Jonny, I know what your saying, and I think I can help you understand.
Any martial art can be made to be like what you described. Usually, the schools that do that share a few traits. The traits are :
1. Outlandish tuition and belt test fees (1000 dollar black belt test!).
2. Teaching kihon (basics) and kata only, kumite is either non existant or an afterthought.
3. They have an inordinate amount of black belts that are age 7 or less and they promise a black belt in 2 years.
4. They have a lot of belt colors and belt colors with stripes (mostly over 25-30 different grades to suck more belt test money out of you.
5. They require that you purchase equipment from them at a ungodly mark up (70 dollars for a middleweight (10 oz cotton) gi that should cost 40)
(now its time for me to crack a few jokes
)
6. They have a poster of Bruce Lee on the wall in a karate dojo or TKD dojang, even though they can't realize that Lee was a master of kung fu and his Jeet Kun Do philosophy was based off of Chinese martial arts instead of Japanese or Korean.
7. When you get your black belt they ask you if you want fries with that.
8. Any school or club with the word "Tiger" or "Dragon" (I.E. Tiny Tigers, Little Dragons)
Anyway, these schools that operate this way have been dubbed "McDojos" or "Belt Factories". They are out to take your money and nothing more. They leave the students with a false sense of security and they end up getting hurt. Anyone who claims to have beaten up a black belt probably has beaten a McDojo black belt. If anyone tries to harm a legitimate black belt in karate or TKD, they probably won't know he is a black belt until the fight is over, they don't brag about it. McDojo's do not teach humility or respect.
Legit schools do limit novices in fighting due to the overly litigious society we live in now. Anyone will sue anyone for anything, so they have to be careful. We spar full speed, but we use sparring gear. Once we reach brown belt or above, we can spar without them. By then, the chief instructor feels we can control ourselves to the point where we won't seriously injure anyone.