Overcharged by a business and receiving payment back in installments?

Long story short but a gym continued to charge my bank account for an annual membership after it had already been paid off. After proving that I had been overcharged $400 they agreed to pay it back in weekly/bi-weekly cash installments of $100. They said that it had to be in installments so it doesn't look suspicious to their bank. Is this normal and what kind of penalty would be imposed on them by their bank if they paid me back the full amount at once?