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OCCUPATIONS CODE

TITLE 3. HEALTH PROFESSIONS

SUBTITLE M. REGULATION OF OTHER HEALTH PROFESSIONS

CHAPTER 702. HEALTH SPAS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 702.001. SHORT TITLE. This chapter may be cited as the

Health Spa Act.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.002. PURPOSE AND CONSTRUCTION. (a) The purpose of

this chapter is to protect the public against fraud, deceit,

imposition, and financial hardship and to foster and encourage

competition, fair dealing, and prosperity in the field of health

spa operations and services by prohibiting or restricting

injurious practices involving:

(1) health spa contracts; and

(2) the marketing of health spa services.

(b) This chapter shall be liberally construed and applied to

promote its purpose and to provide efficient and economical

procedures to protect the public.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.003. DEFINITIONS. In this chapter:

(1) "Closed" means a condition in which:

(A) the facilities of a health spa are no longer available to

the health spa's members and equivalent facilities located not

more than 10 miles from the health spa have not been made

available to the members;

(B) a certificate holder sells a registered location and the

security filed or posted by the certificate holder under

Subchapter D is:

(i) canceled;

(ii) withdrawn; or

(iii) otherwise unavailable to the members of the health spa; or

buyer does not adopt or honor the contracts of existing members

of the health spa.

(2) "Contract" means an agreement between a seller and purchaser

by which the purchaser becomes a member of a health spa.

(3) "Facilities" means the equipment, physical structures,

improvements, including improvements to leasehold premises, and

other tangible property, including saunas, whirlpool baths,

gymnasiums, running tracks, swimming pools, shower areas,

racquetball courts, martial arts equipment, and exercise

equipment, that are located at a health spa and used to conduct

the business of the health spa.

(4) "Health spa" means a business that offers for sale, or

sells, memberships that provide the members instruction in or the

use of facilities for a physical exercise program. The term does

not include:

(A) an organization that is tax exempt under Section 501 et

seq., Internal Revenue Code (26 U.S.C. Section 501 et seq.);

(B) a private club owned and operated by its members;

(i) teach dance or aerobic exercise; or

(ii) provide physical rehabilitation activity related to an

individual's injury or disease;

(D) a person engaged in an activity authorized under a license

issued by the state; or

(E) an activity conducted or sanctioned by a school under the

Education Code.

(5) "Location" means the physical site of the facilities of a

health spa.

(6) "Member" means a person who is entitled to the benefits of

membership in a health spa.

(7) "Membership" means the status of a person under a contract

that entitles the person to use a health spa's services or

facilities.

(8) "Obligor" means a person, other than a surety, who is

obligated to perform if a certificate holder defaults.

(9) "Open" means the date each service of a health spa that was

advertised before the opening, or promised to be made available,

are available for use by its members.

(10) "Prepayment" means consideration paid by a purchaser for

membership in a health spa before the date the health spa opens.

(11) "Purchaser" means a person who purchases, or applies to

purchase, the right to use a health spa's services or facilities.

(12) "Registered location" means a health spa location for which

a health spa operator's certificate of registration is issued

under this chapter.

(13) "Seller" means a person who:

(A) owns or operates a health spa; or

(B) offers for sale, or sells, the right to use a health spa's

services or facilities.

(14) "Services" means the programs, plans, guidance, or

instruction that a health spa provides for its members. The term

includes diet planning, exercise instruction and programs, and

instructional classes.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

SUBCHAPTER B. POWERS AND DUTIES OF SECRETARY OF STATE

Sec. 702.051. ADMINISTRATIVE AND RULEMAKING AUTHORITY. (a) The

secretary of state shall administer this chapter.

(b) In administering this chapter, the secretary of state shall:

(1) adopt rules;

(2) issue administrative orders; and

(3) take action necessary to ensure compliance with this

chapter.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.052. RULES RELATING TO SECURITY CLAIMS AND PROCEEDS.

The secretary of state shall adopt rules necessary to:

(1) determine the disposition of a security claim filed under

Section 702.251; and

(2) ensure the prompt and fair distribution of security

proceeds.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.053. REGISTRATION AND RENEWAL FEES. The secretary of

state may charge each applicant for a certificate of

registration, or renewal of a certificate, a reasonable fee not

to exceed $100 to cover the cost of issuance or renewal.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

SUBCHAPTER C. CERTIFICATE OF REGISTRATION

Sec. 702.101. CERTIFICATE OF REGISTRATION REQUIRED. A person

may not operate a health spa or offer for sale, or sell, a

membership in a health spa unless the person holds a health spa

operator's certificate of registration.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.102. APPLICATION REQUIREMENTS. (a) An applicant for a

health spa operator's certificate of registration must file with

the secretary of state an application stating:

(1) the applicant's name, address, and telephone number;

(2) the applicant's business trade name;

(3) for an applicant whose business is incorporated:

(A) the applicant's business name registered with the secretary

of state;

(B) the location of the applicant's registered business office;

and

indirectly owns or controls 10 percent or more of the outstanding

shares of stock in the applicant's business;

(4) the date the applicant became the owner and operator of the

applicant's business;

(5) the address of the health spa; and

(6) the type of available or proposed facilities and services

offered at the health spa location.

(b) An application for a certificate of registration must be

accompanied by:

(1) a sample of each contract used to sell a membership in the

applicant's health spa;

(2) proof of security filed or posted by the applicant under

Subchapter D; and

(3) the required registration fee.

of this section for each location where the applicant operates a

health spa.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.103. CERTIFICATE OF REGISTRATION NONTRANSFERABLE;

APPLICATION BY NEW OWNER. (a) A health spa operator's

certificate of registration is not transferable.

(b) A person who obtains ownership of a health spa by purchase

or other transfer shall file an application for a certificate of

registration under Section 702.102 not later than the fifth day

after the date the person obtains ownership.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.104. TERM; RENEWAL. (a) A health spa operator's

certificate of registration expires on the first anniversary of

the date of issuance.

(b) A certificate of registration may be renewed as provided by

the secretary of state.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.105. CERTIFICATE POSTING. A certificate holder shall

post a health spa operator's certificate of registration in a

conspicuous place at each registered location.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.106. CHANGE OF INFORMATION. If the information

provided in an application for a certificate of registration

changes, the certificate holder shall amend the application not

later than the 90th day after the date the change occurs.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.107. SALES TAX PERMIT; PROOF OF REGISTRATION REQUIRED.

(a) A health spa operator shall submit to the comptroller a copy

of the operator's certificate of registration at the time the

operator applies for a sales tax permit.

(b) The comptroller may not issue a sales tax permit to a health

spa operator who fails to comply with this section. The

secretary of state shall assist the comptroller in determining

whether a business is a health spa under this chapter.

Added by Acts 2005, 79th Leg., Ch.

908, Sec. 1, eff. September 1, 2005.

SUBCHAPTER D. SECURITY REQUIREMENTS

Sec. 702.151. SECURITY REQUIRED. (a) Except as provided by

Subchapter E, the secretary of state may not issue a health spa

operator's certificate of registration to an applicant unless the

applicant files a surety bond, or posts other security as

prescribed by the secretary, in the amount prescribed by the

secretary under Subsection (b).

(b) The secretary of state shall prescribe the amount of

security required for an applicant in the amount determined

sufficient by the secretary to protect the health spa's total

membership. The amount may not be less than $20,000 or more than

$50,000.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

908, Sec. 2, eff. September 1, 2005.

Sec. 702.152. SURETY BOND REQUIREMENTS. If a surety bond is

filed under Section 702.151, the bond must:

(1) remain in effect until canceled by the surety company;

(2) be issued by a company authorized to do business in this

state; and

(3) conform to the requirements of the Insurance Code.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.153. REQUIREMENTS FOR SECURITY OTHER THAN SURETY BOND.

An applicant who posts under Section 702.151 security other than

a surety bond is:

(1) not required to post other security annually if the

applicant maintains security in the amount of $20,000; and

(2) entitled to receive the interest that accumulates on the

other security posted.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.154. BENEFICIARY OF SECURITY. The security filed or

posted by a certificate holder under this subchapter must be

payable to the state and held for the benefit of:

(1) the state; and

(2) each member of the certificate holder's health spa who has

been administratively adjudicated to have suffered actual

financial loss as a result of the closing of the certificate

holder's health spa.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.155. DURATION OF SECURITY. A certificate holder shall

maintain the security filed or posted under Section 702.151 in

effect until the later of:

(1) the second anniversary of the date the certificate holder's

health spa closes; or

(2) the date the secretary of state determines that each claim

filed against the security has been satisfied or foreclosed by

law.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.156. CANCELLATION OF SECURITY. (a) A surety or

obligor of security filed or posted under this subchapter shall

provide to the secretary of state, not later than the 60th day

before the date the security is canceled, written notice of the

cancellation.

(b) If the security filed or posted under this subchapter by a

certificate holder is canceled, the secretary of state shall:

(1) suspend the certificate holder's certificate of registration

on the date of cancellation; and

(2) maintain other security on file with the secretary until the

later of:

(A) the second anniversary of the date the certificate holder's

health spa closes; or

(B) the date the secretary determines that each claim filed

against the security has been satisfied or foreclosed by law.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.157. LIMIT ON LIABILITY OF SURETY OR OBLIGOR. (a) The

limit of a surety's or obligor's liability stated in the security

filed or posted under this subchapter may not be cumulative from

year to year or period to period, regardless of the number of:

(1) years that the security continues in force; or

(2) premiums paid or payable.

(b) The liability of a surety or obligor is exclusively

conditioned on a final administrative order issued by the

secretary of state.

a claim only as provided by this subchapter.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.158. REVIEW OF SECURITY AMOUNT. (a) At least once

every three years, the secretary of state shall review the amount

of security a health spa operator is required to post under

Section 702.151 to determine whether the amount is sufficient to

protect the health spa's total membership. The secretary may

increase the amount required if the secretary determines that the

increase is necessary to protect that membership but may not

increase the amount above the maximum amount allowed under

Section 702.151(b).

(b) The secretary of state may adopt procedures necessary to

implement this section, including:

(1) establishing a schedule to review the amount of security

posted by each health spa operator; and

(2) requiring each health spa operator to submit periodically a

written statement of the health spa's total membership.

Added by Acts 2005, 79th Leg., Ch.

908, Sec. 3, eff. September 1, 2005.

SUBCHAPTER E. EXEMPTION FROM SECURITY REQUIREMENTS

Sec. 702.201. APPLICATION FOR EXEMPTION. A certificate holder

may apply for an exemption from the security requirements of

Subchapter D by filing with the secretary of state a sworn

application for the exemption on a form prescribed by the

secretary of state.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.202. QUALIFICATIONS FOR EXEMPTION. A certificate

holder may apply for an exemption under Section 702.201 if:

(1) the certificate holder does not require, or solicit or offer

a plan or program that requires, a health spa consumer to:

(A) execute a membership contract for a term that exceeds 31

days;

(B) execute a note or retail installment contract;

institution in favor of the certificate holder or the certificate

holder's assignee;

(D) pay an initiation fee or other fee, not including monthly

dues; or

(E) prepay for a term that exceeds 31 days; or

(2) the certificate holder submits a sworn statement every three

years with the secretary of state stating that the certificate

holder:

(A) has assets based on net book value that exceed $50,000 per

registered location;

(B) has operated under substantially the same ownership or

management for at least five years; and

closing of a health spa owned by the certificate holder or the

failure of a health spa owned by the certificate holder to open

that has been initiated or filed by a member of the health spa

with a governmental authority in this state.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

908, Sec. 4, eff. September 1, 2005.

Sec. 702.205. ISSUANCE OF EXEMPTION. (a) On approval of an

application for an exemption under Section 702.201, the secretary

of state shall issue a certificate of exemption.

(b) A certificate holder to whom a certificate of exemption is

issued is not required to file a surety bond or post other

security under Subchapter D.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.206. NONTRANSFERABILITY OF EXEMPTION. (a) A

certificate of exemption is not transferable.

(b) A person who by purchase or other transfer obtains ownership

of a health spa for which a certificate of exemption has been

issued shall, not later than the fifth day after the date the

person obtains ownership:

(1) file a surety bond, or post other security, as required by

Section 702.151; or

(2) file a new application for an exemption under Section

702.201.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.207. DENIAL AND REVOCATION OF EXEMPTION. After notice

and hearing, the secretary of state may deny an application for

an exemption or permanently revoke a certificate holder's

certificate of exemption if the secretary finds that the

applicant or certificate holder:

(1) provided false information on the application for an

exemption; or

(2) is no longer eligible for an exemption.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

SUBCHAPTER F. CLAIM ON SECURITY

Sec. 702.251. FILING OF SECURITY CLAIM. A member may file a

claim against the security filed or posted under this subchapter

by sending to the secretary of state by certified mail a copy of

the contract between the member and certificate holder who filed

or posted the security, accompanied by proof of payment made

under the contract, if the certificate holder's health spa:

(1) closes and fails to provide alternative facilities not more

than 10 miles from the location of the health spa; or

(2) relocates more than 10 miles from its location preceding the

relocation.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.252. COMPUTATION OF CLAIM. (a) Recovery on a claim

filed under Section 702.251 is limited to the amount of actual

financial loss suffered by the member as a result of the closing

or relocating of the certificate holder's health spa.

(b) For purposes of this section, actual financial loss is

computed by:

(1) rounding the date of the health spa's closing or relocation

and the contract's expiration date to the nearest full month;

(2) subtracting the date of closing or relocation determined

under Subdivision (1) from the expiration date determined under

that subdivision, with the result expressed in whole months and

representing the number of months remaining on a contract;

(3) computing the gross monthly payment by adding all payments

made under the contract, including any down payment and

initiation fee, and dividing the resulting amount by the total

number of months in the term of the contract; and

(4) multiplying the number of months remaining on the contract

computed under Subdivision (2) by the gross monthly payment

computed under Subdivision (3).

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.253. ADJUDICATION ON PRO RATA BASIS. If the total

amount of actual financial losses computed under Section 702.252

for all claims filed under Section 702.251 exceeds the amount of

available security, the secretary of state shall reduce the

amount of each recovery under Section 702.252 on a pro rata basis

and shall compute the amount of each recovery by:

(1) dividing the amount of available security by the total

amount of actual financial losses computed under Section 702.252

for all claims; and

(2) multiplying the results computed under Subdivision (1) by

the amount of the recovery.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by Acts 2001, 77th Leg., ch. 756, Sec. 1, eff. Sept. 1,

2001.

Sec. 702.254. CLAIM BARRED. The secretary of state may not

consider a claim filed under Section 702.251 if the claim is

received later than the 90th day after the date notice is first

posted under Section 702.452.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by Acts 2001, 77th Leg., ch. 756, Sec. 2, eff. Sept. 1,

2001.

SUBCHAPTER G. CONTRACT REQUIREMENTS

Sec. 702.301. GENERAL REQUIREMENTS. (a) A contract:

(1) must be:

(A) in writing; and

(B) signed by the purchaser;

(2) must state the proposed opening date of the health spa that

is the subject of the contract, if the health spa is not open on

the contract date; and

(3) must include the health spa operator's certificate of

registration number or an identification number as provided by

Subsection (b).

(b) The secretary of state shall adopt procedures for the

issuance of an identification number that may be used in a

contract for purposes of Subsection (a) by health spas with more

than one location in this state.

agreement between the seller and purchaser.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

908, Sec. 5, eff. September 1, 2005.

Sec. 702.302. DISCLOSURE REQUIREMENTS. (a) A health spa shall

prepare a comprehensive list that includes each membership plan

the health spa offers for sale. The health spa shall disclose the

list to a prospective purchaser on request.

(b) A certificate holder who is not exempt under Section 702.202

from the security requirements of Subchapter D must deliver to a

purchaser a complete copy of the contract, accompanied by a

written receipt for any payment made by the purchaser under the

contract before entering into the contract with the purchaser.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.303. CONTRACT TERM. (a) Except as provided by

Subsection (b), the term of a contract may not exceed three

years.

(b) A contract that is financed through a retail installment

contract or note may not require the purchaser to make payments

or finance the contract for more than five years after the

contract date.

unusable for 30 consecutive days or longer because of an event

beyond the control of the owner or operator of the health spa,

including a natural disaster, the health spa shall extend the

term of each affected member's contract for a period equal to the

time that the health spa is rendered unusable.

(d) If the term of a contract overlaps the term of another

contract between the same seller and purchaser, the contracts are

considered to be one contract.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.304. CANCELLATION AND REFUND NOTICE. (a) Except as

provided by Subsection (b), a contract must state in at least

10-point type that is boldfaced, capitalized, underlined, or

otherwise conspicuously distinguished from surrounding written

material:

(1) "NOTICE TO PURCHASER: DO NOT SIGN THIS CONTRACT UNTIL YOU

READ IT OR IF IT CONTAINS BLANK SPACES."

(2) "IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER OF THIS

HEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE HEALTH

SPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU SIGN

THIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THIS

CONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO

THE FOLLOWING ADDRESS:

(Address of the health spa home office)."

(3) "IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES NOT PROVIDE

FACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU ARE

ENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THE

FACILITY IN WHICH YOU ARE ENROLLED, YOU MAY:

(A) CANCEL THIS CONTRACT BY MAILING BY CERTIFIED MAIL A WRITTEN

NOTICE STATING YOUR DESIRE TO CANCEL THIS CONTRACT, ACCOMPANIED

BY PROOF OF PAYMENT ON THE CONTRACT TO THE HEALTH SPA AT THE

FOLLOWING ADDRESS:

(Address of the health spa home office); AND

(B) FILE A CLAIM FOR A REFUND OF YOUR UNUSED MEMBERSHIP FEES

AGAINST THE BOND OR OTHER SECURITY POSTED BY THE HEALTH SPA WITH

THE TEXAS SECRETARY OF STATE. TO MAKE A CLAIM AGAINST THE

SECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH PROOF OF

PAYMENTS MADE ON THE CONTRACT TO THE TEXAS SECRETARY OF STATE.

THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THE

FOLLOWING ADDRESS:

OFFICE OF THE SECRETARY OF STATE

STATUTORY DOCUMENTS SECTION

P.O. BOX 12887

AUSTIN, TEXAS 78711-2887."

(4) "IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY DISABLED AFTER

THE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR ESTATE MAY

CANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF YOUR UNUSED

MEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA STATING YOUR

DESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY REQUIRE PROOF

OF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE MAILED BY

CERTIFIED MAIL TO THE FOLLOWING ADDRESS:

(Address of the health spa home office)."

(b) A health spa operator is required to include the statement

under Subsection (a)(3)(B) in a contract only if the operator is

required to post security with the secretary of state under

Subchapter D.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by:

Acts 2005, 79th Leg., Ch.

908, Sec. 6, eff. September 1, 2005.

Sec. 702.305. PREPAYMENT REFUND NOTICE. If a certificate holder

offers for sale, or sells, memberships in a health spa before the

date the health spa opens, the contract for the health spa must

state in at least 10-point type that is boldfaced, capitalized,

underlined, or otherwise conspicuously distinguished from

surrounding written material:

"IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the date that is

the 181st day after the date the membership is prepaid) OR IF THE

NEW SPA DOES NOT REMAIN OPEN FOR THIRTY DAYS, YOU ARE ENTITLED TO

A FULL REFUND OF THE MONEY YOU PREPAID. HOWEVER, IF ANOTHER

HEALTH SPA, OPERATED BY (insert: the name of the health spa

registration holder), IS LOCATED WITHIN 10 MILES OF (insert: the

address of the proposed location of the new spa) AND IF YOU ARE

AUTHORIZED TO USE THE OTHER FACILITIES, YOU ARE ENTITLED TO

RECEIVE A FULL REFUND OF YOUR MEMBERSHIP FEES ONLY IF THIS

LOCATION DOES NOT FULLY OPEN FOR BUSINESS BEFORE (insert: the

date that is the 361st day after the date the new spa first sells

memberships) OR IF THE NEW SPA DOES NOT REMAIN OPEN FOR 30 DAYS."

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.306. FINANCE CHARGE NOTICE. A contract that contains a

finance charge as defined by the Truth in Lending Act (15 U.S.C.

Section 1601 et seq.) or Regulation Z (12 C.F.R. Part 226) must

state in at least 10-point type that is boldfaced, capitalized,

underlined, or otherwise conspicuously distinguished from

surrounding written material:

"ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALL

CLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THE

SELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THE

PROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOT

EXCEED AMOUNTS PAID BY THE DEBTOR HEREUNDER."

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.307. CANCELLATION OF CONTRACT FOR FULL REFUND. (a) A

member may cancel a contract and receive a full refund of the

payments made under the contract by sending, not later than

midnight of the third business day after the contract date,

written notice of cancellation, accompanied by proof of payment

made under the contract, by certified mail to the certificate

holder's home office.

(b) A certificate holder who receives notice under Subsection

(a) shall refund the payments made under the contract not later

than the 30th day after the date notice is received.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.308. CANCELLATION OF CONTRACT FOR PARTIAL REFUND. (a)

A member may cancel a contract and receive a refund of unearned

payments made under the contract by sending written notice of

cancellation, accompanied by proof of payment made under the

contract, by certified mail to the certificate holder's home

office if the certificate holder:

(1) closes the health spa and fails to provide alternative

facilities not more than 10 miles from the location of the health

spa;

(2) relocates the health spa more than 10 miles from its

location preceding the relocation; or

(3) fails to provide advertised services.

(b) A member who dies or becomes totally and permanently

disabled after the date a contract is entered into, or the

member's estate, may cancel the contract and receive a refund of

the unearned payments made under the contract by sending written

notice of cancellation by certified mail to the certificate

holder's home office. The certificate holder may require the

member, or the member's estate, to provide reasonable proof of

the member's death or disability.

(a) or (b) shall refund the unearned payments made under the

contract to the member, or the member's estate, as appropriate,

not later that the 30th day after the date notice is received.

(d) In this section, the unearned payments are computed in the

same manner as a member's actual financial loss is computed under

Section 702.252, except that the date a contract is canceled is

substituted for the date a health spa closes or relocates.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.309. PROOF OF PAYMENT. A receipt given to a purchaser

by a health spa when the purchaser makes a payment under a

contract constitutes proof of the payment.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.310. EFFECT OF CONTRACT ON THIRD-PARTY RIGHTS. A

contract may not require the purchaser to execute a note or

series of notes if separate negotiation of the notes cuts off as

to third parties a right of action or defense that the purchaser

may assert against the seller.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.311. VOID CONTRACT. A contract is void if:

(1) the contract or an assignment of the contract does not

comply with this chapter;

(2) the seller does not hold a certificate of registration

issued under this chapter at the time of contract; or

(3) the purchaser enters into the contract in reliance on false,

fraudulent, or misleading information wilfully provided by, or a

false, fraudulent, or misleading representation, notice, or

advertisement wilfully made by, the seller or the health spa

owner or operator.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

SUBCHAPTER H. PREPAYMENTS AND ESCROW

Sec. 702.351. MEMBERSHIP PREPAYMENT. A certificate holder may

offer for sale, or sell, a membership in a health spa before the

date the health spa opens.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.352. ESCROW DEPOSIT REQUIRED. (a) A certificate

holder or an assignee or agent of a certificate holder who

accepts a prepayment for a membership in the certificate holder's

health spa shall deposit the prepayment in an escrow account

established with a financial institution insured by the Federal

Deposit Insurance Corporation.

(b) A person required to make a deposit under Subsection (a)

shall:

(1) not later than the 14th day after the date the person first

accepts a prepayment:

(A) deposit the prepayments received; and

(B) submit to the secretary of state:

(i) a notarized statement that identifies the financial

institution and the name in which the escrow account is held; and

(ii) a signed statement on a form approved by the secretary of

state that authorizes the secretary to direct inquiries to the

financial institution regarding the escrow account; and

(2) after the first deposit is made under this section, deposit

subsequent prepayments not less frequently than biweekly.

this section until the 30th day after the date the certificate

holder's health spa opens.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.353. EXEMPTION FROM ESCROW REQUIREMENT. (a) A

certificate holder is not required to deposit prepayments in an

escrow account under Section 702.352 if:

(1) the certificate holder has operated at least one health spa

in the state for not less than two years before the date the

certificate holder first sells a membership in the health spa

that is the subject of the exemption; and

(2) except as provided by Subsection (b):

(A) litigation has not been initiated against the certificate

holder by a member of a health spa owned or operated by the

certificate holder relating to the closing of the health spa or

the failure of the health spa to open; and

(B) a member of a health spa has not filed a complaint with a

governmental authority in this state against the certificate

holder, or an owner, officer, or director of a health spa owned

or operated by the certificate holder, relating to the closing of

the health spa or the failure of the health spa to open.

(b) The initiation of litigation or filing of a complaint

against a certificate holder, or an owner, officer, or director

of a health spa owned or operated by the certificate holder, does

not preclude the certificate holder from claiming an exemption

under Subsection (a) if the basis of the litigation or complaint

is that the certificate holder's health spa closed:

(1) as a result of a natural disaster and the closing did not

exceed one month; or

(2) to relocate the health spa to a location not more than 10

miles from its location preceding the relocation and the closing

did not exceed one month.

under Subsection (a) during a two-year period may not exceed

twice the number of health spas operated by the certificate

holder on the first day of that two-year period.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.354. DUTY OF FINANCIAL INSTITUTION. A financial

institution in which an escrow account is established under

Section 702.352 shall hold each prepayment in the account as

escrow agent for the benefit of the member who made the

prepayments.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.355. REFUND OF ESCROWED PREPAYMENT. (a) Except as

provided by Subsection (b), a member is entitled to receive a

full refund of the prepayment made under a contract if the health

spa that is the subject of the contract does not open before the

181st day after the date the health spa first sells a membership

in the health spa or does not remain open for at least 30 days

unless:

(1) an alternative health spa operated by the seller is located

not more than 10 miles from the location of the health spa that

is the subject of the contract; and

(2) the member is authorized to use the facilities of the

alternative health spa.

(b) A member who is authorized to use the facilities of an

alternative health spa under Subsection (a) is entitled to

receive a full refund of the prepayment made under the contract

if the health spa that is the subject of the contract does not

open before the 361st day after the date the health spa first

sells a membership in the health spa or does not remain open for

at least 30 days.

does not depend on whether the services of the health spa that

were advertised before the opening, or promised to be made

available, are included in the contract.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.356. WITHDRAWAL OF ESCROW FUNDS. A certificate holder

may withdraw prepayments deposited in an escrow account under

Section 702.352 if:

(1) the health spa for which the prepayments are made remains

open for not less than 30 days;

(2) the certificate holder files with the secretary of state an

affidavit certifying that all obligations of the health spa for

which a lien may be claimed under Chapter 53, Property Code, have

been paid; and

(3) no person is eligible to claim a lien under Chapter 53,

Property Code, during the period the certificate holder or an

assignee or agent of the certificate holder accepts prepayments

for memberships in the certificate holder's health spa.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

SUBCHAPTER I. PROHIBITED PRACTICES

Sec. 702.401. WAIVER PROHIBITED. A person, including a person

who buys a health spa membership from a former member, may not

waive a provision of this chapter by contract or other means. A

purported waiver of this chapter is void.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.402. PROHIBITED ACTS. (a) A seller or certificate

holder may not:

(1) offer a special offer or discount to fewer than all

prospective members of the health spa, except that a seller or

certificate holder may offer a special group price or discount;

(2) make a material misrepresentation to a member, prospective

member, or purchaser regarding:

(A) the qualifications of the health spa staff;

(B) the availability, quality, or extent of the facilities or

services of the health spa;

or physical fitness conditioning programs;

(D) membership rights; or

(E) the period during which a special offer or discount will be

available.

(b) A certificate holder may not:

(1) fail or refuse to:

(A) file or amend an application for registration as required by

Subchapter C;

(B) file or post, or maintain, the security required by

Subchapter D; or

Subchapter H;

(2) advertise that the certificate holder is bonded by the

state; or

(3) sell a membership plan that is not included in the list

required by Section 702.302(a).

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.403. APPLICATION OF DECEPTIVE TRADE PRACTICES ACT. (a)

A person who violates this chapter commits a false, misleading,

or deceptive act or practice within the meaning of Section 17.46,

Business & Commerce Code.

(b) A public or private right or remedy under Chapter 17,

Business & Commerce Code, may be used to enforce this

chapter.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.404. INFORMATION REQUIRED IN ADVERTISEMENT. A health

spa operator may not advertise in any print or electronic medium

unless the advertisement includes the health spa operator's

certificate of registration number or an identification number

issued as provided by Section 702.301(b).

Added by Acts 2005, 79th Leg., Ch.

908, Sec. 7, eff. September 1, 2005.

SUBCHAPTER J. ADMINISTRATIVE ENFORCEMENT AND DISCIPLINARY ACTIONS

Sec. 702.451. DISCIPLINARY ACTIONS. After notice and hearing,

the secretary of state may deny an application for a certificate

of registration, or permanently revoke or suspend for a definite

period a health spa operator's certificate of registration, on a

finding by the secretary that the applicant or certificate

holder:

(1) provided false information on an application or other

document filed with the secretary;

(2) failed to file or post, or maintain, the security for each

health spa location as required by Subchapter D; or

(3) failed to provide the contract disclosure language required

by Subchapter G.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.452. NOTICE REQUIREMENT BEFORE HEALTH SPA CLOSING. (a)

At least 30 days before the date a health spa is scheduled to

close or relocate, the certificate holder shall

contemporaneously:

(1) post, inside and outside each entrance to the health spa, a

notice stating:

(A) the date the health spa is scheduled to close or relocate;

(B) that a member of the health spa may, not later than the 90th

day after the date the health spa closes or relocates, file with

the secretary of state a claim to recover actual financial loss

suffered by the member as a result of the health spa closing;

and

(2) notify the secretary of state in writing of the health spa

closing or relocation and the date that the notice was first

posted.

(b) The notice posted under Subsection (a)(1) must be:

(1) at least 8-1/2 by 11 inches in size; and

(2) posted continuously for at least 30 days.

by Subsection (a)(1) within the time specified, the secretary of

state, not later than the 30th day after the date the secretary

discovers that a health spa is closed, shall post the notice

required under Subsection (a)(1).

(d) After receiving a notice under Subsection (a)(2) or

otherwise discovering that a health spa is closed, the secretary

of state shall post on the secretary of state's Internet website

a notice containing the information specified in Subsection

(a)(1). The notice must be posted continuously for at least 30

days.

(e) The secretary of state shall, not later than the 10th day

after the date the secretary receives notice or otherwise

discovers that a health spa is closed, notify the appropriate

surety company or obligor of the administrative proceedings

pending under Subsection (a)(1).

(f) The notice required under Subsection (a) is not required in

the case of a fire, flood, or act of God that is not within the

reasonable control of a health spa.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Amended by Acts 2001, 77th Leg., ch. 756, Sec. 3, eff. Sept. 1,

2001.

Amended by:

Acts 2005, 79th Leg., Ch.

908, Sec. 8, eff. September 1, 2005.

Acts 2005, 79th Leg., Ch.

908, Sec. 9, eff. September 1, 2005.

SUBCHAPTER K. CIVIL REMEDY

Sec. 702.501. FILING OF SUIT; VENUE. (a) A member may file

suit against a seller if:

(1) the seller violates this chapter; and

(2) the seller's violation causes injury to the member.

(b) Venue for a suit filed under Subsection (a) is in a court

located in:

(1) Travis County; or

(2) the county in which:

(A) the seller resides;

(B) the seller's principal place of business is located;

(D) the member resides; or

(E) the transaction that is the subject of the suit occurred.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.502. STATUTE OF LIMITATIONS. A member must file a suit

under Section 702.501 not later than the later of:

(1) the first anniversary of the date the attorney general or

district or county attorney concludes a suit filed under Section

702.552; or

(2) the second anniversary of the date the seller's violation of

this chapter is discovered.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.503. RECOVERY. In a suit filed under Section 702.501,

a court may award:

(1) actual damages;

(2) equitable relief;

(3) punitive damages; or

(4) reasonable attorney's fees and court costs to the prevailing

party.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.504. TEMPORARY CLOSING. For purposes of this

subchapter, the closing of a health spa is not a violation of

this chapter if the closing does not exceed one month and:

(1) is a result of a natural disaster; or

(2) is to relocate the health spa not more than 10 miles from

its location preceding the relocation.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

SUBCHAPTER L. ENFORCEMENT AND PENALTIES

Sec. 702.551. INVESTIGATIVE AND ENFORCEMENT AUTHORITY. (a) The

attorney general or a district or county attorney may:

(1) investigate an alleged violation of this chapter; and

(2) enforce any penalty or remedy authorized by this chapter.

(b) The attorney general, a district or county attorney, or the

secretary of state may recover reasonable expenses, including

court costs, attorney's fees, investigative costs, witness fees,

and deposition expenses, incurred in obtaining an injunction or

recovering a civil penalty under this subchapter.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.552. SUIT FOR ENFORCEMENT. (a) The attorney general

or a district or county attorney may file suit against a person

who violates, or threatens to violate, this chapter to:

(1) obtain an injunction to enjoin the person from violating

this chapter; or

(2) recover a civil penalty under Section 702.553.

(b) Venue for a suit filed under this section is in a district

court located in:

(1) Travis County; or

(2) the county in which the defendant resides.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.553. AMOUNT OF CIVIL PENALTY. (a) Except as provided

by Subsection (b) and Section 702.554, a person who violates this

chapter is subject to a civil penalty in an amount not to exceed

$1,000 for a single violation.

(b) If more than one civil penalty is assessed against the same

person, the total amount of civil penalties assessed may not

exceed $25,000.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.554. VIOLATION OF INJUNCTION. (a) The attorney

general or a district or county attorney may file suit to recover

a civil penalty against a person who violates an injunction

issued under this subchapter in an amount not to exceed $25,000

for a single violation. If more than one civil penalty is

assessed against the same person, the total amount of civil

penalties assessed under this section may not exceed $50,000.

(b) Venue for a suit filed under this section is in the district

court that issued the injunction that is the subject of the civil

penalty.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.555. DEPOSIT IN COUNTY FUND. A civil penalty collected

under this subchapter by a district or county attorney shall be

deposited to the credit of the general fund of the county.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.556. CRIMINAL OFFENSE: VIOLATION OF CHAPTER. (a) A

person commits an offense if the person knowingly operates, or

attempts to operate, a health spa in violation of Subchapter C,

D, or H.

(b) An offense under this section is a Class A misdemeanor.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.557. CRIMINAL OFFENSE: INTERFERENCE WITH INVESTIGATION.

(a) A person commits an offense if with actual notice that the

attorney general, or a district or county attorney, has

initiated, or plans to initiate, an investigation under this

chapter the person intentionally conceals, alters, destroys, or

falsifies a document or record that is relevant or material to

the investigation.

(b) An offense under this section is a Class A misdemeanor.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.

Sec. 702.558. CRIMINAL OFFENSE: NONCOMPLIANCE WITH SUBPOENA OR

INVESTIGATIVE DEMAND. (a) A person commits an offense if, after

receiving a subpoena or civil investigative demand issued under

Section 17.61, Business & Commerce Code, the person

intentionally falsifies or withholds relevant material, including

a document or record, that is not privileged.

(b) An offense under this section is a misdemeanor punishable by

a fine not to exceed $2,000.

Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.