AN ACT Relating to health clubs; adding a new chapter to Title 19 RCW; and prescribing penalties.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature recognizes that there is an increasing interest by the citizens of this state in physical fitness and that in response to such interest a wide variety of health and conditioning services are available. Therefore, the legislature declares that it is a matter of public interest that the citizens of this state be assured of reasonable protection when contracting for health and conditioning services.

NEW SECTION. Sec. 2. (1) As used in this chapter, unless the context clearly requires otherwise:

(a) "Contract for health and conditioning services" means: A contract which provides as one of its primary purposes services or facilities which assist the purchaser to improve physical condition or appearance through physical fitness programs, body building, exercising, reducing, weight loss, figure development, or any other similar activity;

(b) "Initiation or membership fee" means a fee paid either in a lump sum or installments on a one-time basis when a person first joins a health and conditioning facility for the privilege of belonging to such facility;

(c) "Use fees" means fees paid on a regular periodic basis for use of a health club. This does not preclude prepayment of use fees at the buyer's option;

(d) "Health club" or "club" means any individual, partnership, corporation, or other legal entity offering contracts for health and conditioning services to the public.

(2) A "contract for health and conditioning services" does not include:

(a) Professional services within the scope of the person's license rendered or furnished by a person licensed under Title 18 RCW;

(b) Instruction at public common schools, public institutions of higher education, private schools approved under RCW 28A.02.201, and private institutions of higher education; or

(c) Instruction, training, or assistance relating to diet or control of eating habits not involving physical fitness programs, body building, exercising, figure development, or any other similar activity.

(3) Except for the purposes of sections 3, 8, and 9 of this act, a "contract for health and conditioning services" does not include: (a) Services rendered by bona fide nonprofit organizations which have been granted tax exempt status by the internal revenue service, including, but not limited to, the Young Men's Christian Association, the Young Women's Christian Association, or other similar organizations, whose functions as health studios are only incidental to their overall functions and purposes; or (b) services rendered by bona fide nonprofit corporations organized under chapter 24.03 RCW which have members and whose members have meaningful voting rights to elect and remove a board of directors which is responsible for the operation of the health club and corporation.

NEW SECTION. Sec. 3. Contracts for health and conditioning services shall be in writing and are subject to this chapter. A copy of the written contract shall be given to the customer when the customer signs the contract.

NEW SECTION. Sec. 4. Contracts for health and conditioning services between the same buyer and the same seller which have overlapping terms are deemed to be one contract for the purpose of this chapter.

NEW SECTION. Sec. 5. If a contract exceeds three years, the buyer shall sign or initial the provision which establishes the duration of the contract.

Contracts may not be sold, advertised, or measured by the lifetime of the buyer.

NEW SECTION. Sec. 6. A contract for health and conditioning services may be sold prior to opening of the facility. Such contract shall provide that:

(1) Agreed upon services will begin within twelve months from the date the contract is signed unless the buyer signs an extension; and

(2) A five-day period for cancellation of the contract shall begin to run from the day the facility opens for use of the buyer and the seller begins to provide the agreed upon services.

NEW SECTION. Sec. 7. (1) Except as provided in subsection (2) of this section, all moneys paid to the seller by the buyer prior to the opening of the facility shall promptly be deposited by the seller in a trust account, maintained by the seller for the purpose of holding such moneys for the buyer, in a bank, savings and loan association, mutual savings bank, or licensed escrow agent located in Washington. The seller shall within seven days of the first deposit notify the office of the attorney general, in writing, of the name, address, and location of the depository and any subsequent change thereof. Unless otherwise agreed in writing, the seller is entitled to receipt of interest paid on such trust account moneys. The seller shall provide the buyer with a written receipt for the moneys and shall provide written notice of the name and address and location of the depository and any subsequent change thereof. If prior to the opening of the facility the status of the seller is transferred to another, any sums in the trust account affected by such transfer shall simultaneously be transferred to an equivalent trust account of the successor, and the successor shall promptly notify the buyer and the office of the attorney general of the transfer and of the name, address, and location of the new depository. The buyer's claim to any moneys paid under this section is prior to that of any creditor of the seller, including a trustee in bankruptcy or receiver, even if such moneys are commingled. After receipt of the notice of cancellation of the agreement or if the seller fails to open the facility and provide the agreed upon services within twelve months of the signing of the contract, the seller shall within ten days give a full refund to the buyer. The moneys on deposit shall revert to the seller on the day the facility opens.

(2) Subsection (1) of this section does not apply to any sellers who, prior to any preopening sales, have provided a bond guaranteeing performance of all contracts for health and conditioning services sold prior to the opening of the facility. The bond shall be drawn upon a surety in an amount acceptable to the office of the attorney general, running to the state of Washington. An action on the bond may be brought by the office of the attorney general or by any buyer of a contract for health and conditioning services sold prior to the opening of the facility.

NEW SECTION. Sec. 8. (1) The contract for health and conditioning services shall contain:

(a) The name and address of the health and conditioning facilities operator;

(b) The date the buyer signed the contract;

(c) The current fees to be paid by the buyer and, if such fees are subject to periodic adjustment, such fact shall be disclosed;

(d) The services to be provided under the contract; and

(e) The duration of the contract.

(2) Unless the health and conditioning facilities operator has complied with subsection (1) of this section, the buyer may cancel the contract for health and conditioning services at any time.

NEW SECTION. Sec. 9. Contracts for health and conditioning services shall contain clauses which notify buyers of the following rights:

(1) The buyer has the right to cancel the contract at any time prior to midnight of the third calendar day after the date the contract is signed by the buyer. Cancellation under this subsection entitles the buyer to a refund of all moneys paid and relieves the buyer from any future obligations under the contract without penalty.

(2) If by reason of death or total disability the person agreeing to receive services is unable to receive services that have been contracted for, the person or person's estate may cancel the contract.

(a) For total disability, a written confirmation of total disability shall be submitted by the person's treating physician. The health and conditioning facility may require the person to be examined by a physician of their choice if requested within sixty days after a written confirmation is submitted by the treating physician. If the two physicians disagree, they shall choose a third physician to examine the person, each party bearing half the fee. The third physician's opinion shall be binding on all parties. Total disability is a condition incurred after the person signs the contract which precludes the person from physically using the facilities for the remaining term of the contract.

(b) For death, a certified copy of the death certificate shall be sufficient evidence to cancel the contract.

(3) If the health and conditioning facilities are permanently closed and comparable facilities owned and operated by the seller are not made available within a ten-mile radius of the closed facility, the person agreeing to receive health and conditioning services may cancel the contract.

(4) If a contract for health and conditioning services extends for more than one year or requires payment of an initiation or membership fee, the buyer has the right to cancel the contract for any reason upon thirty days' written notice to the seller.

(5) Upon cancellation under subsection (2), (3), or (4) of this section, the buyer is entitled to a refund and relief from future obligations for payments of one-time only initiation and membership fees and monthly use fees as follows:

(a) The buyer is entitled to a refund of the unused portion of any prepaid monthly use fees and relief from future obligations to pay use fees concerning use after the date of cancellation;

(b) If a contract includes a one-time only initiation or membership fee and the buyer cancels under subsection (2) of this section, the buyer is entitled to a pro rata refund of such fee less a predetermined fee not to exceed one-half of the initial initiation or membership fee;

(c) If the contract includes a one-time only initiation or membership fee and the buyer cancels under subsection (3) of this section, the buyer is entitled to a pro rata refund of such fee;

(d) If the contract includes a one-time only initiation or membership fee and the buyer cancels under subsection (4) of this section, the buyer is entitled to a pro rata refund of such fee and relief from future obligations for payment under the contract unless the contract clearly states that the initiation or membership fee is nonrefundable, or states what percentage of the fee is refundable, and the clause is separately signed by the buyer;

(e) To calculate the amount of the refund and relief from future obligations for payment under the contract, the fee shall be apportioned into an equal installment amount by dividing the total fee by the number of months of use contracted for by the buyer. The buyer is entitled to relief from the obligation for payment and a refund of any moneys paid in excess of the number of months of use prior to the date of cancellation multiplied by the equal installment amount; and

(f) All refunds shall be made within thirty days of receipt of the notice of cancellation by the health and conditioning facilities operator. Notice of cancellation shall be provided to the seller by mailing or delivering a signed and dated notice, or sending a telegram which states that the buyer is canceling the contract, or words of similar effect. The seller may require the buyer to return the original copy of the contract, or any membership card, or any other materials which evidence membership in the club.

(6) For any period in which a person is precluded from physically using the facilities due to a temporary total disability, the obligation of that person to pay any monthly use fees will be suspended. For a temporary total disability, a written confirmation shall be submitted by the person's treating physician. The health and conditioning facility may require, if requested within sixty days after a written confirmation is submitted by the treating physician, the person to be examined by a physician of their choice. If the two physicians disagree, they shall choose a third physician to examine the person, each party bearing half the fee. The third physician's opinion shall be binding on all parties.

NEW SECTION. Sec. 10. The provisions of this chapter are not exclusive and do not relieve the parties from compliance with all other applicable federal, state, and local laws and rules.

NEW SECTION. Sec. 11. Any contract for health and conditioning services which does not comply with the applicable provisions of this chapter or in which the buyer waives any provision of this chapter is void and unenforceable as contrary to public policy.

NEW SECTION. Sec. 12. It shall be unlawful to sell or offer for sale any contract for health and conditioning services entered into in reliance upon any false, fraudulent, or misleading information or representations.

NEW SECTION. Sec. 13. A seller who has not furnished a bond under section 7 of this act and who receives money from a buyer under a contract for services from health and conditioning facilities sold prior to the opening of the facility and the provision of the agreed upon services and who fails to deposit such moneys in a trust account maintained by the seller for the purpose of holding such funds for the buyer in a bank, savings and loan association, mutual savings bank, or licensed escrow agent located in Washington within three business days of receipt excluding Saturday, Sunday and holidays shall be guilty of a class C felony as defined in chapter 9A.20 RCW.

NEW SECTION. Sec. 14. A violation of this chapter, for purposes of the consumer protection act, chapter 19.86 RCW, constitutes an unfair or deceptive act or practice.

NEW SECTION. Sec. 15. The provisions of this chapter shall not apply to any contracts for health and conditioning services entered into before the effective date of this act.

NEW SECTION. Sec. 16. If any provision of this act or its application to any person or circumstance is held invalid, the remainder of the act or the application of the provision to other persons or circumstances is not affected.

NEW SECTION. Sec. 17. Sections 1 through 15 of this act shall constitute a new chapter in Title 19 RCW.