AN ACT Relating to health studios; 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 studio 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 studio services.

NEW SECTION. Sec. 2. (1) As used in this chapter, unless the context clearly requires otherwise, "contract for health studio 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.

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

(a) Professional services rendered or furnished by a person licensed under Title 18 RCW;

(b) Instruction at schools operating under Title 28A, 28B, or 28C RCW; 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 9 and 10(1) of this act, a "contract for health studio 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 studio and corporation.

NEW SECTION. Sec. 3. A contract for health studio services shall be in writing and is 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 studio 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. A contract for health studio services shall not:

(1) Require payments by the buyer over a period in excess of two years from the date the contract is signed by the buyer;

(2) Extend over a period in excess of three years from the date the contract is signed by the buyer;

(3) Measure the duration of the contract by the lifetime of the buyer; or

(4) Require payment in a lump sum except as permitted under section 6 of this act.

NEW SECTION. Sec. 6. The seller shall only collect payment in the form of a one-time initiation or membership fee and/or monthly use fees. Monthly use fees shall be uniform throughout the period of the contract. The buyer may prepay the monthly use fee at his or her election.

NEW SECTION. Sec. 7. A contract for health studio services may be sold prior to opening of the facility. Such contract shall provide that:

(1) Agreed upon services will begin within six months from the date the contract is signed; and

(2) The seven-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. 8. 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 six 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 upon expiration of the cancellation period established by section 7 of this act.

NEW SECTION. Sec. 9. (1) A contract for health studio services shall contain on its face, and in close proximity to the space reserved for the signature of the buyer, a conspicuous statement in a size equal to at least ten-point boldface type, the following: "You, the buyer, may cancel this contract at any time prior to midnight of the seventh calendar day after the date this contract is signed by the buyer. To cancel this contract, mail or deliver a signed and dated notice, or send a telegram which states that you, the buyer, are canceling this contract, or words of similar effect. The notice shall be sent to:

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(Name of health studio operator)

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(Address of health studio operator)"

(2) The contract for health studio services shall contain on the first page, in a type size no smaller than that generally used in the body of the document: (a) The name and address of the health studio operator to which the notice of cancellation may be mailed; (b) the date the buyer signed the contract; (c) the schedule of fees to be paid by the buyer; and (d) the services to be provided under the contract.

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

(4) All moneys paid under the contract for health studio services shall be refunded within ten days of receipt of the notice of cancellation.

NEW SECTION. Sec. 10. Every contract for health studio services shall contain clauses providing that:

(1) The buyer has the right to cancel the contract at any time prior to midnight of the seventh calendar day after the date the contract is signed by the buyer. Notice of cancellation shall be provided to the seller pursuant to section 9 of this act. Cancellation under this subsection entitles the buyer to a one hundred percent 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 disability the person agreeing to receive services is unable to receive all services that have been contracted for, the person and the person's estate shall be relieved from the obligation of making payments for services other than those received prior to receipt of notice by the health studio operator of the death or disability. Disability means a condition, verified by a physician, which precludes the buyer from physically using the facilities;

(3) If the health studio is 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 studio services shall be relieved from the obligation of making payments for services other than those received prior to closure;

(4) Any person agreeing to receive health studio services has the right to cancel the contract for any reason upon ten days' notice to the seller. The buyer shall be relieved from the obligation of making payment for services other than those received prior to cancellation. The buyer, however, may be charged a predetermined fee not exceeding one hundred dollars or the balance on the contract, whichever is lower or, if more than half the life of the contract has expired, the person may be charged a predetermined fee not exceeding fifty dollars or the balance on the contract, whichever is lower; and

(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 the contract includes a one time only initiation or membership fee, the buyer is entitled to a prorata refund of such fee and relief from future obligations for payment under the contract. 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

NEW SECTION. Sec. 11. 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. 12. Any contract for health studio 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. 13. It shall be unlawful to sell or offer for sale any contract for health studio services entered into in reliance upon any false, fraudulent, or misleading information or representations.

NEW SECTION. Sec. 14. A seller who receives money from a buyer under a contract for health studio services 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. 15. A violation of this chapter, for purposes of the consumer protection act, chapter 19.86 RCW, constitutes an unfair or deceptive act or practice or unfair method of competition in the conduct of trade or commerce.

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.