BILL ANALYSIS Ó
AB 693
Page 1
Date of Hearing: May 5, 2015
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Susan Bonilla, Chair
AB 693
Eggman - As Amended April 30, 2015
SUBJECT: Health studio services: cancellation.
SUMMARY: Allows a buyer to cancel a health studio services
contract via first-class mail, with an e-mail 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 a "contract for health studio services" as a contract
for: (CIV § 1812.81)
a) Instruction, training or assistance in physical culture,
body building, exercising, reducing, figure development, or
physical skill;
b) For the use of the facilities of a health studio,
gymnasium or other facility used for the above purposes; or
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c) For membership in a group, club, association, or
organization formed for any of the above purposes; but does
not include:
i) Contracts for professional services rendered or
furnished by a person licensed under the provisions of
Division 2 (commencing with Section 500) of the Business
and Professions Code (Healing Arts);
ii)Contracts for instruction at schools operating pursuant
to the provisions of the Education Code; or
iii)Contracts for instruction, training, or assistance
relating to diet or control of eating habits not
involving physical culture, body building, exercising,
figure development, or any other such physical skill.
3)Prohibits a contract for health studio services to require
payments or financing by a consumer to exceed the term of the
contract and limits the term of a contract to three years. The
prohibition does not apply to a member's obligation to pay
valid, outstanding dues under the contract, including dues to
be paid pursuant to a termination notice period in the
contract in which the termination notice period does not
exceed 30 days. (CIV § 1812.84(a))
4)Requires a contract for health studio services to include a
statement printed, in a size at least 14-point type, that
discloses the length of the term of the contract. (CIV §
1812.84(b))
5)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
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agreement by mailing or delivering a cancellation notice to
the health studio operator's address. (CIV § 1812.85(b)(1))
THIS BILL:
6)Specifies that, at any time a cancellation is authorized under
Title 2.5 (commencing with § 1812.80) of the Civil Code, a
contract for health studio services may be canceled by the
consumer via first-class mail, via an e-mail address on file,
or in person.
7)Amends the requirement that a contract for health studio
services contain a conspicuous statement that states, among
other things, that the consumer may cancel the agreement by
mailing or delivering in person a cancellation notice to the
health studio operator's address or by sending an e-mail from
an address on file with the health studio.
8)Makes other technical and clarifying amendments.
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS:
Purpose. This bill is author sponsored. According to the
author, "Under current law, fitness clubs may require that their
members send a cancellation letter via mail, including certified
mail, in order to terminate their membership. 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
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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.
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 issues, some of which may have been the result of
contracts that were difficult to cancel.
[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 specific services, such as health studio services,
dance studio lessons, and discount buying services. The purpose
of the protections is to safeguard the public against fraud,
deceit, and financial hardship, and to foster and encourage fair
dealing by restricting unfair contract terms and other unfair,
deceptive, and discriminatory practices.
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). Under current law, health studios are only required to
allow consumers to cancel their contracts through mail. This is
often burdensome for consumers, and some may try to cancel over
the phone or through email, not realizing their contract
specifies they may only cancel through mail. This may result in
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miscommunication between consumers and health studios.
For example, in 2010, the health club 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), there have been similar class-actions suits across the
nation (see Vaughn v. L.A. Fitness, no. 10-cv-2326-MMB (E.D.
Penn., 2013) and Martina v. L.A. Fitness, no. 2:12-CV-02063 (D.
N.J. 2013)). This bill seeks to remove the ability of health
clubs to limit the ways a consumer can cancel a contract,
preventing unwanted charges by allowing a contract for health
studio services to be canceled in person, by first-class mail or
by an email address on file with the health studio.
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 and through
mail.
Prior Related Legislation. 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 was held in the
Assembly Business, Professions and Consumer Protection
Committee.
REGISTERED SUPPORT:
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None on file.
REGISTERED OPPOSITION:
None on file.
Analysis Prepared by:Vincent Chee / B. & P. / (916) 319-3301