1-1 By: West S.B. No. 1100
1-2 (In the Senate - Filed March 12, 1993; March 15, 1993, read
1-3 first time and referred to Committee on State Affairs; May 5, 1993,
1-4 reported favorably, as amended, by the following vote: Yeas 11,
1-5 Nays 0; May 5, 1993, sent to printer.)
1-6 COMMITTEE VOTE
1-7 Yea Nay PNV Absent
1-8 Harris of Dallas x
1-9 Rosson x
1-10 Carriker x
1-11 Henderson x
1-12 Leedom x
1-13 Lucio x
1-14 Luna x
1-15 Nelson x
1-16 Patterson x
1-17 Shelley x
1-18 Sibley x
1-19 West x
1-20 Whitmire x
1-21 COMMITTEE AMENDMENT NO. 1 By: West
1-22 Amend S.B. No. 1100 as follows:
1-23 (1) On page 8, line 38 strike SECTION 6 and add the
1-24 following:
1-25 SECTION 6. The Health Spa Act (Article 5221l, Vernon's Texas
1-26 Civil Statutes) is amended by adding Section 10B to read as
1-27 follows:
1-28 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) As
1-29 provided in this section, a health spa registrant may apply for an
1-30 exemption from the security requirements of Section 10 of this Act.
1-31 To qualify for an exemption, a registrant must first file an
1-32 application for an exemption on a form approved by the secretary.
1-33 The application shall be verified by the person authorized by the
1-34 secretary to make the application. On approval of the exemption,
1-35 the secretary shall issue a certificate of exemption. A registrant
1-36 who has been granted a certificate of exemption by the secretary
1-37 shall not be required to post a bond or other security as required
1-38 by Section 10 of this Act.
1-39 (b) A health spa registrant may apply for an exemption from
1-40 the security requirements of Section 10 of this Act if it meets the
1-41 following criteria:
1-42 (1) the registrant does not require a health spa
1-43 consumer to:
1-44 (A) execute a membership contract for a term
1-45 exceeding 31 days;
1-46 (B) execute a note or a retail installment
1-47 contract;
1-48 (C) authorize a draw or other recurring debit on
1-49 a financial institution to the favor of the registrant or the
1-50 registrant's assignee;
1-51 (D) pay an initiation fee or other fee except
1-52 monthly dues; or
1-53 (E) prepay for a term exceeding 31 days; and
1-54 (2) the registrant does not solicit or offer any plan
1-55 or program which contains any of the elements identified in
1-56 Subdivision (1) of this subsection.
1-57 (c) Alternatively, a health spa registrant may apply for an
1-58 exemption from the security requirements of Section 10 of this Act
1-59 if:
1-60 (1) the registrant owns and operates at least one
1-61 health spa located in this state which has operated continuously at
1-62 one location for at least five years; and
1-63 (2) none of the members of a health spa owned by the
1-64 registrant has initiated or filed a complaint with any governmental
1-65 authority in this state relating to the closing of a health spa
1-66 owned by the registrant or the failure of a health spa owned by the
1-67 registrant to open.
1-68 (d) If a health spa registrant, who has claimed an exemption
2-1 provided by Subsection (c) of this section, closes a health spa or
2-2 fails to open a health spa and a member of the health spa initiates
2-3 or files a complaint with any governmental authority in this state
2-4 relating to the closing of the health spa or the failure of the
2-5 health spa to open, the registrant may still claim an exemption
2-6 under Subsection (c) of this section for all health spas operating
2-7 on the date the health spa closed or failed to open; however, the
2-8 registrant shall provide the security required by Section 10 of
2-9 this Act for all health spas the registrant opens after the date
2-10 the spa closed or failed to open.
2-11 (e) If a health spa registrant, who has claimed an exemption
2-12 provided by Subsection (c) of this section, has closed or failed to
2-13 open more than one health spa and a member of one of the affected
2-14 health spas initiates or files a complaint with any governmental
2-15 authority in this state relating to the closing of a health spa
2-16 owned by the registrant or the failure of a health spa owned by the
2-17 registrant to open, the registrant shall no longer qualify for an
2-18 exemption under Subsection (c) of this section and shall be subject
2-19 to the provisions of Subsection (i) of this section.
2-20 (f) If a health spa registrant, who has claimed an exemption
2-21 provided by Subsection (c) of this section, is forced, due to an
2-22 act of God or an act of a governmental authority beyond the control
2-23 of the registrant, to move or temporarily close the location of the
2-24 health spa which provides the basis for the exemption, the
2-25 registrant may still claim an exemption under Subsection (c) of
2-26 this section as long as the spa is not moved more than 10 miles
2-27 from the original facility. This subsection shall apply regardless
2-28 of whether the move is temporary or permanent.
2-29 (g) An exemption provided by this section is not
2-30 transferable. If a health spa registrant sells or otherwise
2-31 transfers ownership in a health spa for which an exemption from the
2-32 security requirement has been granted, the new owner shall file a
2-33 new application for an exemption or post the security required by
2-34 Section 10 of this Act no later than the fifth day following the
2-35 date of the sale or transfer.
2-36 (h) To claim an exemption provided by Subsection (c) of this
2-37 section, a registrant must have continuously owned and operated at
2-38 least one health spa which is eligible for an exemption under that
2-39 subsection. A newly acquired health spa, regardless of its
2-40 previous eligibility for an exemption, may not provide the basis
2-41 for an exemption.
2-42 (i) The secretary, after notice and hearing, may refuse to
2-43 issue or may permanently revoke a registrant's certificate of
2-44 exemption if the secretary finds that the registrant:
2-45 (1) furnished false information on the application for
2-46 exemption; or
2-47 (2) no longer qualifies for an exemption.
2-48 COMMITTEE AMENDMENT NO. 2 By: West
2-49 Amend S.B. No. 1100 as follows:
2-50 (2) On page 9, line 22, between the words "by" and
2-51 "Section" insert the words: "Subsection (b) of"
2-52 A BILL TO BE ENTITLED
2-53 AN ACT
2-54 relating to the regulation of health spas; providing a penalty;
2-55 making appropriations.
2-56 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
2-57 SECTION 1. Section 6, Health Spa Act (Article 5221l,
2-58 Vernon's Texas Civil Statutes), is amended to read as follows:
2-59 Sec. 6. DEFINITIONS. In this Act:
2-60 (a) "Closed," "closes," or "closing" means a condition
2-61 where:
2-62 (1) the facilities of a health spa are no longer
2-63 available to its members and equivalent facilities within 10 miles
2-64 of the closed facilities have not been made available to members of
2-65 the closed facilities; or
2-66 (2) the registrant has sold a registered location and
2-67 the security required by Section 8 of this Act has either been
2-68 cancelled, withdrawn, or is otherwise unavailable for the use of
2-69 members; or
2-70 (3) the registrant has sold a registered location and
3-1 the new owner has neither adopted nor honored the contracts of
3-2 existing members.
3-3 (b) <(1)> "Contract" means an agreement by which a person
3-4 <one> becomes a member of a health spa.
3-5 (c) <(2)> "Facilities" means equipment, physical structures,
3-6 improvements, improvements to leasehold premises, and other
3-7 tangible property, real, personal, or mixed, used by a health spa
3-8 at each location to conduct its business, including but not limited
3-9 to saunas, whirlpool baths, gymnasiums, running tracks, swimming
3-10 pools, shower areas, racquetball courts, martial arts equipment,
3-11 and exercise equipment.
3-12 (d) "Fully open" or "fully open for business" means the date
3-13 on which all services of the health spa that were advertised before
3-14 the opening or promised to be made available are available for use
3-15 by its members.
3-16 (e) <(3)> "Health spa" means a business <primarily> involved
3-17 in the sale of memberships that provides the members instruction in
3-18 a program of physical exercise or provides the members use of the
3-19 facilities of the health spa for a program of physical exercise.
3-20 The term does not include an organization that is tax exempt under
3-21 26 U.S.C. 501 et seq., a private club owned and operated by its
3-22 members, an entity exclusively <primarily> operated for the purpose
3-23 of teaching dance or aerobic exercise, an entity exclusively
3-24 <primarily> engaged in physical rehabilitation activity related to
3-25 an individual's injury or disease, an individual or entity engaged
3-26 in an activity authorized under a valid license issued by this
3-27 state, or an activity conducted or sanctioned by a school operating
3-28 under the Education Code.
3-29 (f) "Location" means the physical site or place where health
3-30 spa facilities are located.
3-31 (g) <(4)> "Member" means a person entitled to the benefits
3-32 of membership in a health spa.
3-33 (h) <(5)> "Membership" means the status under a contract
3-34 between an individual and a health spa that entitles the individual
3-35 to the use of services or facilities of the health spa.
3-36 (i) "Obligor" means a person other than a surety who is
3-37 obligated to perform in the event of a registrant's default.
3-38 (j) <(6)> "Person" means an individual, corporation,
3-39 association, organization, partnership, business trust, trust,
3-40 estate, and any other legal entity.
3-41 (k) <(7)> "Prepayment" means consideration paid to a health
3-42 spa by a purchaser prior to the time that the health spa is fully
3-43 open for business <a payment for all services or for the use of
3-44 facilities made by members of a health spa before the first day the
3-45 services or facilities are made available to the members>.
3-46 (l) <(8)> "Purchaser" means a person who seeks or acquires
3-47 by purchase the use of health spa facilities or services <purchases
3-48 a health spa membership>.
3-49 (m) "Registrant" means a person who has registered with the
3-50 secretary and has been issued a health spa operator's certificate
3-51 of registration.
3-52 (n) "Secretary" means the secretary of state.
3-53 (o) <(9)> "Seller" means a person who owns or operates a
3-54 health spa or who offers for sale the right to use the facilities
3-55 or the services of the health spa.
3-56 (p) <(10)> "Services" means programs, plans, guidance, or
3-57 instruction that a health spa provides for its members, including
3-58 diet planning, exercise instruction, exercise programs, and
3-59 instructional classes.
3-60 SECTION 2. Section 8, Health Spa Act (Article 5221l,
3-61 Vernon's Texas Civil Statutes), is amended to read as follows:
3-62 Sec. 8. REGISTRATION. (a) A person may not operate a
3-63 health spa or offer for sale or sell memberships in a health spa in
3-64 this state unless the person possesses a valid health spa
3-65 operator's certificate of registration.
3-66 (b) Each applicant for a health spa operator's certificate
3-67 of registration shall file with the secretary for each location an
3-68 application for registration containing the following information:
3-69 (1) the legal name, address, and telephone number of
3-70 the applicant;
4-1 (2) the trade name by which the applicant does
4-2 business and if incorporated, the name registered with the
4-3 secretary, the location of the registered office, and the name and
4-4 address of any person who directly or indirectly owns or controls
4-5 10 percent or more of the outstanding shares of stock in the
4-6 corporation;
4-7 (3) the date on which the applicant became the owner
4-8 and operator of the health spa;
4-9 (4) the address of the health spa;
4-10 (5) the type of available or proposed facilities and
4-11 services offered at the location; and
4-12 (6) samples of all contracts used by the seller in
4-13 connection with the sale of memberships.
4-14 (c) Each application for a health spa operator's certificate
4-15 of registration shall be accompanied by proof of the security
4-16 required by this Act and payment of the required fee for issuance
4-17 of the certificate.
4-18 (d) All certificates of registration are valid for a period
4-19 of one year from the date of issuance and are renewable as provided
4-20 by the secretary.
4-21 (e) The registrant shall amend the application for
4-22 registration not later than the 90th day after the day on which a
4-23 change in the information provided in the statement occurs.
4-24 (f) A health spa operator's certificate of registration is
4-25 not transferrable. In the event a registrant sells or otherwise
4-26 transfers ownership in a registered health spa location, the new
4-27 owner or owners shall file an application for registration as
4-28 required by this section no later than the fifth day following the
4-29 date of sale.
4-30 (g) The secretary may charge each applicant for a
4-31 certificate of registration a reasonable fee not to exceed $100 to
4-32 cover the cost of application or renewal.
4-33 (h) The secretary, after notice and hearing, may refuse to
4-34 issue or may permanently revoke or suspend for a definite period of
4-35 time a certificate of registration if the secretary finds that the
4-36 applicant or registrant:
4-37 (1) furnished false information on any application,
4-38 report, or other document filed with the secretary;
4-39 (2) failed to provide the contract disclosure language
4-40 required by Section 12 of this Act; or
4-41 (3) failed to file and maintain the bond or post other
4-42 security for each location as required by Section 10 of this Act.
4-43 (i) A registrant shall prominently post the health spa
4-44 operator's certificate of registration at each registered location
4-45 <health spa shall file a registration statement with the secretary
4-46 of state before offering for sale or selling memberships in this
4-47 state. The health spa shall file a separate registration statement
4-48 for each location at which the health spa operates. The
4-49 registration statement must contain:>
4-50 <(1) the name and address of the health spa;>
4-51 <(2) the name and address of any person who directly
4-52 or indirectly owns or controls 10 percent or more of the
4-53 outstanding shares of stock in the health spa;>
4-54 <(3) the type of available or proposed facilities and
4-55 services offered at that location; and>
4-56 <(4) the approximate size of the health spa location
4-57 measured in square feet.>
4-58 <(b) The registration statement must also contain either:>
4-59 <(1) a full and complete disclosure of any litigation,
4-60 or any complaint filed with a governmental authority, relating to
4-61 the failure to open or the closing of a health spa brought against
4-62 the owners, officers, or directors of a health spa that was
4-63 completed within the past two years or is currently pending; or>
4-64 <(2) a notarized statement that states that there has
4-65 been no litigation, or complaint filed with a governmental
4-66 authority, relating to the opening or closing of the health spa
4-67 within the past two years.>
4-68 <(c) The health spa shall update the statement not later
4-69 than the 90th day after the day on which a change in the
4-70 information required in the statement occurs.>
5-1 <(d) Each health spa registering under this section shall
5-2 maintain a copy of the registration statement filed for each
5-3 location in the records of the health spa. The health spa shall
5-4 allow a current member or a prospective purchaser of a membership
5-5 to inspect a registration statement on request.>
5-6 <(e) The secretary of state may charge each health spa that
5-7 files a registration statement a reasonable fee not to exceed $100
5-8 to cover the cost of filing. The secretary of state may not
5-9 require a health spa to provide information other than that
5-10 provided in the registration statement>.
5-11 SECTION 3. Section 9, Health Spa Act (Article 5221l,
5-12 Vernon's Texas Civil Statutes), is amended to read as follows:
5-13 Sec. 9. ESCROW. (a) Except as provided by Subsection (e)
5-14 of this section, a registrant <health spa> or its assignee or agent
5-15 that accepts prepayments for its memberships shall deposit all of
5-16 the funds received as prepayments in an escrow account established
5-17 with a financial institution whose accounts are insured by the
5-18 Federal Deposit Insurance Corporation or the Federal Savings and
5-19 Loan Insurance Corporation, which shall hold the funds as escrow
5-20 agent for the benefit of the members that prepay. The registrant
5-21 <health spa> shall deposit prepayments received at least as often
5-22 as biweekly and shall make the first deposit not later than the
5-23 14th day after the day on which the registrant or its agent <spa>
5-24 accepts the first prepayment. Not later than the 14th day after
5-25 the day on which the first prepayment is received, the registrant
5-26 <spa> shall give the secretary <of state> a notarized statement
5-27 that identifies the financial institution in which the prepayments
5-28 are held in escrow and the name in which the account is held,
5-29 together with a signed statement on a form approved by the
5-30 secretary which authorizes the secretary to make inquiries of the
5-31 financial institution regarding the funds in escrow. The
5-32 prepayments shall be held in escrow until the 30th day after the
5-33 date that the health spa fully opens for business.
5-34 (b) Except as provided by Subsection (c) of this section, if
5-35 a health spa does not fully open for business before the 181st day
5-36 after the date it first sells a membership in the health spa or if
5-37 the spa does not remain open for 30 days, the members whose fees
5-38 are held in escrow under this section shall receive a full refund
5-39 of their membership fees from the escrow agent.
5-40 (c) If another health spa operated by the same registrant
5-41 <seller> is located not more than 10 miles from the proposed
5-42 location of a new health spa and if the person purchasing the
5-43 membership is authorized to use these other facilities, a member of
5-44 the new spa whose fees are held in escrow under this section is
5-45 entitled to receive a full refund of the membership fees from the
5-46 escrow agent if the new spa does not fully open for business before
5-47 the 361st day after the date on which the new spa first sells a
5-48 membership or if the new spa does not remain open for 30 days.
5-49 (d) If the health spa remains open for 30 days after the
5-50 date the health spa initially fully opens for business, the
5-51 registrant <health spa> may withdraw the escrowed funds at its
5-52 discretion if the registrant <health spa> files an affidavit with
5-53 the secretary of state certifying that all obligations of the
5-54 health spa for which a lien could be claimed under Chapter 53,
5-55 Property Code, have been paid and if no person is eligible to claim
5-56 a lien under that chapter during the period the registrant or its
5-57 agent <health spa> accepts prepayments.
5-58 (e) Subject to the limitations of this subsection, a
5-59 registrant who is the <an> owner of one or more health spas in
5-60 operation in this state is not required to escrow prepayments on
5-61 the opening of an additional health spa in this state if the health
5-62 spas in operation have operated for at least two years preceding
5-63 the date the first membership in the additional spa is sold and if
5-64 none of the members of the spas in operation have initiated
5-65 litigation against the registrant <owner's spas> relating to the
5-66 failure to open or the closing of a health spa or filed a complaint
5-67 relating to the failure to open or the closing of a health spa with
5-68 any governmental authority in the state against the registrant or
5-69 any of the owners, officers, or directors of the health spa. A
5-70 registrant <An owner of a health spa> is not required to escrow
6-1 prepayments because of litigation or a complaint based on the
6-2 closing of a health spa if that closing was caused by a fire,
6-3 flood, or other natural disaster and if the closing is temporary
6-4 and does not exceed one month. A registrant <An owner> is not
6-5 required to escrow prepayments because of litigation or a complaint
6-6 based on the closing of a health spa if that closing is due to the
6-7 relocation of the spa to a site not more than 10 miles from the
6-8 original location and if the time elapsed between closing the spa
6-9 at the old location and reopening at the new location does not
6-10 exceed one month.
6-11 (f) The total number of spas opened by the registrant
6-12 <owner> during any two-year period to which the exception provided
6-13 by Subsection (e) of this section applies is limited to twice the
6-14 number of spas in operation on the first day of the two-year
6-15 period.
6-16 (g) For the purposes of this section, the date on which a
6-17 health spa fully opens is the date on which all services of the spa
6-18 that were advertised before the opening or promised to be made
6-19 available, whether or not contained in the contract, are available
6-20 for use by its members.
6-21 SECTION 4. Section 10, Health Spa Act (Article 5221l,
6-22 Vernon's Texas Civil Statutes), is amended to read as follows:
6-23 Sec. 10. SECURITY. (a) Except as provided by Section 10B
6-24 of this Act, the secretary may not issue a certificate of
6-25 registration unless the applicant first files a surety bond or
6-26 posts other security in such form as the secretary may prescribe.
6-27 (b) If a surety bond is filed, it shall be continuous and
6-28 remain in effect until cancelled by the surety company with notice
6-29 as provided in this section. If a bond is cancelled, the
6-30 certificate of registration is suspended on the effective date of
6-31 cancellation.
6-32 (c) The bond shall be a surety bond issued by a company
6-33 authorized to do business in this state and shall be in conformity
6-34 with the Insurance Code.
6-35 (d) Other security need not be posted annually so long as
6-36 the applicable amount specified in this section remains posted. If
6-37 other security is posted, the interest from the security shall go
6-38 to the person posting the security. The other security shall be in
6-39 such form as the secretary may deem appropriate.
6-40 (e) The bond or other security shall be payable in favor of
6-41 the state and shall be held for the benefit of the state and for
6-42 the registrant's members who have been administratively adjudicated
6-43 to have suffered actual financial losses due to the closing of the
6-44 registrant's health spa.
6-45 (f) Actual financial loss shall mean and be limited to those
6-46 sums which have been paid under a health spa contract to a
6-47 registrant or a registrant's assignee and which at the time the
6-48 health spa is closed are unearned. Actual financial losses shall
6-49 be calculated by multiplying the gross monthly payment by the total
6-50 number of months remaining on a contract at the time the health spa
6-51 closes minus any payments not made. For the purposes of this
6-52 section:
6-53 (1) The gross monthly payment shall be calculated by
6-54 determining the total of payments, including down payments and
6-55 initiation fees required by the contract, divided by the total
6-56 number of months in the term of the contract.
6-57 (2) The date of closing and the date of the contract
6-58 expiration shall be rounded to the nearest full month. The total
6-59 number of months remaining on the contract shall be calculated by
6-60 subtracting the date of closing from the expiration date of the
6-61 contract. The result shall be expressed in whole months.
6-62 (g) The amount of the security required under Subsection (a)
6-63 of this section is $20,000.
6-64 (h) The registrant shall maintain the bond or other security
6-65 in the amount provided in Subsection (g) of this section in effect
6-66 for two years after the date on which the health spa closes or
6-67 until the secretary determines that each claim to which the bond or
6-68 other security deposit is subject has been satisfied or foreclosed
6-69 by law.
6-70 (i) The following provisions shall be applicable to all
7-1 bonds and other security required by this section:
7-2 (1) Regardless of the number of years the bond or
7-3 other security shall continue in force or the number of premiums
7-4 payable or paid, the limit of the surety's or obligor's liability
7-5 stated in the bond or other security shall not be cumulative from
7-6 year to year or period to period.
7-7 (2) The liability of the surety or obligor is
7-8 exclusively conditioned on a final administrative order by the
7-9 secretary, and the bond or other security posted hereunder is
7-10 subject to no other type of claim.
7-11 (j) The surety or obligor must provide written notification
7-12 to the secretary at least 60 days prior to the cancellation of any
7-13 bond or other security required by this section. Any other
7-14 security on file with the secretary shall remain on file with the
7-15 secretary for two years after the registrant ceases business or at
7-16 such later time as the secretary may determine that no claims exist
7-17 against the security. <(a) Not later than the 30th day before the
7-18 date a health spa opens a location for the use of its members, the
7-19 health spa shall file with the secretary of state a surety bond
7-20 issued by a surety company licensed to do business in this state,
7-21 or, in lieu of and in equal amount to the bond, a security deposit
7-22 in the form of a certificate of deposit, letter of credit, or other
7-23 negotiable instrument issued by a financial institution in this
7-24 state whose deposits are insured by the Federal Deposit Insurance
7-25 Corporation or the Federal Savings and Loan Insurance Corporation.
7-26 The bond or other security deposit shall be payable in favor of the
7-27 state and shall be held for the benefit of any members of the
7-28 health spa who suffer financial losses due to the insolvency or
7-29 cessation of operation of the health spa. "Financial losses" shall
7-30 mean and be limited to any unused or unearned portion of such
7-31 member's dues or fees. Such a member may bring an action based on
7-32 the bond and recover against the surety regardless of the number of
7-33 claimants or claims filed against the bond, but the liability of
7-34 the surety may not exceed the aggregate amount of the bond. If the
7-35 claims filed against the bond exceed the amount of the bond, the
7-36 surety shall pay the amount of the bond to the secretary of state
7-37 for distribution to the claimants on a pro rata basis. The surety
7-38 is relieved of liability under the bond on payment of the amount to
7-39 the secretary of state.>
7-40 <(b) The amount of the security required under Subsection
7-41 (a) of this section is $20,000. If a claim is paid from the bond
7-42 or other security deposit, the health spa must post additional
7-43 security, not later than the 20th day after the date on which the
7-44 claim is paid, to restore the amount of the security to $20,000.>
7-45 <(c) The health spa shall maintain the bond or other
7-46 security deposit in the amount provided in Subsection (b) of this
7-47 section in effect for two years after the date on which the health
7-48 spa ceases business or until the secretary of state determines that
7-49 each claim to which the bond or other security deposit is subject
7-50 has been satisfied or foreclosed by law.>
7-51 <(d) The following provisions shall be applicable to all
7-52 bonds issued hereunder:>
7-53 <(1) Regardless of the number of years the bond shall
7-54 continue in force or the number of premiums payable or paid, the
7-55 limit of the surety's liability stated in the bond shall not be
7-56 cumulative from year to year or period to period.>
7-57 <(2) The surety shall not be liable through a bond for
7-58 punitive damages or for civil or criminal penalties assessed
7-59 against a health spa, its individual owners, or its employees.>
7-60 <(3) The bond written by a surety hereunder shall be
7-61 continuous until cancelled by the surety or terminated by the
7-62 health spa only upon giving 90 days prior notice to the secretary
7-63 of state of such cancellation.>
7-64 <(4) A surety hereunder shall not be liable for any
7-65 claim brought or suit filed against a bond if the claim or filing
7-66 of a suit occurs more than two years from the last effective date
7-67 of the bond.>
7-68 SECTION 5. The Health Spa Act (Article 5221l, Vernon's Texas
7-69 Civil Statutes) is amended by adding Section 10A to read as
7-70 follows:
8-1 Sec. 10A. ADJUDICATION OF CLAIMS. (a) Within 45 days from
8-2 the date the secretary first discovers that a health spa has
8-3 closed, the secretary shall publish a display advertisement in a
8-4 newspaper of general circulation in the county or nearest county in
8-5 which the health spa is located notifying the public of the fact
8-6 that the health spa is closed and that a health spa member has 90
8-7 days from the date of the first notice to perfect a claim under the
8-8 security posted pursuant to Section 10 of this Act.
8-9 Contemporaneously with the publication of the notice, the secretary
8-10 shall notify the surety company or obligor of the pending
8-11 administrative action.
8-12 (b) The notice shall be published for two consecutive
8-13 Saturdays and Sundays and shall inform those affected of the
8-14 procedures for perfecting a claim against the security. The
8-15 secretary shall have a claim against the security for reasonable
8-16 expenses incurred in publishing the notice which shall not exceed
8-17 $3,000.
8-18 (c) All claims received by the secretary after 90 days
8-19 following the date of the first notice are barred and shall not be
8-20 considered by the secretary. If the total of claims evidencing
8-21 actual financial loss exceeds the amount of the security, the
8-22 secretary shall adjudicate the claims on a pro rata basis by
8-23 dividing the amount of the security, after first deducting the
8-24 actual costs for publication of the notice, by the total amount of
8-25 the claims in order to ascertain a percentage to be applied to each
8-26 claim.
8-27 (d) The secretary shall adopt and publish such rules and
8-28 regulations as are necessary to determine claims and to ensure the
8-29 prompt and fair distribution of the proceeds from the bond or other
8-30 security. Rules adopted by the secretary are subject to the
8-31 Administrative Procedure and Texas Register Act (Article 6252-13a,
8-32 Vernon's Texas Civil Statutes).
8-33 SECTION 6. The Health Spa Act (Article 5221l, Vernon's Texas
8-34 Civil Statutes) is amended by adding Section 10B to read as
8-35 follows:
8-36 Sec. 10B. EXEMPTION FROM SECURITY REQUIREMENTS. (a) A
8-37 health spa registrant who has been granted a certificate of
8-38 exemption by the secretary shall not be required to post a bond or
8-39 other security as required by Section 10 of this Act. To qualify
8-40 for an exemption, a registrant must first file an application for
8-41 exemption on a form approved by the secretary. The application
8-42 shall be verified by the person authorized to make the same and
8-43 shall set out the following:
8-44 (1) that the registrant does not require a health spa
8-45 consumer to:
8-46 (A) execute a membership contract for a term
8-47 exceeding 31 days;
8-48 (B) execute a note or a retail installment
8-49 contract;
8-50 (C) authorize a draw or other recurring debit on
8-51 a financial institution to the favor of the registrant or the
8-52 registrant's assignee;
8-53 (D) pay an initiation fee or other fee except
8-54 monthly dues; or
8-55 (E) prepay for a term exceeding 31 days; and
8-56 (2) that the registrant does not solicit or offer any
8-57 plan or program which contains any of the elements identified in
8-58 Subdivision (1) of this section.
8-59 (b) The secretary, after notice and hearing, may refuse to
8-60 issue or may permanently revoke a certificate of exemption if the
8-61 secretary finds that the registrant:
8-62 (1) furnished false information on the application for
8-63 exemption; or
8-64 (2) no longer qualifies for an exemption.
8-65 SECTION 7. Section 11, Health Spa Act (Article 5221l,
8-66 Vernon's Texas Civil Statutes), is amended to read as follows:
8-67 Sec. 11. PREPAYMENTS. (a) A registrant <health spa> may
8-68 offer for sale or sell memberships before the date on which the
8-69 health spa opens for business.
8-70 (b) Except as provided by Subsection (c) of this section, if
9-1 the health spa does not open before the 181st day after the day on
9-2 which a membership is prepaid, the person who made the prepayment
9-3 is entitled to a full refund of the amount prepaid in the manner
9-4 provided by Subsection (b) of Section 9 of this Act.
9-5 (c) If another health spa operated by the same seller is
9-6 located not more than 10 miles from the proposed location of a new
9-7 health spa and if the person purchasing the membership is
9-8 authorized to use these other facilities, each person who made a
9-9 prepayment for a membership in the new spa is entitled to a full
9-10 refund of the amount prepaid in the manner provided by Subsection
9-11 (c) of Section 9 of this Act if the new spa does not open before
9-12 the 361st day after the date on which the first prepayment of a
9-13 membership in the new spa is received.
9-14 SECTION 8. Section 12, Health Spa Act (Article 5221l,
9-15 Vernon's Texas Civil Statutes), is amended to read as follows:
9-16 Sec. 12. Contract Terms. (a) A registrant, unless exempted
9-17 from the security requirements by Section 10B of this Act, shall
9-18 <The health spa must> deliver a fully completed copy of a contract
9-19 to a purchaser before the contract is signed. The contract
9-20 constitutes the entire agreement between the seller and the
9-21 purchaser. The contract must be in writing and must be signed by
9-22 the purchaser. If the health spa is not open at the time the
9-23 contract is entered, the contract must clearly state the proposed
9-24 opening date of the health spa. At the time of delivery the health
9-25 spa must give the purchaser a written receipt for any payment made
9-26 by the purchaser under the contract.
9-27 (b) If the contract is financed through a retail installment
9-28 contract or note, the contract may not require the purchaser to
9-29 make payments or finance the contract for more than five years
9-30 after the date on which the contract is made <a health spa has been
9-31 in operation in this state for two years or less, the contract may
9-32 not require the purchaser to make payments or to finance the
9-33 contract for more than two years after the date on which the
9-34 contract is made. If the health spa has been in operation in this
9-35 state for more than two years, the contract may require the
9-36 purchaser to make payments or to finance the contract for a period
9-37 not to exceed five years after the date on which the contract is
9-38 made. The term of a contract may not be measured by the life of
9-39 the purchaser. If the purchaser is required by the contract to pay
9-40 a renewal fee of not less than $50, the contract may contain a
9-41 renewal option for as long as two additional years after the date
9-42 on which the contract expires>.
9-43 (c) If the contract is not financed, the terms of the
9-44 contract may not exceed three years.
9-45 (d) When the terms of two or more contracts between the same
9-46 parties overlap for any period, the contracts are considered as one
9-47 contract for the purpose of this Act.
9-48 (e) <(d)> A contract may not require or entail the execution
9-49 of a note or series of notes by the purchaser that when separately
9-50 negotiated will cut off as to third parties a right of action or
9-51 defense that the purchaser may have against the seller.
9-52 (f) <(e)> Each contract shall state in at least 10-point
9-53 type that is boldfaced, capitalized, underlined, or otherwise set
9-54 out from surrounding written material so as to be conspicuous:
9-55 (1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT
9-56 UNTIL YOU READ IT OR IF IT CONTAINS BLANK SPACES."
9-57 (2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER
9-58 OF THIS HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE
9-59 HEALTH SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU
9-60 SIGN THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS
9-61 CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO
9-62 THE FOLLOWING ADDRESS:
9-63 (Address of the health spa home office)."
9-64 (3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES
9-65 NOT PROVIDE FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU
9-66 ARE ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE
9-67 FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY CANCEL THIS CONTRACT BY
9-68 MAILING A NOTICE TO THE HEALTH SPA STATING YOUR DESIRE TO CANCEL
9-69 THIS CONTRACT, ACCOMPANIED BY PROOF OF PAYMENT ON THE CONTRACT.
9-70 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
10-1 FOLLOWING ADDRESS:
10-2 (Address of the health spa home office)."
10-3 "YOU MAY ALSO BE ENTITLED TO FILE A CLAIM FOR A REFUND OF YOUR
10-4 UNUSED MEMBERSHIP FEES AGAINST THE BOND OR OTHER SECURITY POSTED BY
10-5 THE HEALTH SPA WITH THE SECRETARY OF STATE. TO MAKE A CLAIM
10-6 AGAINST THE SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH
10-7 PROOF OF PAYMENTS MADE ON THE CONTRACT TO THE SECRETARY OF STATE.
10-8 THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE
10-9 FOLLOWING ADDRESS:
10-10 OFFICE OF THE SECRETARY OF STATE
10-11 STATUTORY DOCUMENTS SECTION
10-12 P.O. BOX 12887
10-13 AUSTIN, TEXAS 78711-2887."
10-14 (4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY
10-15 DISABLED AFTER THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR
10-16 ESTATE MAY CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF
10-17 YOUR UNUSED MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA
10-18 STATING YOUR DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY
10-19 REQUIRE PROOF OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE
10-20 MAILED BY CERTIFIED MAIL TO THE FOLLOWING ADDRESS:
10-21 (Address of the health spa home office)."
10-22 (g) If the registrant offers for sale or sells memberships
10-23 before the date on which the spa opens for business, each contract
10-24 shall state in at least 10-point type that is boldfaced,
10-25 capitalized, underlined, or otherwise set out from surrounding
10-26 written material so as to be conspicuous:
10-27 "IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the
10-28 date on which the 181st day after the date on which the
10-29 membership is prepaid falls) OR IF THE NEW SPA DOES NOT
10-30 REMAIN OPEN FOR 30 DAYS, YOU ARE ENTITLED TO A FULL
10-31 REFUND OF THE MONEY YOU PREPAID. HOWEVER, IF ANOTHER
10-32 HEALTH SPA OPERATED BY (insert: the name of the health
10-33 spa registrant) IS LOCATED WITHIN 10 MILES OF
10-34 (insert: the address of the proposed location of the
10-35 new spa) AND IF YOU ARE AUTHORIZED TO USE THE OTHER
10-36 FACILITIES, YOU ARE ENTITLED TO RECEIVE A FULL REFUND
10-37 OF YOUR MEMBERSHIP FEES ONLY IF THIS LOCATION DOES NOT
10-38 FULLY OPEN FOR BUSINESS BEFORE (insert: the date that
10-39 is the 361st day after the day the new spa first sells
10-40 memberships) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR
10-41 30 DAYS."
10-42 (h) Each contract for which a finance charge within the
10-43 meaning of the Truth-in-Lending Act (15 U.S.C. Section 1601 et
10-44 seq.) or Regulation Z is charged or collected shall state in at
10-45 least 10-point type that is boldfaced, capitalized, underlined, or
10-46 otherwise set out from surrounding written material so as to be
10-47 conspicuous:
10-48 "ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT
10-49 TO ALL CLAIMS AND DEFENSES WHICH THE DEBTOR COULD
10-50 ASSERT AGAINST THE SELLER OF GOODS OR SERVICES OBTAINED
10-51 PURSUANT HERETO OR WITH THE PROCEEDS HEREOF. RECOVERY
10-52 HEREUNDER BY THE DEBTOR SHALL NOT EXCEED AMOUNTS PAID
10-53 BY THE DEBTOR HEREUNDER."
10-54 SECTION 9. Section 13, Health Spa Act (Article 5221l,
10-55 Vernon's Texas Civil Statutes), is amended to read as follows:
10-56 Sec. 13. Cancellation of Contracts. (a) A member may
10-57 cancel a contract before the fourth business day after the date on
10-58 which the contract is signed by notifying the health spa registrant
10-59 of the cancellation in writing. Written notification is considered
10-60 given if the notification is mailed by certified mail to the home
10-61 office of the health spa registrant and postmarked not later than
10-62 midnight of the third business day. The health spa registrant
10-63 shall refund all money paid to the purchaser exercising the right
10-64 to cancel.
10-65 (b) A member may cancel a contract on written notice by
10-66 certified mail to the home office of the health spa registrant if
10-67 the health spa registrant goes out of business and fails to provide
10-68 facilities within 10 miles or moves its facilities more than 10
10-69 miles from the location in which the member is enrolled. A member
10-70 may cancel a contract in the same manner if the health spa
11-1 registrant fails to provide advertised services. <If a contract is
11-2 canceled under this subsection, the member is liable for an amount
11-3 equal to the value of services received and facilities used under
11-4 the contract up to the date of the cancellation, and if the member
11-5 has paid money under the contract in excess of that amount the
11-6 health spa shall promptly refund to the member the excess.>
11-7 (c) A purchaser of a membership may cancel a contract if the
11-8 member dies or becomes totally and permanently disabled after the
11-9 date on which the contract takes effect. <The purchaser remains
11-10 liable for an amount equal to the value of services received and
11-11 facilities used by the member under the contract up to the day on
11-12 which the death occurred or the disability was incurred. The
11-13 health spa shall make a pro rata refund of funds paid under the
11-14 contract in an amount based on the time remaining in the contract
11-15 term up to a maximum of 50 percent of the total contract amount.>
11-16 The health spa registrant may require a purchaser or the
11-17 purchaser's estate to provide reasonable proof of total and
11-18 permanent disability or death.
11-19 (d) If a purchaser or an estate elects to cancel a
11-20 membership contract pursuant to Subsection (b) or (c) of this
11-21 section the health spa registrant shall refund to the purchaser or
11-22 the purchaser's estate any unearned sums paid under the contract.
11-23 "Unearned sums" shall be calculated by multiplying the gross
11-24 monthly payment by the total number of months remaining on a
11-25 contract at the time of cancellation minus any payments not made.
11-26 For the purposes of this section:
11-27 (1) The gross monthly payment shall be calculated by
11-28 determining the total of payments, including down payments and
11-29 initiation fees required by the contract, divided by the total
11-30 number of months in the term of the contract.
11-31 (2) The date of cancellation and the date of the
11-32 contract expiration shall be rounded to the nearest full month.
11-33 The total months remaining on the contract shall be calculated by
11-34 subtracting the date of cancellation from the expiration date of
11-35 the contract. The result shall be expressed in whole months.
11-36 (e) A health spa registrant shall make a refund required
11-37 under this section before the 31st day after the date the health
11-38 spa registrant receives the notice of cancellation accompanied by
11-39 proof of payment. The receipt given to the purchaser by the health
11-40 spa at the time the purchaser made a payment under the contract
11-41 constitutes <adequate> proof of payment.
11-42 SECTION 10. Section 15, Health Spa Act (Article 5221l,
11-43 Vernon's Texas Civil Statutes), is amended to read as follows:
11-44 Sec. 15. Unenforceable Contracts. (a) A contract or
11-45 assignment of a contract that does not comply with this Act is void
11-46 and unenforceable as contrary to public policy.
11-47 (b) If a seller does not possess a valid health spa
11-48 operator's certificate of registration at the time of entering into
11-49 any contract with a purchaser, the contract between the purchaser
11-50 and the seller is void and unenforceable as contrary to public
11-51 policy.
11-52 (c) A contract entered into in reliance on wilful and false,
11-53 fraudulent, or misleading information, representation, notice, or
11-54 advertisement of the health spa owner, <or> operator, or seller is
11-55 void and unenforceable.
11-56 SECTION 11. Section 17, Health Spa Act (Article 5221l,
11-57 Vernon's Texas Civil Statutes), is amended to read as follows:
11-58 Sec. 17. Prohibited Activities. (a) A seller or registrant
11-59 <health spa> may not offer a special offer or discount unless the
11-60 special offer or discount is available to all prospective members.
11-61 This subsection does not prohibit a health spa from offering
11-62 special group prices or group discounts.
11-63 (b) A seller or registrant <health spa> may not make a
11-64 material misrepresentation to a current member, prospective member,
11-65 or purchaser of a membership contract regarding:
11-66 (1) the qualifications of the staff;
11-67 (2) the availability, quality, or extent of the
11-68 facilities or services;
11-69 (3) the results obtained through exercise, dieting,
11-70 weight control, or physical fitness conditioning programs;
12-1 (4) membership rights; or
12-2 (5) the period that a special offer or discount will
12-3 be available.
12-4 (c) A health spa registrant may not fail or refuse to:
12-5 (1) file or update the registration statements
12-6 required by Section 8 of this Act;
12-7 (2) establish the escrow account required by Section 9
12-8 of this Act; or
12-9 (3) maintain the security required by Section 10 of
12-10 this Act in full force and effect.
12-11 (d) A health spa registrant may not advertise that it is
12-12 bonded by the state.
12-13 (e) A health spa registrant may not sell a membership plan
12-14 not included in the list required by Section 16 of this Act.
12-15 SECTION 12. Section 18, Health Spa Act (Article 5221l,
12-16 Vernon's Texas Civil Statutes), is amended to read as follows:
12-17 Sec. 18. Injunction. (a) If it appears that a person is in
12-18 violation of or is threatening violation of this Act, the attorney
12-19 general or a district or county attorney may institute an action
12-20 for injunctive relief to restrain the person from continuing the
12-21 violation and for civil penalties authorized by Section 20 <A
12-22 district attorney, county attorney, or the attorney general may sue
12-23 in a court of competent jurisdiction to enjoin or restrain a person
12-24 from engaging in conduct described by Section 17> of this Act.
12-25 (b) A civil action filed under this section shall be filed
12-26 in a district court in Travis County or in the county in which the
12-27 defendant resides <Except as prescribed by Subsection (c) of this
12-28 section, a district attorney, county attorney, or attorney general
12-29 who intends to sue under this section shall notify the defendant of
12-30 the alleged prohibited conduct not later than the seventh day
12-31 before the date the suit is filed.>
12-32 <(c) The notice prescribed by Subsection (b) of this section
12-33 is not required if the district attorney, county attorney, or
12-34 attorney general intends to request that the court issue a
12-35 temporary restraining order>.
12-36 SECTION 13. Section 20, Health Spa Act (Article 5221l,
12-37 Vernon's Texas Civil Statutes), is amended to read as follows:
12-38 Sec. 20. Civil Penalties. (a) A person who violates this
12-39 Act is subject to a civil penalty of not more than $1,000 for each
12-40 violation, not to exceed $25,000 in total penalties.
12-41 (b) A person who violates the terms of an injunction issued
12-42 in an action brought under Section 18 of this Act is liable to the
12-43 state for a civil penalty of not more than $25,000 for a single
12-44 violation and not more than $50,000 for all violations of the
12-45 injunction. A district attorney, county attorney, or the attorney
12-46 general may bring suit to recover the civil penalty in the court
12-47 that issued the original injunction.
12-48 (c) The attorney general, a district or county attorney, and
12-49 the secretary may recover reasonable expenses incurred in obtaining
12-50 injunctive relief, civil penalties, or both, including court costs,
12-51 reasonable attorney's fees, investigative costs, witness fees, and
12-52 deposition expenses.
12-53 (d) A penalty collected under this section by the attorney
12-54 general shall be deposited to the credit of the general revenue
12-55 fund. A penalty collected under this section by a district or
12-56 county attorney shall be deposited to the credit of the general
12-57 fund of the county.
12-58 SECTION 14. Subsection (a), Section 22, Health Spa Act
12-59 (Article 5221l, Vernon's Texas Civil Statutes), is amended to read
12-60 as follows:
12-61 (a) A person who knowingly or intentionally operates or
12-62 attempts to operate a health spa in violation of Section 8, 9, <or>
12-63 10, or 11 of this Act commits an offense. An offense under this
12-64 subsection is a Class A misdemeanor.
12-65 SECTION 15. Section 25, Health Spa Act (Article 5221l,
12-66 Vernon's Texas Civil Statutes), is amended to read as follows:
12-67 Sec. 25. Applicability. This <(a) Except as provided by
12-68 Subsection (b) of this section, this> Act applies to all health
12-69 spas <a health spa> in operation on or after September 1, 1985.
12-70 <(b) Section 9 of this Act does not apply to a health spa
13-1 that began operation before September 1, 1985.>
13-2 SECTION 16. The Health Spa Act (Article 5221l, Vernon's
13-3 Texas Civil Statutes) is amended by adding Section 26 to read as
13-4 follows:
13-5 Sec. 26. RULE-MAKING AUTHORITY. The secretary shall adopt
13-6 rules and regulations, promulgate administrative orders, and take
13-7 all action necessary to assure compliance with the intent and
13-8 purpose of this Act.
13-9 SECTION 17. Sections 7, 7A, and 14, Health Spa Act (Article
13-10 5221l, Vernon's Texas Civil Statutes), are repealed.
13-11 SECTION 18. Section 6.09, Chapter 1039, Acts of 71st
13-12 Legislature, Regular Session, 1989, is repealed.
13-13 SECTION 19. (a) There is appropriated to the Office of the
13-14 Attorney General from the general revenue fund for the fiscal
13-15 biennium ending August 31, 1995, the amounts awarded to the office
13-16 under Section 20, Health Spa Act (Article 5221l, Vernon's Texas
13-17 Civil Statutes), as amended by this Act, to be used to reimburse
13-18 the office for the office's expenses related to the litigation for
13-19 which the expenses were awarded.
13-20 (b) There is appropriated to the secretary of state from the
13-21 general revenue fund for the fiscal biennium ending August 31,
13-22 1995, the amounts awarded to the office under Section 20, Health
13-23 Spa Act (Article 5221l, Vernon's Texas Civil Statutes), as amended
13-24 by this Act, to be used to reimburse the secretary for the
13-25 secretary's expenses related to the litigation for which the
13-26 expenses were awarded.
13-27 SECTION 20. This Act takes effect September 1, 1993.
13-28 SECTION 21. The importance of this legislation and the
13-29 crowded condition of the calendars in both houses create an
13-30 emergency and an imperative public necessity that the
13-31 constitutional rule requiring bills to be read on three several
13-32 days in each house be suspended, and this rule is hereby suspended.
13-33 * * * * *
13-34 Austin,
13-35 Texas
13-36 May 5, 1993
13-37 Hon. Bob Bullock
13-38 President of the Senate
13-39 Sir:
13-40 We, your Committee on State Affairs to which was referred S.B. No.
13-41 1100, have had the same under consideration, and I am instructed to
13-42 report it back to the Senate with the recommendation that it do
13-43 pass, as amended, and be printed.
13-44 Harris of
13-45 Dallas, Chairman
13-46 * * * * *
13-47 WITNESSES
13-48 FOR AGAINST ON
13-49 ___________________________________________________________________
13-50 Name: Guy Joyner x
13-51 Representing: Secretary of State
13-52 City: Austin
13-53 -------------------------------------------------------------------
13-54 Name: Teri Flack x
13-55 Representing: Office of the Atty General
13-56 City: Austin
13-57 -------------------------------------------------------------------