Existing law requires every health studio services contract to be in writing and that a copy of the written contract be given to the customer at the time he or she signs the contract.

This bill would, in the alternative, require that the contract be delivered by email to the customer at the time he or she signs the contract.

Existing law requires the contract to include a statement that discloses the length of the term of the contract in at least 14-point type and requires the contract to contain on the first page the name and address of the health studio operator to which a notice of cancellation can be mailed and the date the buyer signed the contract.

This bill would, instead, require the contract to disclose the initial or minimum length of the term of the contract and would, in the alternative, require the contract to be presented in an electronic format that is as equally legible as the printed contract.

Existing law requires the contract to provide a description of the services, facilities, and hours of access that the consumer is entitled to and provides that any services, facilities, and hours of access that are not described in the contract are to be considered optional services and as separate contracts, as specified.

This bill would, in the alternative, require a contract to state where the description of services, facilities, and hours of access that the consumer is entitled to is available on the health studio operators Internet Web site and would provide that any services, facilities, and hours of access that are not described in the contract or on the health studio operators Internet Web site are to be considered optional services and as separate contracts, as specified.

Existing law authorizes a consumer to cancel a contract for health studio services within specified timeframes after the contract is executed, if the health studio fails to provide the specific facilities advertised or offered or if the health studio eliminates or reduces the scope of the facilities, as specified.

This bill would specify that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail, and would require that the email address to which a notice of cancellation email is to be sent be on the first page of the contract. The bill would make other conforming changes.

Existing law requires every health studio services contract to be in writing and that a copy of the written contract be given to the customer at the time he or she signs the contract.

This bill would, in the alternative, require that the contract be delivered by email to the customer at the time he or she signs the contract.

Existing law requires the contract to include a statement that discloses the length of the term of the contract in at least 14-point type and requires the contract to contain on the first page the name and address of the health studio operator to which a notice of cancellation can be mailed and the date the buyer signed the contract.

This bill would, instead, require the contract to disclose the initial or minimum length of the term of the contract and would, in the alternative, require the contract to be presented in an electronic format that is as equally legible as the printed contract.

Existing law requires the contract to provide a description of the services, facilities, and hours of access that the consumer is entitled to and provides that any services, facilities, and hours of access that are not described in the contract are to be considered optional services and as separate contracts, as specified.

This bill would, in the alternative, require a contract to state where the description of services, facilities, and hours of access that the consumer is entitled to is available on the health studio operators Internet Web site and would provide that any services, facilities, and hours of access that are not described in the contract or on the health studio operators Internet Web site are to be considered optional services and as separate contracts, as specified.

Existing law authorizes a consumer to cancel a contract for health studio services within specified timeframes after the contract is executed, if the health studio fails to provide the specific facilities advertised or offered or if the health studio eliminates or reduces the scope of the facilities, as specified.

This bill would specify that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail, and would require that the email address to which a notice of cancellation email is to be sent be on the first page of the contract. The bill would make other conforming changes.

Existing law authorizes requires every health studio services contract to be in writing and that a copy of the written contract be given to the customer at the time he or she signs the contract.

Existing law authorizes a consumer to cancel a contract for health studio services within specified timeframes after the contract is executed, if the health studio fails to provide the specific facilities advertised or offered or if the health studio eliminates or reduces the scope of the facilities, as specified.

This bill would specify that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail. mail, and would require that the email address to which a notice of cancellation email is to be sent be on the first page of the contract. The bill would make other conforming changes.

Existing law authorizes a consumer to cancel a contract for health studio services within specified timeframes after the contract is executed, if the health studio fails to provide the specific facilities advertised or offered or if the health studio eliminates or reduces the scope of the facilities, as specified.

The bill would specify that a contract for health studio services may be canceled by the buyer in person person, via email from an email address on file with the health studio, or via first-class mail. The bill would make other conforming changes.

Under the End of Life Option Act, an adult who meets certain qualifications and who has been determined by his or her attending physician to be suffering from a terminal disease, as defined, is authorized to make a request for a drug prescribed pursuant to these provisions for the purpose of ending his or her life. The act is repealed on January 1, 2026.

This bill would declare the intent of the Legislature to enact legislation relating to health care coverage and payment for aid-in-dying prescription drugs. add to the schedule of benefits under the Medi-Cal program coverage for aid-in-dying drugs, as defined. The bill would require coverage for an aid-in-dying drug prescription to be provided to a Medi-Cal beneficiary who meets the qualifications of the End of Life Option Act and who requests a prescription in accordance with that act, and would require the cost for those services to be provided with state-only funds. The bill would authorize the department to implement, interpret, or make specific its provisions by all-county letters or similar instructions, without taking regulatory action, until the time regulations are adopted, as specified. The bills provisions would be repealed on January 1, 2026.

Under the End of Life Option Act, an adult who meets certain qualifications and who has been determined by his or her attending physician to be suffering from a terminal disease, as defined, is authorized to make a request for a drug prescribed pursuant to these provisions for the purpose of ending his or her life.

This bill would declare the intent of the Legislature to enact legislation relating to health care coverage and payment for aid-in-dying prescription drugs.

CONCURRENCE IN SENATE AMENDMENTS

CSA1 Bill Id:AB 2810

Author:(Eggman)

As Amended Ver:June 30, 2016

Majority vote

Original Committee Reference: B. & P.

SUMMARY: This bill specifies that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail, and makes other conforming changes.

The Senate amendments:

1. Allow a health studio services contract to be delivered by email instead of in writing.
2. Clarify that the contract must disclose the initial or minimum length of the term of the contract and that, if in electronic format, the statement must be equally legible to 14-point type.
3. Require the contract to state where the description of services, facilities, and hours of access that the consumer is entitled to is available on the health studio operator's Web site and would provide that any services, facilities, and hours of access that are not described in the contract or on the website are to be considered optional services and as separate contracts, as specified.
4. Make other conforming changes.

FISCAL EFFECT: None.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, the "process of sending a cancellation letter via certified mail is time consuming and inconvenient and creates a hardship for gym members, which causes them—in some cases—to continue in memberships they have idled, and pay for access to services they are not using. The confusion caused by this complicated requirement and the lack of options for recourse results in considerable frustration, unnecessary expense, and forces gym members to go through onerous steps in order to simply cancel a membership. [This bill] will free fitness club members from having to navigate a complicated, time consuming process by giving them the choice to cancel their membership contracts in person or via first-class mail."

Background. California contract law provides protections for consumers of certain services, such as health studio and gym services and dance studio lessons. Specifically, the purpose of the protections as they relate to health studio and gyms "is to safeguard the public against fraud, deceit, and financial hardship, and to foster and encourage fair dealing, and prosperity in the field of health studio services by prohibiting or restricting false or misleading advertising, onerous contract terms, harmful financial practices, and other unfair, dishonest, deceptive, destructive, unscrupulous, fraudulent, and discriminatory practices by which the public has been injured in connection with contracts for health studio services" (Civil Code Section (CIV) 1812.80).

For instance, existing law specifies the maximum lengths of health studio contracts, specifies the maximum payments allowed, and limits a health studio's ability to force buyers to sign waivers and indemnity clauses. It also provides buyers with treble damages (three times the amount of actual damages awarded to a buyer) and attorney fees when health studios violate the contract requirements.

Cancellation of Gym Memberships. One of the current consumer protection issues is related to a health club's ability to automatically charge a consumer's credit card or bank account through an electronic funds transfer (EFT). While existing law provides various timelines for canceling a health studio contract, it is unclear on the methods a consumer may use to cancel a contract.

Specifically, CIV 1812.85(b)(1) requires all contracts for health studio services to contain the following statement: "You, the buyer, may cancel this agreement at any time prior to midnight of the fifth business day of the health studio after the date of this agreement, excluding Sundays and holidays. To cancel this agreement, mail or deliver a signed and dated notice, or send a telegram which states that you, the buyer, are canceling this agreement, or words of similar effect."

Because the law specifically notes mail and telegram, many health studios and gyms do not allow members to cancel over the phone or via email. This can be burdensome for consumers, as some may try to cancel over the phone or through email, not realizing the contract specifies they may only cancel through mail. This may result in miscommunication between consumers and health studios. For instance, there may be situations where the consumer believes the contract is canceled but the health studio continues to debit the account on file.

Analysis Prepared by: Vincent Chee / B. & P. / (916) 319-3301 FN: 0003671

 THIRD READING  

Bill No: AB 2810

Author:

:

Vote:

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 8-0, 6/6/16

AYES: Hill, Bates, Block, Gaines, Galgiani, Hernandez, Mendoza, Wieckowski

NO VOTE RECORDED: Jackson

ASSEMBLY FLOOR: 76-0, 5/2/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill provides for the contract for health studio services to be sent by email to the consumer and that the conditions of the contract may be sent in electronic format and that the description of services and hours of operation may be available on health studio’s Internet Web site. Specifies that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail, and makes other conforming changes.

Senate Floor Amendments of 6/30/16 provide some further clarifying changes to providing a contract for health studio services in an electronic format, providing a notice of cancellation by email, and to include a description of health studio services on the health studio operator’s Internet Web site.

ANALYSIS:

Existing law:

1. Regulates the contracts entered into between health studios and members of the health studios. (Civil Code (CC) § 1812.80 et seq.)
2. Defines “contract for health studio services” to include membership in a club, group or organization formed for purposes of providing instruction, training or assistance in physical culture, body building or exercise, or other physical skills, or for the use of facilities of a health studio, gymnasium, or other facility used for the above listed purposes. (CC § 1812.81)
   
3. Requires every contract for health studio services to be in writing and requires a copy of the written contract to be given to the customer at the time he/she signs the contract. (CC § 1812.82)
   
4. Provides that a contract for health studio services may not require payments or financing by the buyer to exceed the term of the contact, nor may the term of the contract exceed three years, however, this does not apply to a member’s obligation to pay valid, outstanding moneys due under the contract, including moneys to be paid pursuant to a termination notice period in the contract in which the termination notice period does not exceed 30 days. (CC § 1812.84)
   
5. Provides that the consumer may cancel the contract and receive a pro rata refund if the health studio fails within specified timeframes to provide specific facilities advertised or offered in writing by the time indicated. (CC § 1812.85 (a))
   
6. Provides that the consumer may cancel the contract and receive a pro rate refund if the health studio, during the term of the contract, eliminates or substantially reduces the scope of the facilities that were described in the contract. (CC § 1812.85 (c))
   
7. Provides that depending on the amount of payment for membership and initiation fees, the person receiving the services or use of the facility shall have a certain amount of specified days to cancel the contract and that the right of cancellation shall be set out in the membership contract. (CC § 1812.85 (d))
   
8. Requires every contract for health studio services to provide a conspicuous statement as specified that states that they buyer may cancel the agreement at any time prior a specified time frame and may do so by mail, or deliver a signed and dated notice or send a telegram that they buyer is canceling the agreement. The notice shall be sent to the name and address of the health studio operator as specified. (CC § 1812.85 (b))

This bill:

1. Provides that a copy of the written contract shall be physically given to or delivered by email to the customer at the time her or she signs the contract.
   
2. Specifies that a contract for health studio services shall include a statement printed in a size at least 14-point or may be presented in an equally legible electronic format that discloses the initial or minimum length of the term of the contract.
   
3. Provides that any time a cancellation of the contract is authorized for health studio services, as specified, that it may be cancelled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail.
4. Provides that the contract for health studio services shall include in the conspicuous statement that the buyer may cancel the contract by mail, email, or deliver a signed and dated notice that states that the buyer is canceling the agreement and that the notice shall be sent via first-class mail, via email from an email address on file with the health studio, or delivered to the name and address of the health studio operator listed on the contract.
   
5. Requires the contract for health studio services to contain the mailing address of the health studio operator to which a notice of cancelation is to be sent and the email address of the health studio operator to which a notice of cancellation email is to be sent.
   
6. Allows the contract for health studio services to also provide a description of the services, facilities, and hours of access to which the consumer is entitled on the health studio operator’s Internet Web site and that for those services, facilities and hours of access that are not described on the health studio operator’s Internet Web site, they shall be considered as optional services and subject to separate contracts as specified.

Background

Growth of Health Studios in the U.S. The growth of health clubs, and those who purchase members to these clubs, has grown significantly since that time. Today nearly 55.3 million people belong to more than 36,180 health clubs in the United States with over $25.8 billion in revenues received from the public. This is in sharp contrast to 25 years ago when only 20 million people belonged to about 13,000 health clubs. Considering the growth in the variety of fitness options available, consumers more and more are showing that they believe in the physical and mental benefits of exercise and are showing that belief by increasing their investment (both in terms of time and money) in their health and fitness. As a recent report shows from the International Health, Racquet and Sportsclub Association, an average of 16% of health club members belong to more than one club, indicating that many people are willing to pay for access and services across fitness facilities.

Current Regulation of Health Studios. Since the enactment of the health studios law in 1961, many changes have occurred in the overall costs for joining health clubs, the facilities and service provided, and the type of contracts that consumers enter into with these clubs. SB 581 (Figueroa, Chapter 439, Statutes of 2005) was one of the first major changes to the health studios law. Prior to SB 581, there was concern that consumer were being locked into health club contracts without an opportunity to consider whether they want to continue using the services and facilities of the health club, or to cancel the contract if services or facilities were not provided as advertised or as promised, or at some later time, are substantially reduced or eliminated. Consumers were sometime subject to high pressure sales tactics, and in some instances, felt obligated to sign a contract immediately without adequate time to actually use the services or facilities or think about whether they wanted to continue their membership. Also, fees had to be paid up front for a health club that may never open or goes out of business at a later date and consumers had no other recourse but to seek legal action to collect fees that had already been paid.

In 2005, after extensive negotiations between the Office of the Attorney General and the health club industry, SB 581 was passed by the Legislature and signed by the Governor. SB 581 extended the time from three days to five days in which a consumer can cancel the contract with a health club for any reason. A consumer was also granted an extended period of time to cancel the contract, from 20 days to 45 days, and receive a prorated refund if the amount paid to the health club exceeded certain dollar amounts; if the contract required payment of $1,500 to $2,000, then the consumer had 20 days to cancel, or if the contract requires payment of $2,001 to $2,500, then the consumer had 30 days, or if the contract requires payment of $2,501 or more, then the consumer had up to 45 days to cancel. A consumer could also cancel the contract and receive a prorated refund if the health club failed to provide the specific facilities advertised or offered in writing by the time indicated, or to provide them within 6 months from the time the contract is executed. This bill required the contract to provide a description of the services, facilities and hours of access to which the consumer is entitled, and those not described would be considered as optional services. If during the term of the contract the health club eliminated or substantially reduced the scope of the services or facilities, or failed to provide similar services if they are transferred to a different club, the consumer could cancel the contract and receive a prorated refund. SB 581 required that all of the provisions regarding cancellation of the contract be set out in the membership contract and if the health club did not comply with any of these provisions, then the person could cancel the contract immediately.

The bill removed the current cap of $1,000 on contract amounts which was established in 1981, and provided a more reasonable cap on dollar amounts charged by health clubs over the next five years. These amounts were more reflective of actual contract amounts for health clubs to reflect changes in the state’s Consumer Price Index. The bill provided that after January 1, 2006, no contract for health clubs may exceed $3,000 and after January 1, 2010, no contract may exceed $4,400. Although the cap was being raised, it still prevented health clubs from entering into “lifetime” health programs or extremely long-term arrangements with large sums of money paid up-front which potentially could bilk consumers out of thousands of dollars if the health club went out of business. The additional reasons to cancel a contract, such as elimination or reduction of services, or having the additional time of 20 to 45 days to consider whether the health club is providing all that it promised, provided greater protections to consumers overall when entering into contractual obligations with health clubs.

Lastly, the measure required that any health club that has not yet opened for business must keep all funds in a bank trust account and prohibited the use of these funds until the health club has been open for at least five days. The consumer would still have up until five days after the opening of the health club to cancel the contract for any reason.

Another measure was passed in 2006 to just clarify a provision enacted into law under SB 581 regarding requirements that would not apply to health studio services contracts when there was a payment of less than $1,500. It provided that if a health studio services contract requires a payment of less than $1,500, including initiation fees or initial membership fees and exclusive of interest or finance charges, the health studio is was not required to comply with the 20, 30 and 45-day timeframes during which a consumer may cancel his or her contract, and other conditions as specified.

Ability to Cancel Health Studio Membership Outdated. According to the Author, canceling a gym membership is unnecessarily complicated and burdensome, as is the law dictating the process, which is out of step with the times, technology and the way we live our lives. The law still requires cancellation via telegram, though Western Union sent its last telegram in 2006, or certified mail, when many gyms have their own mobile phone apps to check in or schedule classes. In fact, as stated by the Author, the certified mail requirement is so time-consuming and inconvenient that many people continue paying for memberships they are not using; this causes considerable frustration and unnecessary expense.

The Author indicates that according to the Better Business Bureau, there have been 132 contract-related complaints reported against fitness centers since March 2012 in the Northeast California Region. In addition, there were 229 complaints related to billing or collection problems, some of which may have been the result of contracts that were difficult to cancel. The Author argues that this bill will give fitness club members the choice to cancel their club membership in person, via mail, or via first-class mail, making the law responsive to technology and our contemporary lifestyles.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 8/2/16)

International Health, Racquet and Sportsclub Association

OPPOSITION: (Verified 8/2/16)

None received

ARGUMENTS IN SUPPORT: The International Health, Racquet and Sportsclub Association is in support of this measure and indicates that consumers of health studio services have three methods of placing notice of cancellation: by email – from an email address on file with the health studio to an email account designated by the seller, in-person, or by the postal service. Currently, the health studio statute states only one method – U.S. mail. This measure additionally specifies that health studios may provide membership contracts as an emailed copy or hard copy. Existing law does not contemplate substituting a written pen-and-paper document with an electronic document. IHRSA supports these changes to support electronic communication, which is necessary in today’s digital age.

ASSEMBLY FLOOR: 76-0, 5/2/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Wood, Rendon

NO VOTE RECORDED: Beth Gaines, Roger Hernández, Ridley-Thomas, Williams

Prepared by:

8/8/16 9:33:50

**** END ****

 THIRD READING  

Bill No: AB 2810

Author:

:

Vote:

SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 8-0, 6/6/16

AYES: Hill, Bates, Block, Gaines, Galgiani, Hernandez, Mendoza, Wieckowski

NO VOTE RECORDED: Jackson

ASSEMBLY FLOOR: 76-0, 5/2/16 (Consent) - See last page for vote

SUBJECT:

SOURCE: Author

DIGEST: This bill specifies that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail, and makes other conforming changes.

ANALYSIS:

Existing law:

1. Regulates the contracts entered into between health studios and members of the health studios. (Civil Code (CC) § 1812.80 et seq.)
2. Defines “contract for health studio services” to include membership in a club, group or organization formed for purposes of providing instruction, training or assistance in physical culture, body building or exercise, or other physical skills, or for the use of facilities of a health studio, gymnasium, or other facility used for the above listed purposes. (CC § 1812.81)
   
3. Requires every contract for health studio services to be in writing and requires a copy of the written contract to be given to the customer at the time he/she signs the contract. (CC § 1812.82)
   
4. Provides that a contract for health studio services may not require payments or financing by the buyer to exceed the term of the contact, nor may the term of the contract exceed three years, however, this does not apply to a member’s obligation to pay valid, outstanding moneys due under the contract, including moneys to be paid pursuant to a termination notice period in the contract in which the termination notice period does not exceed 30 days. (CC § 1812.84)
   
5. Provides that the consumer may cancel the contract and receive a pro rata refund if the health studio fails within specified timeframes to provide specific facilities advertised or offered in writing by the time indicated. (CC § 1812.85 (a))
   
6. Provides that the consumer may cancel the contract and receive a pro rate refund if the health studio, during the term of the contract, eliminates or substantially reduces the scope of the facilities that were described in the contract. (CC § 1812.85 (c))
   
7. Provides that depending on the amount of payment for membership and initiation fees, the person receiving the services or use of the facility shall have a certain amount of specified days to cancel the contract and that the right of cancellation shall be set out in the membership contract. (CC § 1812.85 (d))
   
8. Requires every contract for health studio services to provide a conspicuous statement as specified that states that they buyer may cancel the agreement at any time prior a specified time frame and may do so by mail, or deliver a signed and dated notice or send a telegram that they buyer is canceling the agreement. The notice shall be sent to the name and address of the health studio operator as specified. (CC § 1812.85 (b))

This bill:

1. Provides that any time a cancellation of the contract is authorized for health studio services, as specified, that it may be cancelled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail.
   
2. Provides that the contract for health studio services shall include in the conspicuous statement that the buyer may cancel the contract by mail, email, or deliver a signed and dated notice that states that the buyer is canceling the agreement and that the notice shall be sent via first-class mail, via email from an email address on file with the health studio, or delivered to the name and address of the health studio operator listed on the contract.

Background

Growth of Health Studios in the U.S. The growth of health clubs, and those who purchase members to these clubs, has grown significantly since that time. Today nearly 55.3 million people belong to more than 36,180 health clubs in the United States with over $25.8 billion in revenues received from the public. This is in sharp contrast to 25 years ago when only 20 million people belonged to about 13,000 health clubs. Considering the growth in the variety of fitness options available, consumers more and more are showing that they believe in the physical and mental benefits of exercise and are showing that belief by increasing their investment (both in terms of time and money) in their health and fitness. As a recent report shows from the International Health, Racquet and Sportsclub Association, an average of 16% of health club members belong to more than one club, indicating that many people are willing to pay for access and services across fitness facilities.

Current Regulation of Health Studios. Since the enactment of the health studios law in 1961, many changes have occurred in the overall costs for joining health clubs, the facilities and service provided, and the type of contracts that consumers enter into with these clubs. SB 581 (Figueroa, Chapter 439, Statutes of 2005) was one of the first major changes to the health studios law. Prior to SB 581, there was concern that consumer were being locked into health club contracts without an opportunity to consider whether they want to continue using the services and facilities of the health club, or to cancel the contract if services or facilities were not provided as advertised or as promised, or at some later time, are substantially reduced or eliminated. Consumers were sometime subject to high pressure sales tactics, and in some instances, felt obligated to sign a contract immediately without adequate time to actually use the services or facilities or think about whether they wanted to continue their membership. Also, fees had to be paid up front for a health club that may never open or goes out of business at a later date and consumers had no other recourse but to seek legal action to collect fees that had already been paid.


In 2005, after extensive negotiations between the Office of the Attorney General and the health club industry, SB 581 was passed by the Legislature and signed by the Governor. SB 581 extended the time from three days to five days in which a consumer can cancel the contract with a health club for any reason. A consumer was also granted an extended period of time to cancel the contract, from 20 days to 45 days, and receive a prorated refund if the amount paid to the health club exceeded certain dollar amounts; if the contract required payment of $1,500 to $2,000, then the consumer had 20 days to cancel, or if the contract requires payment of $2,001 to $2,500, then the consumer had 30 days, or if the contract requires payment of $2,501 or more, then the consumer had up to 45 days to cancel. A consumer could also cancel the contract and receive a prorated refund if the health club failed to provide the specific facilities advertised or offered in writing by the time indicated, or to provide them within 6 months from the time the contract is executed. SB 581 required the contract to provide a description of the services, facilities and hours of access to which the consumer is entitled, and those not described would be considered as optional services. If during the term of the contract the health club eliminated or substantially reduced the scope of the services or facilities, or failed to provide similar services if they are transferred to a different club, the consumer could cancel the contract and receive a prorated refund. SB 581 required that all of the provisions regarding cancellation of the contract be set out in the membership contract and if the health club did not comply with any of these provisions, then the person could cancel the contract immediately.

The bill removed the current cap of $1,000 on contract amounts which was established in 1981, and provided a more reasonable cap on dollar amounts charged by health clubs over the next five years. These amounts were more reflective of actual contract amounts for health clubs to reflect changes in the state’s Consumer Price Index. The bill provided that after January 1, 2006, no contract for health clubs may exceed $3,000 and after January 1, 2010, no contract may exceed $4,400. Although the cap was being raised, it still prevented health clubs from entering into “lifetime” health programs or extremely long-term arrangements with large sums of money paid up-front which potentially could bilk consumers out of thousands of dollars if the health club went out of business. The additional reasons to cancel a contract, such as elimination or reduction of services, or having the additional time of 20 to 45 days to consider whether the health club is providing all that it promised, provided greater protections to consumers overall when entering into contractual obligations with health clubs.

Lastly, SB 581 required that any health club that has not yet opened for business must keep all funds in a bank trust account and prohibited the use of these funds until the health club has been open for at least five days. The consumer would still have up until five days after the opening of the health club to cancel the contract for any reason.

Another measure was passed in 2006 to just clarify a provision enacted into law under SB 581 regarding requirements that would not apply to health studio services contracts when there was a payment of less than $1,500. It provided that if a health studio services contract requires a payment of less than $1,500, including initiation fees or initial membership fees and exclusive of interest or finance charges, the health studio is was not required to comply with the 20, 30 and 45-day timeframes during which a consumer may cancel his or her contract, and other conditions as specified.

Ability to Cancel Health Studio Membership Outdated. According to the Author, canceling a gym membership is unnecessarily complicated and burdensome, as is the law dictating the process, which is out of step with the times, technology and the way we live our lives. The law still requires cancellation via telegram, though Western Union sent its last telegram in 2006, or certified mail, when many gyms have their own mobile phone apps to check in or schedule classes. In fact, as stated by the Author, the certified mail requirement is so time-consuming and inconvenient that many people continue paying for memberships they are not using; this causes considerable frustration and unnecessary expense.

The Author indicates that according to the Better Business Bureau, there have been 132 contract-related complaints reported against fitness centers since March 2012 in the Northeast California Region. In addition, there were 229 complaints related to billing or collection problems, some of which may have been the result of contracts that were difficult to cancel. The Author argues that this bill will give fitness club members the choice to cancel their club membership in person, via mail, or via first-class mail, making the law responsive to technology and our contemporary lifestyles.

FISCAL EFFECT: Appropriation: Fiscal Com.: Local:

SUPPORT: (Verified 6/7/16)

None received

OPPOSITION: (Verified 6/7/16)

None received

ASSEMBLY FLOOR: 76-0, 5/2/16

AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker, Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Quirk, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Wood, Rendon

NO VOTE RECORDED: Beth Gaines, Roger Hernández, Ridley-Thomas, Williams

Prepared by:

6/8/16 16:12:02

**** END ****

SENATE COMMITTEE ON

BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT

Senator Jerry Hill, Chair

2015 - 2016 Regular

Bill No: AB 2810 Hearing Date: June 6, 2016

Subject: Health studio services: cancellation

SUMMARY:

Specifies that a contract for health studio services may be canceled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail, and makes other conforming changes.

Existing law:

1. Regulates the contracts entered into between health studios and members of the health studios. (Civil Code (CC) § 1812.80 et seq.)
2. Defines “contract for health studio services” to include membership in a club, group or organization formed for purposes of providing instruction, training or assistance in physical culture, body building or exercise, or other physical skills, or for the use of facilities of a health studio, gymnasium, or other facility used for the above listed purposes. (CC § 1812.81)
   
3. Requires every contract for health studio services to be in writing and requires a copy of the written contract to be given to the customer at the time he/she signs the contract. (CC § 1812.82)
   
4. Provides that a contract for health studio services may not require payments or financing by the buyer to exceed the term of the contact, nor may the term of the contract exceed three years, however, this does not apply to a member’s obligation to pay valid, outstanding moneys due under the contract, including moneys to be paid pursuant to a termination notice period in the contract in which the termination notice period does not exceed 30 days. (CC § 1812.84)
   
5. Provides that the consumer may cancel the contract and receive a pro rata refund if the health studio fails within specified timeframes to provide specific facilities advertised or offered in writing by the time indicated. (CC § 1812.85 (a))
   
6. Provides that the consumer may cancel the contract and receive a pro rate refund if the health studio, during the term of the contract, eliminates or substantially reduces the scope of the facilities that were described in the contract. (CC § 1812.85 (c))
   
7. Provides that depending on the amount of payment for membership and initiation fees, the person receiving the services or use of the facility shall have a certain amount of specified days to cancel the contract and that the right of cancellation shall be set out in the membership contract. (CC § 1812.85 (d))
   
8. Requires every contract for health studio services to provide a conspicuous statement as specified that states that they buyer may cancel the agreement at any time prior a specified time frame and may do so by mail, or deliver a signed and dated notice or send a telegram that they buyer is canceling the agreement. The notice shall be sent to the name and address of the health studio operator as specified. (CC § 1812.85 (b))

This bill:

1. Provides that any time a cancellation of the contract is authorized for health studio services, as specified, that it may be cancelled by the buyer in person, via email from an email address on file with the health studio, or via first-class mail.
   
2. Provides that the contract for health studio services shall include in the conspicuous statement that the buyer may cancel the contract by mail, email, or deliver a signed and dated notice that states that the buyer is canceling the agreement and that the notice shall be sent via first-class mail, via email from an email address on file with the health studio, or delivered to the name and address of the health studio operator listed on the contract.

FISCAL EFFECT:

None. Legislative Counsel has keyed this bill as “non-fiscal.”

COMMENTS:

1. Purpose. This bill is sponsored by the Author. According to the Author, canceling a gym membership is unnecessarily complicated and burdensome, as is the law dictating the process, which is out of step with the times, technology and the way we live our lives. The law still requires cancellation via telegram, though Western Union sent its last telegram in 2006, or certified mail, when many gyms have their own mobile phone apps to check in or schedule classes. In fact, as stated by the Author, the certified mail requirement is so time-consuming and inconvenient that many people continue paying for memberships they are not using; this causes considerable frustration and unnecessary expense.

The Author indicates that according to the Better Business Bureau, there have been 132 contract-related complaints reported against fitness centers since March 2012 in the Northeast California Region. In addition, there were 229 complaints related to billing or collection problems, some of which may have been the result of contracts that were difficult to cancel. The Author argues that this bill will give fitness club members the choice to cancel their club membership in person, via mail, or via first-class mail, making the law responsive to technology and our contemporary lifestyles.

1. Background.
   
   Growth of Health Studios in the U.S. The growth of health clubs, and those who purchase members to these clubs, has grown significantly since that time. Today nearly 55.3 million people belong to more than 36,180 health clubs in the United States with over $25.8 billion in revenues received from the public. This is in sharp contrast to 25 years ago when only 20 million people belonged to about 13,000 health clubs. Considering the growth in the variety of fitness options available, consumers more and more are showing that they believe in the physical and mental benefits of exercise and are showing that belief by increasing their investment (both in terms of time and money) in their health and fitness. As a recent report shows from the International Health, Racquet and Sportsclub Association, an average of 16% of health club members belong to more than one club, indicating that many people are willing to pay for access and services across fitness facilities.
   
   Current Regulation of Health Studios. Since the enactment of the health studios law in 1961, many changes have occurred in the overall costs for joining health clubs, the facilities and service provided, and the type of contracts that consumers enter into with these clubs. SB 581 (Figueroa, Chapter 439, Statutes of 2005) was one of the first major changes to the health studios law. Prior to SB 581, there was concern that consumer were being locked into health club contracts without an opportunity to consider whether they want to continue using the services and facilities of the health club, or to cancel the contract if services or facilities were not provided as advertised or as promised, or at some later time, are substantially reduced or eliminated. Consumers were sometime subject to high pressure sales tactics, and in some instances, felt obligated to sign a contract immediately without adequate time to actually use the services or facilities or think about whether they wanted to continue their membership. Also, fees had to be paid up front for a health club that may never open or goes out of business at a later date and consumers had no other recourse but to seek legal action to collect fees that had already been paid.
   
   In 2005, after extensive negotiations between the Office of the Attorney General and the health club industry, SB 581 was passed by the Legislature and signed by the Governor. SB 581 extended the time from three days to five days in which a consumer can cancel the contract with a health club for any reason. A consumer was also granted an extended period of time to cancel the contract, from 20 days to 45 days, and receive a prorated refund if the amount paid to the health club exceeded certain dollar amounts; if the contract required payment of $1,500 to $2,000, then the consumer had 20 days to cancel, or if the contract requires payment of $2,001 to $2,500, then the consumer had 30 days, or if the contract requires payment of $2,501 or more, then the consumer had up to 45 days to cancel. A consumer could also cancel the contract and receive a prorated refund if the health club failed to provide the specific facilities advertised or offered in writing by the time indicated, or to provide them within 6 months from the time the contract is executed. This bill required the contract to provide a description of the services, facilities and hours of access to which the consumer is entitled, and those not described would be considered as optional services. If during the term of the contract the health club eliminated or substantially reduced the scope of the services or facilities, or failed to provide similar services if they are transferred to a different club, the consumer could cancel the contract and receive a prorated refund. SB 581 required that all of the provisions regarding cancellation of the contract be set out in the membership contract and if the health club did not comply with any of these provisions, then the person could cancel the contract immediately.

The bill removed the current cap of $1,000 on contract amounts which was established in 1981, and provided a more reasonable cap on dollar amounts charged by health clubs over the next five years. These amounts were more reflective of actual contract amounts for health clubs to reflect changes in the state’s Consumer Price Index. The bill provided that after January 1, 2006, no contract for health clubs may exceed $3,000 and after January 1, 2010, no contract may exceed $4,400. Although the cap was being raised, it still prevented health clubs from entering into “lifetime” health programs or extremely long-term arrangements with large sums of money paid up-front which potentially could bilk consumers out of thousands of dollars if the health club went out of business. The additional reasons to cancel a contract, such as elimination or reduction of services, or having the additional time of 20 to 45 days to consider whether the health club is providing all that it promised, provided greater protections to consumers overall when entering into contractual obligations with health clubs.

Lastly, the measure required that any health club that has not yet opened for business must keep all funds in a bank trust account and prohibited the use of these funds until the health club has been open for at least five days. The consumer would still have up until five days after the opening of the health club to cancel the contract for any reason.

Another measure was passed in 2006 to just clarify a provision enacted into law under SB 581 regarding requirements that would not apply to health studio services contracts when there was a payment of less than $1,500. It provided that if a health studio services contract requires a payment of less than $1,500, including initiation fees or initial membership fees and exclusive of interest or finance charges, the health studio is was not required to comply with the 20, 30 and 45-day timeframes during which a consumer may cancel his or her contract, and other conditions as specified.

SUPPORT AND OPPOSITION:

Support: None on file as of May 31, 2016.

Opposition: None on file as of May 31, 2016.

-- END --

Date of Hearing:

ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS

Rudy Salas, Chair

ABPCA Bill Id:AB 2810

Author:(Eggman) – As Amended Ver:April 18, 2016

SUBJECT: Health studio services: cancellation.

SUMMARY: Requires contracts for health studio services to allow a buyer to cancel the contract via first-class mail, via email from an email address on file, or in person.

EXISTING LAW:

1. Establishes consumer protection requirements for contracts for health studio services. (Civil Code (CIV) §§ 1812.80 - 1812.98)
2. Defines “contract for health studio services” as a contract for one the following services: (CIV § 1812.81)
   1. Instruction, training, or assistance in physical culture, body building, exercising, reducing, figure development, or physical skill.
   2. The use of the facilities of a health studio, gymnasium, or other facility used for the above purposes.
   3. Membership in a group, club, association, or organization formed for the above purposes.
3. Provides that a “contract for health studio services” does not include contracts for any of the following services: (CIV § 1812.81)
   1. Professional services provided by a person licensed under Division 2 of the Business and Professions Code (BPC) relating to Healing Arts (BPC §§ 500 - 4999.129).
   2. Instruction at schools operating pursuant to the Education Code.
   3. Instruction, training, or assistance relating to diet or control of eating habits not involving physical culture, body building, exercising, figure development, or physical skill.
4. Requires a contract for health studio services to contain on its face, and in close proximity to the space reserved for the signature of the consumer, a conspicuous statement that states, among other things, that the consumer may cancel the agreement by mailing or delivering a cancellation notice to the health studio operator’s address. (CIV § 1812.85(b)(1))

THIS BILL:

1. Specifies that, at any time a cancellation is authorized under the state laws relating to contracts for health studio services (CIV §§ 1812.80 - 1812.98), the consumer may cancel the contract via first-class mail, via an email address on file, or in person.
2. Requires a contract for health studio services to state, alongside the existing mailing provisions, that a consumer may cancel the agreement by delivering in person a cancellation notice to the health studio operator’s address or by sending an email from an address on file with the health studio.
3. Makes other technical and clarifying amendments, including deleting an outdated reference to sending a telegram.

FISCAL EFFECT: None. This bill is keyed non-fiscal by the Legislative Counsel.

COMMENTS:

Purpose. This bill is sponsored by the author. According to the author, the “process of sending a cancellation letter via certified mail is time consuming and inconvenient and creates a hardship for gym members, which causes them—in some cases—to continue in memberships they have idled, and pay for access to services they are not using. The confusion caused by this complicated requirement and the lack of options for recourse results in considerable frustration, unnecessary expense, and forces gym members to go through onerous steps in order to simply cancel a membership. [This bill] will free fitness club members from having to navigate a complicated, time consuming process by giving them the choice to cancel their membership contracts in person or via first-class mail.”

Background. California contract law provides protections for consumers of certain services, such as health studio and gym services and dance studio lessons. Specifically, the purpose of the protections as they relate to health studio and gyms “is to safeguard the public against fraud, deceit, and financial hardship, and to foster and encourage fair dealing, and prosperity in the field of health studio services by prohibiting or restricting false or misleading advertising, onerous contract terms, harmful financial practices, and other unfair, dishonest, deceptive, destructive, unscrupulous, fraudulent, and discriminatory practices by which the public has been injured in connection with contracts for health studio services” (CIV § 1812.80).

For instance, existing law specifies the maximum lengths of health studio contracts, specifies the maximum payments allowed, and limits a health studio’s ability to force buyers to sign waivers and indemnity clauses. It also provides buyers with treble damages (three times the amount of actual damages awarded to a buyer) and attorney fees when health studios violate the contract requirements.

Cancellation of Gym Memberships. One of the current consumer protection issues is related to a health club’s ability to automatically charge a consumer’s credit card or bank account through an electronic funds transfer (EFT). While existing law provides various timelines for canceling a health studio contract, it is unclear on the methods a consumer may use to cancel a contract.

Specifically, CIV § 1812.85(b)(1) requires all contracts for health studio services to contain the following statement: “You, the buyer, may cancel this agreement at any time prior to midnight of the fifth business day of the health studio after the date of this agreement, excluding Sundays and holidays. To cancel this agreement, mail or deliver a signed and dated notice, or send a telegram which states that you, the buyer, are canceling this agreement, or words of similar effect.”

Because the law specifically notes mail and telegram, many health studios and gyms do not allow members to cancel over the phone or via email. This can be burdensome for consumers, as some may try to cancel over the phone or through email, not realizing the contract specifies they may only cancel through mail. This may result in miscommunication between consumers and health studios. For instance, there may be situations where the consumer believes the contract is canceled but the health studio continues to debit the account on file.

An example is a case involving the health club 24 Hour Fitness. 24 Hour Fitness settled a class-action lawsuit that alleged the club intentionally continued to charge its members monthly dues after they provided notice canceling their memberships (Friedman v. 24 Hour Fitness USA, Inc., no. CV 06-06282 (C.D. Cal July 12, 2010)). While there was no decision on the merits in the case (no legal finding), it suggests that at least some consumers have experienced difficulties with the issue of cancelations. Further, there have been similar class-actions suits in other states, for example Pennsylvania (Vaughn v. L.A. Fitness, no. 10-cv-2326-MMB (E.D. Penn., 2013)) and New Jersey (Martina v. L.A. Fitness, no. 2:12-CV-02063 (D. N.J. 2013)). To address the issue, this bill will remove the ability of health clubs to limit the ways a consumer can cancel a contract.

Other States. At least two other states, Hawaii (Rev. Stat. 6 (c)) and New Hampshire (N. Rev. Stat. Ann. 358-3 IV) require health clubs to allow members to cancel in person or by mail.

Prior Related Legislation. AB 693 (Eggman), Chapter 582, Statutes of 2015, was substantially similar to this bill and would have required contracts for health studio services to allow a buyer to cancel the contract via first-class mail, with an email address on file, or in person. NOTE: This bill was substantially amended to deal with a different topic.

AB 602 (Spitzer and Huff) of 2005, would have provided that, when a health studio facility is transferred or sold to another health studio, a consumer of the health studio facility shall be given the option of receiving a refund of his or her remaining payments on the existing contract or entering into a new contract on the same terms with the new owners of the facility. NOTE: This bill failed passage in the Assembly Committee on Business and Professions.

REGISTERED SUPPORT:

None on file.

REGISTERED OPPOSITION:

None on file.

Analysis Prepared by: Vincent Chee / B. & P. / (916) 319-3301