Alleges unfair practices in "membership dues" collections
(DES MOINES) The Iowa Attorney General's Office filed a consumer protection lawsuit Tuesday alleging that Cutty's Des Moines Camping Club, Inc., is violating the Iowa Consumer Fraud Act in its efforts to collect membership dues dating back up to15 years and totaling up to $4,000 for some consumers. [See below for UPDATES as of April 2004 and April 2005.]
Cutty's Camping Club manages an 82-acre recreational vehicle park and campground resort at 10500 NW 54th Ave. in Grimes, just north of I-35/80 near Highway 141.
The lawsuit, filed today in Polk Country District Court, alleges that collection efforts by Cutty's Camping Club constitute an unfair practice under Iowa law. According to the suit, the Club has launched collection actions to collect purportedly past due amounts of up to $4000 from individual consumers, which represents as much as 12 to 15 years of uncollected dues - even though many consumers have ceased using the campground and Cutty's policies have made membership shares "virtually unmarketable" for sale to other consumers.
The campground originally was owned by Cutty's, Inc., which in 1980 decided to create a "camping club" by selling 3000 "shares" in the campground to consumers. Purchase price of the shares ranged from approximately $3000 to $5800. "Membership dues" originally started at $96 per year but have risen now to approximately $400 per year. Cutty's Inc. is not named as a defendant in the State's lawsuit.
According to the suit, the Club began taking actions last year to collect back membership dues from hundreds of consumers, including taking consumers to court.
The Attorney General's lawsuit alleges the collection efforts constitute an unfair practice based on several facts alleged in the petition, including:
- The purchase contracts are ambiguous as to how purchase relates to membership dues. Although the contract states that purchasers of the shares are eligible for membership in the Club, and the Declaration of Restrictions states that purchasers become members upon approval of an application for membership, each purchaser is assessed membership dues without an application process.
- Some consumers report receiving only sporadic notices of dues over the years, and the Club lacks adequate records to substantiate purported delinquent dues.
- Many consumers who purchased shares nearly twenty years ago have ceased using the campground facilities. "Some have aged, become infirm, moved away, or otherwise become unable to use or enjoy camping at the campground," the suit notes, yet "there is little market for these consumers to sell their shares privately and terminate the financial obligation."
- The Camping Club and Cutty's, Inc., hold unsold approximately 40% of the shares (1200 of 3000). Because the Club and Cutty's, Inc., hold so many unsold shares - for which no membership or dues assessments accrue - "a relatively small group of consumers must absorb all of the operational and maintenance costs."
- Membership dues -- which have increased approximately 400 per cent since the shares were sold originally -- realistically have become a lifetime obligation. The Camping Club and Cutty's, Inc., continue to hold the unsold shares and have made no effort to sell additional new membership shares since about 1986-88 - policies which have made consumers' shares "virtually unmarketable" for sale to others.
- The Club relies on the statute of limitations applicable under property law to pursue the members for dues that are long in arrears, even though the "1/3000th interest" in the campground property sold to consumers does not convey rights normally associated with property ownership. Members do not own any specific camp site, don't have guaranteed access to any specific site, cannot reserve a specific site, are limited to 14-day usage, and must spend at least 6 hours of every 24-hour period with their recreational vehicle.
The Consumer Protection lawsuit asks the court to issue temporary and permanent injunctions barring Cutty's Camping Club from engaging in the alleged illegal collection practices, order reimbursement to consumers, and pay a civil penalty not to exceed $40,000.
UPDATE as of April 2004:
On May 12, 2003, Polk County District Court Judge Darrell Goodhue ruled against the State. Thus, the Attorney General's efforts to protect consumers from Cutty's collection practices have been blocked so far.
The Attorney General appealed Goodhue's decision, and the Iowa Court of Appeals set oral arguments on the appeal for May 5, 2004. There can be no additional legal action by the State until there is a final decision on the appeal. The appellate courts ordinarily issue a decision several months after the oral argument (perhaps in Fall 2004, in this case.)
District Court Judge Goodhue concluded (among other things) that the Iowa Consumer Fraud Act did not apply to the relationship between Cutty's Des Moines Camping Club and its members. He also found that, even if the Consumer Fraud Act did apply, the conduct of the Club was not an "unfair practice" as defined in the Consumer Fraud Act and alleged by the Attorney General. The District Court decision thus blocks efforts by the Attorney General to protect consumers from Cutty's collection practices.
UPDATE as of April 2005:
On April 1, the Iowa Supreme Court reversed prior lower court decisions and reinstated a lawsuit by the Attorney General against Cutty's Des Moines Camping Club, Inc., that alleges "unfair practices" in the collection of out-dated membership dues. (Click here for AG's statement and link to the Supreme Court decision April 1, 2005.) The case was sent back to Polk County District Court for trial, which is likely to be scheduled some time in late 2005 or early 2006.
In the meantime, any dissatisfied Cutty's consumers who have not yet contacted the Consumer Protection Division are encouraged to file a complaint so that the consumer's concerns may be addressed. To file a complaint, call 515-281-5926, call 1-888-777-4590 (toll-free in Iowa), or go to www.IowaAttorneyGeneral.gov and click on "protecting consumers" to obtain a complaint form. New complaints received by the Attorney General's office will be considered in the current lawsuit against Cutty's Camping Club but cannot be resolved until the case is concluded.
The rulings on the Attorney General's case have no effect on private attorneys, so consumers are advised to contact a private attorney if they require immediate assistance, such as the need to respond to debt collection efforts or a lawsuit by the Club.