By: West S.B. No. 1100
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the regulation of health spas; providing a penalty;
1-2 making appropriations.
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
1-8 where:
1-9 (1) the facilities of a health spa are no longer
1-10 available to its members and equivalent facilities within 10 miles
1-11 of the closed facilities have not been made available to members of
1-12 the closed facilities; or
1-13 (2) the registrant has sold a registered location and
1-14 the security required by Section 8 of this Act has either been
1-15 cancelled, withdrawn, or is otherwise unavailable for the use of
1-16 members; or
1-17 (3) the registrant has sold a registered location and
1-18 the new owner has neither adopted nor honored the contracts of
1-19 existing members.
1-20 (b) <(1)> "Contract" means an agreement by which a person
1-21 <one> becomes a member of a health spa.
1-22 (c) <(2)> "Facilities" means equipment, physical structures,
1-23 improvements, improvements to leasehold premises, and other
1-24 tangible property, real, personal, or mixed, used by a health spa
2-1 at each location to conduct its business, including but not limited
2-2 to saunas, whirlpool baths, gymnasiums, running tracks, swimming
2-3 pools, shower areas, racquetball courts, martial arts equipment,
2-4 and exercise equipment.
2-5 (d) "Fully open" or "fully open for business" means the date
2-6 on which all services of the health spa that were advertised before
2-7 the opening or promised to be made available are available for use
2-8 by its members.
2-9 (e) <(3)> "Health spa" means a business <primarily> involved
2-10 in the sale of memberships that provides the members instruction in
2-11 a program of physical exercise or provides the members use of the
2-12 facilities of the health spa for a program of physical exercise.
2-13 The term does not include an organization that is tax exempt under
2-14 26 U.S.C. 501 et seq., a private club owned and operated by its
2-15 members, an entity exclusively <primarily> operated for the purpose
2-16 of teaching dance or aerobic exercise, an entity exclusively
2-17 <primarily> engaged in physical rehabilitation activity related to
2-18 an individual's injury or disease, an individual or entity engaged
2-19 in an activity authorized under a valid license issued by this
2-20 state, or an activity conducted or sanctioned by a school operating
2-21 under the Education Code.
2-22 (f) "Location" means the physical site or place where health
2-23 spa facilities are located.
2-24 (g) <(4)> "Member" means a person entitled to the benefits
2-25 of membership in a health spa.
2-26 (h) <(5)> "Membership" means the status under a contract
2-27 between an individual and a health spa that entitles the individual
3-1 to the use of services or facilities of the health spa.
3-2 (i) "Obligor" means a person other than a surety who is
3-3 obligated to perform in the event of a registrant's default.
3-4 (j) <(6)> "Person" means an individual, corporation,
3-5 association, organization, partnership, business trust, trust,
3-6 estate, and any other legal entity.
3-7 (k) <(7)> "Prepayment" means consideration paid to a health
3-8 spa by a purchaser prior to the time that the health spa is fully
3-9 open for business <a payment for all services or for the use of
3-10 facilities made by members of a health spa before the first day the
3-11 services or facilities are made available to the members>.
3-12 (l) <(8)> "Purchaser" means a person who seeks or acquires
3-13 by purchase the use of health spa facilities or services <purchases
3-14 a health spa membership>.
3-15 (m) "Registrant" means a person who has registered with the
3-16 secretary and has been issued a health spa operator's certificate
3-17 of registration.
3-18 (n) "Secretary" means the secretary of state.
3-19 (o) <(9)> "Seller" means a person who owns or operates a
3-20 health spa or who offers for sale the right to use the facilities
3-21 or the services of the health spa.
3-22 (p) <(10)> "Services" means programs, plans, guidance, or
3-23 instruction that a health spa provides for its members, including
3-24 diet planning, exercise instruction, exercise programs, and
3-25 instructional classes.
3-26 SECTION 2. Section 8, Health Spa Act (Article 5221l,
3-27 Vernon's Texas Civil Statutes), is amended to read as follows:
4-1 Sec. 8. REGISTRATION. (a) A person may not operate a
4-2 health spa or offer for sale or sell memberships in a health spa in
4-3 this state unless the person possesses a valid health spa
4-4 operator's certificate of registration.
4-5 (b) Each applicant for a health spa operator's certificate
4-6 of registration shall file with the secretary for each location an
4-7 application for registration containing the following information:
4-8 (1) the legal name, address, and telephone number of
4-9 the applicant;
4-10 (2) the trade name by which the applicant does
4-11 business and, if incorporated, the name registered with the
4-12 secretary, the location of the registered office, and the name and
4-13 address of any person who directly or indirectly owns or controls
4-14 10 percent or more of the outstanding shares of stock in the
4-15 corporation;
4-16 (3) the date on which the applicant became the owner
4-17 and operator of the health spa;
4-18 (4) the address of the health spa;
4-19 (5) the type of available or proposed facilities and
4-20 services offered at the location; and
4-21 (6) samples of all contracts used by the seller in
4-22 connection with the sale of memberships.
4-23 (c) Each application for a health spa operator's certificate
4-24 of registration shall be accompanied by proof of the security
4-25 required by this Act and payment of the required fee for issuance
4-26 of the certificate.
4-27 (d) All certificates of registration are valid for a period
5-1 of one year from the date of issuance and are renewable as provided
5-2 by the secretary.
5-3 (e) The registrant shall amend the application for
5-4 registration not later than the 90th day after the day on which a
5-5 change in the information provided in the statement occurs.
5-6 (f) A health spa operator's certificate of registration is
5-7 not transferable. In the event a registrant sells or otherwise
5-8 transfers ownership in a registered health spa location, the new
5-9 owner or owners shall file an application for registration as
5-10 required by this section no later than the fifth day following the
5-11 date of sale.
5-12 (g) The secretary may charge each applicant for a
5-13 certificate of registration a reasonable fee not to exceed $100 to
5-14 cover the cost of application or renewal.
5-15 (h) The secretary, after notice and hearing, may refuse to
5-16 issue or may permanently revoke or suspend for a definite period of
5-17 time a certificate of registration if the secretary finds that the
5-18 applicant or registrant:
5-19 (1) furnished false information on any application,
5-20 report, or other document filed with the secretary;
5-21 (2) failed to provide the contract disclosure language
5-22 required by Section 12 of this Act; or
5-23 (3) failed to file and maintain the bond or post other
5-24 security for each location as required by Section 10 of this Act.
5-25 (i) A registrant shall prominently post the health spa
5-26 operator's certificate of registration at each registered location
5-27 <health spa shall file a registration statement with the secretary
6-1 of state before offering for sale or selling memberships in this
6-2 state. The health spa shall file a separate registration statement
6-3 for each location at which the health spa operates. The
6-4 registration statement must contain:>
6-5 <(1) the name and address of the health spa;>
6-6 <(2) the name and address of any person who directly
6-7 or indirectly owns or controls 10 percent or more of the
6-8 outstanding shares of stock in the health spa;>
6-9 <(3) the type of available or proposed facilities and
6-10 services offered at that location; and>
6-11 <(4) the approximate size of the health spa location
6-12 measured in square feet.>
6-13 <(b) The registration statement must also contain either:>
6-14 <(1) a full and complete disclosure of any litigation,
6-15 or any complaint filed with a governmental authority, relating to
6-16 the failure to open or the closing of a health spa brought against
6-17 the owners, officers, or directors of a health spa that was
6-18 completed within the past two years or is currently pending; or>
6-19 <(2) a notarized statement that states that there has
6-20 been no litigation, or complaint filed with a governmental
6-21 authority, relating to the opening or closing of the health spa
6-22 within the past two years.>
6-23 <(c) The health spa shall update the statement not later
6-24 than the 90th day after the day on which a change in the
6-25 information required in the statement occurs.>
6-26 <(d) Each health spa registering under this section shall
6-27 maintain a copy of the registration statement filed for each
7-1 location in the records of the health spa. The health spa shall
7-2 allow a current member or a prospective purchaser of a membership
7-3 to inspect a registration statement on request.>
7-4 <(e) The secretary of state may charge each health spa that
7-5 files a registration statement a reasonable fee not to exceed $100
7-6 to cover the cost of filing. The secretary of state may not
7-7 require a health spa to provide information other than that
7-8 provided in the registration statement>.
7-9 SECTION 3. Section 9, Health Spa Act (Article 5221l,
7-10 Vernon's Texas Civil Statutes), is amended to read as follows:
7-11 Sec. 9. ESCROW. (a) Except as provided by Subsection (e)
7-12 of this section, a registrant <health spa> or its assignee or agent
7-13 that accepts prepayments for its memberships shall deposit all of
7-14 the funds received as prepayments in an escrow account established
7-15 with a financial institution whose accounts are insured by the
7-16 Federal Deposit Insurance Corporation or the Federal Savings and
7-17 Loan Insurance Corporation, which shall hold the funds as escrow
7-18 agent for the benefit of the members that prepay. The registrant
7-19 <health spa> shall deposit prepayments received at least as often
7-20 as biweekly and shall make the first deposit not later than the
7-21 14th day after the day on which the registrant or its agent <spa>
7-22 accepts the first prepayment. Not later than the 14th day after
7-23 the day on which the first prepayment is received, the registrant
7-24 <spa> shall give the secretary <of state> a notarized statement
7-25 that identifies the financial institution in which the prepayments
7-26 are held in escrow and the name in which the account is held,
7-27 together with a signed statement on a form approved by the
8-1 secretary which authorizes the secretary to make inquiries of the
8-2 financial institution regarding the funds in escrow. The
8-3 prepayments shall be held in escrow until the 30th day after the
8-4 date that the health spa fully opens for business.
8-5 (b) Except as provided by Subsection (c) of this section, if
8-6 a health spa does not fully open for business before the 181st day
8-7 after the date it first sells a membership in the health spa or if
8-8 the spa does not remain open for 30 days, the members whose fees
8-9 are held in escrow under this section shall receive a full refund
8-10 of their membership fees from the escrow agent.
8-11 (c) If another health spa operated by the same registrant
8-12 <seller> is located not more than 10 miles from the proposed
8-13 location of a new health spa and if the person purchasing the
8-14 membership is authorized to use these other facilities, a member of
8-15 the new spa whose fees are held in escrow under this section is
8-16 entitled to receive a full refund of the membership fees from the
8-17 escrow agent if the new spa does not fully open for business before
8-18 the 361st day after the date on which the new spa first sells a
8-19 membership or if the new spa does not remain open for 30 days.
8-20 (d) If the health spa remains open for 30 days after the
8-21 date the health spa initially fully opens for business, the
8-22 registrant <health spa> may withdraw the escrowed funds at its
8-23 discretion if the registrant <health spa> files an affidavit with
8-24 the secretary of state certifying that all obligations of the
8-25 health spa for which a lien could be claimed under Chapter 53,
8-26 Property Code, have been paid and if no person is eligible to claim
8-27 a lien under that chapter during the period the registrant or its
9-1 agent <health spa> accepts prepayments.
9-2 (e) Subject to the limitations of this subsection, a
9-3 registrant who is the <an> owner of one or more health spas in
9-4 operation in this state is not required to escrow prepayments on
9-5 the opening of an additional health spa in this state if the health
9-6 spas in operation have operated for at least two years preceding
9-7 the date the first membership in the additional spa is sold and if
9-8 none of the members of the spas in operation have initiated
9-9 litigation against the registrant <owner's spas> relating to the
9-10 failure to open or the closing of a health spa or filed a complaint
9-11 relating to the failure to open or the closing of a health spa with
9-12 any governmental authority in the state against the registrant or
9-13 any of the owners, officers, or directors of the health spa. A
9-14 registrant <An owner of a health spa> is not required to escrow
9-15 prepayments because of litigation or a complaint based on the
9-16 closing of a health spa if that closing was caused by a fire,
9-17 flood, or other natural disaster and if the closing is temporary
9-18 and does not exceed one month. A registrant <An owner> is not
9-19 required to escrow prepayments because of litigation or a complaint
9-20 based on the closing of a health spa if that closing is due to the
9-21 relocation of the spa to a site not more than 10 miles from the
9-22 original location and if the time elapsed between closing the spa
9-23 at the old location and reopening at the new location does not
9-24 exceed one month.
9-25 (f) The total number of spas opened by the registrant
9-26 <owner> during any two-year period to which the exception provided
9-27 by Subsection (e) of this section applies is limited to twice the
10-1 number of spas in operation on the first day of the two-year
10-2 period.
10-3 (g) For the purposes of this section, the date on which a
10-4 health spa fully opens is the date on which all services of the spa
10-5 that were advertised before the opening or promised to be made
10-6 available, whether or not contained in the contract, are available
10-7 for use by its members.
10-8 SECTION 4. Section 10, Health Spa Act (Article 5221l,
10-9 Vernon's Texas Civil Statutes), is amended to read as follows:
10-10 Sec. 10. SECURITY. (a) Except as provided by Section 10B
10-11 of this Act, the secretary may not issue a certificate of
10-12 registration unless the applicant first files a surety bond or
10-13 posts other security in such form as the secretary may prescribe.
10-14 (b) If a surety bond is filed, it shall be continuous and
10-15 remain in effect until cancelled by the surety company with notice
10-16 as provided in this section. If a bond is cancelled, the
10-17 certificate of registration is suspended on the effective date of
10-18 cancellation.
10-19 (c) The bond shall be a surety bond issued by a company
10-20 authorized to do business in this state and shall be in conformity
10-21 with the Insurance Code.
10-22 (d) Other security need not be posted annually so long as
10-23 the applicable amount specified in this section remains posted. If
10-24 other security is posted, the interest from the security shall go
10-25 to the person posting the security. The other security shall be in
10-26 such form as the secretary may deem appropriate.
10-27 (e) The bond or other security shall be payable in favor of
11-1 the state and shall be held for the benefit of the state and for
11-2 the registrant's members who have been administratively adjudicated
11-3 to have suffered actual financial losses due to the closing of the
11-4 registrant's health spa.
11-5 (f) Actual financial loss shall mean and be limited to those
11-6 sums which have been paid under a health spa contract to a
11-7 registrant or a registrant's assignee and which at the time the
11-8 health spa is closed are unearned. Actual financial losses shall
11-9 be calculated by multiplying the gross monthly payment by the total
11-10 number of months remaining on a contract at the time the health spa
11-11 closes minus any payments not made. For the purposes of this
11-12 section:
11-13 (1) The gross monthly payment shall be calculated by
11-14 determining the total of payments, including down payments and
11-15 initiation fees required by the contract, divided by the total
11-16 number of months in the term of the contract.
11-17 (2) The date of closing and the date of the contract
11-18 expiration shall be rounded to the nearest full month. The total
11-19 number of months remaining on the contract shall be calculated by
11-20 subtracting the date of closing from the expiration date of the
11-21 contract. The result shall be expressed in whole months.
11-22 (g) The amount of the security required under Subsection (a)
11-23 of this section is $20,000.
11-24 (h) The registrant shall maintain the bond or other security
11-25 in the amount provided in Subsection (g) of this section in effect
11-26 for two years after the date on which the health spa closes or
11-27 until the secretary determines that each claim to which the bond or
12-1 other security deposit is subject has been satisfied or foreclosed
12-2 by law.
12-3 (i) The following provisions shall be applicable to all
12-4 bonds and other security required by this section:
12-5 (1) Regardless of the number of years the bond or
12-6 other security shall continue in force or the number of premiums
12-7 payable or paid, the limit of the surety's or obligor's liability
12-8 stated in the bond or other security shall not be cumulative from
12-9 year to year or period to period.
12-10 (2) The liability of the surety or obligor is
12-11 exclusively conditioned on a final administrative order by the
12-12 secretary, and the bond or other security posted hereunder is
12-13 subject to no other type of claim.
12-14 (j) The surety or obligor must provide written notification
12-15 to the secretary at least 60 days prior to the cancellation of any
12-16 bond or other security required by this section. Any other
12-17 security on file with the secretary shall remain on file with the
12-18 secretary for two years after the registrant ceases business or at
12-19 such later time as the secretary may determine that no claims exist
12-20 against the security. <(a) Not later than the 30th day before the
12-21 date a health spa opens a location for the use of its members, the
12-22 health spa shall file with the secretary of state a surety bond
12-23 issued by a surety company licensed to do business in this state,
12-24 or, in lieu of and in equal amount to the bond, a security deposit
12-25 in the form of a certificate of deposit, letter of credit, or other
12-26 negotiable instrument issued by a financial institution in this
12-27 state whose deposits are insured by the Federal Deposit Insurance
13-1 Corporation or the Federal Savings and Loan Insurance Corporation.
13-2 The bond or other security deposit shall be payable in favor of the
13-3 state and shall be held for the benefit of any members of the
13-4 health spa who suffer financial losses due to the insolvency or
13-5 cessation of operation of the health spa. "Financial losses" shall
13-6 mean and be limited to any unused or unearned portion of such
13-7 member's dues or fees. Such a member may bring an action based on
13-8 the bond and recover against the surety regardless of the number of
13-9 claimants or claims filed against the bond, but the liability of
13-10 the surety may not exceed the aggregate amount of the bond. If the
13-11 claims filed against the bond exceed the amount of the bond, the
13-12 surety shall pay the amount of the bond to the secretary of state
13-13 for distribution to the claimants on a pro rata basis. The surety
13-14 is relieved of liability under the bond on payment of the amount to
13-15 the secretary of state.>
13-16 <(b) The amount of the security required under Subsection
13-17 (a) of this section is $20,000. If a claim is paid from the bond
13-18 or other security deposit, the health spa must post additional
13-19 security, not later than the 20th day after the date on which the
13-20 claim is paid, to restore the amount of the security to $20,000.>
13-21 <(c) The health spa shall maintain the bond or other
13-22 security deposit in the amount provided in Subsection (b) of this
13-23 section in effect for two years after the date on which the health
13-24 spa ceases business or until the secretary of state determines that
13-25 each claim to which the bond or other security deposit is subject
13-26 has been satisfied or foreclosed by law.>
13-27 <(d) The following provisions shall be applicable to all
14-1 bonds issued hereunder:>
14-2 <(1) Regardless of the number of years the bond shall
14-3 continue in force or the number of premiums payable or paid, the
14-4 limit of the surety's liability stated in the bond shall not be
14-5 cumulative from year to year or period to period.>
14-6 <(2) The surety shall not be liable through a bond for
14-7 punitive damages or for civil or criminal penalties assessed
14-8 against a health spa, its individual owners, or its employees.>
14-9 <(3) The bond written by a surety hereunder shall be
14-10 continuous until cancelled by the surety or terminated by the
14-11 health spa only upon giving 90 days prior notice to the secretary
14-12 of state of such cancellation.>
14-13 <(4) A surety hereunder shall not be liable for any
14-14 claim brought or suit filed against a bond if the claim or filing
14-15 of a suit occurs more than two years from the last effective date
14-16 of the bond.>
14-17 SECTION 5. The Health Spa Act (Article 5221l, Vernon's Texas
14-18 Civil Statutes) is amended by adding Section 10A to read as
14-19 follows:
14-20 Sec. 10A. ADJUDICATION OF CLAIMS. (a) Within 45 days from
14-21 the date the secretary first discovers that a health spa has
14-22 closed, the secretary shall publish a display advertisement in a
14-23 newspaper of general circulation in the county or nearest county in
14-24 which the health spa is located notifying the public of the fact
14-25 that the health spa is closed and that a health spa member has 90
14-26 days from the date of the first notice to perfect a claim under the
14-27 security posted pursuant to Section 10 of this Act.
15-1 Contemporaneously with the publication of the notice, the secretary
15-2 shall notify the surety company or obligor of the pending
15-3 administrative action.
15-4 (b) The notice shall be published for two consecutive
15-5 Saturdays and Sundays and shall inform those affected of the
15-6 procedures for perfecting a claim against the security. The
15-7 secretary shall have a claim against the security for reasonable
15-8 expenses incurred in publishing the notice which shall not exceed
15-9 $3,000.
15-10 (c) All claims received by the secretary after 90 days
15-11 following the date of the first notice are barred and shall not be
15-12 considered by the secretary. If the total of claims evidencing
15-13 actual financial loss exceeds the amount of the security, the
15-14 secretary shall adjudicate the claims on a pro rata basis by
15-15 dividing the amount of the security, after first deducting the
15-16 actual costs for publication of the notice, by the total amount of
15-17 the claims in order to ascertain a percentage to be applied to each
15-18 claim.
15-19 (d) The secretary shall adopt and publish such rules and
15-20 regulations as are necessary to determine claims and to ensure the
15-21 prompt and fair distribution of the proceeds from the bond or other
15-22 security. Rules adopted by the secretary are subject to the
15-23 Administrative Procedure and Texas Register Act (Article 6252-13a,
15-24 Vernon's Texas Civil Statutes).
15-25 SECTION 6. The Health Spa Act (Article 5221l, Vernon's Texas
15-26 Civil Statutes) is amended by adding Section 10B to read as
15-27 follows:
16-1 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) As
16-2 provided in this section, a health spa registrant may apply for an
16-3 exemption from the security requirements of Section 10 of this Act.
16-4 To qualify for an exemption, a registrant must first file an
16-5 application for an exemption on a form approved by the secretary.
16-6 The application shall be verified by the person authorized by the
16-7 secretary to make the application. On approval of the exemption,
16-8 the secretary shall issue a certificate of exemption. A registrant
16-9 who has been granted a certificate of exemption by the secretary
16-10 shall not be required to post a bond or other security as required
16-11 by Section 10 of this Act.
16-12 (b) A health spa registrant may apply for an exemption from
16-13 the security requirements of Section 10 of this Act if it meets the
16-14 following criteria:
16-15 (1) the registrant does not require a health spa
16-16 consumer to:
16-17 (A) execute a membership contract for a term
16-18 exceeding 31 days;
16-19 (B) execute a note or a retail installment
16-20 contract;
16-21 (C) authorize a draw or other recurring debit on
16-22 a financial institution to the favor of the registrant or the
16-23 registrant's assignee;
16-24 (D) pay an initiation fee or other fee except
16-25 monthly dues; or
16-26 (E) prepay for a term exceeding 31 days; and
16-27 (2) the registrant does not solicit or offer any plan
17-1 or program which contains any of the elements identified in
17-2 Subdivision (1) of this subsection.
17-3 (c) Alternatively, a health spa registrant may apply for an
17-4 exemption from the security requirements of Section 10 of this Act
17-5 if:
17-6 (1) the registrant owns and operates at least one
17-7 health spa located in this state which has operated continuously at
17-8 one location for at least five years; and
17-9 (2) none of the members of a health spa owned by the
17-10 registrant has initiated or filed a complaint with any governmental
17-11 authority in this state relating to the closing of a health spa
17-12 owned by the registrant or the failure of a health spa owned by the
17-13 registrant to open.
17-14 (d) If a health spa registrant, who has claimed an exemption
17-15 provided by Subsection (c) of this section, closes a health spa or
17-16 fails to open a health spa and a member of the health spa initiates
17-17 or files a complaint with any governmental authority in this state
17-18 relating to the closing of the health spa or the failure of the
17-19 health spa to open, the registrant may still claim an exemption
17-20 under Subsection (c) of this section for all health spas operating
17-21 on the date the health spa closed or failed to open; however, the
17-22 registrant shall provide the security required by Section 10 of
17-23 this Act for all health spas the registrant opens after the date
17-24 the spa closed or failed to open.
17-25 (e) If a health spa registrant, who has claimed an exemption
17-26 provided by Subsection (c) of this section, has closed or failed to
17-27 open more than one health spa and a member of one of the affected
18-1 health spas initiates or files a complaint with any governmental
18-2 authority in this state relating to the closing of a health spa
18-3 owned by the registrant or the failure of a health spa owned by the
18-4 registrant to open, the registrant shall no longer qualify for an
18-5 exemption under Subsection (c) of this section and shall be subject
18-6 to the provisions of Subsection (i) of this section.
18-7 (f) If a health spa registrant, who has claimed an exemption
18-8 provided by Subsection (c) of this section, is forced, due to an
18-9 act of God or an act of a governmental authority beyond the control
18-10 of the registrant, to move or temporarily close the location of the
18-11 health spa which provides the basis for the exemption, the
18-12 registrant may still claim an exemption under Subsection (c) of
18-13 this section as long as the spa is not moved more than 10 miles
18-14 from the original facility. This subsection shall apply regardless
18-15 of whether the move is temporary or permanent.
18-16 (g) An exemption provided by this section is not
18-17 transferable. If a health spa registrant sells or otherwise
18-18 transfers ownership in a health spa for which an exemption from the
18-19 security requirement has been granted, the new owner shall file a
18-20 new application for an exemption or post the security required by
18-21 Section 10 of this Act no later than the fifth day following the
18-22 date of the sale or transfer.
18-23 (h) To claim an exemption provided by Subsection (c) of this
18-24 section, a registrant must have continuously owned and operated at
18-25 least one health spa which is eligible for an exemption under that
18-26 subsection. A newly acquired health spa, regardless of its
18-27 previous eligibility for an exemption, may not provide the basis
19-1 for an exemption.
19-2 (i) The secretary, after notice and hearing, may refuse to
19-3 issue or may permanently revoke a registrant's certificate of
19-4 exemption if the secretary finds that the registrant:
19-5 (1) furnished false information on the application for
19-6 exemption; or
19-7 (2) no longer qualifies for an exemption.
19-8 SECTION 7. Section 11, Health Spa Act (Article 5221l,
19-9 Vernon's Texas Civil Statutes), is amended to read as follows:
19-10 Sec. 11. PREPAYMENTS. (a) A registrant <health spa> may
19-11 offer for sale or sell memberships before the date on which the
19-12 health spa opens for business.
19-13 (b) Except as provided by Subsection (c) of this section, if
19-14 the health spa does not open before the 181st day after the day on
19-15 which a membership is prepaid, the person who made the prepayment
19-16 is entitled to a full refund of the amount prepaid in the manner
19-17 provided by Subsection (b) of Section 9 of this Act.
19-18 (c) If another health spa operated by the same seller is
19-19 located not more than 10 miles from the proposed location of a new
19-20 health spa and if the person purchasing the membership is
19-21 authorized to use these other facilities, each person who made a
19-22 prepayment for a membership in the new spa is entitled to a full
19-23 refund of the amount prepaid in the manner provided by Subsection
19-24 (c) of Section 9 of this Act if the new spa does not open before
19-25 the 361st day after the date on which the first prepayment of a
19-26 membership in the new spa is received.
19-27 SECTION 8. Section 12, Health Spa Act (Article 5221l,
20-1 Vernon's Texas Civil Statutes), is amended to read as follows:
20-2 Sec. 12. Contract Terms. (a) A registrant, unless exempted
20-3 from the security requirements by Subsection (b) of Section 10B of
20-4 this Act, shall <The health spa must> deliver a fully completed
20-5 copy of a contract to a purchaser before the contract is signed.
20-6 The contract constitutes the entire agreement between the seller
20-7 and the purchaser. The contract must be in writing and must be
20-8 signed by the purchaser. If the health spa is not open at the time
20-9 the contract is entered, the contract must clearly state the
20-10 proposed opening date of the health spa. At the time of delivery
20-11 the health spa must give the purchaser a written receipt for any
20-12 payment made by the purchaser under the contract.
20-13 (b) If the contract is financed through a retail installment
20-14 contract or note, the contract may not require the purchaser to
20-15 make payments or finance the contract for more than five years
20-16 after the date on which the contract is made <a health spa has been
20-17 in operation in this state for two years or less, the contract may
20-18 not require the purchaser to make payments or to finance the
20-19 contract for more than two years after the date on which the
20-20 contract is made. If the health spa has been in operation in this
20-21 state for more than two years, the contract may require the
20-22 purchaser to make payments or to finance the contract for a period
20-23 not to exceed five years after the date on which the contract is
20-24 made. The term of a contract may not be measured by the life of
20-25 the purchaser. If the purchaser is required by the contract to pay
20-26 a renewal fee of not less than $50, the contract may contain a
20-27 renewal option for as long as two additional years after the date
21-1 on which the contract expires>.
21-2 (c) If the contract is not financed, the terms of the
21-3 contract may not exceed three years.
21-4 (d) When the terms of two or more contracts between the same
21-5 parties overlap for any period, the contracts are considered as one
21-6 contract for the purpose of this Act.
21-7 (e) <(d)> A contract may not require or entail the execution
21-8 of a note or series of notes by the purchaser that when separately
21-9 negotiated will cut off as to third parties a right of action or
21-10 defense that the purchaser may have against the seller.
21-11 (f) <(e)> Each contract shall state in at least 10-point
21-12 type that is boldfaced, capitalized, underlined, or otherwise set
21-13 out from surrounding written material so as to be conspicuous:
21-14 (1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT
21-15 UNTIL YOU READ IT OR IF IT CONTAINS BLANK SPACES."
21-16 (2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER
21-17 OF THIS HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE
21-18 HEALTH SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU
21-19 SIGN THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS
21-20 CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO
21-21 THE FOLLOWING ADDRESS:
21-22 (Address of the health spa home office)."
21-23 (3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES
21-24 NOT PROVIDE FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU
21-25 ARE ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE
21-26 FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY CANCEL THIS CONTRACT BY
21-27 MAILING A NOTICE TO THE HEALTH SPA STATING YOUR DESIRE TO CANCEL
22-1 THIS CONTRACT, ACCOMPANIED BY PROOF OF PAYMENT ON THE CONTRACT.
22-2 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
22-3 FOLLOWING ADDRESS:
22-4 (Address of the health spa home office)."
22-5 "YOU MAY ALSO BE ENTITLED TO FILE A CLAIM FOR A REFUND OF YOUR
22-6 UNUSED MEMBERSHIP FEES AGAINST THE BOND OR OTHER SECURITY POSTED BY
22-7 THE HEALTH SPA WITH THE SECRETARY OF STATE. TO MAKE A CLAIM
22-8 AGAINST THE SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH
22-9 PROOF OF PAYMENTS MADE ON THE CONTRACT TO THE SECRETARY OF STATE.
22-10 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
22-11 FOLLOWING ADDRESS:
22-12 OFFICE OF THE SECRETARY OF STATE
22-13 STATUTORY DOCUMENTS SECTION
22-14 P.O. BOX 12887
22-15 AUSTIN, TEXAS 78711-2887."
22-16 (4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY
22-17 DISABLED AFTER THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR
22-18 ESTATE MAY CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF
22-19 YOUR UNUSED MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA
22-20 STATING YOUR DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY
22-21 REQUIRE PROOF OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE
22-22 MAILED BY CERTIFIED MAIL TO THE FOLLOWING ADDRESS:
22-23 (Address of the health spa home office)."
22-24 (g) If the registrant offers for sale or sells memberships
22-25 before the date on which the spa opens for business, each contract
22-26 shall state in at least 10-point type that is boldfaced,
22-27 capitalized, underlined, or otherwise set out from surrounding
23-1 written material so as to be conspicuous:
23-2 "IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the
23-3 date on which the 181st day after the date on which the
23-4 membership is prepaid falls) OR IF THE NEW SPA DOES NOT
23-5 REMAIN OPEN FOR 30 DAYS, YOU ARE ENTITLED TO A FULL
23-6 REFUND OF THE MONEY YOU PREPAID. HOWEVER, IF ANOTHER
23-7 HEALTH SPA OPERATED BY (insert: the name of the health
23-8 spa registrant) IS LOCATED WITHIN 10 MILES OF
23-9 (insert: the address of the proposed location of the
23-10 new spa) AND IF YOU ARE AUTHORIZED TO USE THE OTHER
23-11 FACILITIES, YOU ARE ENTITLED TO RECEIVE A FULL REFUND
23-12 OF YOUR MEMBERSHIP FEES ONLY IF THIS LOCATION DOES NOT
23-13 FULLY OPEN FOR BUSINESS BEFORE (insert: the date that
23-14 is the 361st day after the day the new spa first sells
23-15 memberships) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR
23-16 30 DAYS."
23-17 (h) Each contract for which a finance charge within the
23-18 meaning of the Truth-in-Lending Act (15 U.S.C. Section 1601 et
23-19 seq.) or Regulation Z is charged or collected shall state in at
23-20 least 10-point type that is boldfaced, capitalized, underlined, or
23-21 otherwise set out from surrounding written material so as to be
23-22 conspicuous:
23-23 "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT
23-24 TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD
23-25 ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED
23-26 PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY
23-27 HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID
24-1 BY THE DEBTOR HEREUNDER."
24-2 SECTION 9. Section 13, Health Spa Act (Article 5221l,
24-3 Vernon's Texas Civil Statutes), is amended to read as follows:
24-4 Sec. 13. Cancellation of Contracts. (a) A member may
24-5 cancel a contract before the fourth business day after the date on
24-6 which the contract is signed by notifying the health spa registrant
24-7 of the cancellation in writing. Written notification is considered
24-8 given if the notification is mailed by certified mail to the home
24-9 office of the health spa registrant and postmarked not later than
24-10 midnight of the third business day. The health spa registrant
24-11 shall refund all money paid to the purchaser exercising the right
24-12 to cancel.
24-13 (b) A member may cancel a contract on written notice by
24-14 certified mail to the home office of the health spa registrant if
24-15 the health spa registrant goes out of business and fails to provide
24-16 facilities within 10 miles or moves its facilities more than 10
24-17 miles from the location in which the member is enrolled. A member
24-18 may cancel a contract in the same manner if the health spa
24-19 registrant fails to provide advertised services. <If a contract is
24-20 canceled under this subsection, the member is liable for an amount
24-21 equal to the value of services received and facilities used under
24-22 the contract up to the date of the cancellation, and if the member
24-23 has paid money under the contract in excess of that amount the
24-24 health spa shall promptly refund to the member the excess.>
24-25 (c) A purchaser of a membership may cancel a contract if the
24-26 member dies or becomes totally and permanently disabled after the
24-27 date on which the contract takes effect. <The purchaser remains
25-1 liable for an amount equal to the value of services received and
25-2 facilities used by the member under the contract up to the day on
25-3 which the death occurred or the disability was incurred. The
25-4 health spa shall make a pro rata refund of funds paid under the
25-5 contract in an amount based on the time remaining in the contract
25-6 term up to a maximum of 50 percent of the total contract amount.>
25-7 The health spa registrant may require a purchaser or the
25-8 purchaser's estate to provide reasonable proof of total and
25-9 permanent disability or death.
25-10 (d) If a purchaser or an estate elects to cancel a
25-11 membership contract pursuant to Subsection (b) or (c) of this
25-12 section the health spa registrant shall refund to the purchaser or
25-13 the purchaser's estate any unearned sums paid under the contract.
25-14 "Unearned sums" shall be calculated by multiplying the gross
25-15 monthly payment by the total number of months remaining on a
25-16 contract at the time of cancellation minus any payments not made.
25-17 For the purposes of this section:
25-18 (1) The gross monthly payment shall be calculated by
25-19 determining the total of payments, including down payments and
25-20 initiation fees required by the contract, divided by the total
25-21 number of months in the term of the contract.
25-22 (2) The date of cancellation and the date of the
25-23 contract expiration shall be rounded to the nearest full month.
25-24 The total months remaining on the contract shall be calculated by
25-25 subtracting the date of cancellation from the expiration date of
25-26 the contract. The result shall be expressed in whole months.
25-27 (e) A health spa registrant shall make a refund required
26-1 under this section before the 31st day after the date the health
26-2 spa registrant receives the notice of cancellation accompanied by
26-3 proof of payment. The receipt given to the purchaser by the health
26-4 spa at the time the purchaser made a payment under the contract
26-5 constitutes <adequate> proof of payment.
26-6 SECTION 10. Section 15, Health Spa Act (Article 5221l,
26-7 Vernon's Texas Civil Statutes), is amended to read as follows:
26-8 Sec. 15. Unenforceable Contracts. (a) A contract or
26-9 assignment of a contract that does not comply with this Act is void
26-10 and unenforceable as contrary to public policy.
26-11 (b) If a seller does not possess a valid health spa
26-12 operator's certificate of registration at the time of entering into
26-13 any contract with a purchaser, the contract between the purchaser
26-14 and the seller is void and unenforceable as contrary to public
26-15 policy.
26-16 (c) A contract entered into in reliance on wilful and false,
26-17 fraudulent, or misleading information, representation, notice, or
26-18 advertisement of the health spa owner, <or> operator, or seller is
26-19 void and unenforceable.
26-20 SECTION 11. Section 17, Health Spa Act (Article 5221l,
26-21 Vernon's Texas Civil Statutes), is amended to read as follows:
26-22 Sec. 17. Prohibited Activities. (a) A seller or registrant
26-23 <health spa> may not offer a special offer or discount unless the
26-24 special offer or discount is available to all prospective members.
26-25 This subsection does not prohibit a health spa from offering
26-26 special group prices or group discounts.
26-27 (b) A seller or registrant <health spa> may not make a
27-1 material misrepresentation to a current member, prospective member,
27-2 or purchaser of a membership contract regarding:
27-3 (1) the qualifications of the staff;
27-4 (2) the availability, quality, or extent of the
27-5 facilities or services;
27-6 (3) the results obtained through exercise, dieting,
27-7 weight control, or physical fitness conditioning programs;
27-8 (4) membership rights; or
27-9 (5) the period that a special offer or discount will
27-10 be available.
27-11 (c) A health spa registrant may not fail or refuse to:
27-12 (1) file or update the registration statements
27-13 required by Section 8 of this Act;
27-14 (2) establish the escrow account required by Section 9
27-15 of this Act; or
27-16 (3) maintain the security required by Section 10 of
27-17 this Act in full force and effect.
27-18 (d) A health spa registrant may not advertise that it is
27-19 bonded by the state.
27-20 (e) A health spa registrant may not sell a membership plan
27-21 not included in the list required by Section 16 of this Act.
27-22 SECTION 12. Section 18, Health Spa Act (Article 5221l,
27-23 Vernon's Texas Civil Statutes), is amended to read as follows:
27-24 Sec. 18. Injunction. (a) If it appears that a person is in
27-25 violation of or is threatening violation of this Act, the attorney
27-26 general or a district or county attorney may institute an action
27-27 for injunctive relief to restrain the person from continuing the
28-1 violation and for civil penalties authorized by Section 20 <A
28-2 district attorney, county attorney, or the attorney general may sue
28-3 in a court of competent jurisdiction to enjoin or restrain a person
28-4 from engaging in conduct described by Section 17> of this Act.
28-5 (b) A civil action filed under this section shall be filed
28-6 in a district court in Travis County or in the county in which the
28-7 defendant resides <Except as prescribed by Subsection (c) of this
28-8 section, a district attorney, county attorney, or attorney general
28-9 who intends to sue under this section shall notify the defendant of
28-10 the alleged prohibited conduct not later than the seventh day
28-11 before the date the suit is filed.>
28-12 <(c) The notice prescribed by Subsection (b) of this section
28-13 is not required if the district attorney, county attorney, or
28-14 attorney general intends to request that the court issue a
28-15 temporary restraining order>.
28-16 SECTION 13. Section 20, Health Spa Act (Article 5221l,
28-17 Vernon's Texas Civil Statutes), is amended to read as follows:
28-18 Sec. 20. Civil Penalties. (a) A person who violates this
28-19 Act is subject to a civil penalty of not more than $1,000 for each
28-20 violation, not to exceed $25,000 in total penalties.
28-21 (b) A person who violates the terms of an injunction issued
28-22 in an action brought under Section 18 of this Act is liable to the
28-23 state for a civil penalty of not more than $25,000 for a single
28-24 violation and not more than $50,000 for all violations of the
28-25 injunction. A district attorney, county attorney, or the attorney
28-26 general may bring suit to recover the civil penalty in the court
28-27 that issued the original injunction.
29-1 (c) The attorney general, a district or county attorney, and
29-2 the secretary may recover reasonable expenses incurred in obtaining
29-3 injunctive relief, civil penalties, or both, including court costs,
29-4 reasonable attorney's fees, investigative costs, witness fees, and
29-5 deposition expenses.
29-6 (d) A penalty collected under this section by the attorney
29-7 general shall be deposited to the credit of the general revenue
29-8 fund. A penalty collected under this section by a district or
29-9 county attorney shall be deposited to the credit of the general
29-10 fund of the county.
29-11 SECTION 14. Subsection (a), Section 22, Health Spa Act
29-12 (Article 5221l, Vernon's Texas Civil Statutes), is amended to read
29-13 as follows:
29-14 (a) A person who knowingly or intentionally operates or
29-15 attempts to operate a health spa in violation of Section 8, 9, <or>
29-16 10, or 11 of this Act commits an offense. An offense under this
29-17 subsection is a Class A misdemeanor.
29-18 SECTION 15. Section 25, Health Spa Act (Article 5221l,
29-19 Vernon's Texas Civil Statutes), is amended to read as follows:
29-20 Sec. 25. Applicability. This <(a) Except as provided by
29-21 Subsection (b) of this section, this> Act applies to all health
29-22 spas <a health spa> in operation on or after September 1, 1985.
29-23 <(b) Section 9 of this Act does not apply to a health spa
29-24 that began operation before September 1, 1985.>
29-25 SECTION 16. The Health Spa Act (Article 5221l, Vernon's
29-26 Texas Civil Statutes) is amended by adding Section 26 to read as
29-27 follows:
30-1 Sec. 26. RULE-MAKING AUTHORITY. The secretary shall adopt
30-2 rules and regulations, promulgate administrative orders, and take
30-3 all action necessary to assure compliance with the intent and
30-4 purpose of this Act.
30-5 SECTION 17. Sections 7, 7A, and 14, Health Spa Act (Article
30-6 5221l, Vernon's Texas Civil Statutes), are repealed.
30-7 SECTION 18. Section 6.09, Chapter 1039, Acts of the 71st
30-8 Legislature, Regular Session, 1989, is repealed.
30-9 SECTION 19. (a) There is appropriated to the Office of the
30-10 Attorney General from the general revenue fund for the fiscal
30-11 biennium ending August 31, 1995, the amounts awarded to the office
30-12 under Section 20, Health Spa Act (Article 5221l, Vernon's Texas
30-13 Civil Statutes), as amended by this Act, to be used to reimburse
30-14 the office for the office's expenses related to the litigation for
30-15 which the expenses were awarded.
30-16 (b) There is appropriated to the secretary of state from the
30-17 general revenue fund for the fiscal biennium ending August 31,
30-18 1995, the amounts awarded to the office under Section 20, Health
30-19 Spa Act (Article 5221l, Vernon's Texas Civil Statutes), as amended
30-20 by this Act, to be used to reimburse the secretary for the
30-21 secretary's expenses related to the litigation for which the
30-22 expenses were awarded.
30-23 SECTION 20. This Act takes effect September 1, 1993.
30-24 SECTION 21. The importance of this legislation and the
30-25 crowded condition of the calendars in both houses create an
30-26 emergency and an imperative public necessity that the
30-27 constitutional rule requiring bills to be read on three several
31-1 days in each house be suspended, and this rule is hereby suspended.