HOUSE BILL REPORT

SHB 791

BYHouse Committee on Judiciary (originally sponsored by Representatives Crane, Ballard, Wineberry and P. King) 

Regulating camping clubs.

House Committe on Judiciary

Majority Report:     The substitute bill be substituted therefor and the substitute bill do pass.  (14)

     Signed by Representatives Armstrong, Chair; Crane, Vice Chair; Belcher, Brough, Hargrove, Lewis, Locke, Meyers, Moyer, Patrick, Schmidt, Scott, Wang and Wineberry.

Minority Report:     Do not pass.  (1)

     Signed by Representative Padden.

House Staff:Harry Reinert (786-7110)

AS PASSED HOUSE FEBRUARY 9, 1988

BACKGROUND:

In 1982 the Legislature enacted a measure regulating camping clubs.  A camping club is an enterprise that has the primary purpose of providing camping or outdoor recreation.  A camping club contract which gives the purchaser an interest in camping club facilities is governed by the act.  The department of licensing is responsible for enforcing the camping club act.

A camping club contract may not be sold in this state unless it is registered with the department.  To apply for registration the applicant must fill out an application and include written disclosures that will be made to purchasers of the camping club contract.  The disclosures must include: the identity and experience of the operator and the identity of any affiliate of the camping club; the interest of the purchaser in the camping club; the location and description of then existing and planned facilities and other facilities the purchaser will be entitled to use; the payments required under the contract; limitations on transfers by the purchaser; and, in addition to other disclosures, a copy of the contract form.  A registration is effective beginning fifteen days after the date it is filed with the department, unless the department issues an order suspending the registration.

The department may order funds from contract sales to be impounded if it determines that there is likely to be a deficiency in the resources of the operator that will prevent it from providing the anticipated services.  The department may also order the operator to set aside in a separate account a portion of the contract sales funds to pay for property interests which are to be acquired by the purchaser.

At least five days prior to the use of any sales literature, contract forms, or disclosure supplements, the operator must provide the material to the department for its review.

The department may deny, suspend, or revoke an application or registration or impose a fine of up to one thousand dollars for violations of the act.  Violations include: false or misleading advertising or sales practices or fraudulent acts; failure to file required documents; or failure to comply with rules adopted by the department.  In addition, the department may take action if the operator is not financially responsible or has insufficient capital, the operator or any officer has been convicted of an offense involving, or the operator has withdrawn a substantial portion of camping club property from use by the purchasers without providing alternative facilities.  An operator has a right to a hearing prior to entry of an order by the department.

A purchaser of a camping club contract may cancel the contract up to three days after entering into the agreement. The purchaser may also void a contract which was entered into without proper disclosures for up to two years after the contract was signed.

The department may assess a fee for registration of camping club contracts.  A registration is good for one year.  The registration may be amended.

A person selling camping club contracts must register with the department as a salesperson.  An individual with past criminal offenses is not eligible to be a camping club salesperson.  The department may suspend the salesperson's license if necessary for the protection of purchasers and the salesperson has violated the provisions of the act.  The salesperson has the right to a hearing on the denial of a license or its suspension or revocation.

The department has authority to conduct investigations to determine whether registrations should be granted, denied, or suspended.  The department may issue subpoenas and may seek contempt orders to enforce its investigatory powers.  The department may also issue cease and desist orders and temporary orders to halt violations of the act.  The cease and desist order may be issued only after an opportunity for a hearing is provided.

It is a gross misdemeanor for a person to make false statements on an application, to engage in fraudulent activities relating to camping clubs, or to make a claim that registration with the department is a determination by the department on the merits of the club.  The consumer protection act is made applicable to the camping club act.

SUMMARY:

The camping club act is changed to the camping resort act.  The procedure for registration of camping resort contracts and the enforcement of the act is modified.

The application must include information assuring the Department of Licensing that all required governmental permits have been complied with and a statement disclosing the potential effect on the purchaser if there is a foreclosure on any of the operator's properties.  The application must also include an affidavit of the operator's right to withdraw, replace, or change the camping resort properties.  A consent to service of process on the department must also be filed.  Exempt from registration are contracts up for resale.

The department has twenty days after a completed application, which must include all required fees, has been filed in which to conduct its examination. The department must notify the applicant within seven days that it has received the completed application and required fees.  The application must be signed by the operator or a trustee granted such power by the operator.

After the effective date of this act, any new campground or campground on which underlying financial obligations are refinanced must have in place protections for purchasers of contracts.  The protections must include a non-disturbance agreement.  For campgrounds in existence prior to the effective date of this act, the operator must provide financial or other assurances to the director that the campground will remain in operation.  If these protections are not provided, the department may by rule, permit, or order require the titles, funds, or receivables to be put in escrow, trust, or impounds to protect the quiet enjoyment of the resort properties for the purchasers.  No offering may be made until all required devices are put in place by the operator of the resort.

The operator of a camping resort must provide a membership list, when requested, to a purchaser of a camping resort contract.  The membership list may not be used for commercial purposes unless the operator agrees.

Prior to offering any promotional prizes or gifts in conjunction with an offering of camping resort contracts, the person making the offering must provide security with the department that the prizes or gifts will be fulfilled.  The person entitled to a prize may sue for treble damages if the prize or gift is not made available.

In addition to existing prohibited activities that may lead to a civil penalty or revocation or denial of a registration, the following activities are prohibited:  failure to provide required security arrangements; employment of unregistered salespersons; breaching any escrow, impound, or reserve account; making untrue or misleading statements; failing to provide written disclosures; failing to provide a bond when required; or selling or proposing to seal contracts in excess of the ratio of contracts to sites started in the registration.

Instead of proceeding with a complaint alleging a violation of the act, the department may enter into an agreement with a resort operator or a salesperson that the alleged practices will cease.  The operator or salesperson shall not be required to admit any violation of law as part of the agreement.

The department may establish fees for application and renewal of registrations, as well as for other activities requiring oversight by the department.

The act is declared an emergency and goes into effect immediately.

EFFECT OF SENATE AMENDMENT(S):  The Substitute House Bill authorized a camping club operator to require a purchaser of a contract who requests a list of club members to sign an affidavit which promises to compensate the operator of the camping club if the list is used for commercial purposes.  The Senate amendment changes this to require the operator to obtain a statement that the list will not be used for commercial purposes.

Fiscal Note:    Requested February 2, 1988.

Effective Date:The bill contains an emergency clause and takes effect immediately.

House Committee ‑ Testified For:     Cleotis Borner, Richard Handke, Department of Licensing; C.E. Colton, American Adventure Members Association; Marge Colton, American Resort Members Association; Jack Limbaugh, Mayfield Camp Sites; Robert and Lorene O'Hara, Lake Sawyer Resort Members Association; Steve Kelley, Lake Sawyer Resort Members Association; Charles A. Johnson, Attorney.

House Committee - Testified Against: Fred Mendoza, Thousand Trails and NACO West; Thomas Sites, Washington Membership Resort Association.

House Committee - Testimony For:     There have been a number of bankruptcies and failures of campgrounds over the past several years. Thousands of people have lost their investments in these campgrounds.  The department needs additional authority to regulate the operation of the campgrounds to assure their financial viability. The purchasers of campground contracts need additional protection so that in the event of a bankruptcy, their entire investment will not be lost.  Purchasers also need access to a list of members so they can communicate with each other to protect their common interest.

House Committee - Testimony Against: The restrictions and limitations in the bill may force campgrounds to close.  Membership lists are a proprietary right of campgrounds and the dissemination of these lists may give competitors an unfair advantage.  If members use these lists to circulate unfounded rumors, the result may be the failure of an otherwise viable campground.

VOTE ON FINAL PASSAGE:

     Yeas 97; Excused 1

Excused:   Representative Taylor