Commerce, Consumer Protection

Rule R152-23

Utah Health Spa Services

Notice of Proposed Rule

(Amendment)

DAR File No.: 33771
Filed: 06/15/2010 02:45:57 PM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Various revisions were made to make the rule more clear and concise.

Summary of the rule or change:

The changes: 1) remove duplicative definitions already contained within the statute; 2) add the definitions for "facility", "operate", and "personal trainer"; 3) include an email address in information required on the Health Spa application; 4) add a requirement for separate registration for each health spa facility; 5) require that any changes to the information contained in the Health Spa application be corrected with the Division; 6) impose a time limit for the Division to process Health Spa applications; 7) clarify the separate disclosures that must be contained in membership contracts for bonded facilities, facilities exempt from surety requirement, or advanced sales contracts; 8) simplify and clarify the right of rescission; and 9) simplify and clarify the procedure to be followed upon the closing of a facility.

State statutory or constitutional authorization for this rule:

• Section 63G-3-201
• Section 13-2-5
• Section 13-23-1

Anticipated cost or savings to:

the state budget:

The state budget will not be affected by the various amendments to this rule.

local governments:

Local government will not be affected by the various amendments to this rule.

small businesses:

To the extent that a health spa employs fewer than fifty (50) people and operates more than one facility, there will be an additional $100 application fee for each additional facility that must now be registered.

persons other than small businesses, businesses, or local governmental entities:

To the extent that a health spa operates more than one facility, there will be an additional $100 application fee for each additional facility that must now be registered.

Compliance costs for affected persons:

To the extent that a health spa operates more than one facility, there will be an additional $100 application fee for each additional facility that must now be registered.

Comments by the department head on the fiscal impact the rule may have on businesses:

Two aspects of this rule filing could have a fiscal impact on businesses. This filing clarifies that each separate facility must have its own registration and bond. That fiscal impact is mitigated because the filing simply clarifies existing enforcement practice. The filing also clarifies contract requirements. Health spas may incur a cost to update their contract to be in compliance, which will also bring greater clarity and transparency to consumers.

Francine Giani, Executive Director

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Commerce
Consumer Protection
160 E 300 S
SALT LAKE CITY, UT 84111-2316

Direct questions regarding this rule to:

• Angela Hendricks at the above address, by phone at 801-530-6035, by FAX at 801-538-6001, or by Internet E-mail at [email protected]

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

08/02/2010

This rule may become effective on:

08/09/2010

Authorized by:

Kevin Olsen, Director

R152. Commerce, Consumer Protection.

R152-23. Utah Health Spa Services.

R152-23-1. Authority.

These Rules are promulgated in accordance with the provisions of Section 63G-3-201 and Section 13-2-5, Utah Code Ann. (1953), as amended, to prescribe for the administration of the [Utah] Health Spa Services Protection Act, Section 13-23-1, et seq., Utah Code Ann. (1953), as amended[, the "Act"].

 

R152-23-2. Scope and Applicability.

These rules shall apply to the conduct of every Health Spa [Business] within the State of Utah.

 

R152-23-3. Definitions.

In addition to the definitions set forth in Section 13-23-2, the following definitions shall apply to these Rules.

[A.] (1) "Advance Sales[,]" shall mean sales of membership contracts on any date prior to the date a health spa facility [shall be open and available to provide services to purchasers]becomes fully operational and available for use.

[B. "Bond", "Letter of Credit", or "Certificate of Deposit" shall mean an instrument containing a promise from a third party to pay to the Division of Consumer Protection for the benefit of purchasers of membership contracts the dollar value of the unused portion of such purchaser's membership in the event the health spa facility shall be unable to or refuse to provide health services pursuant to such Membership Contract.

C.](2) "Costs" shall mean those costs incurred by the Division in investigating complaints, [administering rescission of membership contracts or]in collecting and distributing funds, and in otherwise fulfilling its responsibilities under the [Utah] Health Spa Services Protection Act or these Rules[ promulgated thereunder].

[D. "Department" shall mean the Department of Commerce of the State of Utah.

E. "Division" shall mean the Division of Consumer Protection of the Department of Commerce of the State of Utah.

F. "Health Spa Business" shall mean the business of buying, operating and selling health spa facilities and shall include all acts related thereto.

G. "Health Spa Facility" shall mean the physical facilities at which the services of a health spa business are provided to its members.

H. "Member" shall mean the purchaser of a Membership contract pursuant to which the member anticipates receipt of health spa services in exchange for consideration given by such purchaser.

I. "Membership Contract" shall mean a legally binding obligation pursuant to which a purchaser agrees to give consideration in exchange for membership privileges which the seller shall be obligated to provide.

J. "Rescission" shall mean the process of canceling a membership contract and refunding to the purchaser thereof the dollar value of the consideration paid for services which have not been provided as of the date of cancellation.](3) "Facility" means the physical building where the health spa services are provided.

(4) "Operate" means to advertise health spa services, to sell memberships, or to perform any other function of business by a Health Spa that is doing business in Utah.

(5) "Personal Trainer" means an individual who is a health spa under Section 13-23-2 because the individual (1) hires another individual, either as an employee or an independent contractor, to provide instruction to assist patrons to improve their physical condition or appearance through aerobic conditioning, strength training, fitness training or other exercise, and (2) is granted the use of a facility that contains exercise equipment.

 

R152-23-4. Registration Requirements[ and Contracts for Health Spa Services].

[A. Prior to selling or attempting to sell a Membership Contract, a health spa facility must file the following documentation with the Division:](1) A Health Spa may not operate in this state without first having received a registration permit from the Division. The application for a permit shall be completed on the form provided by the Division.

[1. A completed application on the form prescribed and furnished by the Division which shall include:](2) The application shall request the following items:

[a.](a) Name, addresses, email address and telephone numbers of owner(s) of the Health Spa Facility and the facility address, telephone number, email address, and name of contact person at the facility.

[b.](b) [A check or money order for a $100 non-refundable application fee.]Payment of the non-refundable application fee.

[c.](c) A current pricing structure for membership services.

[d.](d) A copy of the contract[(s)] that will be utilized by the facility containing the [language required by the Act]provisions required by law. The required provisions shall be highlighted for easy reference.

[e.](e) The [original or certified copy of the surety bond, letter of credit, or certificate of deposit in the required amount or, if applicable, the information set out in the application as the basis for a claim of exemption from registration.]documents necessary to satisfy the surety requirement of Section 13-23-5(2)(a). If the Health Spa claims that it is exempt from providing the surety, then it must provide the Division with sufficient evidence that each requirement of Section 13-23-6 is satisfied.

[f.](f) The number of membership contracts that relate to each facility.

(g) The name, address, email address, and telephone number of each Personal Trainer who will use the Health Spa's facilities during the year.

(3) A separate registration shall be required for each facility that is maintained and operated by a Health Spa.

(4) If any information contained in the application becomes incorrect or incomplete, then the Health Spa shall, within thirty (30) days of the information becoming incorrect or incomplete, correct the application or file the complete information.

(5) All initial applications and renewal applications shall be processed within twenty (20) business days after their receipt by the Division.

[ 2. Notice of intent to sell memberships.

]

R152-23-5. Health Spa Membership Contracts.

(1) Health Spa membership contracts shall contain the following provisions:

(a) Each membership contract shall contain:

(i) the date of the transaction;

(ii) the name and address of the Health Spa; and

(iii) the name, address, email address (if available), and telephone number of the consumer.

[B.] (b) Each [Membership Contract]membership contract shall contain one of the following provisions, printed in capital letters, regarding closure of the facility:

(i) Health Spas that are required to comply with the surety requirement shall contain a provision[, printed in all capital letters which reads substantially] that states as follows: "IN THE EVENT THE HEALTH SPA FACILITY CLOSES AND ANOTHER HEALTH SPA FACILITY OPERATED BY THE SELLER, OR ASSIGNS OF THE SELLER, OF THIS CONTRACT IS NOT AVAILABLE WITHIN FIVE (5) MILES OF THE LOCATION THE MEMBER INTENDS TO PATRONIZE, SELLER WILL REFUND TO MEMBER A PRORATA SHARE OF THE MEMBERSHIP COST, BASED UPON THE UNUSED MEMBERSHIP TIME REMAINING ACCORDING TO THE CONTRACT."

(ii) Health Spas that are not required to comply with the surety requirement shall contain a provision that states as follows: "IF THIS HEALTH SPA CEASES OPERATION AND FAILS TO OFFER AN ALTERNATE LOCATION WITHIN FIVE MILES, NO FURTHER PAYMENTS UNDER THIS CONTRACT SHALL BE DUE TO ANYONE, INCLUDING ANY PURCHASER OF ANY NOTE ASSOCIATED WITH OR CONTAINED IN THIS CONTRACT."

[C.] (c) All [Membership Contracts]membership contracts shall specify what items of equipment or services provided by the health spa facility on the date of the execution of the membership contract are subject to deletion or change at the discretion of the facility.

[D.](d) [All Membership Contracts sold prior to opening of the health spa facility shall allow the buyer a three (3) day right of rescission in accordance with Section 13-23-4 of the Act, or Section 13-11-4(m) of the Utah Consumer Sales Practices Act.]Each membership contract shall include one of the following provisions regarding the consumer's right of rescission under Section 13-23-3(6). The provision shall be bolded and printed in capital letters with at least 12 point font and shall be located on the first page of the contract and just above the signature line.

(i) Membership contracts sold in advance sales shall contain a provision that states as follows: "YOU, THE CONSUMER, MAY CANCEL THIS CONTRACT AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE HEALTH SPA BECOMES FULLY OPERATIONAL AND AVAILABLE FOR USE. IF THE HEALTH SPA DOES NOT BECOME FULLY OPERATIONAL AND AVAILABLE FOR USE WITHIN 60 DAYS AFTER THE DATE OF THE CONTRACT, YOU MAY CANCEL THIS CONTRACT AT ANY TIME."

[E. The right of rescission set out in Section 13-23-3(6) shall:

1. be a conspicuous statement written in dark bold with at least 12 point type on the first page of the contract; and

2. read](ii) All other membership contracts shall contain a provision that states as follows: "YOU, THE CONSUMER, MAY CANCEL THIS CONTRACT AT ANY TIME PRIOR TO MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DATE ON WHICH THE CONTRACT IS EXECUTED."

[F. No fee may be charged if a consumer exercises the consumer's right to rescind the contract pursuant to Section 13-23-3(6).

G.](e) [The dollar value of a Membership Contract shall be clearly stated on the face of the contract.]All membership contracts shall itemize the costs to the consumer and shall include a statement as to the total cost of the contract. These costs shall be clearly stated on the first page of the contract.

[H.](f) Every membership contract shall clearly state the beginning and expiration dates of its term. In any event, no [Membership Contract shall be sold which provides]membership contract shall provide for a membership term of longer than thirty-six (36) months.

(2) The membership contract or any attachment to it shall clearly state any rules of the Health Spa that apply to:

(a) the consumer's use of its facilities and services; and

(b) cancellation and refund policies of the Health Spa.

(3) Each membership contract shall specify which equipment or facility of the Health Spa is omitted from the contract's coverage.

[ I. The purchaser of a Health Spa Facility shall replace the Seller as a party to any unexpired Membership Contract and shall honor all Membership Contracts of the purchased facility in effect at the time of purchase, pursuant to Section 13-23-5(2) of the Act. In the event a Health Spa Facility shall be sold under circumstances which will result in its closure and the purchaser shall not operate a Health Spa Facility within 5 miles thereof, purchaser must notify Members of such closure in writing within 10 days of the date of sale. Members may cancel their outstanding Membership Contracts or may choose to continue their Membership Contract in force. Notice of such election shall be in writing mailed to the purchaser within 30 days of the receipt of notice of closure of the acquired Health Spa Facility.

J. The notice required in Section 13-23-5(7) shall be in writing and shall include the following:

1. The date on which the health spa will cease operations or relocate and fail to offer an alternative location within five miles;

2. Information concerning the members of the health spa, including:

a. the total number of members;

b. the name and address of each member;

c. the total cost of each membership; and

d. the effective dates of each membership;

3. Proof of the bond, letter of credit, or certificate of deposit required under Section 13-23- 5(2)(a) and proof that the bond, letter of credit, or certificate of deposit will remain in force for one year after the health spa notifies the division that it has ceased all activities regulated by Title 13, Chapter 23 of the Utah code;

4. A description of what action the health spa plans to take with regard to its members, including:

a. the amount of each member's refund;

b. any reason refunds are not to be made;

c. an explanation of how refunds are to be calculated; and

d. copies of the refund checks that the health spa has issued; and

5. Any complaints that the health spa has received from the members and how the complaints were resolved.

K. A separate registration shall be required for each separate location maintained by a health spa business.

]

R152-23-[ 5]6 . Rescission.

(1) Except where advanced sales are involved, no fee may be charged if a consumer exercises the consumer's right to rescind the contract pursuant to Section 13-23-3(6).

(2) When the membership contract is the result of the Health Spa's advance sales and the consumer exercises the consumer's right to rescind, then a fee may be charged against the payments made by the consumer to the extent allowed by Section 13-23-4.

 

R152-23-7. Procedure When Facility Closes.

[A.](1) In the event a Health Spa [Facility] shall, for any reason, close, discontinue normal operations for a period of ten (10) business days, or otherwise cease to do business at any of its facilities while having outstanding obligations to provide [membership]health spa services to members holding valid membership contracts, the Health Spa [Facility must]shall[ offer, in writing, to rescind all such membership contracts and to], after obtaining the Division's approval, immediately refund the unused portion of all [Member's] membership fees , including the proration of any fees paid up front. The proration of fees paid up front is required only on initial contracts unless similar fees were charged when the contracts were renewed.[ Such written offer of rescission shall establish the procedure and time limit for acceptance of the rescission offer and obtaining the desired refund.

B.](2) [An offer of rescission shall be made to each purchaser whose Membership Contract is valid on the last day the Health Spa Facility is open for business.]Within ten (10) business days of the closure of its facility, [T]the Health Spa[ Facility] shall provide the Division with a [list of Membership Contracts]copy of each membership contract that was valid on the date of closure[valid on the date of closure 10 business days before such closure].

[C. Money to be refunded to members upon closure of a Health Spa Facility under these Rules shall be placed in escrow with a bank or other financial institution previously approved by the Division. Such funds shall come from a Bond, Letter of Credit, or Certificate of Deposit payable to the Division.

D.](3) The Division shall determine the amount of refunds that shall be made and to whom. [Refunds shall be made to Members who submit claims within a time period to be prescribed by the Division.] Such refunds shall be made under the supervision and with the prior approval of the Division .[ and shall, if insufficient funds are available for full refund, be made] If sufficient funds are not available to make a full refund, then the refund shall be made from the surety proceeds on a prorata basis based upon the full amount [due a claimant]that is determined to be due to all members. The refund amount due shall be determined by multiplying the number of [months]days remaining on [claimant's membership]the member's contract term as of the date of closure by the [monthly]daily cost of such membership to the member at the time of purchase. [Periods of less than a full month shall be compensated by determining a daily cost of membership and multiplying such daily cost by the number of unused membership days in such period.]The Health Spa shall remain responsible for the balance.

[ E. Refunds shall be made to claimants within 90 days following the final date for submission of claims in accordance with the procedures specified above.

F. The Division may recover from the funds deposited in escrow pursuant to this Rule, its costs, including investigative costs, processing costs, attorneys fees and other expenses related to administration of rescissions made under these rules.

G. In the event there shall be funds remaining after full refund to all claimants and payment of costs of the Division, such excess shall be returned to Owners of the Health Spa Facility.

] (4) For purposes of Sections 13-23-5(6) and (7), the distance of five miles shall be calculated by the distance traveled by an automobile over a public road.

(5) The notice required in Section 13-23-5(7) shall be in writing and shall include the following:

(a) The date on which the health spa will cease operations or relocate and fail to offer an alternative location within five miles;

(b) Information concerning the members of the health spa, including:

(i) the total number of members;

(ii) the name, address, email address, and telephone number of each member;

(iii) the total cost of each membership; and

(iv) the effective beginning and ending dates of each membership;

(c) Proof of the bond, letter of credit, or certificate of deposit required under Section 13-23- 5(2)(a) and proof that the bond, letter of credit, or certificate of deposit will remain in force for one year after the health spa notifies the Division that it has ceased all activities regulated by Title 13, Chapter 23 of the Utah Code;

(d) A description of what action the health spa plans to take with regard to its members, including:

(i) the amount of each member's refund;

(ii) any reason refunds are not to be made;

(iii) an explanation of how refunds are to be calculated; and

(iv) copies of the refund checks that the health spa has issued; and

(e) Any complaints that the health spa has received from the members and how the complaints were resolved.

 

R152-23-[6]8. Bond, Irrevocable Letter of Credit, or Certificate of Deposit [Required].

[A. Except as provided in Section 13-23-6, of the Act, all Health Spa Facilities shall be covered by a performance Bond, Letter of Credit, or Certificate of Deposit payable to the Division in an amount to be determined by the number and cost of membership contracts sold by the Health Spa Facility.

B.](1) [Originals or certified copies of such Bonds, Letters of Credit, or Certificates of Deposit]The surety required by Section 13-23-5(2) shall be provided to the Division not less than [10]30 days in advance of [the first sale or attempt to sell made by any Health Spa] any advanced sales by any Health Spa [Facility]. Annual renewals of such Bonds, Irrevocable Letters of Credit, or Certificates of Deposit shall be filed with the Division [at least]not less than 30 days in advance of expiration of existing Bonds, Irrevocable Letters of Credit, or Certificates of Deposit.

[C.](2) The Division shall have the right to approve or reject Bonds, Irrevocable Letters of Credit, or Certificates of Deposit submitted [in compliance with this Rule]to the Division. In the event a Bond, Irrevocable Letter of Credit, or Certificate of Deposit is rejected by the Division, the Health Spa [Facility] shall submit another surety within 15 days following notice by the Division. In no event shall a Health Spa [Facility conduct business]operate without having a Bond, Irrevocable Letter of Credit, or Certificate of Deposit in effect or establishing an exemption pursuant to Section 13-23-6.

[D. A Health Spa Facility which allows Bonds, Letters of Credit, or Certificates of Deposit to expire without filing renewal as provided herein, may be allowed, at the discretion of the Division, to register as a new Health Spa Facility pursuant to the provisions of R152-7-4 and R152-7-6, hereof.](3) In addition to the members' refunds, the Division shall be entitled to recover from the surety proceeds all of its costs and fines as allowed by Sections 13-23-5(2)(c) and (e).

 

[R152-23-7. Enforcement.

A. The Division may be entitled to recover costs, including investigative costs, processing costs, attorneys fees and other costs incurred in administration of these rules. Upon election of the parties, payment of such costs shall be made from the proceeds of the Bond, Letter of Credit, or Certificate of Deposit.

B. Any payment made to the Division shall be approved by the Executive Director of the Department of Commerce.

]

KEY: consumer protection, health spas

Date of Enactment or Last Substantive Amendment: [January 23, 2007]2010

Notice of Continuation: June 22, 2007

Authorizing, and Implemented or Interpreted Law: 63G-3-201; 13-2-5; 13-23-1