. The association is there to monitor quality of instruction of their Sifus.

I had a feeling there was some miscommunication, lol, and not surprised to see the same recurring theme among everyone here - integrity. What you mention is what concerned me and will be a focus of an article - retain full control of their schools. A franchise owner does not. And even if you do own your school, if you're assigning your rights under contracts with students to third parties then you don't have full control over those contracts. And as @thanson02 says, once the trust (or perhaps a bone) is broken, things can get ugly very fast. My experience in trying to help this student with billing was that there was no recognition that even material delays caused by the school (failure to return communications) should have any impact (reduction) of any amount owed. Ruthless.

I think some do and some don't. Sometimes it's the schools fault and sometimes it's their marketing company's fault. For how they present stuff. Here's an example This schools marketing refers to the videos as Hapkido as "Korean Kung Fu Karate".. "Students trying out their self defense moves in a practice fight."... By the way Moderators I'm not bashing the school in the video. The videos are only to show an example of how the school is being advertised. For all I know the people who do the marketing for them probably don't know the difference between Hapkido, Karate, and Kung Fu. I say this because one of my neighbors asked me what type of martial arts do I do. I told him Kung fu and he asked me "Is that some kind of Karate?"

Precisely and you are not bashing the school at all. What made it particularly galling to me in this instance was the discovery that the franchise owns several domain names with different styles although they all point to the same school. So if you're really learning Hapkido or Tang Soo Do they have a domains with other forms, e.g. Karate, TKD that redirect to the same site. This school's domain is something like BubbasHapkido .com yet the brand/company name on the site is "Bubba's Karate." And in the description of the martial art doesn't really even mention Karate because they are explaining the other martial art. And the master/founder on each site appear to be legit practitioners but this misdirection doesn't seem to be of concern.

Our membership agreements clearly state that if the student moves more than 20 miles from the school, or if there is injury or illness to the point that they can't continue, we automatically cancel the membership. If they quit for any other reason, there is a termination penalty equal to three months monthly payments and then they are out. The agreement is not intended to be ironclad so that we can hound them forever for money. It is intended to protect both of us.

4. Do they immediately go to a hard sell, long-term contract, or do they offer non-restrictive terms similar to what I described above? The hard sell is a red flag to me.
7. Are the instructors certified under a standardizing organization, or is this just one guy with his own made-up style? Not that that is a bad thing, but having a standardizing organization implies that there is "quality control" in the ranks and certifications.
8. Do some due diligence. Read the online reviews from several sites. Check with the Better Business Bureau for excessive complaints, etc.

Great post and thank you for sharing. As long as the termination is straightforward and reasonable, that's a good thing. Some of the questions that come into play concern "can't continue". Since your school as a 3 month liquidation, the student is never in danger of being forced to pay for 6, 12 or even 30+ months of classes they can't or won't take. Issues should be able to be settled amicably. But a company collecting may require release of full medical records and the legal department confirming a "permanent disability." So if you tear your ACL at age 50, is that a full disability? In a year or two you should be able to continue although you might have understandable reservations. But if a student's contract is sold to third party company that perhaps paid a school up front for a contract, they may not let it go and hound the student into submission.

 

[pgsmith]

As a result, I've started to put together an article to help people who hope to join a legitimate martial arts school identify and avoid schools that are likely to either be a fraud, engaging in fraud, questionable practice or other issue which may not be disclosed and will only serve to disappoint and deject a student later.

In my opinion, that would be an extremely short article. The entire thing should say "Do your research!" That is all that is required to avoid the vast majority of scams in just about any field. A great many people are being scammed today by various "businesses" because they can't be bothered to research said business. With the vast amount of information easily available on the internet, there is really no excuse except laziness for people to not research any business before engaging with them.

I just have a real hard time with trying to save people from their own mistakes. I think it is better to allow them to make their mistakes, and hopefully they'll be able to learn from them and avoid repeating them in the future. It unfortunately doesn't work that way a lot, but I still keep hoping.

 

[sadan]

In my opinion, that would be an extremely short article. The entire thing should say "Do your research!" That is all that is required to avoid the vast majority of scams in just about any field. A great many people are being scammed today by various "businesses" because they can't be bothered to research said business. With the vast amount of information easily available on the internet, there is really no excuse except laziness for people to not research any business before engaging with them.

I just have a real hard time with trying to save people from their own mistakes. I think it is better to allow them to make their mistakes, and hopefully they'll be able to learn from them and avoid repeating them in the future. It unfortunately doesn't work that way a lot, but I still keep hoping.

This business has perhaps a dozen franchises and the masters appear to be legitimate instructors. For some reason they have no problem with the brand name publicizes it is an "X" school while the about section clearly discusses the curriculum as Y. They have top ratings on Facebook and several other sites. They hold tournaments in the state and there are quite a number of students. Respectfully, you greatly underestimate the power of marketing and the difficulty of laypeople to understand what a martial art is, acceptable boundaries and that which is Bullshido.

1. It's easy to claim that your master was XYZ, who passed away a few years ago and where you earned your 6th Dan. And when certified instructors need jobs, who are they to refuse work unless the instructor can prove the fake certificate is not fake?

2. Reviews can be fabricated all too easily. Issues rarely go to the BBB. And see #3.

3. If the issue involves assignment, the complaints are usually against the billing company, not the school. The contract I read barely mentions the assignment and it took me a while to differentiate what happened - that they weren't just a credit card processing company. I found only good reviews from all the franchises. The only negative one referred to the billing company being the evil. I'm sure this person didn't even realize that the moment they joined the school their contract was sold off. And the billing company has a generic name, making searches difficult. But I did find them. They have at least 2 dozen angry reviews for the obvious reasons.

I've been running online services and working with SEO for a very long time at a high level. You'd be surprised at how well perceptions can be altered online. If you want an example, just go to Amazon and you'll find plenty of 5 star reviews similar to: "This is an honest review for a product which I received for evaluation at no cost or at a substantial discount." And they don't always add that disclosure. This is the low hanging fruit.

 

[sadan]

I just performed some follow up. There are at least 4 dozen angry complaints against the membership and billing company that handle these services for several dozen different martial arts clubs. My guess is that these were the contracts which were assigned and not all of them are. In the instance of my friend, perhaps the school owner needed the money and sold her contract the moment it was signed. There is no way that the average consumer understands how this works...

 

[pgsmith]

Too many people today consider reading a few reviews on Facebook as "research". If you were researching a complaint for a court case, you wouldn't read a few reviews on Facebook and call it done. Why should it be acceptable for the rest of the population to do that then?
I do not underestimate the power of marketing. My problem is in overestimating the amount of effort the average individual is willing to exert for their own edification.

However, I understand that I am a minority opinion. You are more than welcome to carefully explain to people how a Nigerian princess doesn't really want to give them money, and the warranty isn't really expiring on their new car. Oops, we were discussing martial arts business ripoffs in particular weren't we.

 

[sadan]

Too many people today consider reading a few reviews on Facebook as "research". If you were researching a complaint for a court case, you wouldn't read a few reviews on Facebook and call it done. Why should it be acceptable for the rest of the population to do that then?
I do not underestimate the power of marketing. My problem is in overestimating the amount of effort the average individual is willing to exert for their own edification.

I'm all ears and willing to be educated. Please let us know on what you consider reasonable "research" before joining a martial arts club near you for a contract that is of the value handled in small claims court.

Note - attorneys generally don't handle small claims cases. The numbers are much larger in size. They also hire expert witnesses to help because the average person has no reference to understand subtleties, e.g. of calling yourself the "Bubba Karate School" when Hapkido or Tang Soo Do are being taught and orally explained as "Korean Karate" by experienced, impressive martial artists. Lots of opinions.

Note 2 - I wonder how many laypersons know what an "assignment" is and probably don't even think it's a legal term, e.g. assigning billing my credit card to Billing Company. That's why there are dozens of complaints against the billing company and very few against the school that sold them out. So do you have every contract reviewed by an attorney, such as the service contract on the 4K TV you bought from Best Buy for $1,500?

 

[WaterGal]

LOL, thanks. On my site we have had many questions regarding gym / health club membership scams (some epic in length) and only a handful of martial arts school topics although a couple recently.

One item that I can't yet identify. There is a reference to potentially assign the contract to "APS". Does anyone have any idea what entity this might be?

Probably a billing company, though not one I've heard of. Many schools use billing companies to collect dues. For a fee, these companies handle the billing and payment processing for the school owner, and will call and harass any students who don't pay on time and potentially take them to collections.

 

[pgsmith]

I'm all ears and willing to be educated. Please let us know on what you consider reasonable "research" before joining a martial arts club near you for a contract that is of the value handled in small claims court.

Note - attorneys generally don't handle small claims cases. The numbers are much larger in size. They also hire expert witnesses to help because the average person has no reference to understand subtleties, e.g. of calling yourself the "Bubba Karate School" when Hapkido or Tang Soo Do are being taught and orally explained as "Korean Karate" by experienced, impressive martial artists. Lots of opinions.

Note 2 - I wonder how many laypersons know what an "assignment" is and probably don't even think it's a legal term, e.g. assigning billing my credit card to Billing Company. That's why there are dozens of complaints against the billing company and very few against the school that sold them out. So do you have every contract reviewed by an attorney, such as the service contract on the 4K TV you bought from Best Buy for $1,500?

There is no way that I would sign a long term contract with a martial arts school ... ever. I would likewise not sign a long term contract with a fitness center, personal trainer, or little league baseball team. It is fairly easy to find respectable martial arts schools that don't require long term contracts. I never buy service contracts from Best Buy. If you do a little research, you'll find that they are generally superfluous and are almost never worth the money paid for them. This is why Best Buy offers a service contract with everything they sell as it is a large money maker for them.

In the words attributed to P.T. Barnum, "there's a sucker born every minute". I'm sure there are a great many more people getting ripped off with unneeded service contracts and bogus auto warranties than there are from unscrupulous "martial artists". Since you aren't interested in trying to save all of those people from themselves, it makes me wonder what your ultimate motivation is. Did you get burned with a martial arts contract at some point, or is it just serendipity that got you on this crusade?

 

[sadan]

There is no way that I would sign a long term contract with a martial arts school ... ever. I would likewise not sign a long term contract with a fitness center, personal trainer, or little league baseball team. It is fairly easy to find respectable martial arts schools that don't require long term contracts. I never buy service contracts from Best Buy. If you do a little research, you'll find that they are generally superfluous and are almost never worth the money paid for them. This is why Best Buy offers a service contract with everything they sell as it is a large money maker for them.

So if there was only 1 or 2 little league baseball teams in town and they would have the same one year contracts, your son would be the one to sit out. And if there are only 3 gyms in the area (such as there are in mine) but only 1 that is even half decent with a 1 year contract you'd forgo the gym too. Same goes for Internet service. I'm not saying you should sign a dumb oppressive contract because it's the only game in town. You shouldn't. But the world isn't black and white and people need to find solutions that frequently fall in the middle. Regarding Best Buy contracts, I said "service contracts" and not extended warranties, which at times can work out. It was not meant to debate specifics, the point is illustrated below.

In the words attributed to P.T. Barnum, "there's a sucker born every minute". I'm sure there are a great many more people getting ripped off with unneeded service contracts and bogus auto warranties than there are from unscrupulous "martial artists". Since you aren't interested in trying to save all of those people from themselves, it makes me wonder what your ultimate motivation is. Did you get burned with a martial arts contract at some point, or is it just serendipity that got you on this crusade?

I'm guessing that for the same reason you don't purchase any insurance except as required by law because the odds are clearly against needing it. Only suckers are harmed in buying peace of mind and security (which is what they feel they prefer) instead of playing the mathematical odds...

While I'm sure the schools in your area are so flourishing that they need to turn students away, many schools in my part of town start off with best of intentions only to discover that it's much harder to make ends meet than anticipated. When in need, they sell their debts to others thinking it will buy them some time with minimal harm. And following this rabbit hole I've discovered that this is going on far more often than anticipated. And what really got me disgusted was that the "billing company" refused to credit my friend for the time that her school failed to communicate with her the procedure to terminate services as a result of the injury she suffered very early on. And now I understand why...

My motivation? Many years ago I learned that most people aren't nearly as knowledgeable as you are and also foolishly believe people keep their word and honor agreements, such as friends and family. And furthermore, leverage is king because the cost of using the law to obtain justice can be prohibitive. As a result, I founded a site that helped people help themselves by creating a central repository of legal information and advice on how to deal with common problems where hiring an attorney was not an option. So I guess it's shame on me for my "crusade" in trying to keep people honest...

 

[KangTsai]

This kind of thing can really only be solved with standardisation of martial arts, which has proven successful with ITF, or the Gracie family.

 

[Andrew Green]

One item that I can't yet identify. There is a reference to potentially assign the contract to "APS". Does anyone have any idea what entity this might be?

How old is this contract? APS merged with another company to form member solutions in 2005.

https://pay.membersolutions.com/website/news-merger.html

 

[Balrog]

As long as the termination is straightforward and reasonable, that's a good thing. Some of the questions that come into play concern "can't continue". Since your school as a 3 month liquidation, the student is never in danger of being forced to pay for 6, 12 or even 30+ months of classes they can't or won't take. Issues should be able to be settled amicably. But a company collecting may require release of full medical records and the legal department confirming a "permanent disability." So if you tear your ACL at age 50, is that a full disability? In a year or two you should be able to continue although you might have understandable reservations. But if a student's contract is sold to third party company that perhaps paid a school up front for a contract, they may not let it go and hound the student into submission.

That is exactly what I DON'T want to do. I might be completely justified in placing an account for collection, but if I do, they more than likely will bad-mouth me to everyone under the sun, even though they were the ones who defaulted. And they will put it all over the Internet as well.

I just sigh, mutter something about lack of integrity, and write them off.

 

[sadan]

How old is this contract? APS merged with another company to form member solutions in 2005.

Thanks. APS is one of the unchecked options. Perhaps the place didn't want to reprint new agreements.

That is exactly what I DON'T want to do. I might be completely justified in placing an account for collection, but if I do, they more than likely will bad-mouth me to everyone under the sun, even though they were the ones who defaulted. And they will put it all over the Internet as well. I just sigh, mutter something about lack of integrity, and write them off.

Unfortunately it goes both ways. Sending to collections can be necessary. I have seen incorrigible, unethical students who only care to get what they want. It's a nightmare when they threaten to besmirch the school's excellent reputation unless they get what they want. But at least the agreement is in your control.

I'm guessing some are uncomfortable and perhaps engage in assignment. It's not necessarily evil but I suggest you consider the impact. My friend's problem should have been easily settled. You'd probably be willing to discount a student's membership fee in proportion to a 2 week mistake you made - that seems fair. But the financial institution may tell the student they don't care. And now it's your problem. And it's an entirely different thing when a student is told during the trial/presale stage "trust us" only to have the contract sold elsewhere from day one. Consumers will fail to differentiate honest schools from sales mills like these and the growth of this practice leads to the same poor reputation that has surrounded fitness clubs.

 

[pgsmith]

My motivation? Many years ago I learned that most people aren't nearly as knowledgeable as you are and also foolishly believe people keep their word and honor agreements, such as friends and family. And furthermore, leverage is king because the cost of using the law to obtain justice can be prohibitive. As a result, I founded a site that helped people help themselves by creating a central repository of legal information and advice on how to deal with common problems where hiring an attorney was not an option. So I guess it's shame on me for my "crusade" in trying to keep people honest...

I simply gave you my opinions and you are the one that appears to be offended that I don't agree with you. You seem to have some serious issues since I never said anything about shame. As an attorney, I would have expected you to not be quite as easily offended as you seem to be, but that is pretty irrelevant also..

Knock yourself out. I have absolutely no say in what you do or don't do. I just think there are a great number of problems that could use your spare time expertise much more than the one you have chosen to spend your time championing. But that is also only my opinion.

 

[sadan]

I simply gave you my opinions and you are the one that appears to be offended that I don't agree with you. You seem to have some serious issues since I never said anything about shame. As an attorney, I would have expected you to not be quite as easily offended as you seem to be, but that is pretty irrelevant also..

I'm unsure why you seem so upset at my dropping the smallest amount of sarcasm aimed at the second paragraph of your response here about my "crusade." Your tone is very clear. After being sure my motives couldn't be altruistic and the result of ulterior motives, I guess you never saw my reply coming. Whatever, not a big deal, no need for us to engage in personal remarks or psychological evaluations. Just a civil conversation and sharing of knowledge and opinions.

Knock yourself out. I have absolutely no say in what you do or don't do. I just think there are a great number of problems that could use your spare time expertise much more than the one you have chosen to spend your time championing. But that is also only my opinion.

You're entitled to your opinion and that's fine. I'm not entirely sure what it is and that's OK too. A person in trouble found me and I investigated. And what I found was unsettling and decided to write an article to help others avoid the same issue, no more no less. Thanks for contributing.

 

[Paul_D]

Who is in charge of deciding what is and isn't a McDojo?

 

[WaterGal]

I'm guessing some are uncomfortable and perhaps engage in assignment. It's not necessarily evil but I suggest you consider the impact. My friend's problem should have been easily settled. You'd probably be willing to discount a student's membership fee in proportion to a 2 week mistake you made - that seems fair. But the financial institution may tell the student they don't care. And now it's your problem. And it's an entirely different thing when a student is told during the trial/presale stage "trust us" only to have the contract sold elsewhere from day one. Consumers will fail to differentiate honest schools from sales mills like these and the growth of this practice leads to the same poor reputation that has surrounded fitness clubs.

It can be very uncomfortable to have to call and e-mail a student about not paying their bill. I think a lot of people don't want to deal with that, probably especially if they're teaching the classes and running the business/financial end as well.

But you're totally right about the trade-off there. We used to use a billing company, and while it was helpful in some ways.... it meant that we had less control over the student/customer experience. There could be issues going on that we knew nothing about, and things we couldn't help students with. I've found in-house billing to be better overall, even if it does mean making some painfully awkward phone calls sometimes, and sometimes it means writing off someone that still owes you a couple month's tuition.

Oh, and for what it's worth..... I don't know about all billing companies, but the one we used didn't buy the contracts from us, they just collected the money for us and took a percentage.

 

[Flying Crane]

Who is in charge of deciding what is and isn't a McDojo?

I am. Didn't you know that?