By: West S.B. No. 1100
73R6743 T
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the regulation of health spas.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Section 6, Health Spa Act (Article 5221l,
1-5 Vernon's Texas Civil Statutes) is amended to read as follows:
1-6 Sec. 6. DEFINITIONS. In this Act
1-7 (a) "Closed," "closes" or "closing" means a condition where:
1-8 1. the facilities of a health spa are no longer
1-9 available to its members and equivalent facilities within 10 miles
1-10 of the closed facilities have not been made available to members of
1-11 the closed facilities; or
1-12 2. the registrant has sold a registered location and
1-13 the security required by Section 8 has either been cancelled,
1-14 withdrawn, or otherwise unavailable for the use of members; or
1-15 3. the registrant has sold a registered location and
1-16 the new owner has neither adopted nor honored the contracts of
1-17 existing members.
1-18 (b) <(1)> "Contract" means an agreement by which a person
1-19 <one> becomes a member of a health spa.
1-20 (c) <(2)> "Facilities" means equipment, physical structures,
1-21 improvements, improvements to leasehold premises, and other
1-22 tangible property, real, personal, or mixed, used by a health spa
1-23 at each location to conduct its business, including but not limited
1-24 to saunas, whirlpool baths, gymnasiums, running tracks, swimming
2-1 pools, shower areas, racquetball courts, martial arts equipment,
2-2 and exercise equipment.
2-3 (d) "Fully open" or "fully open for business" means the date
2-4 on which all services of the health spa that were advertised before
2-5 the opening or promised to be made available are available for use
2-6 by its members.
2-7 (e) <(3)> "Health spa" means a business <primarily> involved
2-8 in the sale of memberships that provides the members instruction in
2-9 a program of physical exercise or provides the members use of the
2-10 facilities of the health spa for a program of physical exercise.
2-11 The term does not include an organization that is tax exempt under
2-12 26 U.S.C. 501 et seq., a private club owned and operated by its
2-13 members, an entity exclusively <primarily> operated for the purpose
2-14 of teaching dance or aerobic exercise, an entity exclusively
2-15 <primarily> engaged in physical rehabilitation activity related to
2-16 an individual's injury or disease, an individual or entity engaged
2-17 in an activity authorized under a valid license issued by this
2-18 state, or an activity conducted or sanctioned by a school operating
2-19 under the Education Code.
2-20 (f) "Location" means the physical site or place where health
2-21 spa facilities are located.
2-22 (g) <(4)> "Member" means a person entitled to the benefits
2-23 of membership in a health spa.
2-24 (h) <(5)> "Membership" means the status under a contract
2-25 between an individual and a health spa that entitles the individual
2-26 to the use of services or facilities of the health spa.
2-27 (i) "Obligor" means a person other than a surety who is
3-1 obligated to perform in the event of a registrant's default.
3-2 (j) <(6)> "Person" means an individual, corporation,
3-3 association, organization, partnership, business trust, trust,
3-4 estate, and any other legal entity.
3-5 (k) <(7)> "Prepayment" means consideration paid to a health
3-6 spa by a purchaser prior to the time that the health spa is fully
3-7 open for business <a payment for all services or for the use of
3-8 facilities made by members of a health spa before the first day the
3-9 services or facilities are made available to the members>.
3-10 (l) <(8)> "Purchaser" means a person who <purchases a health
3-11 spa membership> seeks or acquires by purchase the use of health spa
3-12 facilities or services.
3-13 (m) "Registrant" means a person who has registered with the
3-14 secretary and has been issued a health spa operator's certificate
3-15 of registration.
3-16 (n) "Secretary" means the Texas Secretary of State.
3-17 (o) <(9)> "Seller" means a person who owns or operates a
3-18 health spa or who offers for sale the right to use the facilities
3-19 or the services of the health spa.
3-20 (p) <(10)> "Services" means programs, plans, guidance, or
3-21 instruction that a health spa provides for its members, including
3-22 diet planning, exercise instruction, exercise programs, and
3-23 instructional classes.
3-24 SECTION 2. Section 8, Health Spa Act (Article 5221l,
3-25 Vernon's Texas Civil Statutes) is amended to read as follows:
3-26 Sec. 8. REGISTRATION. (a) A person may not operate a
3-27 health spa or offer for sale or sell memberships in a health spa in
4-1 this state unless the person possesses a valid health spa
4-2 operator's certificate of registration.
4-3 (b) Each applicant for a health spa operator's certificate
4-4 of registration shall file with the Secretary of State for each
4-5 location an application for registration containing the following
4-6 information:
4-7 1. the legal name, address, and telephone number of
4-8 the applicant:
4-9 2. the trade name by which the applicant does
4-10 business, and if incorporated, the name registered with the
4-11 secretary of state, the location of the registered office, and the
4-12 name and address of any person who directly or indirectly owns or
4-13 controls 10 percent of more of the outstanding shares of stock in
4-14 the corporation;
4-15 3. the date on which the applicant became the owner
4-16 and operator of the business;
4-17 4. the address of the health spa;
4-18 5. the type of available or proposed facilities and
4-19 services offered at the location;
4-20 6. samples of all contracts used by the seller in
4-21 connection with the sale of memberships; and
4-22 (c) Each application for a health spa operator's certificate
4-23 of registration shall be accompanied by proof of the security
4-24 required by this Act and payment of the required fee for issuance
4-25 of the certificate.
4-26 (d) All certificates of registration are valid for a period
4-27 of one year from the date of issuance and are renewable as provided
5-1 by the secretary.
5-2 (e) The registrant shall amend the application for
5-3 registration not later than the 90th day after the day on which a
5-4 change in the information provided in the statement occurs.
5-5 (f) A health spa operator's certificate of registration is
5-6 not transferrable. In the event a registrant sells or otherwise
5-7 transfers ownership in a registered health spa location, the new
5-8 owner(s) shall file an application of registration as required by
5-9 this section no later than the fifth day following the date of
5-10 sale.
5-11 (g) The secretary may charge each applicant for a
5-12 certificate of registration a reasonable fee not to exceed $100 to
5-13 cover the cost of application or renewal.
5-14 (h) The secretary, after notice and hearing, may refuse to
5-15 issue or may permanently revoke or suspend for a definite period of
5-16 time a certificate of registration if the secretary finds that the
5-17 applicant or registrant:
5-18 1. furnished false information on any application,
5-19 report, or other document filed with the secretary;
5-20 2. failed to provide the contract disclosure language
5-21 required by Section 12 of this Act; or
5-22 3. failed to file and maintain the bond or post other
5-23 security for each location as required by Section 10 of this Act.
5-24 (i) A registrant shall prominently post the health spa
5-25 operator's certificate of registration at each registered location
5-26 <A health spa shall file a registration statement with the
5-27 secretary of state before offering for sale or selling memberships
6-1 in this state. The health spa shall file a separate registration
6-2 statement for each location at which the health spa operates. The
6-3 registration statement must contain:>
6-4 <(1) the name and address of the health spa;>
6-5 <(2) the name and address of any person who directly
6-6 or indirectly owns or controls 10 percent or more of the
6-7 outstanding shares of stock in the health spa;>
6-8 <(3) the type of available or proposed facilities and
6-9 services offered at that location; and>
6-10 <(4) the approximate size of the health spa location
6-11 measured in square feet.>
6-12 <(b) The registration statement must also contain either:>
6-13 <(1) a full and complete disclosure of any litigation,
6-14 or any complaint filed with a governmental authority, relating to
6-15 the failure to open or the closing of a health spa brought against
6-16 the owners, officers, or directors of a health spa that was
6-17 completed within the past two years or is currently pending; or>
6-18 <(2) a notarized statement that states that there has
6-19 been no litigation, or complaint filed with a governmental
6-20 authority, relating to the opening or closing of the health spa
6-21 within the past two years.>
6-22 <(c) The health spa shall update the statement not later
6-23 than the 90th day after the day on which a change in the
6-24 information required in the statement occurs.>
6-25 <(d) Each health spa registering under this section shall
6-26 maintain a copy of the registration statement filed for each
6-27 location in the records of the health spa. The health spa shall
7-1 allow a current member or a prospective purchaser of a membership
7-2 to inspect a registration statement on request.>
7-3 <(e) The secretary of state may charge each health spa that
7-4 files a registration statement a reasonable fee not to exceed $100
7-5 to cover the cost of filing. The secretary of state may not
7-6 require a health spa to provide information other than that
7-7 provided in the registration statement>.
7-8 SECTION 3. Section 9, Health Spa Act (Article 5221l,
7-9 Vernon's Texas Civil Statutes) is amended to read as follows:
7-10 Sec. 9. ESCROW. (a) Except as provided by Subsection (e)
7-11 of this section, a registrant <health spa> or its assignee or agent
7-12 that accepts prepayments for its memberships shall deposit all of
7-13 the funds received as prepayments in an escrow account established
7-14 with a financial institution whose accounts are insured by the
7-15 Federal Deposit Insurance Corporation or the Federal Savings and
7-16 Loan Insurance Corporation, which shall hold the funds as escrow
7-17 agent for the benefit of the members that prepay. The registrant
7-18 <health spa> shall deposit prepayments received at least as often
7-19 as biweekly and shall make the first deposit not later than the
7-20 14th day after the day on which the registrant or its agent <spa>
7-21 accepts the first prepayment. Not later than the 14th day after
7-22 the day on which the first prepayment is received, the registrant
7-23 <spa> shall give the secretary of state a notarized statement that
7-24 identifies the financial institution in which the prepayments are
7-25 held in escrow and the name in which the account is held, together
7-26 with a signed statement on a form approved by the secretary of
7-27 state which authorizes the secretary to make inquiries of the
8-1 financial institution regarding the funds in escrow. The
8-2 prepayments shall be held in escrow until the 30th day after the
8-3 date that the health spa fully opens for business.
8-4 (b) Except as provided by Subsection (c) of this section, if
8-5 a health spa does not fully open for business before the 181st day
8-6 after the date it first sells a membership in the health spa or if
8-7 the spa does not remain open for 30 days, the members whose fees
8-8 are held in escrow under this section shall receive a full refund
8-9 of their membership fees from the escrow agent.
8-10 (c) If another health spa operated by the same registrant
8-11 <seller> is located not more than 10 miles from the proposed
8-12 location of a new health spa and if the person purchasing the
8-13 membership is authorized to use these other facilities, a member of
8-14 the new spa whose fees are held in escrow under this section is
8-15 entitled to receive a full refund of the membership fees from the
8-16 escrow agent if the new spa does not fully open for business before
8-17 the 361st day after the date on which the new spa first sells a
8-18 membership or if the new spa does not remain open for 30 days.
8-19 (d) If the health spa remains open for 30 days after the
8-20 date the health spa initially fully opens for business, the
8-21 registrant <health spa> may withdraw the escrowed funds at its
8-22 discretion if the registrant <health spa> files an affidavit with
8-23 the secretary of state certifying that all obligations of the
8-24 health spa for which a lien could be claimed under Chapter 53,
8-25 Property Code, have been paid and if no person is eligible to claim
8-26 a lien under that chapter during the period the registrant or its
8-27 agent <health spa> accepts prepayments.
9-1 (e) Subject to the limitations of this subsection, a <an>
9-2 registrant who is the owner of one or more health spas in operation
9-3 in this state is not required to escrow prepayments on the opening
9-4 of an additional health spa in this state if the health spas in
9-5 operation have operated for at least two years preceding the date
9-6 the first membership in the additional spa is sold and if none of
9-7 the members of the spas in operation have initiated litigation
9-8 against the registrant <owner's spas> relating to the failure to
9-9 open or the closing of a health spa or filed a complaint relating
9-10 to the failure to open or the closing of a health spa with any
9-11 governmental authority in the state against the registrant or any
9-12 of the owners, officers, or directors of the health spa. A
9-13 registrant <An owner of a health spa> is not required to escrow
9-14 prepayments because of litigation or a complaint based on the
9-15 closing of a health spa if that closing was caused by a fire,
9-16 flood, or other natural disaster and if the closing is temporary
9-17 and does not exceed one month. A registrant <An owner> is not
9-18 required to escrow prepayments because of litigation or a complaint
9-19 based on the closing of a health spa if that closing is due to the
9-20 relocation of the spa to a site not more than 10 miles from the
9-21 original location and if the time elapsed between closing the spa
9-22 at the old location and reopening at the new location does not
9-23 exceed one month.
9-24 (f) The total number of spas opened by the registrant
9-25 <owner> during any two-year period to which the exception provided
9-26 by Subsection (e) of this section applies is limited to twice the
9-27 number of spas in operation on the first day of the two-year
10-1 period.
10-2 (g) For the purposes of this section, the date on which a
10-3 health spa fully opens is the date on which all services of the spa
10-4 that were advertised before the opening or promised to be made
10-5 available, whether or not contained in the contract, are available
10-6 for use by its members.
10-7 SECTION 4. Section 10, Health Spa Act (Article 5221l,
10-8 Vernon's Texas Civil Statutes) is amended to read as follows:
10-9 Sec. 10. SECURITY (a) Except as provided by Section 10B of
10-10 this Act, the secretary may not issue a certificate of
10-11 registration, unless the applicant first files a surety bond or
10-12 posts other security in such form as the secretary may prescribe.
10-13 (b) If a surety bond is filed, it shall be continuous and
10-14 remain in effect until cancelled by the surety company with notice
10-15 as provided in this section. If a bond is cancelled, the
10-16 certificate of registration is suspended on the effective date of
10-17 cancellation.
10-18 (c) The bond shall be a surety bond issued by a company
10-19 authorized to do business in this state and shall be in conformity
10-20 with the Insurance Code.
10-21 (d) Other security need not be posted annually so long as
10-22 the applicable amount specified in this section remains posted. If
10-23 other security is posted, the interest from the security shall go
10-24 to the person posting the security. The other security shall be in
10-25 such form as the secretary may deem appropriate.
10-26 (e) The bond or other security shall be payable in favor of
10-27 the state and shall be held for the benefit of the state and for
11-1 the registrant's members who have been administratively adjudicated
11-2 to have suffered actual financial losses due to the closing of the
11-3 registrant's health spa.
11-4 (f) Actual financial loss shall mean and be limited to those
11-5 sums which have been paid under a health spa contract to a
11-6 registrant or a registrant's assignee and which at the time the
11-7 health spa is closed are unearned. Actual financial losses shall
11-8 be calculated by multiplying the gross monthly payment by the total
11-9 of months remaining on a contract at the time the health spa closes
11-10 minus any payments not made. For the purposes of this section:
11-11 (1) The gross monthly payment shall be calculated by
11-12 determining the total of payments, including down payments and
11-13 initiation fees required by the contract, divided by the total
11-14 number of months in the term of the contract; and
11-15 (2) The date of closing and the date of the contract
11-16 expiration shall be rounded to the nearest full month. The total
11-17 months remaining on the contract shall be calculated by subtracting
11-18 the date of closing from the expiration date of the contract. The
11-19 result shall be expressed in whole months.
11-20 (g) The amount of the security required under Subsection (a)
11-21 of this section is $20,000.
11-22 (h) The registrant shall maintain the bond or other security
11-23 in the amount provided in Subsection (g) of this section in effect
11-24 for two years after the date on which the health spa closes or
11-25 until the secretary of state determines that each claim to which
11-26 the bond or other security deposit is subject has been satisfied or
11-27 foreclosed by law.
12-1 (i) The following provisions shall be applicable to all
12-2 bonds and other security required by this section:
12-3 (1) Regardless of the number of years the bond or
12-4 other security shall continue in force or the number of premiums
12-5 payable or paid, the limit of the surety's or obligor's liability
12-6 stated in the bond or other security shall not be cumulative from
12-7 year to year or period to period.
12-8 (2) The liability of the surety or obligor is
12-9 exclusively conditioned upon a final administrative order by the
12-10 secretary, and the bond or other security posted hereunder is
12-11 subject to no other type of claim.
12-12 (j) The surety or obligor must provide written notification
12-13 to the secretary at least 60 days prior to the cancellation of any
12-14 bond or other security required by this section. Any other
12-15 security on file with the secretary shall remain on file with the
12-16 secretary for two years after the registrant ceases business or at
12-17 such later time as the secretary may determine that no claims exist
12-18 against the security. <(a) Not later than the 30th day before the
12-19 date a health spa opens a location for the use of its members, the
12-20 health spa shall file with the secretary of state a surety bond
12-21 issued by a surety company licensed to do business in this state,
12-22 or, in lieu of and in equal amount to the bond, a security deposit
12-23 in the form of a certificate of deposit, letter of credit, or other
12-24 negotiable instrument issued by a financial institution in this
12-25 state whose deposits are insured by the Federal Deposit Insurance
12-26 Corporation or the Federal Savings and Loan Insurance Corporation.
12-27 The bond or other security deposit shall be payable in favor of the
13-1 state and shall be held for the benefit of any members of the
13-2 health spa who suffer financial losses due to the insolvency or
13-3 cessation of operation of the health spa. "Financial losses" shall
13-4 mean and be limited to any unused or unearned portion of such
13-5 member's dues or fees. Such a member may bring an action based on
13-6 the bond and recover against the surety regardless of the number of
13-7 claimants or claims filed against the bond, but the liability of
13-8 the surety may not exceed the aggregate amount of the bond. If the
13-9 claims filed against the bond exceed the amount of the bond, the
13-10 surety shall pay the amount of the bond to the secretary of state
13-11 for distribution to the claimants on a pro rata basis. The surety
13-12 is relieved of liability under the bond on payment of the amount to
13-13 the secretary of state.>
13-14 <(b) The amount of the security required under Subsection
13-15 (a) of this section is $20,000. If a claim is paid from the bond
13-16 or other security deposit, the health spa must post additional
13-17 security, not later than the 20th day after the date on which the
13-18 claim is paid, to restore the amount of the security to $20,000.>
13-19 <(c) The health spa shall maintain the bond or other
13-20 security deposit in the amount provided in Subsection (b) of this
13-21 section in effect for two years after the date on which the health
13-22 spa ceases business or until the secretary of state determines that
13-23 each claim to which the bond or other security deposit is subject
13-24 has been satisfied or foreclosed by law.>
13-25 <(d) The following provisions shall be applicable to all
13-26 bonds issued hereunder:>
13-27 <(1) Regardless of the number of years the bond shall
14-1 continue in force or the number of premiums payable or paid, the
14-2 limit of the surety's liability stated in the bond shall not be
14-3 cumulative from year to year or period to period.>
14-4 <(2) The surety shall not be liable through a bond for
14-5 punitive damages or for civil or criminal penalties assessed
14-6 against a health spa, its individual owners, or its employees.>
14-7 <(3) The bond written by a surety hereunder shall be
14-8 continuous until cancelled by the surety or terminated by the
14-9 health spa only upon giving 90 days prior notice to the secretary
14-10 of state of such cancellation.>
14-11 <(4) A surety hereunder shall not be liable for any
14-12 claim brought or suit filed against a bond if the claim or filing
14-13 of a suit occurs more than two years from the last effective date
14-14 of the bond.>
14-15 SECTION 5. Health Spa Act (Article 5221l, Vernon's Texas
14-16 Civil Statutes) is amended by adding Section 10A to read as
14-17 follows:
14-18 Sec. 10A. ADJUDICATION OF CLAIMS. (a) Within forty-five
14-19 days from the date the secretary first discovers that a health spa
14-20 has closed, the secretary shall publish a display advertisement in
14-21 a newspaper of general circulation in the county or nearest county
14-22 in which the health spa is located notifying the public of the fact
14-23 that the health spa is closed and that a health spa member has
14-24 ninety days from the date of the first notice to perfect a claim
14-25 under the security posted pursuant to section 10 of this Act.
14-26 Contemporaneously with the publication of the notice, the secretary
14-27 shall notify the surety company or obligor of the pending
15-1 administrative action.
15-2 (b) The notice shall be published for two consecutive
15-3 Saturdays and Sundays and shall inform those affected of the
15-4 procedures for perfecting a claim against the security. The
15-5 secretary shall have a claim against the security for reasonable
15-6 expenses incurred in publishing the notice which shall not exceed
15-7 $3,000.00.
15-8 (c) All claims received by the secretary after 90 days
15-9 following the date of the first notice are barred and shall not be
15-10 considered by the secretary. If the total of claims evidencing
15-11 actual financial loss exceed the amount of the security, the
15-12 secretary shall adjudicate the claims on a pro rata basis by
15-13 dividing the amount of the security, after first deducting the
15-14 actual costs for publication of the notice, by the total amount of
15-15 the claims in order to ascertain a percentage to be applied to each
15-16 claim.
15-17 (d) The secretary shall adopt and publish such rules and
15-18 regulations as are necessary to determine claims and to insure the
15-19 prompt and fair distribution of the proceeds from the bond or other
15-20 security. Rules adopted by the secretary are subject to the
15-21 Administrative Procedure and Texas Register Act (Article 6252-13a,
15-22 Vernon's Texas Civil Statutes.
15-23 SECTION 6. Health Spa Act (Article 5221l, Vernon's Texas
15-24 Civil Statutes) is amended by adding Section 10B to read as
15-25 follows:
15-26 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) A
15-27 health spa registrant who has been granted a certificate of
16-1 exemption by the Secretary shall not be required to post a bond or
16-2 other security as required by Section 10 of this Act. To qualify
16-3 for an exemption, a registrant must first file an application for
16-4 exemption on a form approved by the secretary. The application
16-5 shall be verified by the person authorized to make the same and
16-6 shall set out the following:
16-7 (1) that the registrant does not require a health spa
16-8 consumer to:
16-9 (a) execute a membership contract for a term
16-10 exceeding 31 days;
16-11 (b) execute a note or a retail installment
16-12 contract;
16-13 (c) authorize a draw or other recurring debit on
16-14 a financial institution to the favor of the registrant or the
16-15 registrant's assignee
16-16 (d) pay an initiation fee or other fee except
16-17 monthly dues, or
16-18 (e) prepay for a term exceeding 31 days.
16-19 (2) that the registrant does not solicit or offer any
16-20 plan or program which contains any of the elements identified in
16-21 paragraph 1 of this section.
16-22 (b) The secretary, after notice and hearing, may refuse to
16-23 issue or may permanently revoke a certificate of exemption if the
16-24 secretary finds that the registrant:
16-25 (1) furnished false information on the application for
16-26 exemption;
16-27 (2) no longer qualifies for an exemption.
17-1 SECTION 7. Section 11, Health Spa Act (Article 5221l,
17-2 Vernon's Texas Civil Statutes) is amended to read as follows:
17-3 Sec. 11. PREPAYMENTS. (a) A registrant <health spa> may
17-4 offer for sale or sell memberships before the date on which the
17-5 health spa opens for business.
17-6 (b) Except as provided by Subsection (c) of this section, if
17-7 the health spa does not open before the 181st day after the day on
17-8 which a membership is prepaid, the person who made the prepayment
17-9 is entitled to a full refund of the amount prepaid in the manner
17-10 provided by Subsection (b) of Section 9 of this Act.
17-11 (c) If another health spa operated by the same seller is
17-12 located not more than 10 miles from the proposed location of a new
17-13 health spa and if the person purchasing the membership is
17-14 authorized to use these other facilities, each person who made a
17-15 prepayment for a membership in the new spa is entitled to a full
17-16 refund of the amount prepaid in the manner provided by Subsection
17-17 (c) of Section 9 of this Act if the new spa does not open before
17-18 the 361st day after the date on which the first prepayment of a
17-19 membership in the new spa is received.
17-20 SECTION 8. Section 12, Health Spa Act (Article 5221l,
17-21 Vernon's Texas Civil Statutes) is amended to read as follows:
17-22 Sec. 12. Contract Terms. (a) A registrant, unless exempted
17-23 from the security requirements by Section 10B of this Act, shall
17-24 <The health spa must> deliver a fully completed copy of a contract
17-25 to a purchaser before the contract is signed. The contract
17-26 constitutes the entire agreement between the seller and the
17-27 purchaser. The contract must be in writing and must be signed by
18-1 the purchaser. If the health spa is not open at the time the
18-2 contract is entered, the contract must clearly state the proposed
18-3 opening date of the health spa. At the time of delivery the health
18-4 spa must give the purchaser a written receipt for any payment made
18-5 by the purchaser under the contract.
18-6 (b) If the contract is financed through a retail installment
18-7 contract or note, the contract may not require the purchaser to
18-8 make payments or finance the contract for more than five years
18-9 after the date on which the contract is made <If a health spa has
18-10 been in operation in this state for two years or less, the contract
18-11 may not require the purchaser to make payments or to finance the
18-12 contract for more than two years after the date on which the
18-13 contract is made. If the health spa has been in operation in this
18-14 state for more than two years, the contract may require the
18-15 purchaser to make payments or to finance the contract for a period
18-16 not to exceed five years after the date on which the contract is
18-17 made. The term of a contract may not be measured by the life of
18-18 the purchaser. If the purchaser is required by the contract to pay
18-19 a renewal fee of not less than $50, the contract may contain a
18-20 renewal option for as long as two additional years after the date
18-21 on which the contract expires>.
18-22 (c) If the contract is not financed, the terms of the
18-23 contract may not exceed three years.
18-24 (d) When the terms of two or more contracts between the same
18-25 parties overlap for any period, the contracts are considered as one
18-26 contract for the purpose of this Act.
18-27 (e) <(d)> A contract may not require or entail the execution
19-1 of a note or series of notes by the purchaser that when separately
19-2 negotiated will cut off as to third parties a right of action or
19-3 defense that the purchaser may have against the seller.
19-4 (f) <(e)> Each contract shall state in at least 10-point
19-5 type that is boldfaced, capitalized, underlined, or otherwise set
19-6 out from surrounding written material so as to be conspicuous:
19-7 (1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT
19-8 UNTIL YOU READ IT OR IF IT CONTAINS BLANK SPACES."
19-9 (2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER
19-10 OF THIS HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE
19-11 HEALTH SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU
19-12 SIGN THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS
19-13 CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO
19-14 THE FOLLOWING ADDRESS:
19-15 (Address of the health spa home office)."
19-16 (3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES
19-17 NOT PROVIDE FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU
19-18 ARE ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE
19-19 FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY CANCEL THIS CONTRACT BY
19-20 MAILING A NOTICE TO THE HEALTH SPA STATING YOUR DESIRE TO CANCEL
19-21 THIS CONTRACT, ACCOMPANIED BY PROOF OF PAYMENT ON THE CONTRACT.
19-22 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
19-23 FOLLOWING ADDRESS:
19-24 (Address of the health spa home office)."
19-25 YOU MAY ALSO BE ENTITLED TO FILE A CLAIM FOR A REFUND OF YOUR
19-26 UNUSED MEMBERSHIP FEES AGAINST THE BOND OR OTHER SECURITY POSTED BY
19-27 THE HEALTH SPA WITH THE TEXAS SECRETARY OF STATE. TO MAKE A CLAIM
20-1 AGAINST THE SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH
20-2 PROOF OF PAYMENTS MADE ON THE CONTRACT TO THE TEXAS SECRETARY OF
20-3 STATE. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
20-4 FOLLOWING ADDRESS:
20-5 OFFICE OF THE SECRETARY OF STATE
20-6 STATUTORY DOCUMENTS SECTION
20-7 P.O. BOX 12887
20-8 AUSTIN, TEXAS 78711-2887."
20-9 (4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY
20-10 DISABLED AFTER THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR
20-11 ESTATE MAY CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF
20-12 YOUR UNUSED MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA
20-13 STATING YOUR DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY
20-14 REQUIRE PROOF OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE
20-15 MAILED BY CERTIFIED MAIL TO THE FOLLOWING ADDRESS:
20-16 (Address of the health spa home office)."
20-17 (g) If the registrant offers for sale or sells memberships
20-18 before the date on which the spa opens for business, each contract
20-19 shall state in at least 10-pt. type that is boldfaced, capitalized,
20-20 underlined or otherwise set out from surrounding written material
20-21 so as to be conspicuous:
20-22 "IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the date on which
20-23 the 181st day after the date on which the membership is prepaid
20-24 falls) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR THIRTY DAYS, YOU
20-25 ARE ENTITLED TO A FULL REFUND OF THE MONEY YOU PREPAID. HOWEVER,
20-26 IF ANOTHER HEALTH SPA, OPERATED BY (insert: the name of the health
20-27 spa registrant), IS LOCATED WITHIN 10 MILES OF (insert: the
21-1 address of the proposed location of the new spa) AND IF YOU ARE
21-2 AUTHORIZED TO USE THE OTHER FACILITIES, YOU ARE ENTITLED TO RECEIVE
21-3 A FULL REFUND OF YOUR MEMBERSHIP FEES ONLY IF THIS LOCATION DOES
21-4 NOT FULLY OPEN FOR BUSINESS BEFORE (insert: the date that is the
21-5 361st day after the day the new spa first sells memberships) OR IF
21-6 THE NEW SPA DOES NOT REMAIN OPEN FOR 30 DAYS."
21-7 (h) Each contract for which a finance charge within the
21-8 meaning of the Truth-in-Lending Act or Regulation Z is charged or
21-9 collected shall state in at least 10-point type that is boldfaced,
21-10 capitalized, underlined, or otherwise set out from surrounding
21-11 written material so as to be conspicuous:
21-12 "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL
21-13 CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE
21-14 SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE
21-15 PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT EXCEED
21-16 AMOUNTS PAID BY THE DEBTOR HEREUNDER."
21-17 SECTION 9. Section 13, Health Spa Act (Article 5221l,
21-18 Vernon's Texas Civil Statutes) is amended to read as follows:
21-19 Sec. 13. Cancellation of Contracts. (a) A member may
21-20 cancel a contract before the fourth business day after the date on
21-21 which the contract is signed by notifying the health spa registrant
21-22 of the cancellation in writing. Written notification is considered
21-23 given if the notification is mailed by certified mail to the home
21-24 office of the health spa registrant and postmarked not later than
21-25 midnight of the third business day. The health spa registrant
21-26 shall refund all money paid to the purchaser exercising the right
21-27 to cancel.
22-1 (b) A member may cancel a contract on written notice by
22-2 certified mail to the home office of the health spa registrant if
22-3 the health spa registrant goes out of business and fails to provide
22-4 facilities within 10 miles or moves its facilities more than 10
22-5 miles from the location in which the member is enrolled. A member
22-6 may cancel a contract in the same manner if the health spa
22-7 registrant fails to provide advertised services <If a contract is
22-8 canceled under this subsection, the member is liable for an amount
22-9 equal to the value of services received and facilities used under
22-10 the contract up to the date of the cancellation, and if the member
22-11 has paid money under the contract in excess of that amount the
22-12 health spa shall promptly refund to the member the excess>.
22-13 (c) A purchaser of a membership may cancel a contract if the
22-14 member dies or becomes totally and permanently disabled after the
22-15 date on which the contract takes effect <The purchaser remains
22-16 liable for an amount equal to the value of services received and
22-17 facilities used by the member under the contract up to the day on
22-18 which the death occurred or the disability was incurred. The
22-19 health spa shall make a pro rata refund of funds paid under the
22-20 contract in an amount based on the time remaining in the contract
22-21 term up to a maximum of 50 percent of the total contract amount>.
22-22 The health spa registrant may require a purchaser or the
22-23 purchaser's estate to provide reasonable proof of total and
22-24 permanent disability or death.
22-25 (d) If a purchaser or an estate elects to cancel a
22-26 membership contract pursuant to subsections (b) or (c) of this
22-27 Section the health spa registrant shall refund to the purchaser or
23-1 the purchaser's estate any unearned sums paid under the contract.
23-2 "Unearned sums" shall be calculated by multiplying the gross
23-3 monthly payment by the total of months remaining on a contract at
23-4 the time of cancellation minus any payments not made. For the
23-5 purposes of this section:
23-6 (1) The gross monthly payment shall be calculated by
23-7 determining the total of payments, including down payments and
23-8 initiation fees required by the contract, divided by the total
23-9 number of months in the term of the contract
23-10 (2) The date of cancellation and the date of the
23-11 contract expiration shall be rounded to the nearest full month.
23-12 The total months remaining on the contract shall be calculated by
23-13 subtracting the date of cancellation from the expiration date of
23-14 the contract. The result shall be expressed in whole months.
23-15 (e) A health spa registrant shall make a refund required
23-16 under this section before the 31st day after the date the health
23-17 spa registrant receives the notice of cancellation accompanied by
23-18 proof of payment. The receipt given to the purchaser by the health
23-19 spa at the time the purchaser made a payment under the contract
23-20 constitutes <adequate> proof of payment.
23-21 SECTION 10. Section 15, Health Spa Act (Article 5221l,
23-22 Vernon's Texas Civil Statutes) is amended to read as follows:
23-23 Sec. 15. Unenforceable Contracts. (a) A contract or
23-24 assignment of a contract that does not comply with this Act is void
23-25 and unenforceable as contrary to public policy.
23-26 (b) If a seller does not possess a valid health spa
23-27 operator's certificate of registration at the time of entering into
24-1 any contract with the purchaser, the contract between the purchaser
24-2 and the seller is void and unenforceable as contrary to public
24-3 policy.
24-4 (c) A contract entered into in reliance on willful and
24-5 false, fraudulent, or misleading information, representation,
24-6 notice or advertisement of the health spa owner, <or> operator or
24-7 seller is void and unenforceable.
24-8 SECTION 11. Section 17, Health Spa Act (Article 5221l,
24-9 Vernon's Texas Civil Statutes) is amended to read as follows:
24-10 Sec. 17. Prohibited Activities. (a) A seller or registrant
24-11 <health spa> may not offer a special offer or discount unless the
24-12 special offer or discount is available to all prospective members.
24-13 This subsection does not prohibit a health spa from offering
24-14 special group prices or group discounts.
24-15 (b) A seller or registrant <health spa> may not make a
24-16 material misrepresentation to a current member, prospective member,
24-17 or purchaser of a contract regarding:
24-18 (1) the qualifications of the staff;
24-19 (2) the availability, quality, or extent of the
24-20 facilities or services;
24-21 (3) the results obtained through exercise, dieting,
24-22 weight control, or physical fitness conditioning programs;
24-23 (4) membership rights; or
24-24 (5) the period that a special offer or discount will
24-25 be available.
24-26 (c) A health spa registrant may not fail or refuse to:
24-27 (1) file or update the registration statements
25-1 required by Section 8 of this Act;
25-2 (2) establish the escrow account required by Section 9
25-3 of this Act; or
25-4 (3) maintain the security required by Section 10 of
25-5 this Act in full force and effect.
25-6 (d) A health spa registrant may not advertise that it is
25-7 bonded by the state.
25-8 (e) A health spa registrant may not sell a membership plan
25-9 not included in the list required by Section 16 of this Act.
25-10 SECTION 12. Section 18, Health Spa Act (Article 5221l,
25-11 Vernon's Texas Civil Statutes) is amended to read as follows:
25-12 Sec. 18. Injunction. (a) If it appears that a person is in
25-13 violation of, or is threatening violation of this Act, the attorney
25-14 general, a district or county attorney may institute an action for
25-15 injunctive relief to restrain the person from continuing the
25-16 violation and for civil penalties authorized by Section 20 <A
25-17 district attorney, county attorney, or the attorney general may sue
25-18 in a court of competent jurisdiction to enjoin or restrain a person
25-19 from engaging in conduct described by Section 17 of this Act>.
25-20 (b) A civil action filed under this section shall be filed
25-21 in a district court in Travis County or in the county the defendant
25-22 resides <Except as prescribed by Subsection (c) of this section, a
25-23 district attorney, county attorney, or attorney general who intends
25-24 to sue under this section shall notify the defendant of the alleged
25-25 prohibited conduct not later than the seventh day before the date
25-26 the suit is filed.>
25-27 <(c) The notice prescribed by Subsection (b) of this section
26-1 is not required if the district attorney, county attorney, or
26-2 attorney general intends to request that the court issue a
26-3 temporary restraining order>.
26-4 SECTION 13. Section 20, Health Spa Act (Article 5221l,
26-5 Vernon's Texas Civil Statutes) is amended to read as follows:
26-6 Sec. 20. Civil Penalties. (a) A person who violates this
26-7 Act is subject to a civil penalty of not more than $1,000 for each
26-8 violation, not to exceed $25,000.00 in total penalties.
26-9 (b) A person who violates the terms of an injunction issued
26-10 in an action brought under Section 18 of this Act is liable to the
26-11 state for a civil penalty of not more than $25,000 for a single
26-12 violation and not more than $50,000 for all violations of the
26-13 injunction. A district attorney, county attorney, or the attorney
26-14 general may bring suit to recover the civil penalty in the court
26-15 that issued the original injunction.
26-16 (c) The attorney general, a district or county attorney and
26-17 the secretary may recover reasonable expenses incurred in obtaining
26-18 injunctive relief, civil penalties, or both, including court costs,
26-19 reasonable attorney's fees, investigative costs, witness fees, and
26-20 deposition expenses.
26-21 (d) A penalty collected under this section by the attorney
26-22 general shall be deposited to the credit of the general revenue
26-23 fund. A penalty collected under this section by a district or
26-24 county attorney shall be deposited to the credit of the general
26-25 fund of the county.
26-26 SECTION 14. Section 22, Health Spa Act (Article 5221l,
26-27 Vernon's Texas Civil Statutes) is amended to read as follows:
27-1 Sec. 22. Offenses. (a) A person who knowingly or
27-2 intentionally operates or attempts to operate a health spa in
27-3 violation of Section 8, 9, <or> 10 or 11 of this Act commits an
27-4 offense. An offense under this subsection is a Class A
27-5 misdemeanor.
27-6 SECTION 15. Section 25, Health Spa Act (Article 5221l,
27-7 Vernon's Texas Civil Statutes) is amended to read as follows:
27-8 Sec. 25. Applicability. (a) This <Except as provided by
27-9 Subsection (b) of this section, this> Act applies to all health
27-10 spas <a health spa> in operation on or after September 1, 1985
27-11 <(b) Section 9 of this Act does not apply to a health spa
27-12 that began operation before September 1, 1985>.
27-13 SECTION 16. Health Spa Act (Article 5221l, Vernon's Texas
27-14 Civil Statutes) is amended by adding Section 26 to read as follows:
27-15 Sec. 26. RULE-MAKING AUTHORITY. The secretary shall adopt
27-16 rules and regulations, promulgate administrative orders, and take
27-17 all action necessary to assure compliance with the intent and
27-18 purpose of this Act.
27-19 SECTION 17. Sections 7, 7A, and 14 of the Health Spa Act
27-20 (Article 5221l, Vernon's Texas Civil Statutes) are repealed.
27-21 SECTION 18. Sections 6.09(a) and (b), Chapter 1039, Acts of
27-22 71st Legislature, Session, 1989, are repealed.
27-23 SECTION 19. (a) There is appropriated to the Office of the
27-24 Attorney General from the general revenue fund for the fiscal
27-25 biennium ending August 31, 1995, the amounts awarded to the office
27-26 under Sections 20, Article 5221l, Vernon's Texas Civil Statutes, as
27-27 amended or added by this article, to be used to reimburse the
28-1 office for the office's expenses related to the litigation for
28-2 which the expenses were awarded.
28-3 (b) There is appropriated to the Secretary of State from the
28-4 general revenue fund for the fiscal biennium ending August 31,
28-5 1995, the amounts awarded to the office under Sections 20, Article
28-6 5221l, Vernon's Texas Civil Statutes, as amended or added by this
28-7 article, to be used to reimburse the secretary for the secretary's
28-8 expenses related to the litigation for which the expenses were
28-9 awarded.
28-10 SECTION 20. This Act takes effect September 1, 1993.
28-11 SECTION 21. The importance of this legislation and the
28-12 crowded condition of the calendars in both houses create an
28-13 emergency and an imperative public necessity that the
28-14 constitutional rule requiring bills to be read on three several
28-15 days in each house be suspended, and this rule is hereby suspended.