BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2810


                                                                    Page  1


          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          2810 (Eggman)


          As Amended  June 30, 2016


          Majority vote


           -------------------------------------------------------------------- 
          |ASSEMBLY:  |76-0  |(May 2, 2016)  |SENATE: | 37-0 |(August 11,      |
          |           |      |               |        |      |2016)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |
           -------------------------------------------------------------------- 


          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. 









                                                                    AB 2810


                                                                    Page  2



          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  








                                                                    AB 2810


                                                                    Page  3


          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  








                                                                    AB 2810


                                                                    Page  4


          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