"Refund Request Met with Silence"...Pilates Closure Fraud Spreads

Centers Induce Additional Payments, Then Suddenly Shut Down
Lack of Consumer Protection Leaves Victims with Limited Recourse
Civil Disputes Prevail as Proving "Intentional Deception" Remains Difficult

A Pilates center in Seodaemun District, Seoul, suddenly shut its doors in December last year. The owner, identified as Mr. A, continued to promote advance payments with promotions such as "college entrance exam events" and "up to 55% discounts" right up to the brink of closure, inducing members to pay in advance. Around 120 members made payments totaling about 300 million won. Afterwards, the center suspended operations citing internal renovations, and within two weeks, it announced closure due to worsening business conditions. The Seodaemun Police Station in Seoul has launched an investigation into Mr. A on suspicion of fraud, but customers who had purchased long-term memberships or extended their sessions have not received any refunds so far.

The situation is similar outside of Seoul. Ms. B, who was using a Pilates center in Gyeongsan, North Gyeongsang Province, also experienced similar damage. Last November, she acquired a "20 private lesson" package for 1 million won and had been using it. Recently, the center offered her a lower unit price if she made an additional payment, resulting in her paying about 500,000 won more. Two weeks later, when she came for a lesson, she found that the center had already filed for closure. Although she has requested a refund, the owner only repeats, "I will deposit the money soon," continuously postponing the refund.

There has been a series of so-called "closure fraud" cases, where Pilates centers urged payments until just before closing, then suddenly shut their doors and disappeared. ChatGPT-generated image

Cases of so-called "closure fraud" are increasing, where Pilates centers induce additional payments right up to the point of closing and then suddenly shut down and disappear. This method takes advantage of the industry's advance payment structure, but if the business owners cite worsening business conditions or other reasons, it is difficult to prove fraudulent intent, making it challenging for victims to receive restitution.

According to the Korea Consumer Agency on March 31, the number of "closure-related" complaints among Pilates-related damage relief applications rose from 804 cases (4.7% of total) in 2022 to 1,021 cases (7.5%) in 2023, and to 1,036 cases (13.7%) in 2024. Although the number slightly decreased to 998 cases (11.4%) last year, one out of every ten cases still involves closure. These figures exclude cases in which the closure procedure was completed during the processing period of the relief application. If the business owner completes the closure process, current law excludes these cases from the Korea Consumer Agency's scope for damage relief.

From the victims' perspective, they strongly suspect outright fraud, given that Pilates centers induced expensive advance payments right before closure, but it is difficult to prove such allegations legally. In order for fraud charges to be established, it must be proven that at the time of payment, there was no intention or ability to provide the service, and that the business owner deceived the customer to receive money. If even a portion of classes were held before closure or if the center continued operations for a period after additional payments, it is not easy to distinguish whether the closure was due to genuine business difficulties or if the payments were induced from the start with no intention to refund.

A police official explained, "Many similar cases are being reported, but it is not easy to prove the intent to defraud (i.e., misleading the other party to make a wrong decision). Since this falls within the realm of intent, many business owners claim that receiving additional payments until closure was a decision made for business normalization."

As a result, many cases end up being handled as civil disputes rather than criminal cases. In such cases, if the business owner has no assets to compensate or files for bankruptcy, it becomes virtually impossible for victims to recover their losses. Kang Sungjin, professor of economics at Korea University, stated, "When customers are induced to pay for long-term memberships in a lump sum, there is a high possibility that it could lead to fraud. We need to introduce a system similar to guarantee insurance that is used to prevent rental deposit fraud."

This content was produced with the assistance of AI translation services.