H.B. No. 2243
1-1 AN ACT
1-2 relating to the regulation of health spas; providing penalties;
1-3 making an appropriation.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 6, Health Spa Act (Article 5221l,
1-6 Vernon's Texas Civil Statutes), is amended to read as follows:
1-7 Sec. 6. DEFINITIONS. In this Act:
1-8 (a) "Closed," "closes," or "closing" means a condition
1-9 where:
1-10 (1) the facilities of a health spa are no longer
1-11 available to its members and equivalent facilities within 10 miles
1-12 of the closed facilities have not been made available to members of
1-13 the closed facilities; or
1-14 (2) the registrant has sold a registered
1-15 location and the security required by Section 8 has either been
1-16 cancelled, withdrawn, or otherwise unavailable for the use of
1-17 members; or
1-18 (3) the registrant has sold a registered
1-19 location and the new owner has neither adopted nor honored the
1-20 contracts of existing members.
1-21 (b) <(1)> "Contract" means an agreement by which a
1-22 person <one> becomes a member of a health spa.
1-23 (c) <(2)> "Facilities" means equipment, physical
2-1 structures, improvements, improvements to leasehold premises, and
2-2 other tangible property, real, personal, or mixed, used by a health
2-3 spa at each location to conduct its business, including but not
2-4 limited to saunas, whirlpool baths, gymnasiums, running tracks,
2-5 swimming pools, shower areas, racquetball courts, martial arts
2-6 equipment, and exercise equipment.
2-7 (d) "Fully open" or "fully open for business" means
2-8 the date on which all services of the health spa that were
2-9 advertised before the opening or promised to be made available are
2-10 available for use by its members.
2-11 (e) <(3)> "Health spa" means a business <primarily>
2-12 involved in the sale of memberships that provides the members
2-13 instruction in a program of physical exercise or provides the
2-14 members use of the facilities of the health spa for a program of
2-15 physical exercise. The term does not include an organization that
2-16 is tax exempt under 26 U.S.C. 501 et seq., a private club owned and
2-17 operated by its members, an entity exclusively <primarily> operated
2-18 for the purpose of teaching dance or aerobic exercise, an entity
2-19 exclusively <primarily> engaged in physical rehabilitation activity
2-20 related to an individual's injury or disease, an individual or
2-21 entity engaged in an activity authorized under a valid license
2-22 issued by this state, or an activity conducted or sanctioned by a
2-23 school operating under the Education Code.
2-24 (f) "Location" means the physical site or place where
2-25 health spa facilities are located.
3-1 (g) <(4)> "Member" means a person entitled to the
3-2 benefits of membership in a health spa.
3-3 (h) <(5)> "Membership" means the status under a
3-4 contract between an individual and a health spa that entitles the
3-5 individual to the use of services or facilities of the health spa.
3-6 (i) "Obligor" means a person other than a surety who
3-7 is obligated to perform in the event of a registrant's default.
3-8 (j) <(6)> "Person" means an individual, corporation,
3-9 association, organization, partnership, business trust, trust,
3-10 estate, and any other legal entity.
3-11 (k) <(7)> "Prepayment" means consideration paid to a
3-12 health spa by a purchaser prior to the time that the health spa is
3-13 fully open for business <a payment for all services or for the use
3-14 of facilities made by members of a health spa before the first day
3-15 the services or facilities are made available to the members>.
3-16 (l) <(8)> "Purchaser" means a person who <purchases a
3-17 health spa membership> seeks or acquires by purchase the use of
3-18 health spa facilities or services.
3-19 (m) "Registrant" means a person who has registered
3-20 with the secretary and has been issued a health spa operator's
3-21 certificate of registration.
3-22 (n) "Secretary" means the Texas secretary of state.
3-23 (o) <(9)> "Seller" means a person who owns or operates
3-24 a health spa or who offers for sale the right to use the facilities
3-25 or the services of the health spa.
4-1 (p) <(10)> "Services" means programs, plans, guidance,
4-2 or instruction that a health spa provides for its members,
4-3 including diet planning, exercise instruction, exercise programs,
4-4 and instructional classes.
4-5 SECTION 2. Section 8, Health Spa Act (Article 5221l,
4-6 Vernon's Texas Civil Statutes), is amended to read as follows:
4-7 Sec. 8. REGISTRATION. (a) A person may not operate a
4-8 health spa or offer for sale or sell memberships in a health spa in
4-9 this state unless the person possesses a valid health spa
4-10 operator's certificate of registration.
4-11 (b) Each applicant for a health spa operator's certificate
4-12 of registration shall file with the secretary of state for each
4-13 location an application for registration containing the following
4-14 information:
4-15 (1) the legal name, address, and telephone number of
4-16 the applicant;
4-17 (2) the trade name by which the applicant does
4-18 business, and if incorporated, the name registered with the
4-19 secretary of state, the location of the registered office, and the
4-20 name and address of any person who directly or indirectly owns or
4-21 controls 10 percent or more of the outstanding shares of stock in
4-22 the corporation;
4-23 (3) the date on which the applicant became the owner
4-24 and operator of the business;
4-25 (4) the address of the health spa;
5-1 (5) the type of available or proposed facilities and
5-2 services offered at the location;
5-3 (6) samples of all contracts used by the seller in
5-4 connection with the sale of memberships.
5-5 (c) Each application for a health spa operator's certificate
5-6 of registration shall be accompanied by proof of the security
5-7 required by this Act and payment of the required fee for issuance
5-8 of the certificate.
5-9 (d) All certificates of registration are valid for a period
5-10 of one year from the date of issuance and are renewable as provided
5-11 by the secretary.
5-12 (e) The registrant shall amend the application for
5-13 registration not later than the 90th day after the day on which a
5-14 change in the information provided in the statement occurs.
5-15 (f) A health spa operator's certificate of registration is
5-16 not transferrable. In the event a registrant sells or otherwise
5-17 transfers ownership in a registered health spa location, the new
5-18 owner shall file an application of registration as required by this
5-19 section no later than the fifth day following the date of sale.
5-20 (g) The secretary may charge each applicant for a
5-21 certificate of registration a reasonable fee not to exceed $100 to
5-22 cover the cost of application or renewal.
5-23 (h) The secretary, after notice and hearing, may refuse to
5-24 issue or may permanently revoke or suspend for a definite period of
5-25 time a certificate of registration if the secretary finds that the
6-1 applicant or registrant:
6-2 (1) furnished false information on any application,
6-3 report, or other document filed with the secretary;
6-4 (2) failed to provide the contract disclosure language
6-5 required by Section 12 of this Act; or
6-6 (3) failed to file and maintain the bond or post other
6-7 security for each location as required by Section 10 of this Act.
6-8 (i) A registrant shall prominently post the health spa
6-9 operator's certificate of registration at each registered location
6-10 <A health spa shall file a registration statement with the
6-11 secretary of state before offering for sale or selling memberships
6-12 in this state. The health spa shall file a separate registration
6-13 statement for each location at which the health spa operates. The
6-14 registration statement must contain:>
6-15 <(1) the name and address of the health spa;>
6-16 <(2) the name and address of any person who directly
6-17 or indirectly owns or controls 10 percent or more of the
6-18 outstanding shares of stock in the health spa;>
6-19 <(3) the type of available or proposed facilities and
6-20 services offered at that location; and>
6-21 <(4) the approximate size of the health spa location
6-22 measured in square feet.>
6-23 <(b) The registration statement must also contain either:>
6-24 <(1) a full and complete disclosure of any litigation,
6-25 or any complaint filed with a governmental authority, relating to
7-1 the failure to open or the closing of a health spa brought against
7-2 the owners, officers, or directors of a health spa that was
7-3 completed within the past two years or is currently pending; or>
7-4 <(2) a notarized statement that states that there has
7-5 been no litigation, or complaint filed with a governmental
7-6 authority, relating to the opening or closing of the health spa
7-7 within the past two years.>
7-8 <(c) The health spa shall update the statement not later
7-9 than the 90th day after the day on which a change in the
7-10 information required in the statement occurs.>
7-11 <(d) Each health spa registering under this section shall
7-12 maintain a copy of the registration statement filed for each
7-13 location in the records of the health spa. The health spa shall
7-14 allow a current member or a prospective purchaser of a membership
7-15 to inspect a registration statement on request.>
7-16 <(e) The secretary of state may charge each health spa that
7-17 files a registration statement a reasonable fee not to exceed $100
7-18 to cover the cost of filing. The secretary of state may not
7-19 require a health spa to provide information other than that
7-20 provided in the registration statement>.
7-21 SECTION 3. Section 9, Health Spa Act (Article 5221l,
7-22 Vernon's Texas Civil Statutes), is amended to read as follows:
7-23 Sec. 9. ESCROW. (a) Except as provided by Subsection (e)
7-24 of this section, a registrant <health spa> or its assignee or agent
7-25 that accepts prepayments for its memberships shall deposit all of
8-1 the funds received as prepayments in an escrow account established
8-2 with a financial institution whose accounts are insured by the
8-3 Federal Deposit Insurance Corporation or the Federal Savings and
8-4 Loan Insurance Corporation, which shall hold the funds as escrow
8-5 agent for the benefit of the members that prepay. The registrant
8-6 <health spa> shall deposit prepayments received at least as often
8-7 as biweekly and shall make the first deposit not later than the
8-8 14th day after the day on which the registrant or its agent <spa>
8-9 accepts the first prepayment. Not later than the 14th day after
8-10 the day on which the first prepayment is received, the registrant
8-11 <spa> shall give the secretary of state a notarized statement that
8-12 identifies the financial institution in which the prepayments are
8-13 held in escrow and the name in which the account is held, together
8-14 with a signed statement on a form approved by the secretary of
8-15 state which authorizes the secretary to make inquiries of the
8-16 financial institution regarding the funds in escrow. The
8-17 prepayments shall be held in escrow until the 30th day after the
8-18 date that the health spa fully opens for business.
8-19 (b) Except as provided by Subsection (c) of this section, if
8-20 a health spa does not fully open for business before the 181st day
8-21 after the date it first sells a membership in the health spa or if
8-22 the spa does not remain open for 30 days, the members whose fees
8-23 are held in escrow under this section shall receive a full refund
8-24 of their membership fees from the escrow agent.
8-25 (c) If another health spa operated by the same registrant
9-1 <seller> is located not more than 10 miles from the proposed
9-2 location of a new health spa and if the person purchasing the
9-3 membership is authorized to use these other facilities, a member of
9-4 the new spa whose fees are held in escrow under this section is
9-5 entitled to receive a full refund of the membership fees from the
9-6 escrow agent if the new spa does not fully open for business before
9-7 the 361st day after the date on which the new spa first sells a
9-8 membership or if the new spa does not remain open for 30 days.
9-9 (d) If the health spa remains open for 30 days after the
9-10 date the health spa initially fully opens for business, the
9-11 registrant <health spa> may withdraw the escrowed funds at its
9-12 discretion if the registrant <health spa> files an affidavit with
9-13 the secretary of state certifying that all obligations of the
9-14 health spa for which a lien could be claimed under Chapter 53,
9-15 Property Code, have been paid and if no person is eligible to claim
9-16 a lien under that chapter during the period the registrant or its
9-17 agent <health spa> accepts prepayments.
9-18 (e) Subject to the limitations of this subsection, a
9-19 registrant who is the <an> owner of one or more health spas in
9-20 operation in this state is not required to escrow prepayments on
9-21 the opening of an additional health spa in this state if the health
9-22 spas in operation have operated for at least two years preceding
9-23 the date the first membership in the additional spa is sold and if
9-24 none of the members of the spas in operation have initiated
9-25 litigation against the registrant <owner's spas> relating to the
10-1 failure to open or the closing of a health spa or filed a complaint
10-2 relating to the failure to open or the closing of a health spa with
10-3 any governmental authority in the state against the registrant or
10-4 any of the owners, officers, or directors of the health spa. A
10-5 registrant <An owner of a health spa> is not required to escrow
10-6 prepayments because of litigation or a complaint based on the
10-7 closing of a health spa if that closing was caused by a fire,
10-8 flood, or other natural disaster and if the closing is temporary
10-9 and does not exceed one month. A registrant <An owner> is not
10-10 required to escrow prepayments because of litigation or a complaint
10-11 based on the closing of a health spa if that closing is due to the
10-12 relocation of the spa to a site not more than 10 miles from the
10-13 original location and if the time elapsed between closing the spa
10-14 at the old location and reopening at the new location does not
10-15 exceed one month.
10-16 (f) The total number of spas opened by the registrant
10-17 <owner> during any two-year period to which the exception provided
10-18 by Subsection (e) of this section applies is limited to twice the
10-19 number of spas in operation on the first day of the two-year
10-20 period.
10-21 (g) For the purposes of this section, the date on which a
10-22 health spa fully opens is the date on which all services of the spa
10-23 that were advertised before the opening or promised to be made
10-24 available, whether or not contained in the contract, are available
10-25 for use by its members.
11-1 SECTION 4. Section 10, Health Spa Act (Article 5221l,
11-2 Vernon's Texas Civil Statutes), is amended to read as follows:
11-3 Sec. 10. SECURITY. (a) Except as provided by Section 10B
11-4 of this Act, the secretary may not issue a certificate of
11-5 registration, unless the applicant first files a surety bond or
11-6 posts other security in such form as the secretary may prescribe.
11-7 (b) If a surety bond is filed, it shall be continuous and
11-8 remain in effect until cancelled by the surety company with notice
11-9 as provided in this section. If a bond is cancelled, the
11-10 certificate of registration is suspended on the effective date of
11-11 cancellation.
11-12 (c) The bond shall be a surety bond issued by a company
11-13 authorized to do business in this state and shall be in conformity
11-14 with the Insurance Code.
11-15 (d) Other security need not be posted annually so long as
11-16 the applicable amount specified in this section remains posted. If
11-17 other security is posted, the interest from the security shall go
11-18 to the person posting the security. The other security shall be in
11-19 such form as the secretary may deem appropriate.
11-20 (e) The bond or other security shall be payable in favor of
11-21 the state and shall be held for the benefit of the state and for
11-22 the registrant's members who have been administratively adjudicated
11-23 to have suffered actual financial losses due to the closing of the
11-24 registrant's health spa.
11-25 (f) Actual financial loss shall mean and be limited to those
12-1 sums which have been paid under a health spa contract to a
12-2 registrant or a registrant's assignee and which at the time the
12-3 health spa is closed are unearned. Actual financial losses shall
12-4 be calculated by multiplying the gross monthly payment by the total
12-5 of months remaining on a contract at the time the health spa closes
12-6 minus any payments not made. For the purposes of this section:
12-7 (1) The gross monthly payment shall be calculated by
12-8 determining the total of payments, including down payments and
12-9 initiation fees required by the contract, divided by the total
12-10 number of months in the term of the contract; and
12-11 (2) The date of closing and the date of the contract
12-12 expiration shall be rounded to the nearest full month. The total
12-13 months remaining on the contract shall be calculated by subtracting
12-14 the date of closing from the expiration date of the contract. The
12-15 result shall be expressed in whole months.
12-16 (g) The amount of the security required under Subsection (a)
12-17 of this section is $20,000.
12-18 (h) The registrant shall maintain the bond or other security
12-19 in the amount provided in Subsection (g) of this section in effect
12-20 for two years after the date on which the health spa closes or
12-21 until the secretary of state determines that each claim to which
12-22 the bond or other security deposit is subject has been satisfied or
12-23 foreclosed by law.
12-24 (i) The following provisions shall be applicable to all
12-25 bonds and other security required by this section:
13-1 (1) Regardless of the number of years the bond or
13-2 other security shall continue in force or the number of premiums
13-3 payable or paid, the limit of the surety's or obligor's liability
13-4 stated in the bond or other security shall not be cumulative from
13-5 year to year or period to period.
13-6 (2) The liability of the surety or obligor is
13-7 exclusively conditioned upon a final administrative order by the
13-8 secretary, and the bond or other security posted hereunder is
13-9 subject to no other type of claim.
13-10 (j) The surety or obligor must provide written notification
13-11 to the secretary at least 60 days prior to the cancellation of any
13-12 bond or other security required by this section. Any other
13-13 security on file with the secretary shall remain on file with the
13-14 secretary for two years after the registrant ceases business or at
13-15 such later time as the secretary may determine that no claims exist
13-16 against the security. <(a) Not later than the 30th day before the
13-17 date a health spa opens a location for the use of its members, the
13-18 health spa shall file with the secretary of state a surety bond
13-19 issued by a surety company licensed to do business in this state,
13-20 or, in lieu of and in equal amount to the bond, a security deposit
13-21 in the form of a certificate of deposit, letter of credit, or other
13-22 negotiable instrument issued by a financial institution in this
13-23 state whose deposits are insured by the Federal Deposit Insurance
13-24 Corporation or the Federal Savings and Loan Insurance Corporation.
13-25 The bond or other security deposit shall be payable in favor of the
14-1 state and shall be held for the benefit of any members of the
14-2 health spa who suffer financial losses due to the insolvency or
14-3 cessation of operation of the health spa. "Financial losses" shall
14-4 mean and be limited to any unused or unearned portion of such
14-5 member's dues or fees. Such a member may bring an action based on
14-6 the bond and recover against the surety regardless of the number of
14-7 claimants or claims filed against the bond, but the liability of
14-8 the surety may not exceed the aggregate amount of the bond. If the
14-9 claims filed against the bond exceed the amount of the bond, the
14-10 surety shall pay the amount of the bond to the secretary of state
14-11 for distribution to the claimants on a pro rata basis. The surety
14-12 is relieved of liability under the bond on payment of the amount to
14-13 the secretary of state.>
14-14 <(b) The amount of the security required under Subsection
14-15 (a) of this section is $20,000. If a claim is paid from the bond
14-16 or other security deposit, the health spa must post additional
14-17 security, not later than the 20th day after the date on which the
14-18 claim is paid, to restore the amount of the security to $20,000.>
14-19 <(c) The health spa shall maintain the bond or other
14-20 security deposit in the amount provided in Subsection (b) of this
14-21 section in effect for two years after the date on which the health
14-22 spa ceases business or until the secretary of state determines that
14-23 each claim to which the bond or other security deposit is subject
14-24 has been satisfied or foreclosed by law.>
14-25 <(d) The following provisions shall be applicable to all
15-1 bonds issued hereunder:>
15-2 <(1) Regardless of the number of years the bond shall
15-3 continue in force or the number of premiums payable or paid, the
15-4 limit of the surety's liability stated in the bond shall not be
15-5 cumulative from year to year or period to period.>
15-6 <(2) The surety shall not be liable through a bond for
15-7 punitive damages or for civil or criminal penalties assessed
15-8 against a health spa, its individual owners, or its employees.>
15-9 <(3) The bond written by a surety hereunder shall be
15-10 continuous until cancelled by the surety or terminated by the
15-11 health spa only upon giving 90 days prior notice to the secretary
15-12 of state of such cancellation.>
15-13 <(4) A surety hereunder shall not be liable for any
15-14 claim brought or suit filed against a bond if the claim or filing
15-15 of a suit occurs more than two years from the last effective date
15-16 of the bond.>
15-17 SECTION 5. The Health Spa Act (Article 5221l, Vernon's Texas
15-18 Civil Statutes) is amended by adding Section 10A to read as
15-19 follows:
15-20 Sec. 10A. ADJUDICATION OF CLAIMS. (a) Within 45 days from
15-21 the date the secretary first discovers that a health spa has
15-22 closed, the secretary shall publish a display advertisement in a
15-23 newspaper of general circulation in the county or nearest county in
15-24 which the health spa is located notifying the public of the fact
15-25 that the health spa is closed and that a health spa member has 90
16-1 days from the date of the first notice to perfect a claim under the
16-2 security posted pursuant to Section 10 of this Act.
16-3 Contemporaneously with the publication of the notice, the secretary
16-4 shall notify the surety company or obligor of the pending
16-5 administrative action.
16-6 (b) The notice shall be published for two consecutive
16-7 Saturdays and Sundays and shall inform those affected of the
16-8 procedures for perfecting a claim against the security. The
16-9 secretary shall have a claim against the security for reasonable
16-10 expenses incurred in publishing the notice which shall not exceed
16-11 $3,000.
16-12 (c) All claims received by the secretary after 90 days
16-13 following the date of the first notice are barred and shall not be
16-14 considered by the secretary. If the total of claims evidencing
16-15 actual financial loss exceeds the amount of the security, the
16-16 secretary shall adjudicate the claims on a pro rata basis by
16-17 dividing the amount of the security, after first deducting the
16-18 actual costs for publication of the notice, by the total amount of
16-19 the claims in order to ascertain a percentage to be applied to each
16-20 claim.
16-21 (d) The secretary shall adopt and publish such rules and
16-22 regulations as are necessary to determine claims and to insure the
16-23 prompt and fair distribution of the proceeds from the bond or other
16-24 security. Rules adopted by the secretary are subject to the
16-25 Administrative Procedure and Texas Register Act (Article 6252-13a,
17-1 Vernon's Texas Civil Statutes).
17-2 SECTION 6. The Health Spa Act (Article 5221l, Vernon's Texas
17-3 Civil Statutes) is amended by adding Section 10B to read as
17-4 follows:
17-5 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) As
17-6 provided in this section, a health spa registrant may apply for an
17-7 exemption from the security requirements of Section 10 of this Act.
17-8 To qualify for an exemption, a registrant must first file an
17-9 application for an exemption on a form approved by the secretary.
17-10 The application shall be verified by the person authorized by the
17-11 secretary to make the application. Upon approval of the exemption,
17-12 the secretary shall issue a certificate of exemption. A registrant
17-13 who has been granted a certificate of exemption by the secretary
17-14 shall not be required to post a bond or other security as required
17-15 by Section 10 of this Act.
17-16 (b) A health spa registrant may apply for an exemption from
17-17 the security requirements of Section 10 if it meets the following
17-18 criteria:
17-19 (1) the registrant does not require a health spa
17-20 consumer to:
17-21 (A) execute a membership contract for a term
17-22 exceeding 31 days;
17-23 (B) execute a note or a retail installment
17-24 contract;
17-25 (C) authorize a draw or other recurring debit on
18-1 a financial institution to the favor of the registrant or the
18-2 registrant's assignee;
18-3 (D) pay an initiation fee or other fee except
18-4 monthly dues; or
18-5 (E) prepay for a term exceeding 31 days; and
18-6 (2) the registrant does not solicit or offer any plan
18-7 or program which contains any of the elements identified in
18-8 Paragraph (1) of this subsection.
18-9 (c) Alternatively, a health spa registrant may apply for an
18-10 exemption from the security requirements of Section 10 if:
18-11 (1) the registrant owns and operates at least one
18-12 health spa located in this state which has operated continuously at
18-13 one location for at least five years; and
18-14 (2) none of the members of a health spa owned by the
18-15 registrant has initiated or filed a complaint with any governmental
18-16 authority in this state relating to the closing of a health spa
18-17 owned by the registrant or the failure of a health spa owned by the
18-18 registrant to open.
18-19 (d) If a health spa registrant, who has claimed an exemption
18-20 provided by Subsection (c), closes a health spa or fails to open a
18-21 health spa and a member of the health spa initiates or files a
18-22 complaint with any governmental authority in this state relating to
18-23 the closing of the health spa or the failure of the health spa to
18-24 open, the registrant may still claim an exemption under Subsection
18-25 (c) for all health spas operating on the date the health spa closed
19-1 or failed to open; however, the registrant shall provide the
19-2 security required by Section 10 for all health spas the registrant
19-3 opens after the date the spa closed or failed to open.
19-4 (e) If a health spa registrant, who has claimed an exemption
19-5 provided by Subsection (c), has closed or failed to open more than
19-6 one health spa and a member of one of the affected health spas
19-7 initiates or files a complaint with any governmental authority in
19-8 this state relating to the closing of a health spa owned by the
19-9 registrant or the failure of a health spa owned by the registrant
19-10 to open, the registrant shall no longer qualify for an exemption
19-11 under Subsection (c) and shall be subject to the provisions of
19-12 Subsection (i).
19-13 (f) If a health spa registrant, who has claimed an exemption
19-14 provided by Subsection (c), is forced, due to an act of God or an
19-15 act of a governmental authority beyond the control of the
19-16 registrant, to move or temporarily close the location of the health
19-17 spa which provides the basis for the exemption, the registrant may
19-18 still claim an exemption under Subsection (c) as long as the spa is
19-19 not moved more than 10 miles from the original facility. This
19-20 subsection shall apply regardless of whether the move is temporary
19-21 or permanent.
19-22 (g) An exemption provided by this section is not
19-23 transferrable. If a health spa registrant sells or otherwise
19-24 transfers ownership in a health spa for which an exemption from the
19-25 security requirement has been granted, the new owner shall file a
20-1 new application for an exemption or post the security required by
20-2 Section 10 of this Act no later than the fifth day following the
20-3 date of the sale or transfer.
20-4 (h) To claim an exemption provided by Subsection (c), a
20-5 registrant must have continuously owned and operated at least one
20-6 health spa which is eligible for an exemption under that
20-7 subsection. A newly acquired health spa, regardless of its
20-8 previous eligibility for an exemption, may not provide the basis
20-9 for an exemption.
20-10 (i) The secretary, after notice and hearing, may refuse to
20-11 issue or may permanently revoke a registrant's certificate of
20-12 exemption if the secretary finds that the registrant:
20-13 (1) furnished false information on the application for
20-14 exemption; or
20-15 (2) no longer qualifies for an exemption.
20-16 SECTION 7. Section 11, Health Spa Act (Article 5221l,
20-17 Vernon's Texas Civil Statutes), is amended to read as follows:
20-18 Sec. 11. PREPAYMENTS. (a) A registrant <health spa> may
20-19 offer for sale or sell memberships before the date on which the
20-20 health spa opens for business.
20-21 (b) Except as provided by Subsection (c) of this section, if
20-22 the health spa does not open before the 181st day after the day on
20-23 which a membership is prepaid, the person who made the prepayment
20-24 is entitled to a full refund of the amount prepaid in the manner
20-25 provided by Subsection (b) of Section 9 of this Act.
21-1 (c) If another health spa operated by the same seller is
21-2 located not more than 10 miles from the proposed location of a new
21-3 health spa and if the person purchasing the membership is
21-4 authorized to use these other facilities, each person who made a
21-5 prepayment for a membership in the new spa is entitled to a full
21-6 refund of the amount prepaid in the manner provided by Subsection
21-7 (c) of Section 9 of this Act if the new spa does not open before
21-8 the 361st day after the date on which the first prepayment of a
21-9 membership in the new spa is received.
21-10 SECTION 8. Section 12, Health Spa Act (Article 5221l,
21-11 Vernon's Texas Civil Statutes), is amended to read as follows:
21-12 Sec. 12. Contract Terms. (a) A registrant, unless exempted
21-13 from the security requirements by Subsection (b) of Section 10B of
21-14 this Act, shall <The health spa must> deliver a fully completed
21-15 copy of a contract to a purchaser before the contract is signed.
21-16 The contract constitutes the entire agreement between the seller
21-17 and the purchaser. The contract must be in writing and must be
21-18 signed by the purchaser. If the health spa is not open at the time
21-19 the contract is entered, the contract must clearly state the
21-20 proposed opening date of the health spa. At the time of delivery
21-21 the health spa must give the purchaser a written receipt for any
21-22 payment made by the purchaser under the contract.
21-23 (b) If the contract is financed through a retail installment
21-24 contract or note, the contract may not require the purchaser to
21-25 make payments or finance the contract for more than five years
22-1 after the date on which the contract is made <If a health spa has
22-2 been in operation in this state for two years or less, the contract
22-3 may not require the purchaser to make payments or to finance the
22-4 contract for more than two years after the date on which the
22-5 contract is made. If the health spa has been in operation in this
22-6 state for more than two years, the contract may require the
22-7 purchaser to make payments or to finance the contract for a period
22-8 not to exceed five years after the date on which the contract is
22-9 made. The term of a contract may not be measured by the life of
22-10 the purchaser. If the purchaser is required by the contract to pay
22-11 a renewal fee of not less than $50, the contract may contain a
22-12 renewal option for as long as two additional years after the date
22-13 on which the contract expires>.
22-14 (c) If the contract is not financed, the terms of the
22-15 contract may not exceed three years.
22-16 (d) When the terms of two or more contracts between the same
22-17 parties overlap for any period, the contracts are considered as one
22-18 contract for the purpose of this Act.
22-19 (e) <(d)> A contract may not require or entail the execution
22-20 of a note or series of notes by the purchaser that when separately
22-21 negotiated will cut off as to third parties a right of action or
22-22 defense that the purchaser may have against the seller.
22-23 (f) <(e)> Each contract shall state in at least 10-point
22-24 type that is boldfaced, capitalized, underlined, or otherwise set
22-25 out from surrounding written material so as to be conspicuous:
23-1 (1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT
23-2 UNTIL YOU READ IT OR IF IT CONTAINS BLANK SPACES."
23-3 (2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER
23-4 OF THIS HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE
23-5 HEALTH SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU
23-6 SIGN THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS
23-7 CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO
23-8 THE FOLLOWING ADDRESS:
23-9 (Address of the health spa home office)."
23-10 (3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES
23-11 NOT PROVIDE FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU
23-12 ARE ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE
23-13 FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY CANCEL THIS CONTRACT BY
23-14 MAILING A NOTICE TO THE HEALTH SPA STATING YOUR DESIRE TO CANCEL
23-15 THIS CONTRACT, ACCOMPANIED BY PROOF OF PAYMENT ON THE CONTRACT.
23-16 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
23-17 FOLLOWING ADDRESS:
23-18 (Address of the health spa home office)."
23-19 "YOU MAY ALSO BE ENTITLED TO FILE A CLAIM FOR A REFUND OF YOUR
23-20 UNUSED MEMBERSHIP FEES AGAINST THE BOND OR OTHER SECURITY POSTED BY
23-21 THE HEALTH SPA WITH THE TEXAS SECRETARY OF STATE. TO MAKE A CLAIM
23-22 AGAINST THE SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH
23-23 PROOF OF PAYMENTS MADE ON THE CONTRACT TO THE TEXAS SECRETARY OF
23-24 STATE. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
23-25 FOLLOWING ADDRESS:
24-1 OFFICE OF THE SECRETARY OF STATE
24-2 STATUTORY DOCUMENTS SECTION
24-3 P.O. BOX 12887
24-4 AUSTIN, TEXAS 78711-2887."
24-5 (4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY
24-6 DISABLED AFTER THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR
24-7 ESTATE MAY CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF
24-8 YOUR UNUSED MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA
24-9 STATING YOUR DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY
24-10 REQUIRE PROOF OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE
24-11 MAILED BY CERTIFIED MAIL TO THE FOLLOWING ADDRESS:
24-12 (Address of the health spa home office)."
24-13 (g) If the registrant offers for sale or sells memberships
24-14 before the date on which the spa opens for business, each contract
24-15 shall state in at least 10-point type that is boldfaced,
24-16 capitalized, underlined, or otherwise set out from surrounding
24-17 written material so as to be conspicuous:
24-18 "IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the date on which
24-19 the 181st day after the date on which the membership is prepaid
24-20 falls) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR THIRTY DAYS, YOU
24-21 ARE ENTITLED TO A FULL REFUND OF THE MONEY YOU PREPAID. HOWEVER,
24-22 IF ANOTHER HEALTH SPA, OPERATED BY (insert: the name of the health
24-23 spa registrant), IS LOCATED WITHIN 10 MILES OF (insert: the
24-24 address of the proposed location of the new spa) AND IF YOU ARE
24-25 AUTHORIZED TO USE THE OTHER FACILITIES, YOU ARE ENTITLED TO RECEIVE
25-1 A FULL REFUND OF YOUR MEMBERSHIP FEES ONLY IF THIS LOCATION DOES
25-2 NOT FULLY OPEN FOR BUSINESS BEFORE (insert: the date that is the
25-3 361st day after the day the new spa first sells memberships) OR IF
25-4 THE NEW SPA DOES NOT REMAIN OPEN FOR 30 DAYS."
25-5 (h) Each contract for which a finance charge within the
25-6 meaning of the Truth-in-Lending Act or Regulation Z is charged or
25-7 collected shall state in at least 10-point type that is boldfaced,
25-8 capitalized, underlined, or otherwise set out from surrounding
25-9 written material so as to be conspicuous:
25-10 "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL
25-11 CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE
25-12 SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE
25-13 PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED
25-14 AMOUNTS PAID BY THE DEBTOR HEREUNDER."
25-15 SECTION 9. Section 13, Health Spa Act (Article 5221l,
25-16 Vernon's Texas Civil Statutes), is amended to read as follows:
25-17 Sec. 13. Cancellation of Contracts. (a) A member may
25-18 cancel a contract before the fourth business day after the date on
25-19 which the contract is signed by notifying the health spa registrant
25-20 of the cancellation in writing. Written notification is considered
25-21 given if the notification is mailed by certified mail to the home
25-22 office of the health spa registrant and postmarked not later than
25-23 midnight of the third business day. The health spa registrant
25-24 shall refund all money paid to the purchaser exercising the right
25-25 to cancel.
26-1 (b) A member may cancel a contract on written notice by
26-2 certified mail to the home office of the health spa registrant if
26-3 the health spa registrant goes out of business and fails to provide
26-4 facilities within 10 miles or moves its facilities more than 10
26-5 miles from the location in which the member is enrolled. A member
26-6 may cancel a contract in the same manner if the health spa
26-7 registrant fails to provide advertised services. <If a contract is
26-8 canceled under this subsection, the member is liable for an amount
26-9 equal to the value of services received and facilities used under
26-10 the contract up to the date of the cancellation, and if the member
26-11 has paid money under the contract in excess of that amount the
26-12 health spa shall promptly refund to the member the excess.>
26-13 (c) A purchaser of a membership may cancel a contract if the
26-14 member dies or becomes totally and permanently disabled after the
26-15 date on which the contract takes effect. <The purchaser remains
26-16 liable for an amount equal to the value of services received and
26-17 facilities used by the member under the contract up to the day on
26-18 which the death occurred or the disability was incurred. The
26-19 health spa shall make a pro rata refund of funds paid under the
26-20 contract in an amount based on the time remaining in the contract
26-21 term up to a maximum of 50 percent of the total contract amount.>
26-22 The health spa registrant may require a purchaser or the
26-23 purchaser's estate to provide reasonable proof of total and
26-24 permanent disability or death.
26-25 (d) If a purchaser or an estate elects to cancel a
27-1 membership contract pursuant to Subsection (b) or (c) of this
27-2 section the health spa registrant shall refund to the purchaser or
27-3 the purchaser's estate any unearned sums paid under the contract.
27-4 "Unearned sums" shall be calculated by multiplying the gross
27-5 monthly payment by the total of months remaining on a contract at
27-6 the time of cancellation minus any payments not made. For the
27-7 purposes of this section:
27-8 (1) The gross monthly payment shall be calculated by
27-9 determining the total of payments, including down payments and
27-10 initiation fees required by the contract, divided by the total
27-11 number of months in the term of the contract.
27-12 (2) The date of cancellation and the date of the
27-13 contract expiration shall be rounded to the nearest full month.
27-14 The total months remaining on the contract shall be calculated by
27-15 subtracting the date of cancellation from the expiration date of
27-16 the contract. The result shall be expressed in whole months.
27-17 (e) A health spa registrant shall make a refund required
27-18 under this section before the 31st day after the date the health
27-19 spa registrant receives the notice of cancellation accompanied by
27-20 proof of payment. The receipt given to the purchaser by the health
27-21 spa at the time the purchaser made a payment under the contract
27-22 constitutes <adequate> proof of payment.
27-23 SECTION 10. Section 15, Health Spa Act (Article 5221l,
27-24 Vernon's Texas Civil Statutes), is amended to read as follows:
27-25 Sec. 15. Unenforceable Contracts. (a) A contract or
28-1 assignment of a contract that does not comply with this Act is void
28-2 and unenforceable as contrary to public policy.
28-3 (b) If a seller does not possess a valid health spa
28-4 operator's certificate of registration at the time of entering into
28-5 any contract with the purchaser, the contract between the purchaser
28-6 and the seller is void and unenforceable as contrary to public
28-7 policy.
28-8 (c) A contract entered into in reliance on willful and
28-9 false, fraudulent, or misleading information, representation,
28-10 notice, or advertisement of the health spa owner, <or> operator or
28-11 seller is void and unenforceable.
28-12 SECTION 11. Section 17, Health Spa Act (Article 5221l,
28-13 Vernon's Texas Civil Statutes), is amended to read as follows:
28-14 Sec. 17. Prohibited Activities. (a) A seller or registrant
28-15 <health spa> may not offer a special offer or discount unless the
28-16 special offer or discount is available to all prospective members.
28-17 This subsection does not prohibit a health spa from offering
28-18 special group prices or group discounts.
28-19 (b) A seller or registrant <health spa> may not make a
28-20 material misrepresentation to a current member, prospective member,
28-21 or purchaser of a membership contract regarding:
28-22 (1) the qualifications of the staff;
28-23 (2) the availability, quality, or extent of the
28-24 facilities or services;
28-25 (3) the results obtained through exercise, dieting,
29-1 weight control, or physical fitness conditioning programs;
29-2 (4) membership rights; or
29-3 (5) the period that a special offer or discount will
29-4 be available.
29-5 (c) A health spa registrant may not fail or refuse to:
29-6 (1) file or update the registration statements
29-7 required by Section 8 of this Act;
29-8 (2) establish the escrow account required by Section 9
29-9 of this Act; or
29-10 (3) maintain the security required by Section 10 of
29-11 this Act in full force and effect.
29-12 (d) A health spa registrant may not advertise that it is
29-13 bonded by the state.
29-14 (e) A health spa registrant may not sell a membership plan
29-15 not included in the list required by Section 16 of this Act.
29-16 SECTION 12. Section 18, Health Spa Act (Article 5221l,
29-17 Vernon's Texas Civil Statutes), is amended to read as follows:
29-18 Sec. 18. Injunction. (a) If it appears that a person is in
29-19 violation of, has violated, or is about to violate this Act, the
29-20 attorney general or a district or county attorney may institute an
29-21 action for injunctive relief to restrain the person from continuing
29-22 the violation and for civil penalties authorized by Section 20 <A
29-23 district attorney, county attorney, or the attorney general may sue
29-24 in a court of competent jurisdiction to enjoin or restrain a person
29-25 from engaging in conduct described by Section 17 of this Act>.
30-1 (b) A civil action filed under this section shall be filed
30-2 in a district court in Travis County or in the county in which the
30-3 defendant resides <Except as prescribed by Subsection (c) of this
30-4 section, a district attorney, county attorney, or attorney general
30-5 who intends to sue under this section shall notify the defendant of
30-6 the alleged prohibited conduct not later than the seventh day
30-7 before the date the suit is filed.>
30-8 <(c) The notice prescribed by Subsection (b) of this section
30-9 is not required if the district attorney, county attorney, or
30-10 attorney general intends to request that the court issue a
30-11 temporary restraining order>.
30-12 SECTION 13. Section 20, Health Spa Act (Article 5221l,
30-13 Vernon's Texas Civil Statutes), is amended to read as follows:
30-14 Sec. 20. Civil Penalties. (a) A person who violates this
30-15 Act is subject to a civil penalty of not more than $1,000 for each
30-16 violation, not to exceed $25,000 in total penalties.
30-17 (b) A person who violates the terms of an injunction issued
30-18 in an action brought under Section 18 of this Act is liable to the
30-19 state for a civil penalty of not more than $25,000 for a single
30-20 violation and not more than $50,000 for all violations of the
30-21 injunction. A district attorney, county attorney, or the attorney
30-22 general may bring suit to recover the civil penalty in the court
30-23 that issued the original injunction.
30-24 (c) The attorney general, a district or county attorney, and
30-25 the secretary may recover reasonable expenses incurred in obtaining
31-1 injunctive relief, civil penalties, or both, including court costs,
31-2 reasonable attorney's fees, investigative costs, witness fees, and
31-3 deposition expenses.
31-4 (d) A penalty collected under this section by the attorney
31-5 general shall be deposited to the credit of the general revenue
31-6 fund. A penalty collected under this section by a district or
31-7 county attorney shall be deposited to the credit of the general
31-8 fund of the county.
31-9 SECTION 14. Section 22(a), Health Spa Act (Article 5221l,
31-10 Vernon's Texas Civil Statutes), is amended to read as follows:
31-11 (a) A person who knowingly or intentionally operates or
31-12 attempts to operate a health spa in violation of Section 8, 9, <or>
31-13 10, or 11 of this Act commits an offense. An offense under this
31-14 subsection is a Class A misdemeanor.
31-15 SECTION 15. Section 25, Health Spa Act (Article 5221l,
31-16 Vernon's Texas Civil Statutes), is amended to read as follows:
31-17 Sec. 25. Applicability. <(a)> This <Except as provided by
31-18 Subsection (b) of this section, this> Act applies to all health
31-19 spas <a health spa> in operation on or after September 1, 1985.
31-20 <(b) Section 9 of this Act does not apply to a health spa
31-21 that began operation before September 1, 1985.>
31-22 SECTION 16. The Health Spa Act (Article 5221l, Vernon's
31-23 Texas Civil Statutes) is amended by adding Section 26 to read as
31-24 follows:
31-25 Sec. 26. RULE-MAKING AUTHORITY. The secretary shall adopt
32-1 rules and regulations, promulgate administrative orders, and take
32-2 all action necessary to assure compliance with the intent and
32-3 purpose of this Act.
32-4 SECTION 17. Sections 7, 7A, and 14 of the Health Spa Act
32-5 (Article 5221l, Vernon's Texas Civil Statutes) are repealed.
32-6 SECTION 18. Sections 6.09(a) and (b), Chapter 1039, Acts of
32-7 the 71st Legislature, Regular Session, 1989, are repealed.
32-8 SECTION 19. (a) There is appropriated to the Office of the
32-9 Attorney General from the general revenue fund for the fiscal
32-10 biennium ending August 31, 1995, the amounts awarded to the office
32-11 under Section 20 of the Health Spa Act (Article 5221l, Vernon's
32-12 Texas Civil Statutes), as amended by this Act, to be used to
32-13 reimburse the office for the office's expenses related to the
32-14 litigation for which the expenses were awarded.
32-15 (b) There is appropriated to the secretary of state from the
32-16 general revenue fund for the fiscal biennium ending August 31,
32-17 1995, the amounts awarded to the office under Section 20 of the
32-18 Health Spa Act (Article 5221l, Vernon's Texas Civil Statutes), as
32-19 amended by this Act, to be used to reimburse the secretary for the
32-20 secretary's expenses related to the litigation for which the
32-21 expenses were awarded.
32-22 SECTION 20. This Act takes effect September 1, 1993.
32-23 SECTION 21. The importance of this legislation and the
32-24 crowded condition of the calendars in both houses create an
32-25 emergency and an imperative public necessity that the
33-1 constitutional rule requiring bills to be read on three several
33-2 days in each house be suspended, and this rule is hereby suspended.