Popular indoor cycling company SoulCycle Inc. recently settled a nationwide putative class action in an agreement valued between $6.9 million and $9.2 million. The suit alleged that SoulCycle defrauded customers by selling gift certificates with expiration dates (and keeping the expiring, unused balances), in violation of state and Federal law. According to the complaint, SoulCycle sold gift certificates with short enrollment windows, knowing that it is often difficult for consumers to use the certificates within the allotted time period due to a lack of available classes.
Under the settlement agreement, SoulCycle agreed to reinstate up to two expired classes or to reimburse up to $50 to customers with unused, expired gift cards. The company also agreed to adopt policy changes to ensure consumers understand the differentiation between purchasing a SoulCycle class, which expires, and purchasing a gift card or gift certificate, which do not.
Takeaway: Companies may be permitted to offer services with expiration dates, but should take caution when offering expiring gift cards/certificates for those same services.