HOUSE BILL REPORT
ESSB 5838
As Amended by the House
BYSenate Committee on Commerce & Labor (originally sponsored by Senators McDermott, Talmadge, Warnke, Wojahn, Smitherman and Bailey)
Regulating sales of health studio memberships.
House Committe on Commerce & Labor
Majority Report: Do pass with amendments. (11)
Signed by Representatives Wang, Chair; Cole, Vice Chair; Fisch, Fisher, R. King, O'Brien, Patrick, Sanders, Sayan, C. Smith and Walker.
House Staff:Joan Elgee (786-7166)
AS PASSED HOUSE APRIL 13, 1987
BACKGROUND:
The Washington Consumer Protection Act generally prohibits unfair trade practices, but current law contains no specific regulation of health studios. Each year, the attorney general receives numerous complaints from consumers regarding health studio practices. A number of states currently regulate health studios.
SUMMARY:
A new chapter providing for regulation of health studios is enacted. A "health studio" is defined as any person or entity engaged in the sale of instruction, training, assistance or use of facilities which purports to help patrons improve their condition or appearance through exercise, body building, weight loss, figure development, or any other similar activity. Exclusions are provided for 1) institutions of higher education; 2) public schools and approved private schools; 3) persons providing professional services within the scope of their license; 4) bona fide nonprofit organizations which have been granted tax exempt status by the Internal Revenue Service; and 5) bona fide nonprofit organizations whose members have meaningful voting rights to elect and remove a board of directors responsible for the operation of the health studio. Certain services offered are also excluded.
Each prospective health studio member must be provided with a written list of all membership plans. A health studio is prohibited from selling a plan not included on the list and from making special offers or discounts unless they are in writing and available to all prospective members (offers to groups are excluded). A health studio is also prohibited from making misrepresentations about the qualifications of staff, the maximum number of customers, and other specified areas.
A health studio contract must be in writing and may not require financing by the buyer for a period in excess of 36 months. No contract may be measured by the life of the buyer. A copy of the contract and all rules of the health studio must be given to the buyer when the the contract is signed.
A health studio contract must contain: the name and address of the health studio operator, the date the buyer signed the contract, a description of the services and equipment to be provided, the duration of the contract, the fees to be paid, and clauses which explain the buyer's right to cancel and receive a refund.
Circumstances under which the buyer may cancel and the refund to be made are set forth. Upon cancellation, the buyer is relieved from the obligation to pay dues, and is entitled to a refund of the unused portion of any prepaid dues. The extent of the refund of any initiation fee depends on the reason for cancellation. The buyer is entitled to a full refund if cancellation is due to the failure of the health studio to complete the facility by the date represented, the buyer cancels within the first five business days the facility opens, or the buyer cancels within a three day "cooling off period" after signing the contract. If the cancellation is due to buyer's death or total disability and the contract states the percentage of the fee which is nonrefundable, the studio may retain up to one-half the initiation fee, except that if the buyer cancels three years or more after signing the contract, the fee is nonrefundable. If the buyer cancels because the studio is closed and comparable facilities owned by the seller are not available with a 10 mile radius, the buyer is entitled to a pro rata refund. If cancellation is due to the buyer's move more than 25 miles from the studio or an affiliate or if the buyer cancels for any other reason, (allowed if the contract is for more than one year, on 30 days notice) the studio may retain the full initiation fee if the contract clearly states that the fee is nonrefundable and the clause is separately signed by the buyer. However, if the contract is for more than one year, the buyer may cancel because of a move only after one year. Also, if the buyer lived more than 25 miles from the studio when he or she joined, the buyer must move an additional 5 miles away to cancel because of a move. A buyer must be provided a refund within 30 days after written notice of cancellation. If a health studio sells memberships before the health studio facility is completed, the services must begin within 12 months from the date the contract is signed, unless the delay is due to a natural disaster.
All moneys collected by a health studio prior to the opening of a facility must be deposited in a trust account or the health studio must post a $150,000 bond. The failure to maintain a trust account or post a bond constitutes a class C felony.
A violation of the act constitutes a per se violation of the Consumer Protection Act.
The act does not apply to contracts entered before the effective date of the act.
Fiscal Note: Requested April 6, 1987.
House Committee ‑ Testified For: Linda Dunn McQuaid, Office of the Attorney General; Alan S. Levine, Seattle Club and Association of Washington Athletic Facilities; Sharon Foster, YMCAs of Washington; James Schuler, Pac West (with amendments).
House Committee - Testified Against: Robert R. Newgard, Four Seasons Athletic Club.
House Committee - Testimony For: In 1986, the Attorney General received more complaints about health studios than any other area. The bill is a good first step in developing preventative measures, such as restricting lifetime memberships.
House Committee - Testimony Against: It is unfair to cover studios which have not been the subject of complaints. Many of the provisions are too stringent.