1-1 By: Giddings (Senate Sponsor - West) H.B. No. 2243
1-2 (In the Senate - Received from the House May 17, 1993;
1-3 May 18, 1993, read first time and referred to Committee on Economic
1-4 Development; May 20, 1993, rereferred to Committee on State
1-5 Affairs; May 22, 1993, reported favorably by the following vote:
1-6 Yeas 8, Nays 0; May 22, 1993, sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Harris of Dallas x
1-10 Rosson x
1-11 Carriker x
1-12 Henderson x
1-13 Leedom x
1-14 Lucio x
1-15 Luna x
1-16 Nelson x
1-17 Patterson x
1-18 Shelley x
1-19 Sibley x
1-20 West x
1-21 Whitmire x
1-22 A BILL TO BE ENTITLED
1-23 AN ACT
1-24 relating to the regulation of health spas; providing penalties;
1-25 making an appropriation.
1-26 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-27 SECTION 1. Section 6, Health Spa Act (Article 5221l,
1-28 Vernon's Texas Civil Statutes), is amended to read as follows:
1-29 Sec. 6. DEFINITIONS. In this Act:
1-30 (a) "Closed," "closes," or "closing" means a condition
1-32 (1) the facilities of a health spa are no longer
1-33 available to its members and equivalent facilities within 10 miles
1-34 of the closed facilities have not been made available to members of
1-35 the closed facilities; or
1-36 (2) the registrant has sold a registered
1-37 location and the security required by Section 8 has either been
1-38 cancelled, withdrawn, or otherwise unavailable for the use of
1-39 members; or
1-40 (3) the registrant has sold a registered
1-41 location and the new owner has neither adopted nor honored the
1-42 contracts of existing members.
1-43 (b) <
(1)> "Contract" means an agreement by which a
1-44 person < one> becomes a member of a health spa.
1-45 (c) < (2)> "Facilities" means equipment, physical
1-46 structures, improvements, improvements to leasehold premises, and
1-47 other tangible property, real, personal, or mixed, used by a health
1-48 spa at each location to conduct its business, including but not
1-49 limited to saunas, whirlpool baths, gymnasiums, running tracks,
1-50 swimming pools, shower areas, racquetball courts, martial arts
1-51 equipment, and exercise equipment.
1-52 (d) "Fully open" or "fully open for business" means
1-53 the date on which all services of the health spa that were
1-54 advertised before the opening or promised to be made available are
1-55 available for use by its members.
1-56 (e) < (3)> "Health spa" means a business < primarily>
1-57 involved in the sale of memberships that provides the members
1-58 instruction in a program of physical exercise or provides the
1-59 members use of the facilities of the health spa for a program of
1-60 physical exercise. The term does not include an organization that
1-61 is tax exempt under 26 U.S.C. 501 et seq., a private club owned and
1-62 operated by its members, an entity exclusively < primarily> operated
1-63 for the purpose of teaching dance or aerobic exercise, an entity
1-64 exclusively < primarily> engaged in physical rehabilitation activity
1-65 related to an individual's injury or disease, an individual or
1-66 entity engaged in an activity authorized under a valid license
1-67 issued by this state, or an activity conducted or sanctioned by a
1-68 school operating under the Education Code.
2-1 (f) "Location" means the physical site or place where
2-2 health spa facilities are located.
2-3 (g) < (4)> "Member" means a person entitled to the
2-4 benefits of membership in a health spa.
2-5 (h) < (5)> "Membership" means the status under a
2-6 contract between an individual and a health spa that entitles the
2-7 individual to the use of services or facilities of the health spa.
2-8 (i) "Obligor" means a person other than a surety who
2-9 is obligated to perform in the event of a registrant's default.
2-10 (j) < (6)> "Person" means an individual, corporation,
2-11 association, organization, partnership, business trust, trust,
2-12 estate, and any other legal entity.
2-13 (k) < (7)> "Prepayment" means consideration paid to a
2-14 health spa by a purchaser prior to the time that the health spa is
2-15 fully open for business < a payment for all services or for the use
2-16 of facilities made by members of a health spa before the first day
2-17 the services or facilities are made available to the members>.
2-18 (l) < (8)> "Purchaser" means a person who < purchases a
2-19 health spa membership> seeks or acquires by purchase the use of
2-20 health spa facilities or services.
2-21 (m) "Registrant" means a person who has registered
2-22 with the secretary and has been issued a health spa operator's
2-23 certificate of registration.
2-24 (n) "Secretary" means the Texas secretary of state.
2-25 (o) < (9)> "Seller" means a person who owns or operates
2-26 a health spa or who offers for sale the right to use the facilities
2-27 or the services of the health spa.
2-28 (p) < (10)> "Services" means programs, plans, guidance,
2-29 or instruction that a health spa provides for its members,
2-30 including diet planning, exercise instruction, exercise programs,
2-31 and instructional classes.
2-32 SECTION 2. Section 8, Health Spa Act (Article 5221l,
2-33 Vernon's Texas Civil Statutes), is amended to read as follows:
2-34 Sec. 8. REGISTRATION. (a) A person may not operate a
2-35 health spa or offer for sale or sell memberships in a health spa in
2-36 this state unless the person possesses a valid health spa
2-37 operator's certificate of registration.
2-38 (b) Each applicant for a health spa operator's certificate
2-39 of registration shall file with the secretary of state for each
2-40 location an application for registration containing the following
2-42 (1) the legal name, address, and telephone number of
2-43 the applicant;
2-44 (2) the trade name by which the applicant does
2-45 business, and if incorporated, the name registered with the
2-46 secretary of state, the location of the registered office, and the
2-47 name and address of any person who directly or indirectly owns or
2-48 controls 10 percent or more of the outstanding shares of stock in
2-49 the corporation;
2-50 (3) the date on which the applicant became the owner
2-51 and operator of the business;
2-52 (4) the address of the health spa;
2-53 (5) the type of available or proposed facilities and
2-54 services offered at the location;
2-55 (6) samples of all contracts used by the seller in
2-56 connection with the sale of memberships.
2-57 (c) Each application for a health spa operator's certificate
2-58 of registration shall be accompanied by proof of the security
2-59 required by this Act and payment of the required fee for issuance
2-60 of the certificate.
2-61 (d) All certificates of registration are valid for a period
2-62 of one year from the date of issuance and are renewable as provided
2-63 by the secretary.
2-64 (e) The registrant shall amend the application for
2-65 registration not later than the 90th day after the day on which a
2-66 change in the information provided in the statement occurs.
2-67 (f) A health spa operator's certificate of registration is
2-68 not transferrable. In the event a registrant sells or otherwise
2-69 transfers ownership in a registered health spa location, the new
2-70 owner shall file an application of registration as required by this
3-1 section no later than the fifth day following the date of sale.
3-2 (g) The secretary may charge each applicant for a
3-3 certificate of registration a reasonable fee not to exceed $100 to
3-4 cover the cost of application or renewal.
3-5 (h) The secretary, after notice and hearing, may refuse to
3-6 issue or may permanently revoke or suspend for a definite period of
3-7 time a certificate of registration if the secretary finds that the
3-8 applicant or registrant:
3-9 (1) furnished false information on any application,
3-10 report, or other document filed with the secretary;
3-11 (2) failed to provide the contract disclosure language
3-12 required by Section 12 of this Act; or
3-13 (3) failed to file and maintain the bond or post other
3-14 security for each location as required by Section 10 of this Act.
3-15 (i) A registrant shall prominently post the health spa
3-16 operator's certificate of registration at each registered location
3-17 < A health spa shall file a registration statement with the
3-18 secretary of state before offering for sale or selling memberships
3-19 in this state. The health spa shall file a separate registration
3-20 statement for each location at which the health spa operates. The
3-21 registration statement must contain:>
3-22 < (1) the name and address of the health spa;>
3-23 < (2) the name and address of any person who directly
3-24 or indirectly owns or controls 10 percent or more of the
3-25 outstanding shares of stock in the health spa;>
3-26 < (3) the type of available or proposed facilities and
3-27 services offered at that location; and>
3-28 < (4) the approximate size of the health spa location
3-29 measured in square feet.>
3-30 < (b) The registration statement must also contain either:>
3-31 < (1) a full and complete disclosure of any litigation,
3-32 or any complaint filed with a governmental authority, relating to
3-33 the failure to open or the closing of a health spa brought against
3-34 the owners, officers, or directors of a health spa that was
3-35 completed within the past two years or is currently pending; or>
3-36 < (2) a notarized statement that states that there has
3-37 been no litigation, or complaint filed with a governmental
3-38 authority, relating to the opening or closing of the health spa
3-39 within the past two years.>
3-40 < (c) The health spa shall update the statement not later
3-41 than the 90th day after the day on which a change in the
3-42 information required in the statement occurs.>
3-43 < (d) Each health spa registering under this section shall
3-44 maintain a copy of the registration statement filed for each
3-45 location in the records of the health spa. The health spa shall
3-46 allow a current member or a prospective purchaser of a membership
3-47 to inspect a registration statement on request.>
3-48 < (e) The secretary of state may charge each health spa that
3-49 files a registration statement a reasonable fee not to exceed $100
3-50 to cover the cost of filing. The secretary of state may not
3-51 require a health spa to provide information other than that
3-52 provided in the registration statement>.
3-53 SECTION 3. Section 9, Health Spa Act (Article 5221l,
3-54 Vernon's Texas Civil Statutes), is amended to read as follows:
3-55 Sec. 9. ESCROW. (a) Except as provided by Subsection (e)
3-56 of this section, a registrant < health spa> or its assignee or agent
3-57 that accepts prepayments for its memberships shall deposit all of
3-58 the funds received as prepayments in an escrow account established
3-59 with a financial institution whose accounts are insured by the
3-60 Federal Deposit Insurance Corporation or the Federal Savings and
3-61 Loan Insurance Corporation, which shall hold the funds as escrow
3-62 agent for the benefit of the members that prepay. The registrant
3-63 < health spa> shall deposit prepayments received at least as often
3-64 as biweekly and shall make the first deposit not later than the
3-65 14th day after the day on which the registrant or its agent < spa>
3-66 accepts the first prepayment. Not later than the 14th day after
3-67 the day on which the first prepayment is received, the registrant
3-68 < spa> shall give the secretary of state a notarized statement that
3-69 identifies the financial institution in which the prepayments are
3-70 held in escrow and the name in which the account is held, together
4-1 with a signed statement on a form approved by the secretary of
4-2 state which authorizes the secretary to make inquiries of the
4-3 financial institution regarding the funds in escrow. The
4-4 prepayments shall be held in escrow until the 30th day after the
4-5 date that the health spa fully opens for business.
4-6 (b) Except as provided by Subsection (c) of this section, if
4-7 a health spa does not fully open for business before the 181st day
4-8 after the date it first sells a membership in the health spa or if
4-9 the spa does not remain open for 30 days, the members whose fees
4-10 are held in escrow under this section shall receive a full refund
4-11 of their membership fees from the escrow agent.
4-12 (c) If another health spa operated by the same registrant
4-13 < seller> is located not more than 10 miles from the proposed
4-14 location of a new health spa and if the person purchasing the
4-15 membership is authorized to use these other facilities, a member of
4-16 the new spa whose fees are held in escrow under this section is
4-17 entitled to receive a full refund of the membership fees from the
4-18 escrow agent if the new spa does not fully open for business before
4-19 the 361st day after the date on which the new spa first sells a
4-20 membership or if the new spa does not remain open for 30 days.
4-21 (d) If the health spa remains open for 30 days after the
4-22 date the health spa initially fully opens for business, the
4-23 registrant < health spa> may withdraw the escrowed funds at its
4-24 discretion if the registrant < health spa> files an affidavit with
4-25 the secretary of state certifying that all obligations of the
4-26 health spa for which a lien could be claimed under Chapter 53,
4-27 Property Code, have been paid and if no person is eligible to claim
4-28 a lien under that chapter during the period the registrant or its
4-29 agent < health spa> accepts prepayments.
4-30 (e) Subject to the limitations of this subsection, a
4-31 registrant who is the < an> owner of one or more health spas in
4-32 operation in this state is not required to escrow prepayments on
4-33 the opening of an additional health spa in this state if the health
4-34 spas in operation have operated for at least two years preceding
4-35 the date the first membership in the additional spa is sold and if
4-36 none of the members of the spas in operation have initiated
4-37 litigation against the registrant < owner's spas> relating to the
4-38 failure to open or the closing of a health spa or filed a complaint
4-39 relating to the failure to open or the closing of a health spa with
4-40 any governmental authority in the state against the registrant or
4-41 any of the owners, officers, or directors of the health spa. A
4-42 registrant < An owner of a health spa> is not required to escrow
4-43 prepayments because of litigation or a complaint based on the
4-44 closing of a health spa if that closing was caused by a fire,
4-45 flood, or other natural disaster and if the closing is temporary
4-46 and does not exceed one month. A registrant < An owner> is not
4-47 required to escrow prepayments because of litigation or a complaint
4-48 based on the closing of a health spa if that closing is due to the
4-49 relocation of the spa to a site not more than 10 miles from the
4-50 original location and if the time elapsed between closing the spa
4-51 at the old location and reopening at the new location does not
4-52 exceed one month.
4-53 (f) The total number of spas opened by the registrant
4-54 < owner> during any two-year period to which the exception provided
4-55 by Subsection (e) of this section applies is limited to twice the
4-56 number of spas in operation on the first day of the two-year
4-58 (g) For the purposes of this section, the date on which a
4-59 health spa fully opens is the date on which all services of the spa
4-60 that were advertised before the opening or promised to be made
4-61 available, whether or not contained in the contract, are available
4-62 for use by its members.
4-63 SECTION 4. Section 10, Health Spa Act (Article 5221l,
4-64 Vernon's Texas Civil Statutes), is amended to read as follows:
4-65 Sec. 10. SECURITY. (a) Except as provided by Section 10B
4-66 of this Act, the secretary may not issue a certificate of
4-67 registration, unless the applicant first files a surety bond or
4-68 posts other security in such form as the secretary may prescribe.
4-69 (b) If a surety bond is filed, it shall be continuous and
4-70 remain in effect until cancelled by the surety company with notice
5-1 as provided in this section. If a bond is cancelled, the
5-2 certificate of registration is suspended on the effective date of
5-4 (c) The bond shall be a surety bond issued by a company
5-5 authorized to do business in this state and shall be in conformity
5-6 with the Insurance Code.
5-7 (d) Other security need not be posted annually so long as
5-8 the applicable amount specified in this section remains posted. If
5-9 other security is posted, the interest from the security shall go
5-10 to the person posting the security. The other security shall be in
5-11 such form as the secretary may deem appropriate.
5-12 (e) The bond or other security shall be payable in favor of
5-13 the state and shall be held for the benefit of the state and for
5-14 the registrant's members who have been administratively adjudicated
5-15 to have suffered actual financial losses due to the closing of the
5-16 registrant's health spa.
5-17 (f) Actual financial loss shall mean and be limited to those
5-18 sums which have been paid under a health spa contract to a
5-19 registrant or a registrant's assignee and which at the time the
5-20 health spa is closed are unearned. Actual financial losses shall
5-21 be calculated by multiplying the gross monthly payment by the total
5-22 of months remaining on a contract at the time the health spa closes
5-23 minus any payments not made. For the purposes of this section:
5-24 (1) The gross monthly payment shall be calculated by
5-25 determining the total of payments, including down payments and
5-26 initiation fees required by the contract, divided by the total
5-27 number of months in the term of the contract; and
5-28 (2) The date of closing and the date of the contract
5-29 expiration shall be rounded to the nearest full month. The total
5-30 months remaining on the contract shall be calculated by subtracting
5-31 the date of closing from the expiration date of the contract. The
5-32 result shall be expressed in whole months.
5-33 (g) The amount of the security required under Subsection (a)
5-34 of this section is $20,000.
5-35 (h) The registrant shall maintain the bond or other security
5-36 in the amount provided in Subsection (g) of this section in effect
5-37 for two years after the date on which the health spa closes or
5-38 until the secretary of state determines that each claim to which
5-39 the bond or other security deposit is subject has been satisfied or
5-40 foreclosed by law.
5-41 (i) The following provisions shall be applicable to all
5-42 bonds and other security required by this section:
5-43 (1) Regardless of the number of years the bond or
5-44 other security shall continue in force or the number of premiums
5-45 payable or paid, the limit of the surety's or obligor's liability
5-46 stated in the bond or other security shall not be cumulative from
5-47 year to year or period to period.
5-48 (2) The liability of the surety or obligor is
5-49 exclusively conditioned upon a final administrative order by the
5-50 secretary, and the bond or other security posted hereunder is
5-51 subject to no other type of claim.
5-52 (j) The surety or obligor must provide written notification
5-53 to the secretary at least 60 days prior to the cancellation of any
5-54 bond or other security required by this section. Any other
5-55 security on file with the secretary shall remain on file with the
5-56 secretary for two years after the registrant ceases business or at
5-57 such later time as the secretary may determine that no claims exist
5-58 against the security. < (a) Not later than the 30th day before the
5-59 date a health spa opens a location for the use of its members, the
5-60 health spa shall file with the secretary of state a surety bond
5-61 issued by a surety company licensed to do business in this state,
5-62 or, in lieu of and in equal amount to the bond, a security deposit
5-63 in the form of a certificate of deposit, letter of credit, or other
5-64 negotiable instrument issued by a financial institution in this
5-65 state whose deposits are insured by the Federal Deposit Insurance
5-66 Corporation or the Federal Savings and Loan Insurance Corporation.
5-67 The bond or other security deposit shall be payable in favor of the
5-68 state and shall be held for the benefit of any members of the
5-69 health spa who suffer financial losses due to the insolvency or
5-70 cessation of operation of the health spa. "Financial losses" shall
6-1 mean and be limited to any unused or unearned portion of such
6-2 member's dues or fees. Such a member may bring an action based on
6-3 the bond and recover against the surety regardless of the number of
6-4 claimants or claims filed against the bond, but the liability of
6-5 the surety may not exceed the aggregate amount of the bond. If the
6-6 claims filed against the bond exceed the amount of the bond, the
6-7 surety shall pay the amount of the bond to the secretary of state
6-8 for distribution to the claimants on a pro rata basis. The surety
6-9 is relieved of liability under the bond on payment of the amount to
6-10 the secretary of state.>
6-11 < (b) The amount of the security required under Subsection
6-12 (a) of this section is $20,000. If a claim is paid from the bond
6-13 or other security deposit, the health spa must post additional
6-14 security, not later than the 20th day after the date on which the
6-15 claim is paid, to restore the amount of the security to $20,000.>
6-16 < (c) The health spa shall maintain the bond or other
6-17 security deposit in the amount provided in Subsection (b) of this
6-18 section in effect for two years after the date on which the health
6-19 spa ceases business or until the secretary of state determines that
6-20 each claim to which the bond or other security deposit is subject
6-21 has been satisfied or foreclosed by law.>
6-22 < (d) The following provisions shall be applicable to all
6-23 bonds issued hereunder:>
6-24 < (1) Regardless of the number of years the bond shall
6-25 continue in force or the number of premiums payable or paid, the
6-26 limit of the surety's liability stated in the bond shall not be
6-27 cumulative from year to year or period to period.>
6-28 < (2) The surety shall not be liable through a bond for
6-29 punitive damages or for civil or criminal penalties assessed
6-30 against a health spa, its individual owners, or its employees.>
6-31 < (3) The bond written by a surety hereunder shall be
6-32 continuous until cancelled by the surety or terminated by the
6-33 health spa only upon giving 90 days prior notice to the secretary
6-34 of state of such cancellation.>
6-35 < (4) A surety hereunder shall not be liable for any
6-36 claim brought or suit filed against a bond if the claim or filing
6-37 of a suit occurs more than two years from the last effective date
6-38 of the bond.>
6-39 SECTION 5. The Health Spa Act (Article 5221l, Vernon's Texas
6-40 Civil Statutes) is amended by adding Section 10A to read as
6-42 Sec. 10A. ADJUDICATION OF CLAIMS. (a) Within 45 days from
6-43 the date the secretary first discovers that a health spa has
6-44 closed, the secretary shall publish a display advertisement in a
6-45 newspaper of general circulation in the county or nearest county in
6-46 which the health spa is located notifying the public of the fact
6-47 that the health spa is closed and that a health spa member has 90
6-48 days from the date of the first notice to perfect a claim under the
6-49 security posted pursuant to Section 10 of this Act.
6-50 Contemporaneously with the publication of the notice, the secretary
6-51 shall notify the surety company or obligor of the pending
6-52 administrative action.
6-53 (b) The notice shall be published for two consecutive
6-54 Saturdays and Sundays and shall inform those affected of the
6-55 procedures for perfecting a claim against the security. The
6-56 secretary shall have a claim against the security for reasonable
6-57 expenses incurred in publishing the notice which shall not exceed
6-59 (c) All claims received by the secretary after 90 days
6-60 following the date of the first notice are barred and shall not be
6-61 considered by the secretary. If the total of claims evidencing
6-62 actual financial loss exceeds the amount of the security, the
6-63 secretary shall adjudicate the claims on a pro rata basis by
6-64 dividing the amount of the security, after first deducting the
6-65 actual costs for publication of the notice, by the total amount of
6-66 the claims in order to ascertain a percentage to be applied to each
6-68 (d) The secretary shall adopt and publish such rules and
6-69 regulations as are necessary to determine claims and to insure the
6-70 prompt and fair distribution of the proceeds from the bond or other
7-1 security. Rules adopted by the secretary are subject to the
7-2 Administrative Procedure and Texas Register Act (Article 6252-13a,
7-3 Vernon's Texas Civil Statutes).
7-4 SECTION 6. The Health Spa Act (Article 5221l, Vernon's Texas
7-5 Civil Statutes) is amended by adding Section 10B to read as
7-7 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) As
7-8 provided in this section, a health spa registrant may apply for an
7-9 exemption from the security requirements of Section 10 of this Act.
7-10 To qualify for an exemption, a registrant must first file an
7-11 application for an exemption on a form approved by the secretary.
7-12 The application shall be verified by the person authorized by the
7-13 secretary to make the application. Upon approval of the exemption,
7-14 the secretary shall issue a certificate of exemption. A registrant
7-15 who has been granted a certificate of exemption by the secretary
7-16 shall not be required to post a bond or other security as required
7-17 by Section 10 of this Act.
7-18 (b) A health spa registrant may apply for an exemption from
7-19 the security requirements of Section 10 if it meets the following
7-21 (1) the registrant does not require a health spa
7-22 consumer to:
7-23 (A) execute a membership contract for a term
7-24 exceeding 31 days;
7-25 (B) execute a note or a retail installment
7-27 (C) authorize a draw or other recurring debit on
7-28 a financial institution to the favor of the registrant or the
7-29 registrant's assignee;
7-30 (D) pay an initiation fee or other fee except
7-31 monthly dues; or
7-32 (E) prepay for a term exceeding 31 days; and
7-33 (2) the registrant does not solicit or offer any plan
7-34 or program which contains any of the elements identified in
7-35 Paragraph (1) of this subsection.
7-36 (c) Alternatively, a health spa registrant may apply for an
7-37 exemption from the security requirements of Section 10 if:
7-38 (1) the registrant owns and operates at least one
7-39 health spa located in this state which has operated continuously at
7-40 one location for at least five years; and
7-41 (2) none of the members of a health spa owned by the
7-42 registrant has initiated or filed a complaint with any governmental
7-43 authority in this state relating to the closing of a health spa
7-44 owned by the registrant or the failure of a health spa owned by the
7-45 registrant to open.
7-46 (d) If a health spa registrant, who has claimed an exemption
7-47 provided by Subsection (c), closes a health spa or fails to open a
7-48 health spa and a member of the health spa initiates or files a
7-49 complaint with any governmental authority in this state relating to
7-50 the closing of the health spa or the failure of the health spa to
7-51 open, the registrant may still claim an exemption under Subsection
7-52 (c) for all health spas operating on the date the health spa closed
7-53 or failed to open; however, the registrant shall provide the
7-54 security required by Section 10 for all health spas the registrant
7-55 opens after the date the spa closed or failed to open.
7-56 (e) If a health spa registrant, who has claimed an exemption
7-57 provided by Subsection (c), has closed or failed to open more than
7-58 one health spa and a member of one of the affected health spas
7-59 initiates or files a complaint with any governmental authority in
7-60 this state relating to the closing of a health spa owned by the
7-61 registrant or the failure of a health spa owned by the registrant
7-62 to open, the registrant shall no longer qualify for an exemption
7-63 under Subsection (c) and shall be subject to the provisions of
7-64 Subsection (i).
7-65 (f) If a health spa registrant, who has claimed an exemption
7-66 provided by Subsection (c), is forced, due to an act of God or an
7-67 act of a governmental authority beyond the control of the
7-68 registrant, to move or temporarily close the location of the health
7-69 spa which provides the basis for the exemption, the registrant may
7-70 still claim an exemption under Subsection (c) as long as the spa is
8-1 not moved more than 10 miles from the original facility. This
8-2 subsection shall apply regardless of whether the move is temporary
8-3 or permanent.
8-4 (g) An exemption provided by this section is not
8-5 transferrable. If a health spa registrant sells or otherwise
8-6 transfers ownership in a health spa for which an exemption from the
8-7 security requirement has been granted, the new owner shall file a
8-8 new application for an exemption or post the security required by
8-9 Section 10 of this Act no later than the fifth day following the
8-10 date of the sale or transfer.
8-11 (h) To claim an exemption provided by Subsection (c), a
8-12 registrant must have continuously owned and operated at least one
8-13 health spa which is eligible for an exemption under that
8-14 subsection. A newly acquired health spa, regardless of its
8-15 previous eligibility for an exemption, may not provide the basis
8-16 for an exemption.
8-17 (i) The secretary, after notice and hearing, may refuse to
8-18 issue or may permanently revoke a registrant's certificate of
8-19 exemption if the secretary finds that the registrant:
8-20 (1) furnished false information on the application for
8-21 exemption; or
8-22 (2) no longer qualifies for an exemption.
8-23 SECTION 7. Section 11, Health Spa Act (Article 5221l,
8-24 Vernon's Texas Civil Statutes), is amended to read as follows:
8-25 Sec. 11. PREPAYMENTS. (a) A registrant < health spa> may
8-26 offer for sale or sell memberships before the date on which the
8-27 health spa opens for business.
8-28 (b) Except as provided by Subsection (c) of this section, if
8-29 the health spa does not open before the 181st day after the day on
8-30 which a membership is prepaid, the person who made the prepayment
8-31 is entitled to a full refund of the amount prepaid in the manner
8-32 provided by Subsection (b) of Section 9 of this Act.
8-33 (c) If another health spa operated by the same seller is
8-34 located not more than 10 miles from the proposed location of a new
8-35 health spa and if the person purchasing the membership is
8-36 authorized to use these other facilities, each person who made a
8-37 prepayment for a membership in the new spa is entitled to a full
8-38 refund of the amount prepaid in the manner provided by Subsection
8-39 (c) of Section 9 of this Act if the new spa does not open before
8-40 the 361st day after the date on which the first prepayment of a
8-41 membership in the new spa is received.
8-42 SECTION 8. Section 12, Health Spa Act (Article 5221l,
8-43 Vernon's Texas Civil Statutes), is amended to read as follows:
8-44 Sec. 12. Contract Terms. (a) A registrant, unless exempted
8-45 from the security requirements by Subsection (b) of Section 10B of
8-46 this Act, shall < The health spa must> deliver a fully completed
8-47 copy of a contract to a purchaser before the contract is signed.
8-48 The contract constitutes the entire agreement between the seller
8-49 and the purchaser. The contract must be in writing and must be
8-50 signed by the purchaser. If the health spa is not open at the time
8-51 the contract is entered, the contract must clearly state the
8-52 proposed opening date of the health spa. At the time of delivery
8-53 the health spa must give the purchaser a written receipt for any
8-54 payment made by the purchaser under the contract.
8-55 (b) If the contract is financed through a retail installment
8-56 contract or note, the contract may not require the purchaser to
8-57 make payments or finance the contract for more than five years
8-58 after the date on which the contract is made < If a health spa has
8-59 been in operation in this state for two years or less, the contract
8-60 may not require the purchaser to make payments or to finance the
8-61 contract for more than two years after the date on which the
8-62 contract is made. If the health spa has been in operation in this
8-63 state for more than two years, the contract may require the
8-64 purchaser to make payments or to finance the contract for a period
8-65 not to exceed five years after the date on which the contract is
8-66 made. The term of a contract may not be measured by the life of
8-67 the purchaser. If the purchaser is required by the contract to pay
8-68 a renewal fee of not less than $50, the contract may contain a
8-69 renewal option for as long as two additional years after the date
8-70 on which the contract expires>.
9-1 (c) If the contract is not financed, the terms of the
9-2 contract may not exceed three years.
9-3 (d) When the terms of two or more contracts between the same
9-4 parties overlap for any period, the contracts are considered as one
9-5 contract for the purpose of this Act.
9-6 (e) < (d)> A contract may not require or entail the execution
9-7 of a note or series of notes by the purchaser that when separately
9-8 negotiated will cut off as to third parties a right of action or
9-9 defense that the purchaser may have against the seller.
9-10 (f) < (e)> Each contract shall state in at least 10-point
9-11 type that is boldfaced, capitalized, underlined, or otherwise set
9-12 out from surrounding written material so as to be conspicuous:
9-13 (1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT
9-14 UNTIL YOU READ IT OR IF IT CONTAINS BLANK SPACES."
9-15 (2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER
9-16 OF THIS HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE
9-17 HEALTH SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU
9-18 SIGN THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS
9-19 CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO
9-20 THE FOLLOWING ADDRESS:
9-21 (Address of the health spa home office)."
9-22 (3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES
9-23 NOT PROVIDE FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU
9-24 ARE ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE
9-25 FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY CANCEL THIS CONTRACT BY
9-26 MAILING A NOTICE TO THE HEALTH SPA STATING YOUR DESIRE TO CANCEL
9-27 THIS CONTRACT, ACCOMPANIED BY PROOF OF PAYMENT ON THE CONTRACT.
9-28 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
9-29 FOLLOWING ADDRESS:
9-30 (Address of the health spa home office)."
9-31 "YOU MAY ALSO BE ENTITLED TO FILE A CLAIM FOR A REFUND OF YOUR
9-32 UNUSED MEMBERSHIP FEES AGAINST THE BOND OR OTHER SECURITY POSTED BY
9-33 THE HEALTH SPA WITH THE TEXAS SECRETARY OF STATE. TO MAKE A CLAIM
9-34 AGAINST THE SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH
9-35 PROOF OF PAYMENTS MADE ON THE CONTRACT TO THE TEXAS SECRETARY OF
9-36 STATE. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
9-37 FOLLOWING ADDRESS:
9-38 OFFICE OF THE SECRETARY OF STATE
9-39 STATUTORY DOCUMENTS SECTION
9-40 P.O. BOX 12887
9-41 AUSTIN, TEXAS 78711-2887."
9-42 (4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY
9-43 DISABLED AFTER THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR
9-44 ESTATE MAY CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF
9-45 YOUR UNUSED MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA
9-46 STATING YOUR DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY
9-47 REQUIRE PROOF OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE
9-48 MAILED BY CERTIFIED MAIL TO THE FOLLOWING ADDRESS:
9-49 (Address of the health spa home office)."
9-50 (g) If the registrant offers for sale or sells memberships
9-51 before the date on which the spa opens for business, each contract
9-52 shall state in at least 10-point type that is boldfaced,
9-53 capitalized, underlined, or otherwise set out from surrounding
9-54 written material so as to be conspicuous:
9-55 "IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the date on which
9-56 the 181st day after the date on which the membership is prepaid
9-57 falls) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR THIRTY DAYS, YOU
9-58 ARE ENTITLED TO A FULL REFUND OF THE MONEY YOU PREPAID. HOWEVER,
9-59 IF ANOTHER HEALTH SPA, OPERATED BY (insert: the name of the health
9-60 spa registrant), IS LOCATED WITHIN 10 MILES OF (insert: the
9-61 address of the proposed location of the new spa) AND IF YOU ARE
9-62 AUTHORIZED TO USE THE OTHER FACILITIES, YOU ARE ENTITLED TO RECEIVE
9-63 A FULL REFUND OF YOUR MEMBERSHIP FEES ONLY IF THIS LOCATION DOES
9-64 NOT FULLY OPEN FOR BUSINESS BEFORE (insert: the date that is the
9-65 361st day after the day the new spa first sells memberships) OR IF
9-66 THE NEW SPA DOES NOT REMAIN OPEN FOR 30 DAYS."
9-67 (h) Each contract for which a finance charge within the
9-68 meaning of the Truth-in-Lending Act or Regulation Z is charged or
9-69 collected shall state in at least 10-point type that is boldfaced,
9-70 capitalized, underlined, or otherwise set out from surrounding
10-1 written material so as to be conspicuous:
10-2 "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL
10-3 CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE
10-4 SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE
10-5 PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED
10-6 AMOUNTS PAID BY THE DEBTOR HEREUNDER."
10-7 SECTION 9. Section 13, Health Spa Act (Article 5221l,
10-8 Vernon's Texas Civil Statutes), is amended to read as follows:
10-9 Sec. 13. Cancellation of Contracts. (a) A member may
10-10 cancel a contract before the fourth business day after the date on
10-11 which the contract is signed by notifying the health spa registrant
10-12 of the cancellation in writing. Written notification is considered
10-13 given if the notification is mailed by certified mail to the home
10-14 office of the health spa registrant and postmarked not later than
10-15 midnight of the third business day. The health spa registrant
10-16 shall refund all money paid to the purchaser exercising the right
10-17 to cancel.
10-18 (b) A member may cancel a contract on written notice by
10-19 certified mail to the home office of the health spa registrant if
10-20 the health spa registrant goes out of business and fails to provide
10-21 facilities within 10 miles or moves its facilities more than 10
10-22 miles from the location in which the member is enrolled. A member
10-23 may cancel a contract in the same manner if the health spa
10-24 registrant fails to provide advertised services. < If a contract is
10-25 canceled under this subsection, the member is liable for an amount
10-26 equal to the value of services received and facilities used under
10-27 the contract up to the date of the cancellation, and if the member
10-28 has paid money under the contract in excess of that amount the
10-29 health spa shall promptly refund to the member the excess.>
10-30 (c) A purchaser of a membership may cancel a contract if the
10-31 member dies or becomes totally and permanently disabled after the
10-32 date on which the contract takes effect. < The purchaser remains
10-33 liable for an amount equal to the value of services received and
10-34 facilities used by the member under the contract up to the day on
10-35 which the death occurred or the disability was incurred. The
10-36 health spa shall make a pro rata refund of funds paid under the
10-37 contract in an amount based on the time remaining in the contract
10-38 term up to a maximum of 50 percent of the total contract amount.>
10-39 The health spa registrant may require a purchaser or the
10-40 purchaser's estate to provide reasonable proof of total and
10-41 permanent disability or death.
10-42 (d) If a purchaser or an estate elects to cancel a
10-43 membership contract pursuant to Subsection (b) or (c) of this
10-44 section the health spa registrant shall refund to the purchaser or
10-45 the purchaser's estate any unearned sums paid under the contract.
10-46 "Unearned sums" shall be calculated by multiplying the gross
10-47 monthly payment by the total of months remaining on a contract at
10-48 the time of cancellation minus any payments not made. For the
10-49 purposes of this section:
10-50 (1) The gross monthly payment shall be calculated by
10-51 determining the total of payments, including down payments and
10-52 initiation fees required by the contract, divided by the total
10-53 number of months in the term of the contract.
10-54 (2) The date of cancellation and the date of the
10-55 contract expiration shall be rounded to the nearest full month.
10-56 The total months remaining on the contract shall be calculated by
10-57 subtracting the date of cancellation from the expiration date of
10-58 the contract. The result shall be expressed in whole months.
10-59 (e) A health spa registrant shall make a refund required
10-60 under this section before the 31st day after the date the health
10-61 spa registrant receives the notice of cancellation accompanied by
10-62 proof of payment. The receipt given to the purchaser by the health
10-63 spa at the time the purchaser made a payment under the contract
10-64 constitutes < adequate> proof of payment.
10-65 SECTION 10. Section 15, Health Spa Act (Article 5221l,
10-66 Vernon's Texas Civil Statutes), is amended to read as follows:
10-67 Sec. 15. Unenforceable Contracts. (a) A contract or
10-68 assignment of a contract that does not comply with this Act is void
10-69 and unenforceable as contrary to public policy.
10-70 (b) If a seller does not possess a valid health spa
11-1 operator's certificate of registration at the time of entering into
11-2 any contract with the purchaser, the contract between the purchaser
11-3 and the seller is void and unenforceable as contrary to public
11-5 (c) A contract entered into in reliance on willful and
11-6 false, fraudulent, or misleading information, representation,
11-7 notice, or advertisement of the health spa owner, < or> operator or
11-8 seller is void and unenforceable.
11-9 SECTION 11. Section 17, Health Spa Act (Article 5221l,
11-10 Vernon's Texas Civil Statutes), is amended to read as follows:
11-11 Sec. 17. Prohibited Activities. (a) A seller or registrant
11-12 < health spa> may not offer a special offer or discount unless the
11-13 special offer or discount is available to all prospective members.
11-14 This subsection does not prohibit a health spa from offering
11-15 special group prices or group discounts.
11-16 (b) A seller or registrant < health spa> may not make a
11-17 material misrepresentation to a current member, prospective member,
11-18 or purchaser of a membership contract regarding:
11-19 (1) the qualifications of the staff;
11-20 (2) the availability, quality, or extent of the
11-21 facilities or services;
11-22 (3) the results obtained through exercise, dieting,
11-23 weight control, or physical fitness conditioning programs;
11-24 (4) membership rights; or
11-25 (5) the period that a special offer or discount will
11-26 be available.
11-27 (c) A health spa registrant may not fail or refuse to:
11-28 (1) file or update the registration statements
11-29 required by Section 8 of this Act;
11-30 (2) establish the escrow account required by Section 9
11-31 of this Act; or
11-32 (3) maintain the security required by Section 10 of
11-33 this Act in full force and effect.
11-34 (d) A health spa registrant may not advertise that it is
11-35 bonded by the state.
11-36 (e) A health spa registrant may not sell a membership plan
11-37 not included in the list required by Section 16 of this Act.
11-38 SECTION 12. Section 18, Health Spa Act (Article 5221l,
11-39 Vernon's Texas Civil Statutes), is amended to read as follows:
11-40 Sec. 18. Injunction. (a) If it appears that a person is in
11-41 violation of, has violated, or is about to violate this Act, the
11-42 attorney general or a district or county attorney may institute an
11-43 action for injunctive relief to restrain the person from continuing
11-44 the violation and for civil penalties authorized by Section 20 < A
11-45 district attorney, county attorney, or the attorney general may sue
11-46 in a court of competent jurisdiction to enjoin or restrain a person
11-47 from engaging in conduct described by Section 17 of this Act>.
11-48 (b) A civil action filed under this section shall be filed
11-49 in a district court in Travis County or in the county in which the
11-50 defendant resides < Except as prescribed by Subsection (c) of this
11-51 section, a district attorney, county attorney, or attorney general
11-52 who intends to sue under this section shall notify the defendant of
11-53 the alleged prohibited conduct not later than the seventh day
11-54 before the date the suit is filed.>
11-55 < (c) The notice prescribed by Subsection (b) of this section
11-56 is not required if the district attorney, county attorney, or
11-57 attorney general intends to request that the court issue a
11-58 temporary restraining order>.
11-59 SECTION 13. Section 20, Health Spa Act (Article 5221l,
11-60 Vernon's Texas Civil Statutes), is amended to read as follows:
11-61 Sec. 20. Civil Penalties. (a) A person who violates this
11-62 Act is subject to a civil penalty of not more than $1,000 for each
11-63 violation, not to exceed $25,000 in total penalties.
11-64 (b) A person who violates the terms of an injunction issued
11-65 in an action brought under Section 18 of this Act is liable to the
11-66 state for a civil penalty of not more than $25,000 for a single
11-67 violation and not more than $50,000 for all violations of the
11-68 injunction. A district attorney, county attorney, or the attorney
11-69 general may bring suit to recover the civil penalty in the court
11-70 that issued the original injunction.
12-1 (c) The attorney general, a district or county attorney, and
12-2 the secretary may recover reasonable expenses incurred in obtaining
12-3 injunctive relief, civil penalties, or both, including court costs,
12-4 reasonable attorney's fees, investigative costs, witness fees, and
12-5 deposition expenses.
12-6 (d) A penalty collected under this section by the attorney
12-7 general shall be deposited to the credit of the general revenue
12-8 fund. A penalty collected under this section by a district or
12-9 county attorney shall be deposited to the credit of the general
12-10 fund of the county.
12-11 SECTION 14. Section 22(a), Health Spa Act (Article 5221l,
12-12 Vernon's Texas Civil Statutes), is amended to read as follows:
12-13 (a) A person who knowingly or intentionally operates or
12-14 attempts to operate a health spa in violation of Section 8, 9, < or>
12-15 10, or 11 of this Act commits an offense. An offense under this
12-16 subsection is a Class A misdemeanor.
12-17 SECTION 15. Section 25, Health Spa Act (Article 5221l,
12-18 Vernon's Texas Civil Statutes), is amended to read as follows:
12-19 Sec. 25. Applicability. < (a)> This < Except as provided by
12-20 Subsection (b) of this section, this> Act applies to all health
12-21 spas < a health spa> in operation on or after September 1, 1985.
12-22 < (b) Section 9 of this Act does not apply to a health spa
12-23 that began operation before September 1, 1985.>
12-24 SECTION 16. The Health Spa Act (Article 5221l, Vernon's
12-25 Texas Civil Statutes) is amended by adding Section 26 to read as
12-27 Sec. 26. RULE-MAKING AUTHORITY. The secretary shall adopt
12-28 rules and regulations, promulgate administrative orders, and take
12-29 all action necessary to assure compliance with the intent and
12-30 purpose of this Act.
12-31 SECTION 17. Sections 7, 7A, and 14 of the Health Spa Act
12-32 (Article 5221l, Vernon's Texas Civil Statutes) are repealed.
12-33 SECTION 18. Sections 6.09(a) and (b), Chapter 1039, Acts of
12-34 the 71st Legislature, Regular Session, 1989, are repealed.
12-35 SECTION 19. (a) There is appropriated to the Office of the
12-36 Attorney General from the general revenue fund for the fiscal
12-37 biennium ending August 31, 1995, the amounts awarded to the office
12-38 under Section 20 of the Health Spa Act (Article 5221l, Vernon's
12-39 Texas Civil Statutes), as amended by this Act, to be used to
12-40 reimburse the office for the office's expenses related to the
12-41 litigation for which the expenses were awarded.
12-42 (b) There is appropriated to the secretary of state from the
12-43 general revenue fund for the fiscal biennium ending August 31,
12-44 1995, the amounts awarded to the office under Section 20 of the
12-45 Health Spa Act (Article 5221l, Vernon's Texas Civil Statutes), as
12-46 amended by this Act, to be used to reimburse the secretary for the
12-47 secretary's expenses related to the litigation for which the
12-48 expenses were awarded.
12-49 SECTION 20. This Act takes effect September 1, 1993.
12-50 SECTION 21. The importance of this legislation and the
12-51 crowded condition of the calendars in both houses create an
12-52 emergency and an imperative public necessity that the
12-53 constitutional rule requiring bills to be read on three several
12-54 days in each house be suspended, and this rule is hereby suspended.
12-55 * * * * *
12-58 May 22, 1993
12-59 Hon. Bob Bullock
12-60 President of the Senate
12-62 We, your Committee on State Affairs to which was referred H.B.
12-63 No. 2243, have had the same under consideration, and I am
12-64 instructed to report it back to the Senate with the recommendation
12-65 that it do pass and be printed.
12-68 * * * * *
12-70 No witnesses appeared on H.B. No. 2243.