By Giddings H.B. No. 2243
Substitute the following for H.B. No. 2243:
By Thompson of Tarrant C.S.H.B. No. 2243
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of health spas.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 6, Health Spa Act (Article 5221l,
1-5 Vernon's Texas Civil Statutes) is amended to read as follows:
1-6 Sec. 6. DEFINITIONS. In this Act
1-7 (a) "Closed," "closes" or "closing" means a condition where:
1-8 1. the facilities of a health spa are no longer
1-9 available to its members and equivalent facilities within 10 miles
1-10 of the closed facilities have not been made available to members of
1-11 the closed facilities; or
1-12 2. the registrant has sold a registered location and
1-13 the security required by Section 8 has either been cancelled,
1-14 withdrawn, or otherwise unavailable for the use of members; or
1-15 3. the registrant has sold a registered location and
1-16 the new owner has neither adopted nor honored the contracts of
1-17 existing members.
1-18 (b) <
(1)> "Contract" means an agreement by which a person
1-19 < one> becomes a member of a health spa.
1-20 (c) < (2)> "Facilities" means equipment, physical structures,
1-21 improvements, improvements to leasehold premises, and other
1-22 tangible property, real, personal, or mixed, used by a health spa
1-23 at each location to conduct its business, including but not limited
2-1 to saunas, whirlpool baths, gymnasiums, running tracks, swimming
2-2 pools, shower areas, racquetball courts, martial arts equipment,
2-3 and exercise equipment.
2-4 (d) "Fully open" or "fully open for business" means the date
2-5 on which all services of the health spa that were advertised before
2-6 the opening or promised to be made available are available for use
2-7 by its members.
2-8 (e) < (3)> "Health spa" means a business < primarily> involved
2-9 in the sale of memberships that provides the members instruction in
2-10 a program of physical exercise or provides the members use of the
2-11 facilities of the health spa for a program of physical exercise.
2-12 The term does not include an organization that is tax exempt under
2-13 26 U.S.C. 501 et seq., a private club owned and operated by its
2-14 members, an entity exclusively < primarily> operated for the purpose
2-15 of teaching dance or aerobic exercise, an entity exclusively
2-16 < primarily> engaged in physical rehabilitation activity related to
2-17 an individual's injury or disease, an individual or entity engaged
2-18 in an activity authorized under a valid license issued by this
2-19 state, or an activity conducted or sanctioned by a school operating
2-20 under the Education Code.
2-21 (f) "Location" means the physical site or place where health
2-22 spa facilities are located.
2-23 (g) < (4)> "Member" means a person entitled to the benefits
2-24 of membership in a health spa.
2-25 (h) < (5)> "Membership" means the status under a contract
3-1 between an individual and a health spa that entitles the individual
3-2 to the use of services or facilities of the health spa.
3-3 (i) "Obligor" means a person other than a surety who is
3-4 obligated to perform in the event of a registrant's default.
3-5 (j) < (6)> "Person" means an individual, corporation,
3-6 association, organization, partnership, business trust, trust,
3-7 estate, and any other legal entity.
3-8 (k) < (7)> "Prepayment" means consideration paid to a health
3-9 spa by a purchaser prior to the time that the health spa is fully
3-10 open for business < a payment for all services or for the use of
3-11 facilities made by members of a health spa before the first day the
3-12 services or facilities are made available to the members>.
3-13 (l) < (8)> "Purchaser" means a person who < purchases a health
3-14 spa membership> seeks or acquires by purchase the use of health spa
3-15 facilities or services.
3-16 (m) "Registrant" means a person who has registered with the
3-17 secretary and has been issued a health spa operator's certificate
3-18 of registration.
3-19 (n) "Secretary" means the Texas Secretary of State.
3-20 (o) < (9)> "Seller" means a person who owns or operates a
3-21 health spa or who offers for sale the right to use the facilities
3-22 or the services of the health spa.
3-23 (p) < (10)> "Services" means programs, plans, guidance, or
3-24 instruction that a health spa provides for its members, including
3-25 diet planning, exercise instruction, exercise programs, and
4-1 instructional classes.
4-2 SECTION 2. Section 8, Health Spa Act (Article 5221l,
4-3 Vernon's Texas Civil Statutes) is amended to read as follows:
4-4 Sec. 8. REGISTRATION. (a) A person may not operate a
4-5 health spa or offer for sale or sell memberships in a health spa in
4-6 this state unless the person possesses a valid health spa
4-7 operator's certificate of registration.
4-8 (b) Each applicant for a health spa operator's certificate
4-9 of registration shall file with the Secretary of State for each
4-10 location an application for registration containing the following
4-12 1. the legal name, address, and telephone number of
4-13 the applicant;
4-14 2. the trade name by which the applicant does
4-15 business, and if incorporated, the name registered with the
4-16 secretary of state, the location of the registered office, and the
4-17 name and address of any person who directly or indirectly owns or
4-18 controls 10 percent or more of the outstanding shares of stock in
4-19 the corporation;
4-20 3. the date on which the applicant became the owner
4-21 and operator of the business;
4-22 4. the address of the health spa;
4-23 5. the type of available or proposed facilities and
4-24 services offered at the location;
4-25 6. samples of all contracts used by the seller in
5-1 connection with the sale of memberships; and
5-2 (c) Each application for a health spa operator's certificate
5-3 of registration shall be accompanied by proof of the security
5-4 required by this Act and payment of the required fee for issuance
5-5 of the certificate.
5-6 (d) All certificates of registration are valid for a period
5-7 of one year from the date of issuance and are renewable as provided
5-8 by the secretary.
5-9 (e) The registrant shall amend the application for
5-10 registration not later than the 90th day after the day on which a
5-11 change in the information provided in the statement occurs.
5-12 (f) A health spa operator's certificate of registration is
5-13 not transferrable. In the event a registrant sells or otherwise
5-14 transfers ownership in a registered health spa location, the new
5-15 owner(s) shall file an application of registration as required by
5-16 this section no later than the fifth day following the date of
5-18 (g) The secretary may charge each applicant for a
5-19 certificate of registration a reasonable fee not to exceed $100 to
5-20 cover the cost of application or renewal.
5-21 (h) The secretary, after notice and hearing, may refuse to
5-22 issue or may permanently revoke or suspend for a definite period of
5-23 time a certificate of registration if the secretary finds that the
5-24 applicant or registrant:
5-25 1. furnished false information on any application,
6-1 report, or other document filed with the secretary;
6-2 2. failed to provide the contract disclosure language
6-3 required by Section 12 of this Act; or
6-4 3. failed to file and maintain the bond or post other
6-5 security for each location as required by Section 10 of this Act.
6-6 (i) A registrant shall prominently post the health spa
6-7 operator's certificate of registration at each registered location
6-8 < A health spa shall file a registration statement with the
6-9 secretary of state before offering for sale or selling memberships
6-10 in this state. The health spa shall file a separate registration
6-11 statement for each location at which the health spa operates. The
6-12 registration statement must contain:>
6-13 < (1) the name and address of the health spa;>
6-14 < (2) the name and address of any person who directly
6-15 or indirectly owns or controls 10 percent or more of the
6-16 outstanding shares of stock in the health spa>;
6-17 < (3) the type of available or proposed facilities and
6-18 services offered at that location; and>
6-19 < (4) the approximate size of the health spa location
6-20 measured in square feet.>
6-21 < (b) The registration statement must also contain either:>
6-22 < (1) a full and complete disclosure of any litigation,
6-23 or any complaint filed with a governmental authority, relating to
6-24 the failure to open or the closing of a health spa brought against
6-25 the owners, officers, or directors of a health spa that was
7-1 completed within the past two years or is currently pending; or>
7-2 < (2) a notarized statement that states that there has
7-3 been no litigation, or complaint filed with a governmental
7-4 authority, relating to the opening or closing of the health spa
7-5 within the past two years.>
7-6 < (c) The health spa shall update the statement not later
7-7 than the 90th day after the day on which a change in the
7-8 information required in the statement occurs.>
7-9 < (d) Each health spa registering under this section shall
7-10 maintain a copy of the registration statement filed for each
7-11 location in the records of the health spa. The health spa shall
7-12 allow a current member or a prospective purchaser of a membership
7-13 to inspect a registration statement on request>.
7-14 < (e) The secretary of state may charge each health spa that
7-15 files a registration statement a reasonable fee not to exceed $100
7-16 to cover the cost of filing. The secretary of state may not
7-17 require a health spa to provide information other than that
7-18 provided in the registration statement>.
7-19 SECTION 3. Section 9, Health Spa Act (Article 5221l,
7-20 Vernon's Texas Civil Statutes) is amended to read as follows:
7-21 Sec. 9. ESCROW. (a) Except as provided by Subsection (e)
7-22 of this section, a registrant < health spa> or its assignee or agent
7-23 that accepts prepayments for its memberships shall deposit all of
7-24 the funds received as prepayments in an escrow account established
7-25 with a financial institution whose accounts are insured by the
8-1 Federal Deposit Insurance Corporation or the Federal Savings and
8-2 Loan Insurance Corporation, which shall hold the funds as escrow
8-3 agent for the benefit of the members that prepay. The registrant
8-4 < health spa> shall deposit prepayments received at least as often
8-5 as biweekly and shall make the first deposit not later than the
8-6 14th day after the day on which the registrant or its agent < spa>
8-7 accepts the first prepayment. Not later than the 14th day after
8-8 the day on which the first prepayment is received, the registrant
8-9 < spa> shall give the secretary of state a notarized statement that
8-10 identifies the financial institution in which the prepayments are
8-11 held in escrow and the name in which the account is held, together
8-12 with a signed statement on a form approved by the secretary of
8-13 state which authorizes the secretary to make inquiries of the
8-14 financial institution regarding the funds in escrow. The
8-15 prepayments shall be held in escrow until the 30th day after the
8-16 date that the health spa fully opens for business.
8-17 (b) Except as provided by Subsection (c) of this section, if
8-18 a health spa does not fully open for business before the 181st day
8-19 after the date it first sells a membership in the health spa or if
8-20 the spa does not remain open for 30 days, the members whose fees
8-21 are held in escrow under this section shall receive a full refund
8-22 of their membership fees from the escrow agent.
8-23 (c) If another health spa operated by the same registrant
8-24 < seller> is located not more than 10 miles from the proposed
8-25 location of a new health spa and if the person purchasing the
9-1 membership is authorized to use these other facilities, a member of
9-2 the new spa whose fees are held in escrow under this section is
9-3 entitled to receive a full refund of the membership fees from the
9-4 escrow agent if the new spa does not fully open for business before
9-5 the 361st day after the date on which the new spa first sells a
9-6 membership or if the new spa does not remain open for 30 days.
9-7 (d) If the health spa remains open for 30 days after the
9-8 date the health spa initially fully opens for business, the
9-9 registrant < health spa> may withdraw the escrowed funds at its
9-10 discretion if the registrant < health spa> files an affidavit with
9-11 the secretary of state certifying that all obligations of the
9-12 health spa for which a lien could be claimed under Chapter 53,
9-13 Property Code, have been paid and if no person is eligible to claim
9-14 a lien under that chapter during the period the registrant or its
9-15 agent < health spa> accepts prepayments.
9-16 (e) Subject to the limitations of this subsection, a < an>
9-17 registrant who is the owner of one or more health spas in operation
9-18 in this state is not required to escrow prepayments on the opening
9-19 of an additional health spa in this state if the health spas in
9-20 operation have operated for at least two years preceding the date
9-21 the first membership in the additional spa is sold and if none of
9-22 the members of the spas in operation have initiated litigation
9-23 against the registrant < owner's spas> relating to the failure to
9-24 open or the closing of a health spa or filed a complaint relating
9-25 to the failure to open or the closing of a health spa with any
10-1 governmental authority in the state against the registrant or any
10-2 of the owners, officers, or directors of the health spa. A
10-3 registrant < An owner of a health spa> is not required to escrow
10-4 prepayments because of litigation or a complaint based on the
10-5 closing of a health spa if that closing was caused by a fire,
10-6 flood, or other natural disaster and if the closing is temporary
10-7 and does not exceed one month. A registrant < An owner> is not
10-8 required to escrow prepayments because of litigation or a complaint
10-9 based on the closing of a health spa if that closing is due to the
10-10 relocation of the spa to a site not more than 10 miles from the
10-11 original location and if the time elapsed between closing the spa
10-12 at the old location and reopening at the new location does not
10-13 exceed one month.
10-14 (f) The total number of spas opened by the registrant
10-15 < owner> during any two-year period to which the exception provided
10-16 by Subsection (e) of this section applies is limited to twice the
10-17 number of spas in operation on the first day of the two-year
10-19 (g) For the purposes of this section, the date on which a
10-20 health spa fully opens is the date on which all services of the spa
10-21 that were advertised before the opening or promised to be made
10-22 available, whether or not contained in the contract, are available
10-23 for use by its members.
10-24 SECTION 4. Section 10, Health Spa Act (Article 5221l,
10-25 Vernon's Texas Civil Statutes) is amended to read as follows:
11-1 Sec. 10. SECURITY (a) Except as provided by Section 10B of
11-2 this Act, the secretary may not issue a certificate of
11-3 registration, unless the applicant first files a surety bond or
11-4 posts other security in such form as the secretary may prescribe.
11-5 (b) If a surety bond is filed, it shall be continuous and
11-6 remain in effect until cancelled by the surety company with notice
11-7 as provided in this section. If a bond is cancelled, the
11-8 certificate of registration is suspended on the effective date of
11-10 (c) The bond shall be a surety bond issued by a company
11-11 authorized to do business in this state and shall be in conformity
11-12 with the Insurance Code.
11-13 (d) Other security need not be posted annually so long as
11-14 the applicable amount specified in this section remains posted. If
11-15 other security is posted, the interest from the security shall go
11-16 to the person posting the security. The other security shall be in
11-17 such form as the secretary may deem appropriate.
11-18 (e) The bond or other security shall be payable in favor of
11-19 the state and shall be held for the benefit of the state and for
11-20 the registrant's members who have been administratively adjudicated
11-21 to have suffered actual financial losses due to the closing of the
11-22 registrant's health spa.
11-23 (f) Actual financial loss shall mean and be limited to those
11-24 sums which have been paid under a health spa contract to a
11-25 registrant or a registrant's assignee and which at the time the
12-1 health spa is closed are unearned. Actual financial losses shall
12-2 be calculated by multiplying the gross monthly payment by the total
12-3 of months remaining on a contract at the time the health spa closes
12-4 minus any payments not made. For the purposes of this section:
12-5 (1) The gross monthly payment shall be calculated by
12-6 determining the total of payments, including down payments and
12-7 initiation fees required by the contract, divided by the total
12-8 number of months in the term of the contract; and
12-9 (2) The date of closing and the date of the contract
12-10 expiration shall be rounded to the nearest full month. The total
12-11 months remaining on the contract shall be calculated by subtracting
12-12 the date of closing from the expiration date of the contract. The
12-13 result shall be expressed in whole months.
12-14 (g) The amount of the security required under Subsection (a)
12-15 of this section is $20,000.
12-16 (h) The registrant shall maintain the bond or other security
12-17 in the amount provided in Subsection (g) of this section in effect
12-18 for two years after the date on which the health spa closes or
12-19 until the secretary of state determines that each claim to which
12-20 the bond or other security deposit is subject has been satisfied or
12-21 foreclosed by law.
12-22 (i) The following provisions shall be applicable to all
12-23 bonds and other security required by this section:
12-24 (1) Regardless of the number of years the bond or
12-25 other security shall continue in force or the number of premiums
13-1 payable or paid, the limit of the surety's or obligor's liability
13-2 stated in the bond or other security shall not be cumulative from
13-3 year to year or period to period.
13-4 (2) The liability of the surety or obligor is
13-5 exclusively conditioned upon a final administrative order by the
13-6 secretary, and the bond or other security posted hereunder is
13-7 subject to no other type of claim.
13-8 (j) The surety or obligor must provide written notification
13-9 to the secretary at least 60 days prior to the cancellation of any
13-10 bond or other security required by this section. Any other
13-11 security on file with the secretary shall remain on file with the
13-12 secretary for two years after the registrant ceases business or at
13-13 such later time as the secretary may determine that no claims exist
13-14 against the security. < (a) Not later than the 30th day before the
13-15 date a health spa opens a location for the use of its members, the
13-16 health spa shall file with the secretary of state a surety bond
13-17 issued by a surety company licensed to do business in this state,
13-18 or, in lieu of and in equal amount to the bond, a security deposit
13-19 in the form of a certificate of deposit, letter of credit, or other
13-20 negotiable instrument issued by a financial institution in this
13-21 state whose deposits are insured by the Federal Deposit Insurance
13-22 Corporation or the Federal Savings and Loan Insurance Corporation.
13-23 The bond or other security deposit shall be payable in favor of the
13-24 state and shall be held for the benefit of any members of the
13-25 health spa who suffer financial losses due to the insolvency or
14-1 cessation of operation of the health spa. "Financial losses" shall
14-2 mean and be limited to any unused or unearned portion of such
14-3 member's dues or fees. Such a member may bring an action based on
14-4 the bond and recover against the surety regardless of the number of
14-5 claimants or claims filed against the bond, but the liability of
14-6 the surety may not exceed the aggregate amount of the bond. If the
14-7 claims filed against the bond exceed the amount of the bond, the
14-8 surety shall pay the amount of the bond to the secretary of state
14-9 for distribution to the claimants on a pro rata basis. The surety
14-10 is relieved of liability under the bond on payment of the amount to
14-11 the secretary of state.>
14-12 < (b) The amount of the security required under Subsection
14-13 (a) of this section is $20,000. If a claim is paid from the bond
14-14 or other security deposit, the health spa must post additional
14-15 security, not later than the 20th day after the date on which the
14-16 claim is paid, to restore the amount of the security to $20,000.>
14-17 < (c) The health spa shall maintain the bond or other
14-18 security deposit in the amount provided in Subsection (b) of this
14-19 section in effect for two years after the date on which the health
14-20 spa ceases business or until the secretary of state determines that
14-21 each claim to which the bond or other security deposit is subject
14-22 has been satisfied or foreclosed by law.>
14-23 < (d) The following provisions shall be applicable to all
14-24 bonds issued hereunder:>
14-25 < (1) Regardless of the number of years the bond shall
15-1 continue in force or the number of premiums payable or paid, the
15-2 limit of the surety's liability stated in the bond shall not be
15-3 cumulative from year to year or period to period.>
15-4 < (2) The surety shall not be liable through a bond for
15-5 punitive damages or for civil or criminal penalties assessed
15-6 against a health spa, its individual owners, or its employees.>
15-7 < (3) The bond written by a surety hereunder shall be
15-8 continuous until cancelled by the surety or terminated by the
15-9 health spa only upon giving 90 days prior notice to the secretary
15-10 of state of such cancellation.>
15-11 < (4) A surety hereunder shall not be liable for any
15-12 claim brought or suit filed against a bond if the claim or filing
15-13 of a suit occurs more than two years from the last effective date
15-14 of the bond.>
15-15 SECTION 5. Health Spa Act (Article 5221l, Vernon's Texas
15-16 Civil Statutes) is amended by adding Section 10A to read as
15-18 Sec. 10A ADJUDICATION OF CLAIMS. (a). Within forty-five
15-19 days from the date the secretary first discovers that a health spa
15-20 has closed, the secretary shall publish a display advertisement in
15-21 a newspaper of general circulation in the county or nearest county
15-22 in which the health spa is located notifying the public of the fact
15-23 that the health spa is closed and that a health spa member has
15-24 ninety days from the date of the first notice to perfect a claim
15-25 under the security posted pursuant to section 10 of this Act.
16-1 Contemporaneously with the publication of the notice, the secretary
16-2 shall notify the surety company or obligor of the pending
16-3 administrative action.
16-4 (b) The notice shall be published for two consecutive
16-5 Saturdays and Sundays and shall inform those affected of the
16-6 procedures for perfecting a claim against the security. The
16-7 secretary shall have a claim against the security for reasonable
16-8 expenses incurred in publishing the notice which shall not exceed
16-10 (c) All claims received by the secretary after 90 days
16-11 following the date of the first notice are barred and shall not be
16-12 considered by the secretary. If the total of claims evidencing
16-13 actual financial loss exceed the amount of the security, the
16-14 secretary shall adjudicate the claims on a pro rata basis by
16-15 dividing the amount of the security, after first deducting the
16-16 actual costs for publication of the notice, by the total amount of
16-17 the claims in order to ascertain a percentage to be applied to each
16-19 (d) The secretary shall adopt and publish such rules and
16-20 regulations as are necessary to determine claims and to insure the
16-21 prompt and fair distribution of the proceeds from the bond or other
16-22 security. Rules adopted by the secretary are subject to the
16-23 Administrative Procedure and Texas Register Act (Article 6252-13a,
16-24 Vernon's Texas Civil Statutes.
16-25 SECTION 6. Health Spa Act (Article 5221l, Vernon's Texas
17-1 Civil Statutes) is amended by adding Section 10B to read as
17-3 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) As
17-4 provided in this section, a health spa registrant may apply for an
17-5 exemption from the security requirements of Section 10 of this Act.
17-6 To qualify for an exemption, a registrant must first file an
17-7 application for an exemption on a form approved by the secretary.
17-8 The application shall be verified by the person authorized by the
17-9 secretary to make the application. Upon approval of the exemption,
17-10 the Secretary shall issue a certificate of exemption. A registrant
17-11 who has been granted a certificate of exemption by the Secretary
17-12 shall not be required to post a bond or other security as required
17-13 by Section 10 of this Act.
17-14 (b) A health spa registrant may apply for an exemption from
17-15 the security requirements of Section 10 if it meets the following
17-17 (1) the registrant does not require a health spa
17-18 consumer to:
17-19 (a) execute a membership contract for a term
17-20 exceeding 31 days;
17-21 (b) execute a note or a retail installment
17-23 (c) authorize a draw or other recurring debit on
17-24 a financial institution to the favor of the registrant or the
17-25 registrant's assignee;
18-1 (d) pay an initiation fee or other fee except
18-2 monthly dues; or
18-3 (e) prepay for a term exceeding 31 days; and
18-4 (2) the registrant does not solicit or offer any plan
18-5 or program which contains any of the elements identified in
18-6 paragraph (1) of this subsection.
18-7 (c) Alternatively, a health spa registrant may apply for an
18-8 exemption from the security requirements of Section 10 if:
18-9 (1) the registrant owns and operates at least one
18-10 health spa located in this state which has operated continuously at
18-11 one location for at least five years; and
18-12 (2) none of the members of a health spa owned by the
18-13 registrant has initiated or filed a complaint with any governmental
18-14 authority in this state relating to the closing of a health spa
18-15 owned by the registrant or the failure of a health spa owned by the
18-16 registrant to open.
18-17 (d) If a health spa registrant, who has claimed an exemption
18-18 provided by subsection (c), closes a health spa or fails to open a
18-19 health spa and a member of the health spa initiates or files a
18-20 complaint with any governmental authority in this state relating to
18-21 the closing of the health spa or the failure of the health spa to
18-22 open, the registrant may still claim an exemption under subsection
18-23 (c) for all health spas operating on the date the health spa closed
18-24 or failed to open; however, the registrant shall provide the
18-25 security required by Section 10 for all health spas the registrant
19-1 opens after the date the the spa closed or failed to open.
19-2 (e) If a health spa registrant, who has claimed an exemption
19-3 provided by subsection (c), has closed or failed to open more than
19-4 one health spa and a member of one of the affected health spas
19-5 initiates or files a complaint with any governmental authority in
19-6 this state relating to the closing of a health spa owned by the
19-7 registrant or the failure of a health spa owned by the registrant
19-8 to open, the registrant shall no longer qualify for an exemption
19-9 under subsection (c) and shall be subject to the provisions of
19-10 subsection (i).
19-11 (f) If a health spa registrant, who has claimed an exemption
19-12 provided by subsection (c), is forced, due to an act of God or an
19-13 act of a governmental authority beyond the control of the
19-14 registrant, to move or temporarily close the location of the health
19-15 spa which provides the basis for the exemption, the registrant may
19-16 still claim an exemption under subsection (c) as long as the spa is
19-17 not moved more than 10 miles from the original facility. This
19-18 subsection shall apply regardless of whether the move is temporary
19-19 or permanent.
19-20 (g) An exemption provided by this section is not
19-21 transferrable. If a health spa registrant sells or otherwise
19-22 transfers ownership in a health spa for which an exemption from the
19-23 security requirement has been granted, the new owner shall file a
19-24 new application for an exemption or post the security required by
19-25 Section 10 of this Act no later than the fifth day following the
20-1 date of the sale or transfer.
20-2 (h) To claim an exemption provided by Subsection (c), a
20-3 registrant must have continuously owned and operated at least one
20-4 health spa which is eligible for an exemption under that
20-5 Subsection. A newly acquired health spa, regardless of its
20-6 previous eligibility for an exemption, may not provide the basis
20-7 for an exemption.
20-8 (i) The secretary, after notice and hearing, may refuse to
20-9 issue or may permanently revoke a registrant's certificate of
20-10 exemption if the secretary finds that the registrant:
20-11 (1) furnished false information on the application for
20-12 exemption; or
20-13 (2) no longer qualifies for an exemption.
20-14 SECTION 7. Section 11, Health Spa Act (Article 5221l,
20-15 Vernon's Texas Civil Statutes) is amended to read as follows:
20-16 Sec. 11. PREPAYMENTS. (a) A registrant < health spa> may
20-17 offer for sale or sell memberships before the date on which the
20-18 health spa opens for business.
20-19 (b) Except as provided by Subsection (c) of this section, if
20-20 the health spa does not open before the 181st day after the day on
20-21 which a membership is prepaid, the person who made the prepayment
20-22 is entitled to a full refund of the amount prepaid in the manner
20-23 provided by Subsection (b) of Section 9 of this Act.
20-24 (c) If another health spa operated by the same seller is
20-25 located not more than 10 miles from the proposed location of a new
21-1 health spa and if the person purchasing the membership is
21-2 authorized to use these other facilities, each person who made a
21-3 prepayment for a membership in the new spa is entitled to a full
21-4 refund of the amount prepaid in the manner provided by Subsection
21-5 (c) of Section 9 of this Act if the new spa does not open before
21-6 the 361st day after the date on which the first prepayment of a
21-7 membership in the new spa is received.
21-8 SECTION 8. Section 12, Health Spa Act (Article 5221l,
21-9 Vernon's Texas Civil Statutes) is amended to read as follows:
21-10 Sec. 12. Contract Terms. (a) A registrant, unless exempted
21-11 from the security requirements by subsection (b) of Section 10B of
21-12 this Act, shall < The health spa must> deliver a fully completed
21-13 copy of a contract to a purchaser before the contract is signed.
21-14 The contract constitutes the entire agreement between the seller
21-15 and the purchaser. The contract must be in writing and must be
21-16 signed by the purchaser. If the health spa is not open at the time
21-17 the contract is entered, the contract must clearly state the
21-18 proposed opening date of the health spa. At the time of delivery
21-19 the health spa must give the purchaser a written receipt for any
21-20 payment made by the purchaser under the contract.
21-21 (b) If the contract is financed through a retail installment
21-22 contract or note, the contract may not require the purchaser to
21-23 make payments or finance the contract for more than five years
21-24 after the date on which the contract is made < If a health spa has
21-25 been in operation in this state for two years or less, the contract
22-1 may not require the purchaser to make payments or to finance the
22-2 contract for more than two years after the date on which the
22-3 contract is made. If the health spa has been in operation in this
22-4 state for more than two years, the contract may require the
22-5 purchaser to make payments or to finance the contract for a period
22-6 not to exceed five years after the date on which the contract is
22-7 made. The term of a contract may not be measured by the life of
22-8 the purchaser. If the purchaser is required by the contract to pay
22-9 a renewal fee of not less than $50, the contract may contain a
22-10 renewal option for as long as two additional years after the date
22-11 on which the contract expires>.
22-12 (c) If the contract is not financed, the terms of the
22-13 contract may not exceed three years.
22-14 (d) When the terms of two or more contracts between the same
22-15 parties overlap for any period, the contracts are considered as one
22-16 contract for the purpose of this Act.
22-17 (e) < (d)> A contract may not require or entail the execution
22-18 of a note or series of notes by the purchaser that when separately
22-19 negotiated will cut off as to third parties a right of action or
22-20 defense that the purchaser may have against the seller.
22-21 (f) < (e)> Each contract shall state in at least 10-point
22-22 type that is boldfaced, capitalized, underlined, or otherwise set
22-23 out from surrounding written material so as to be conspicuous:
22-24 (1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT
22-25 UNTIL YOU READ IT OR IF IT CONTAINS BLANK SPACES."
23-1 (2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER
23-2 OF THIS HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE
23-3 HEALTH SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU
23-4 SIGN THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS
23-5 CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO
23-6 THE FOLLOWING ADDRESS:
23-7 (Address of the health spa home office)."
23-8 (3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES
23-9 NOT PROVIDE FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU
23-10 ARE ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE
23-11 FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY CANCEL THIS CONTRACT BY
23-12 MAILING A NOTICE TO THE HEALTH SPA STATING YOUR DESIRE TO CANCEL
23-13 THIS CONTRACT, ACCOMPANIED BY PROOF OF PAYMENT ON THE CONTRACT.
23-14 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
23-15 FOLLOWING ADDRESS:
23-16 (Address of the health spa home office).< ">
23-17 YOU MAY ALSO BE ENTITLED TO FILE A CLAIM FOR A REFUND OF YOUR
23-18 UNUSED MEMBERSHIP FEES AGAINST THE BOND OR OTHER SECURITY POSTED BY
23-19 THE HEALTH SPA WITH THE TEXAS SECRETARY OF STATE. TO MAKE A CLAIM
23-20 AGAINST THE SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH
23-21 PROOF OF PAYMENTS MADE ON THE CONTRACT TO THE TEXAS SECRETARY OF
23-22 STATE. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
23-23 FOLLOWING ADDRESS:
23-24 OFFICE OF THE SECRETARY OF STATE
23-25 STATUTORY DOCUMENTS SECTION
24-1 P.O. BOX 12887
24-2 AUSTIN, TEXAS 78711-2887."
24-3 (4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY
24-4 DISABLED AFTER THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR
24-5 ESTATE MAY CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF
24-6 YOUR UNUSED MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA
24-7 STATING YOUR DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY
24-8 REQUIRE PROOF OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE
24-9 MAILED BY CERTIFIED MAIL TO THE FOLLOWING ADDRESS:
24-10 (Address of the health spa home office)."
24-11 (g) If the registrant offers for sale or sells memberships
24-12 before the date on which the spa opens for business, each contract
24-13 shall state in at least 10-pt. type that is boldfaced, capitalized,
24-14 underlined or otherwise set out from surrounding written material
24-15 so as to be conspicuous:
24-16 "IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the date on which
24-17 the 181st day after the date on which the membership is prepaid
24-18 falls) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR THIRTY DAYS, YOU
24-19 ARE ENTITLED TO A FULL REFUND OF THE MONEY YOU PREPAID. HOWEVER,
24-20 IF ANOTHER HEALTH SPA, OPERATED BY (insert: the name of the health
24-21 spa registrant), IS LOCATED WITHIN 10 MILES OF (insert: the
24-22 address of the proposed location of the new spa) AND IF YOU ARE
24-23 AUTHORIZED TO USE THE OTHER FACILITIES, YOU ARE ENTITLED TO RECEIVE
24-24 A FULL REFUND OF YOUR MEMBERSHIP FEES ONLY IF THIS LOCATION DOES
24-25 NOT FULLY OPEN FOR BUSINESS BEFORE (insert: the date that is the
25-1 361st day after the day the new spa first sells memberships) OR IF
25-2 THE NEW SPA DOES NOT REMAIN OPEN FOR 30 DAYS."
25-3 (h) Each contract for which a finance charge within the
25-4 meaning of the Truth-in-Lending Act or Regulation Z is charged or
25-5 collected shall state in at least 10-point type that is boldfaced,
25-6 capitalized, underlined, or otherwise set out from surrounding
25-7 written material so as to be conspicuous:
25-8 "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL
25-9 CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE
25-10 SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE
25-11 PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED
25-12 AMOUNTS PAID BY THE DEBTOR HEREUNDER."
25-13 SECTION 9. Section 13, Health Spa Act (Article 5221l,
25-14 Vernon's Texas Civil Statutes) is amended to read as follows:
25-15 Sec. 13. Cancellation of Contracts. (a) A member may
25-16 cancel a contract before the fourth business day after the date on
25-17 which the contract is signed by notifying the health spa registrant
25-18 of the cancellation in writing. Written notification is considered
25-19 given if the notification is mailed by certified mail to the home
25-20 office of the health spa registrant and postmarked not later than
25-21 midnight of the third business day. The health spa registrant
25-22 shall refund all money paid to the purchaser exercising the right
25-23 to cancel.
25-24 (b) A member may cancel a contract on written notice by
25-25 certified mail to the home office of the health spa registrant if
26-1 the health spa registrant goes out of business and fails to provide
26-2 facilities within 10 miles or moves its facilities more than 10
26-3 miles from the location in which the member is enrolled. A member
26-4 may cancel a contract in the same manner if the health spa
26-5 registrant fails to provide advertised services < If a contract is
26-6 canceled under this subsection, the member is liable for an amount
26-7 equal to the value of services received and facilities used under
26-8 the contract up to the date of the cancellation, and if the member
26-9 has paid money under the contract in excess of that amount the
26-10 health spa shall promptly refund to the member the excess>.
26-11 (c) A purchaser of a membership may cancel a contract if the
26-12 member dies or becomes totally and permanently disabled after the
26-13 date on which the contract takes effect < The purchaser remains
26-14 liable for an amount equal to the value of services received and
26-15 facilities used by the member under the contract up to the day on
26-16 which the death occurred or the disability was incurred. The
26-17 health spa shall make a pro rata refund of funds paid under the
26-18 contract in an amount based on the time remaining in the contract
26-19 term up to a maximum of 50 percent of the total contract amount>.
26-20 The health spa registrant may require a purchaser or the
26-21 purchaser's estate to provide reasonable proof of total and
26-22 permanent disability or death.
26-23 (d) If a purchaser or an estate elects to cancel a
26-24 membership contract pursuant to subsections (b) or (c) of this
26-25 Section the health spa registrant shall refund to the purchaser or
27-1 the purchaser's estate any unearned sums paid under the contract.
27-2 "Unearned sums" shall be calculated by multiplying the gross
27-3 monthly payment by the total of months remaining on a contract at
27-4 the time of cancellation minus any payments not made. For the
27-5 purposes of this section:
27-6 (1) The gross monthly payment shall be calculated by
27-7 determining the total of payments, including down payments and
27-8 initiation fees required by the contract, divided by the total
27-9 number of months in the term of the contract
27-10 (2) The date of cancellation and the date of the
27-11 contract expiration shall be rounded to the nearest full month.
27-12 The total months remaining on the contract shall be calculated by
27-13 subtracting the date of cancellation from the expiration date of
27-14 the contract. The result shall be expressed in whole months.
27-15 (e) A health spa registrant shall make a refund required
27-16 under this section before the 31st day after the date the health
27-17 spa registrant receives the notice of cancellation accompanied by
27-18 proof of payment. The receipt given to the purchaser by the health
27-19 spa at the time the purchaser made a payment under the contract
27-20 constitutes < adequate> proof of payment.
27-21 SECTION 10. Section 15, Health Spa Act (Article 5221l,
27-22 Vernon's Texas Civil Statutes) is amended to read as follows:
27-23 Sec. 15. Unenforceable Contracts. (a) A contract or
27-24 assignment of a contract that does not comply with this Act is void
27-25 and unenforceable as contrary to public policy.
28-1 (b) If a seller does not possess a valid health spa
28-2 operator's certificate of registration at the time of entering into
28-3 any contract with the purchaser, the contract between the purchaser
28-4 and the seller is void and unenforceable as contrary to public
28-6 (c) A contract entered into in reliance on willful and
28-7 false, fraudulent, or misleading information, representation,
28-8 notice or advertisement of the health spa owner, < or> operator or
28-9 seller is void and unenforceable.
28-10 SECTION 11. Section 17, Health Spa Act (Article 5221l,
28-11 Vernon's Texas Civil Statutes) is amended to read as follows:
28-12 Sec. 17. Prohibited Activities. (a) A seller or registrant
28-13 < health spa> may not offer a special offer or discount unless the
28-14 special offer or discount is available to all prospective members.
28-15 This subsection does not prohibit a health spa from offering
28-16 special group prices or group discounts.
28-17 (b) A seller or registrant < health spa> may not make a
28-18 material misrepresentation to a current member, prospective member,
28-19 or purchaser of a contract regarding:
28-20 (1) the qualifications of the staff;
28-21 (2) the availability, quality, or extent of the
28-22 facilities or services;
28-23 (3) the results obtained through exercise, dieting,
28-24 weight control, or physical fitness conditioning programs;
28-25 (4) membership rights; or
29-1 (5) the period that a special offer or discount will
29-2 be available.
29-3 (c) A health spa registrant may not fail or refuse to:
29-4 (1) file or update the registration statements
29-5 required by Section 8 of this Act;
29-6 (2) establish the escrow account required by Section 9
29-7 of this Act; or
29-8 (3) maintain the security required by Section 10 of
29-9 this Act in full force and effect.
29-10 (d) A health spa registrant may not advertise that it is
29-11 bonded by the state.
29-12 (e) A health spa registrant may not sell a membership plan
29-13 not included in the list required by Section 16 of this Act.
29-14 SECTION 12. Section 18, Health Spa Act (Article 5221l,
29-15 Vernon's Texas Civil Statutes) is amended to read as follows:
29-16 Sec. 18. Injunction. (a) If it appears that a person is in
29-17 violation of, has violated or is about to violate this Act, the
29-18 attorney general, a district or county attorney may institute an
29-19 action for injunctive relief to restrain the person from continuing
29-20 the violation and for civil penalties authorized by section 20 < A
29-21 district attorney, county attorney, or the attorney general may sue
29-22 in a court of competent jurisdiction to enjoin or restrain a person
29-23 from engaging in conduct described by Section 17 of this Act>.
29-24 (b) A civil action filed under this section shall be filed
29-25 in a district court in Travis County or in the county the defendant
30-1 resides < Except as prescribed by Subsection (c) of this section, a
30-2 district attorney, county attorney, or attorney general who intends
30-3 to sue under this section shall notify the defendant of the alleged
30-4 prohibited conduct not later than the seventh day before the date
30-5 the suit is filed.>
30-6 < (c) The notice prescribed by Subsection (b) of this section
30-7 is not required if the district attorney, county attorney, or
30-8 attorney general intends to request that the court issue a
30-9 temporary restraining order>.
30-10 SECTION 13. Section 20, Health Spa Act (Article 5221l,
30-11 Vernon's Texas Civil Statutes) is amended to read as follows:
30-12 Sec. 20. Civil Penalties. (a) A person who violates this
30-13 Act is subject to a civil penalty of not more than $1,000 for each
30-14 violation, not to exceed $25,000.00 in total penalties.
30-15 (b) A person who violates the terms of an injunction issued
30-16 in an action brought under Section 18 of this Act is liable to the
30-17 state for a civil penalty of not more than $25,000 for a single
30-18 violation and not more than $50,000 for all violations of the
30-19 injunction. A district attorney, county attorney, or the attorney
30-20 general may bring suit to recover the civil penalty in the court
30-21 that issued the original injunction.
30-22 (c) The attorney general, a district or county attorney and
30-23 the secretary may recover reasonable expenses incurred in obtaining
30-24 injunctive relief, civil penalties, or both, including court costs,
30-25 reasonable attorney's fees, investigative costs, witness fees, and
31-1 deposition expenses.
31-2 (d) A penalty collected under this section by the attorney
31-3 general shall be deposited to the credit of the general revenue
31-4 fund. A penalty collected under this section by a district or
31-5 county attorney shall be deposited to the credit of the general
31-6 fund of the county.
31-7 SECTION 14. Section 22, Health Spa Act (Article 5221l,
31-8 Vernon's Texas Civil Statutes) is amended to read as follows:
31-9 Sec. 22. Offenses. (a) A person who knowingly or
31-10 intentionally operates or attempts to operate a health spa in
31-11 violation of Section 8, 9, < or> 10 or 11 of this Act commits an
31-12 offense. An offense under this subsection is a Class A
31-14 SECTION 15. Section 25, Health Spa Act (Article 5221l,
31-15 Vernon's Texas Civil Statutes) is amended to read as follows:
31-16 Sec. 25. Applicability. (a) This < Except as provided by
31-17 Subsection (b) of this section, this> Act applies to all health
31-18 spas < a health spa> in operation on or after September 1, 1985
31-19 < (b) Section 9 of this Act does not apply to a health spa
31-20 that began operation before September 1, 1985>.
31-21 SECTION 16. Health Spa Act (Article 5221l, Vernon's Texas
31-22 Civil Statutes) is amended by adding Section 26 to read as follows:
31-23 Sec 26. RULE-MAKING AUTHORITY. The secretary shall adopt
31-24 rules and regulations, promulgate administrative orders, and take
31-25 all action necessary to assure compliance with the intent and
32-1 purpose of this Act.
32-2 SECTION 17. Sections 7, 7A, and 14 of the Health Spa Act
32-3 (Article 5221l, Vernon's Texas Civil Statutes) are repealed.
32-4 SECTION 18. Sections 6.09(a) and (b), Chapter 1039, Acts of
32-5 71st Legislature, Session, 1989, are repealed.
32-6 SECTION 19. (a) There is appropriated to the Office of the
32-7 Attorney General from the general revenue fund for the fiscal
32-8 biennium ending August 31, 1995, the amounts awarded to the office
32-9 under Section 20, Article 5221l, Vernon's Texas Civil Statutes, as
32-10 amended or added by this article, to be used to reimburse the
32-11 office for the office's expenses related to the litigation for
32-12 which the expenses were awarded.
32-13 (b) There is appropriated to the Secretary of State from the
32-14 general revenue fund for the fiscal biennium ending August 31,
32-15 1995, the amounts awarded to the office under Section 20, Article
32-16 5221l, Vernon's Texas Civil Statutes, as amended or added by this
32-17 article, to be used to reimburse the secretary for the secretary's
32-18 expenses related to the litigation for which the expenses were
32-20 SECTION 20. This Act takes effect September 1, 1993.
32-21 SECTION 21. The importance of this legislation and the
32-22 crowded condition of the calendars in both houses create an
32-23 emergency and an imperative public necessity that the
32-24 constitutional rule requiring bills to be read on three several
32-25 days in each house be suspended, and this rule is hereby suspended.