BILL ANALYSIS Ó
AB 2810
Page 1
Date of Hearing: April 26, 2016
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Rudy Salas, Chair
AB 2810
(Eggman) - As Amended 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)
a) Instruction, training, or assistance in physical
culture, body building, exercising, reducing, figure
development, or physical skill.
b) The use of the facilities of a health studio, gymnasium,
or other facility used for the above purposes.
c) Membership in a group, club, association, or
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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)
a) 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).
b) Instruction at schools operating pursuant to the
Education Code.
c) 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:
5)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.
6)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
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an email from an address on file with the health studio.
7)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
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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
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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
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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