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CHAPTER 702. HEALTH SPAS

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OCCUPATIONS CODETITLE 3. HEALTH PROFESSIONSSUBTITLE M. REGULATION OF OTHER HEALTH PROFESSIONSCHAPTER 702. HEALTH SPASSUBCHAPTER A. GENERAL PROVISIONSSec. 702.001.SHORT TITLE.This chapter may be cited as theHealth Spa Act.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.002.PURPOSE AND CONSTRUCTION.(a)The purpose ofthis chapter is to protect the public against fraud, deceit,imposition, and financial hardship and to foster and encouragecompetition, fair dealing, and prosperity in the field of healthspa operations and services by prohibiting or restrictinginjurious practices involving:(1)health spa contracts; and(2)the marketing of health spa services.(b)This chapter shall be liberally construed and applied topromote its purpose and to provide efficient and economicalprocedures 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 tothe health spa's members and equivalent facilities located notmore than 10 miles from the health spa have not been madeavailable to the members;(B)a certificate holder sells a registered location and thesecurity filed or posted by the certificate holder underSubchapter D is:(i)canceled;(ii)withdrawn; or(iii)otherwise unavailable to the members of the health spa; or(C)a certificate holder sells a registered location and thebuyer does not adopt or honor the contracts of existing membersof the health spa.(2)"Contract" means an agreement between a seller and purchaserby which the purchaser becomes a member of a health spa.(3)"Facilities" means the equipment, physical structures,improvements, including improvements to leasehold premises, andother tangible property, including saunas, whirlpool baths,gymnasiums, running tracks, swimming pools, shower areas,racquetball courts, martial arts equipment, and exerciseequipment, that are located at a health spa and used to conductthe business of the health spa.(4)"Health spa" means a business that offers for sale, orsells, memberships that provide the members instruction in or theuse of facilities for a physical exercise program. The term doesnot include:(A)an organization that is tax exempt under Section 501 etseq., Internal Revenue Code (26 U.S.C. Section 501 et seq.);(B)a private club owned and operated by its members;(C)an entity operated exclusively to:(i)teach dance or aerobic exercise; or(ii)provide physical rehabilitation activity related to anindividual's injury or disease;(D)a person engaged in an activity authorized under a licenseissued by the state; or(E)an activity conducted or sanctioned by a school under theEducation Code.(5)"Location" means the physical site of the facilities of ahealth spa.(6)"Member" means a person who is entitled to the benefits ofmembership in a health spa.(7)"Membership" means the status of a person under a contractthat entitles the person to use a health spa's services orfacilities.(8)"Obligor" means a person, other than a surety, who isobligated to perform if a certificate holder defaults.(9)"Open" means the date each service of a health spa that wasadvertised before the opening, or promised to be made available,are available for use by its members.(10)"Prepayment" means consideration paid by a purchaser formembership in a health spa before the date the health spa opens.(11)"Purchaser" means a person who purchases, or applies topurchase, the right to use a health spa's services or facilities.(12)"Registered location" means a health spa location for whicha health spa operator's certificate of registration is issuedunder 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'sservices or facilities.(14)"Services" means the programs, plans, guidance, orinstruction that a health spa provides for its members. The termincludes diet planning, exercise instruction and programs, andinstructional classes.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.SUBCHAPTER B. POWERS AND DUTIES OF SECRETARY OF STATESec. 702.051.ADMINISTRATIVE AND RULEMAKING AUTHORITY.(a)Thesecretary 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 thischapter.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 underSection 702.251; and(2)ensure the prompt and fair distribution of securityproceeds.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.053.REGISTRATION AND RENEWAL FEES.The secretary ofstate may charge each applicant for a certificate ofregistration, or renewal of a certificate, a reasonable fee notto 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 REGISTRATIONSec. 702.101.CERTIFICATE OF REGISTRATION REQUIRED.A personmay not operate a health spa or offer for sale, or sell, amembership in a health spa unless the person holds a health spaoperator'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 ahealth spa operator's certificate of registration must file withthe 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 secretaryof state;(B)the location of the applicant's registered business office;and(C)the name and address of each person who directly orindirectly owns or controls 10 percent or more of the outstandingshares of stock in the applicant's business;(4)the date the applicant became the owner and operator of theapplicant's business;(5)the address of the health spa; and(6)the type of available or proposed facilities and servicesoffered at the health spa location.(b)An application for a certificate of registration must beaccompanied by:(1)a sample of each contract used to sell a membership in theapplicant's health spa;(2)proof of security filed or posted by the applicant underSubchapter D; and(3)the required registration fee.(c)An applicant must comply with the application requirementsof this section for each location where the applicant operates ahealth 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'scertificate of registration is not transferable.(b)A person who obtains ownership of a health spa by purchaseor other transfer shall file an application for a certificate ofregistration under Section 702.102 not later than the fifth dayafter 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'scertificate of registration expires on the first anniversary ofthe date of issuance.(b)A certificate of registration may be renewed as provided bythe secretary of state.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.105.CERTIFICATE POSTING.A certificate holder shallpost a health spa operator's certificate of registration in aconspicuous 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 informationprovided in an application for a certificate of registrationchanges, the certificate holder shall amend the application notlater 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 copyof the operator's certificate of registration at the time theoperator applies for a sales tax permit.(b)The comptroller may not issue a sales tax permit to a healthspa operator who fails to comply with this section.Thesecretary of state shall assist the comptroller in determiningwhether 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 REQUIREMENTSSec. 702.151.SECURITY REQUIRED.(a)Except as provided bySubchapter E, the secretary of state may not issue a health spaoperator's certificate of registration to an applicant unless theapplicant files a surety bond, or posts other security asprescribed by the secretary, in the amount prescribed by thesecretary under Subsection (b).(b)The secretary of state shall prescribe the amount ofsecurity required for an applicant in the amount determinedsufficient by the secretary to protect the health spa's totalmembership.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 isfiled 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 thisstate; 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 thana surety bond is:(1)not required to post other security annually if theapplicant maintains security in the amount of $20,000; and(2)entitled to receive the interest that accumulates on theother security posted.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.154.BENEFICIARY OF SECURITY.The security filed orposted by a certificate holder under this subchapter must bepayable to the state and held for the benefit of:(1)the state; and(2)each member of the certificate holder's health spa who hasbeen administratively adjudicated to have suffered actualfinancial loss as a result of the closing of the certificateholder's health spa.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.155.DURATION OF SECURITY.A certificate holder shallmaintain the security filed or posted under Section 702.151 ineffect until the later of:(1)the second anniversary of the date the certificate holder'shealth spa closes; or(2)the date the secretary of state determines that each claimfiled against the security has been satisfied or foreclosed bylaw.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.156.CANCELLATION OF SECURITY.(a)A surety orobligor of security filed or posted under this subchapter shallprovide to the secretary of state, not later than the 60th daybefore the date the security is canceled, written notice of thecancellation.(b)If the security filed or posted under this subchapter by acertificate holder is canceled, the secretary of state shall:(1)suspend the certificate holder's certificate of registrationon the date of cancellation; and(2)maintain other security on file with the secretary until thelater of:(A)the second anniversary of the date the certificate holder'shealth spa closes; or(B)the date the secretary determines that each claim filedagainst 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)Thelimit of a surety's or obligor's liability stated in the securityfiled or posted under this subchapter may not be cumulative fromyear 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 exclusivelyconditioned on a final administrative order issued by thesecretary of state.(c)Security filed or posted under this subchapter is subject toa 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 onceevery three years, the secretary of state shall review the amountof security a health spa operator is required to post underSection 702.151 to determine whether the amount is sufficient toprotect the health spa's total membership. The secretary mayincrease the amount required if the secretary determines that theincrease is necessary to protect that membership but may notincrease the amount above the maximum amount allowed underSection 702.151(b).(b)The secretary of state may adopt procedures necessary toimplement this section, including:(1)establishing a schedule to review the amount of securityposted by each health spa operator; and(2)requiring each health spa operator to submit periodically awritten 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 REQUIREMENTSSec. 702.201.APPLICATION FOR EXEMPTION.A certificate holdermay apply for an exemption from the security requirements ofSubchapter D by filing with the secretary of state a swornapplication for the exemption on a form prescribed by thesecretary of state.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.202.QUALIFICATIONS FOR EXEMPTION.A certificateholder may apply for an exemption under Section 702.201 if:(1)the certificate holder does not require, or solicit or offera plan or program that requires, a health spa consumer to:(A)execute a membership contract for a term that exceeds 31days;(B)execute a note or retail installment contract;(C)authorize a draw or other recurring debit on a financialinstitution in favor of the certificate holder or the certificateholder's assignee;(D)pay an initiation fee or other fee, not including monthlydues; or(E)prepay for a term that exceeds 31 days; or(2)the certificate holder submits a sworn statement every threeyears with the secretary of state stating that the certificateholder:(A)has assets based on net book value that exceed $50,000 perregistered location;(B)has operated under substantially the same ownership ormanagement for at least five years; and(C)has not been the subject of a complaint relating to theclosing of a health spa owned by the certificate holder or thefailure of a health spa owned by the certificate holder to openthat has been initiated or filed by a member of the health spawith 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 anapplication for an exemption under Section 702.201, the secretaryof state shall issue a certificate of exemption.(b)A certificate holder to whom a certificate of exemption isissued is not required to file a surety bond or post othersecurity under Subchapter D.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.206.NONTRANSFERABILITY OF EXEMPTION.(a)Acertificate of exemption is not transferable.(b)A person who by purchase or other transfer obtains ownershipof a health spa for which a certificate of exemption has beenissued shall, not later than the fifth day after the date theperson obtains ownership:(1)file a surety bond, or post other security, as required bySection 702.151; or(2)file a new application for an exemption under Section702.201.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.207.DENIAL AND REVOCATION OF EXEMPTION.After noticeand hearing, the secretary of state may deny an application foran exemption or permanently revoke a certificate holder'scertificate of exemption if the secretary finds that theapplicant or certificate holder:(1)provided false information on the application for anexemption; 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 SECURITYSec. 702.251.FILING OF SECURITY CLAIM.A member may file aclaim against the security filed or posted under this subchapterby sending to the secretary of state by certified mail a copy ofthe contract between the member and certificate holder who filedor posted the security, accompanied by proof of payment madeunder the contract, if the certificate holder's health spa:(1)closes and fails to provide alternative facilities not morethan 10 miles from the location of the health spa; or(2)relocates more than 10 miles from its location preceding therelocation.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.252.COMPUTATION OF CLAIM.(a)Recovery on a claimfiled under Section 702.251 is limited to the amount of actualfinancial loss suffered by the member as a result of the closingor relocating of the certificate holder's health spa.(b)For purposes of this section, actual financial loss iscomputed by:(1)rounding the date of the health spa's closing or relocationand the contract's expiration date to the nearest full month;(2)subtracting the date of closing or relocation determinedunder Subdivision (1) from the expiration date determined underthat subdivision, with the result expressed in whole months andrepresenting the number of months remaining on a contract;(3)computing the gross monthly payment by adding all paymentsmade under the contract, including any down payment andinitiation fee, and dividing the resulting amount by the totalnumber of months in the term of the contract; and(4)multiplying the number of months remaining on the contractcomputed under Subdivision (2) by the gross monthly paymentcomputed 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 totalamount of actual financial losses computed under Section 702.252for all claims filed under Section 702.251 exceeds the amount ofavailable security, the secretary of state shall reduce theamount of each recovery under Section 702.252 on a pro rata basisand shall compute the amount of each recovery by:(1)dividing the amount of available security by the totalamount of actual financial losses computed under Section 702.252for all claims; and(2)multiplying the results computed under Subdivision (1) bythe 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 notconsider a claim filed under Section 702.251 if the claim isreceived later than the 90th day after the date notice is firstposted 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 REQUIREMENTSSec. 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 thatis the subject of the contract, if the health spa is not open onthe contract date; and(3)must include the health spa operator's certificate ofregistration number or an identification number as provided bySubsection (b).(b)The secretary of state shall adopt procedures for theissuance of an identification number that may be used in acontract for purposes of Subsection (a) by health spas with morethan one location in this state.(c) A contract under Subsection (a) constitutes the entireagreement 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 shallprepare a comprehensive list that includes each membership planthe health spa offers for sale. The health spa shall disclose thelist to a prospective purchaser on request.(b)A certificate holder who is not exempt under Section 702.202from the security requirements of Subchapter D must deliver to apurchaser a complete copy of the contract, accompanied by awritten receipt for any payment made by the purchaser under thecontract 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 bySubsection (b), the term of a contract may not exceed threeyears.(b)A contract that is financed through a retail installmentcontract or note may not require the purchaser to make paymentsor finance the contract for more than five years after thecontract date.(c)If, after a health spa opens, the health spa is renderedunusable for 30 consecutive days or longer because of an eventbeyond the control of the owner or operator of the health spa,including a natural disaster, the health spa shall extend theterm of each affected member's contract for a period equal to thetime that the health spa is rendered unusable.(d)If the term of a contract overlaps the term of anothercontract between the same seller and purchaser, the contracts areconsidered 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 asprovided by Subsection (b), acontract must state in at least10-point type that is boldfaced, capitalized, underlined, orotherwise conspicuously distinguished from surrounding writtenmaterial:(1)"NOTICE TO PURCHASER:DO NOT SIGN THIS CONTRACT UNTIL YOUREAD IT OR IF IT CONTAINS BLANK SPACES."(2)"IF YOU DECIDE YOU DO NOT WISH TO REMAIN A MEMBER OF THISHEALTH SPA, YOU MAY CANCEL THIS CONTRACT BY MAILING TO THE HEALTHSPA BY MIDNIGHT OF THE THIRD BUSINESS DAY AFTER THE DAY YOU SIGNTHIS CONTRACT A NOTICE STATING YOUR DESIRE TO CANCEL THISCONTRACT. THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TOTHE FOLLOWING ADDRESS:(Address of the health spa home office)."(3)"IF THE HEALTH SPA GOES OUT OF BUSINESS AND DOES NOT PROVIDEFACILITIES WITHIN 10 MILES OF THE FACILITY IN WHICH YOU AREENROLLED OR IF THE HEALTH SPA MOVES MORE THAN 10 MILES FROM THEFACILITY IN WHICH YOU ARE ENROLLED, YOU MAY:(A)CANCEL THIS CONTRACT BY MAILING BY CERTIFIED MAIL A WRITTENNOTICE STATING YOUR DESIRE TO CANCEL THIS CONTRACT, ACCOMPANIEDBY PROOF OF PAYMENT ON THE CONTRACT TO THE HEALTH SPA AT THEFOLLOWING ADDRESS:(Address of the health spa home office); AND(B)FILE A CLAIM FOR A REFUND OF YOUR UNUSED MEMBERSHIP FEESAGAINST THE BOND OR OTHER SECURITY POSTED BY THE HEALTH SPA WITHTHE TEXAS SECRETARY OF STATE. TO MAKE A CLAIM AGAINST THESECURITY SEND A COPY OF YOUR CONTRACT TOGETHER WITH PROOF OFPAYMENTS MADE ON THE CONTRACT TO THE TEXAS SECRETARY OF STATE.THE WRITTEN NOTICE MUST BE MAILED BY CERTIFIED MAIL TO THEFOLLOWING ADDRESS:OFFICE OF THE SECRETARY OF STATESTATUTORY DOCUMENTS SECTIONP.O. BOX 12887AUSTIN, TEXAS 78711-2887."(4)"IF YOU DIE OR BECOME TOTALLY AND PERMANENTLY DISABLED AFTERTHE DATE THIS CONTRACT TAKES EFFECT, YOU OR YOUR ESTATE MAYCANCEL THIS CONTRACT AND RECEIVE A PARTIAL REFUND OF YOUR UNUSEDMEMBERSHIP FEE BY MAILING A NOTICE TO THE HEALTH SPA STATING YOURDESIRE TO CANCEL THIS CONTRACT. THE HEALTH SPA MAY REQUIRE PROOFOF DISABILITY OR DEATH. THE WRITTEN NOTICE MUST BE MAILED BYCERTIFIED MAIL TO THE FOLLOWING ADDRESS:(Address of the health spa home office)."(b)A health spa operator is required to include the statementunder Subsection (a)(3)(B) in a contract only if the operator isrequired to post security with the secretary of state underSubchapter 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 holderoffers for sale, or sells, memberships in a health spa before thedate the health spa opens, the contract for the health spa muststate in at least 10-point type that is boldfaced, capitalized,underlined, or otherwise conspicuously distinguished fromsurrounding written material:"IF THE HEALTH SPA DOES NOT OPEN BEFORE (insert: the date that isthe 181st day after the date the membership is prepaid) OR IF THENEW SPA DOES NOT REMAIN OPEN FOR THIRTY DAYS, YOU ARE ENTITLED TOA FULL REFUND OF THE MONEY YOU PREPAID. HOWEVER, IF ANOTHERHEALTH SPA, OPERATED BY (insert: the name of the health sparegistration holder), IS LOCATED WITHIN 10 MILES OF (insert: theaddress of the proposed location of the new spa) AND IF YOU AREAUTHORIZED TO USE THE OTHER FACILITIES, YOU ARE ENTITLED TORECEIVE A FULL REFUND OF YOUR MEMBERSHIP FEES ONLY IF THISLOCATION DOES NOT FULLY OPEN FOR BUSINESS BEFORE (insert: thedate that is the 361st day after the date the new spa first sellsmemberships) 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 afinance 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) muststate in at least 10-point type that is boldfaced, capitalized,underlined, or otherwise conspicuously distinguished fromsurrounding written material:"ANY HOLDER OF THIS CONSUMER CREDIT CONTRACT IS SUBJECT TO ALLCLAIMS AND DEFENSES WHICH THE DEBTOR COULD ASSERT AGAINST THESELLER OF GOODS OR SERVICES OBTAINED PURSUANT HERETO OR WITH THEPROCEEDS HEREOF. RECOVERY HEREUNDER BY THE DEBTOR SHALL NOTEXCEED 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)Amember may cancel a contract and receive a full refund of thepayments made under the contract by sending, not later thanmidnight of the third business day after the contract date,written notice of cancellation, accompanied by proof of paymentmade under the contract, by certified mail to the certificateholder's home office.(b)A certificate holder who receives notice under Subsection(a) shall refund the payments made under the contract not laterthan 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 unearnedpayments made under the contract by sending written notice ofcancellation, accompanied by proof of payment made under thecontract, by certified mail to the certificate holder's homeoffice if the certificate holder:(1)closes the health spa and fails to provide alternativefacilities not more than 10 miles from the location of the healthspa;(2)relocates the health spa more than 10 miles from itslocation preceding the relocation; or(3)fails to provide advertised services.(b)A member who dies or becomes totally and permanentlydisabled after the date a contract is entered into, or themember's estate, may cancel the contract and receive a refund ofthe unearned payments made under the contract by sending writtennotice of cancellation by certified mail to the certificateholder's home office. The certificate holder may require themember, or the member's estate, to provide reasonable proof ofthe member's death or disability.(c)A certificate holder who receives notice under Subsection(a) or (b) shall refund the unearned payments made under thecontract 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 thesame manner as a member's actual financial loss is computed underSection 702.252, except that the date a contract is canceled issubstituted 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 purchaserby a health spa when the purchaser makes a payment under acontract 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.Acontract may not require the purchaser to execute a note orseries of notes if separate negotiation of the notes cuts off asto third parties a right of action or defense that the purchasermay 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 notcomply with this chapter;(2)the seller does not hold a certificate of registrationissued 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 afalse, fraudulent, or misleading representation, notice, oradvertisement wilfully made by, the seller or the health spaowner or operator.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.SUBCHAPTER H. PREPAYMENTS AND ESCROWSec. 702.351.MEMBERSHIP PREPAYMENT.A certificate holder mayoffer for sale, or sell, a membership in a health spa before thedate the health spa opens.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.352.ESCROW DEPOSIT REQUIRED.(a)A certificateholder or an assignee or agent of a certificate holder whoaccepts a prepayment for a membership in the certificate holder'shealth spa shall deposit the prepayment in an escrow accountestablished with a financial institution insured by the FederalDeposit 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 firstaccepts a prepayment:(A)deposit the prepayments received; and(B)submit to the secretary of state:(i)a notarized statement that identifies the financialinstitution and the name in which the escrow account is held; and(ii)a signed statement on a form approved by the secretary ofstate that authorizes the secretary to direct inquiries to thefinancial institution regarding the escrow account; and(2)after the first deposit is made under this section, depositsubsequent prepayments not less frequently than biweekly.(c)A certificate holder shall maintain an escrow account underthis section until the 30th day after the date the certificateholder's health spa opens.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.353.EXEMPTION FROM ESCROW REQUIREMENT.(a)Acertificate holder is not required to deposit prepayments in anescrow account under Section 702.352 if:(1)the certificate holder has operated at least one health spain the state for not less than two years before the date thecertificate holder first sells a membership in the health spathat is the subject of the exemption; and(2)except as provided by Subsection (b):(A)litigation has not been initiated against the certificateholder by a member of a health spa owned or operated by thecertificate holder relating to the closing of the health spa orthe failure of the health spa to open; and(B)a member of a health spa has not filed a complaint with agovernmental authority in this state against the certificateholder, or an owner, officer, or director of a health spa ownedor operated by the certificate holder, relating to the closing ofthe health spa or the failure of the health spa to open.(b)The initiation of litigation or filing of a complaintagainst a certificate holder, or an owner, officer, or directorof a health spa owned or operated by the certificate holder, doesnot preclude the certificate holder from claiming an exemptionunder Subsection (a) if the basis of the litigation or complaintis that the certificate holder's health spa closed:(1)as a result of a natural disaster and the closing did notexceed one month; or(2)to relocate the health spa to a location not more than 10miles from its location preceding the relocation and the closingdid not exceed one month.(c)The number of exemptions that a certificate holder may claimunder Subsection (a) during a two-year period may not exceedtwice the number of health spas operated by the certificateholder 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 financialinstitution in which an escrow account is established underSection 702.352 shall hold each prepayment in the account asescrow agent for the benefit of the member who made theprepayments.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.355.REFUND OF ESCROWED PREPAYMENT.(a)Except asprovided by Subsection (b), a member is entitled to receive afull refund of the prepayment made under a contract if the healthspa that is the subject of the contract does not open before the181st day after the date the health spa first sells a membershipin the health spa or does not remain open for at least 30 daysunless:(1)an alternative health spa operated by the seller is locatednot more than 10 miles from the location of the health spa thatis the subject of the contract; and(2)the member is authorized to use the facilities of thealternative health spa.(b)A member who is authorized to use the facilities of analternative health spa under Subsection (a) is entitled toreceive a full refund of the prepayment made under the contractif the health spa that is the subject of the contract does notopen before the 361st day after the date the health spa firstsells a membership in the health spa or does not remain open forat least 30 days.(c)For purposes of this section, the date a health spa opensdoes not depend on whether the services of the health spa thatwere advertised before the opening, or promised to be madeavailable, 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 holdermay withdraw prepayments deposited in an escrow account underSection 702.352 if:(1)the health spa for which the prepayments are made remainsopen for not less than 30 days;(2)the certificate holder files with the secretary of state anaffidavit certifying that all obligations of the health spa forwhich a lien may be claimed under Chapter 53, Property Code, havebeen paid; and(3)no person is eligible to claim a lien under Chapter 53,Property Code, during the period the certificate holder or anassignee or agent of the certificate holder accepts prepaymentsfor memberships in the certificate holder's health spa.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.SUBCHAPTER I. PROHIBITED PRACTICESSec. 702.401.WAIVER PROHIBITED.A person, including a personwho buys a health spa membership from a former member, may notwaive a provision of this chapter by contract or other means. Apurported 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 certificateholder may not:(1)offer a special offer or discount to fewer than allprospective members of the health spa, except that a seller orcertificate holder may offer a special group price or discount;or(2)make a material misrepresentation to a member, prospectivemember, or purchaser regarding:(A)the qualifications of the health spa staff;(B)the availability, quality, or extent of the facilities orservices of the health spa;(C)the results obtained through exercise, diet, weight control,or physical fitness conditioning programs;(D)membership rights; or(E)the period during which a special offer or discount will beavailable.(b)A certificate holder may not:(1)fail or refuse to:(A)file or amend an application for registration as required bySubchapter C;(B)file or post, or maintain, the security required bySubchapter D; or(C)deposit prepayments in an escrow account as required bySubchapter H;(2)advertise that the certificate holder is bonded by thestate; or(3)sell a membership plan that is not included in the listrequired 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 thischapter.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.404.INFORMATION REQUIRED IN ADVERTISEMENT.A healthspa operator may not advertise in any print or electronic mediumunless the advertisement includes the health spa operator'scertificate of registration number or an identification numberissued 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 ACTIONSSec. 702.451.DISCIPLINARY ACTIONS.After notice and hearing,the secretary of state may deny an application for a certificateof registration, or permanently revoke or suspend for a definiteperiod a health spa operator's certificate of registration, on afinding by the secretary that the applicant or certificateholder:(1)provided false information on an application or otherdocument filed with the secretary;(2)failed to file or post, or maintain, the security for eachhealth spa location as required by Subchapter D; or(3)failed to provide the contract disclosure language requiredby 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 toclose or relocate, the certificate holder shallcontemporaneously:(1)post, inside and outside each entrance to the health spa, anotice 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 90thday after the date the health spa closes or relocates, file withthe secretary of state a claim to recover actual financial losssuffered by the member as a result of the health spa closing;and(C)the procedures for perfecting a security claim;and(2)notify the secretary of state in writing of the health spaclosing or relocation and the date that the notice was firstposted.(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.(c)If the certificate holder fails to post the notice requiredby Subsection (a)(1) within the time specified, the secretary ofstate, not later than the 30th day after the date the secretarydiscovers that a health spa is closed, shall post the noticerequired under Subsection (a)(1).(d)After receiving a notice under Subsection (a)(2) orotherwise discovering that a health spa is closed, the secretaryof state shall post on the secretary of state's Internet websitea notice containing the information specified in Subsection(a)(1). The notice must be posted continuously for at least 30days.(e)The secretary of state shall, not later than the 10th dayafter the date the secretary receives notice or otherwisediscovers that a health spa is closed, notify the appropriatesurety company or obligor of the administrative proceedingspending under Subsection (a)(1).(f)The notice required under Subsection (a) is not required inthe case of a fire, flood, or act of God that is not within thereasonable 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 REMEDYSec. 702.501.FILING OF SUIT; VENUE.(a)A member may filesuit 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 courtlocated in:(1)Travis County; or(2)the county in which:(A)the seller resides;(B)the seller's principal place of business is located;(C)the seller is doing business;(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 suitunder Section 702.501 not later than the later of:(1)the first anniversary of the date the attorney general ordistrict or county attorney concludes a suit filed under Section702.552; or(2)the second anniversary of the date the seller's violation ofthis 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 prevailingparty.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.504.TEMPORARY CLOSING.For purposes of thissubchapter, the closing of a health spa is not a violation ofthis 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 fromits location preceding the relocation.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.SUBCHAPTER L. ENFORCEMENT AND PENALTIESSec. 702.551.INVESTIGATIVE AND ENFORCEMENT AUTHORITY.(a)Theattorney 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 thesecretary of state may recover reasonable expenses, includingcourt costs, attorney's fees, investigative costs, witness fees,and deposition expenses, incurred in obtaining an injunction orrecovering 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 generalor a district or county attorney may file suit against a personwho violates, or threatens to violate, this chapter to:(1)obtain an injunction to enjoin the person from violatingthis chapter; or(2)recover a civil penalty under Section 702.553.(b)Venue for a suit filed under this section is in a districtcourt 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 providedby Subsection (b) and Section 702.554, a person who violates thischapter 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 sameperson, the total amount of civil penalties assessed may notexceed $25,000.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.554.VIOLATION OF INJUNCTION.(a)The attorneygeneral or a district or county attorney may file suit to recovera civil penalty against a person who violates an injunctionissued under this subchapter in an amount not to exceed $25,000for a single violation. If more than one civil penalty isassessed against the same person, the total amount of civilpenalties assessed under this section may not exceed $50,000.(b)Venue for a suit filed under this section is in the districtcourt that issued the injunction that is the subject of the civilpenalty.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.Sec. 702.555.DEPOSIT IN COUNTY FUND.A civil penalty collectedunder this subchapter by a district or county attorney shall bedeposited 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)Aperson commits an offense if the person knowingly operates, orattempts 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 theattorney general, or a district or county attorney, hasinitiated, or plans to initiate, an investigation under thischapter the person intentionally conceals, alters, destroys, orfalsifies a document or record that is relevant or material tothe 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 ORINVESTIGATIVE DEMAND.(a)A person commits an offense if, afterreceiving a subpoena or civil investigative demand issued underSection 17.61, Business & Commerce Code, the personintentionally falsifies or withholds relevant material, includinga document or record, that is not privileged.(b)An offense under this section is a misdemeanor punishable bya fine not to exceed $2,000.Acts 1999, 76th Leg., ch. 388, Sec. 1, eff. Sept. 1, 1999.
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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

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

    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;

    (C) an entity operated exclusively to:

    (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

    (C) the name and address of each person who directly or

    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.

    (c) An applicant must comply with the application requirements

    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.

    (c) Security filed or posted under this subchapter is subject to

    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;

    (C) authorize a draw or other recurring debit on a financial

    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

    (C) has not been the subject of a complaint relating to the

    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.

    (c) A contract under Subsection (a) constitutes the entire

    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.

    (c) If, after a health spa opens, the health spa is rendered

    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.

    (c) A certificate holder who receives notice under Subsection

    (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.

    (c) A certificate holder shall maintain an escrow account under

    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.

    (c) The number of exemptions that a certificate holder may claim

    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.

    (c) For purposes of this section, the date a health spa opens

    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;

    or

    (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;

    (C) the results obtained through exercise, diet, weight control,

    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

    (C) deposit prepayments in an escrow account as required by

    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

    (C) the procedures for perfecting a security claim; 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.

    (c) If the certificate holder fails to post the notice required

    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;

    (C) the seller is doing business;

    (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.

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