1 South Carolina General Assembly 2 118th Session, 2009-2010 3 4 S. 546 5 6 STATUS INFORMATION 7 8 General Bill 9 Sponsors: Senator Knotts 10 Document Path: l:\council\bills\ggs\22256ab09.docx 11 12 Introduced in the Senate on March 10, 2009 13 Currently residing in the Senate Committee on Medical Affairs 14 15 Summary: Physical Fitness Services Act 16 17 18 HISTORY OF LEGISLATIVE ACTIONS 19 20 Date Body Action Description with journal page number 21 3/10/2009 Senate Introduced and read first time SJ9 22 3/10/2009 Senate Referred to Committee on Medical Affairs SJ9 23 24 25 VERSIONS OF THIS BILL 26 27 3/10/2009 28 1 2 3 4 5 6 7 8 9 A BILL 10 11 TO AMEND CHAPTER 79 OF TITLE 44, AS AMENDED, 12 CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING 13 TO “PHYSICAL FITNESS SERVICES ACT”, SO AS TO 14 DELETE A TANNING CENTER AND MARTIAL ARTS 15 STUDIO FROM ITS APPLICABILITY, TO PROVIDE FOR 16 PERMANENT CLOSURE OF A SUBJECT FACILITY AS AN 17 EVENT ALLOWING CANCELLATION OF A CONTRACT, TO 18 DEFINE “PERMANENT CLOSURE”, TO PROVIDE FOR 19 RETURN OF UNEARNED PAYMENTS AND ANY 20 EVIDENCE OF INDEBTEDNESS TO THE CANCELING 21 CUSTOMER, TO PROVIDE THAT A SUBJECT CONTRACT 22 MUST NOT BE SOLD OR ASSIGNED WITHOUT THE 23 CUSTOMER’S CONSENT OR REQUIRE A CUSTOMER TO 24 AFFIRMATIVELY CANCEL THE CONTRACT TO STOP 25 AUTOMATIC RENEWAL, TO PROVIDE THAT A 26 CONTRACT MAY BE ON A MONTH TO MONTH BASIS 27 AND MAY BE PAID FOR BY AUTOMATIC DEBITS 28 SUBJECT TO CERTAIN LIMITATIONS, TO PROVIDE THAT 29 A SUBJECT CONTRACT IS VOIDABLE BY THE CUSTOMER 30 IF THE FACILITY FAILS TO OBTAIN THE REQUISITE 31 CERTIFICATE OF AUTHORITY, AND TO PROVIDE THAT 32 THE PROVISIONS ARE ENFORCEABLE BY THE 33 DEPARTMENT OF CONSUMER AFFAIRS AND THE 34 ATTORNEY GENERAL. 35 36 Be it enacted by the General Assembly of the State of South 37 Carolina: 38 39 SECTION 1. Chapter 79, Title 44 of the 1976 Code is amended to 40 read: 41 “CHAPTER 79 42

[546] 2 1 Physical Fitness Services Act 2 3 Section 447910. This chapter may be cited as the ‘Physical 4 Fitness Services Act’. 5 6 Section 447920. As used in this chapter: 7 (1) ‘Physical fitness services’ mean facilities or services for the 8 development of physical fitness through exercise or weight 9 control. The term includes the facilities and services of health or 10 exercise centers, clubs, studios, or classes; health spas; weight 11 control centers, clinics, or studios; figure salons; tanning centers; 12 and athletic or sport clubs. It does not include rehabilitative 13 therapy administered by a licensed physical therapist or martial 14 arts studios. 15 (2) ‘Customer’ or ‘member’ means a person who contracts for 16 the use of physical fitness services. 17 (3) ‘Major facility’ means swimming pool, whirlpool, tennis 18 courts, racquet or handball courts, indoor or outdoor track, 19 gymnasium with exercise equipment, calisthenic room, or similar 20 collection of physical fitness equipment. 21 (4) ‘Major service’ means locations which that have offices, 22 treatment rooms, or counseling rooms but no major facilities and 23 other treatments, visits, or sessions to reduce and control weight. 24 (5) ‘Center’ means any person or organization which that, for 25 profit, offers physical fitness services, whether at multiple outlets 26 bearing the same name or a single outlet. Any A subsidiary of a 27 center, operating under the same name and offering such those 28 services, is a part of the center. 29 (6) ‘Outlet’ means a separate location of a center which is not 30 physically connected with another center but which uses the same 31 name. 32 (7) ‘Administrator’ means the administrator of the South 33 Carolina Department of Consumer Affairs. 34 (8) ‘Permanent closure’ means: 35 (a) nonoperation for thirty consecutive days; 36 (b) nonoperation for twenty or more days during a sixtyday 37 period; or 38 (c) abandonment of the facility. 39 40 Section 447930. (A) Every A prepaid or credit contract for 41 physical fitness services of over three months’ duration or over 42 two hundred dollars in amount must conform to the following 43 requirements:

[546] 3 1 (1) the contract must be in writing, and a copy must be given 2 to the customer at the time he signs it; 3 (2) the contract shall state clearly the street address or 4 location of the center and outlets which that the member may use 5 at the time the contract is executed and the major facilities or 6 major services which that each offers; 7 (3) the contract shall reveal the finance charge, if any, which 8 that the member agrees to pay; 9 (4) if the customer executes a promissory note in connection 10 with the contract, the contract shall clearly indicate whether the 11 promissory note is assignable paper and whether it may be 12 discounted and sold to third parties if the customer executes a 13 promissory note in connection with the contract. Assignment of 14 the promissory note does not affect the right of the member to 15 cancel the contract or the method by which the cancellation may be 16 made; 17 (5) the contract must contain a right to cancel provision in 18 the following language: 19 20 ‘CUSTOMER’S RIGHT TO CANCEL 21 22 (a) You may cancel this contract by sending notice of 23 your wish to cancel to the center before midnight of the third 24 business day after you sign the contract. ‘Business day’ means 25 Monday through Friday excluding state holidays and federal 26 holidays. This notice must be sent certified mail to the following: 27 ______28 Within thirty days of receipt of this notice, the center shall must 29 return any payments made and any a note or other evidence of 30 indebtedness. If you use the seller’s facilities or services, the 31 center may deduct a reasonable fee from the payments being 32 returned based on the actual fee paid divided on a pro rata share by 33 the number of days used by the customer. 34 (b) In addition, you or your estate may also may cancel 35 the contract at any time by written notice to the center at the above 36 address if the following circumstances occur: 37 (1) the customer’s death; 38 (2) substantial physical disability, certified by a 39 physician, which that makes it permanently impossible for the 40 customer to use the center’s services; 41 (3) the customer’s permanent relocation to a residence 42 over fifty thirty miles distant from an outlet operated by the center, 43 if the center is unable to arrange for the customer’s use of another

[546] 4 1 center with equivalent major facilities and services. acceptable to 2 the customer; 3 (4) permanent closure of the facility the customer 4 joined or is currently attending. 5 (c) The center may require reasonable presentation of 6 information to substantiate that one of these circumstances 7 circumstance (1), (2), or (3) has occurred. If the contract is 8 cancelled because of disability, death, or permanent change of 9 residence, the center shall must return any a note or other evidence 10 of indebtedness and unearned prepayments as follows: For for 11 each month that the contract was in effect, the center is entitled to 12 the rate a month or a treatment which it would have charged if the 13 contract had initially been one for the number of months or the 14 number of treatments for which the contract was actually in effect. 15 The rate is to be determined from a fee schedule in effect on the 16 date of the contract. If the contract is cancelled because of 17 permanent closure, the center or its assignee must return a note or 18 other evidence of indebtedness and unearned payments on a pro 19 rata basis. 20 (c)(d) The right of cancellation shall affect affects only the 21 financial obligations under the contract and customer’s right to use 22 the center’s physical fitness services.’ 23 (6) clearly state services such as personal training, personal 24 fitness testing, and daily visitor fees that are not subject to being 25 refunded must be clearly stated in the contract;. 26 (7)(B) Any A contractual provision allowing more liberal rights 27 of cancellation than set forth in this chapter may be substituted for 28 the notice required in this chapter. 29 (B)(C) A contract is not required for personal training, private 30 consultations, and fitness testing rendered on an hourly basis 31 unless they are part of a package of over three hundred dollars. 32 33 Section 447940. No A contract for physical fitness services may 34 not: 35 (1) have a duration of longer than twentyfour months, nor a 36 duration measured by the life of the customer, the life of the 37 center, or any a similar indefinite term; provided, however except 38 that, if a center demonstrates financial responsibility to the 39 administrator of the Department of Consumer Affairs and has been 40 in operation for five or more years in this State, it may offer 41 contracts for physical fitness services for a duration of up to 42 thirtysix months if approved in writing by the administrator; 43 (2) waive the required provisions of this chapter;

[546] 5 1 (3) provide that a right of action or defense of the customer 2 may be cut off by assignment of the contract to a third person. 3 (4) unilaterally be sold or assigned to a third party successor 4 for performance of the contract without the express written consent 5 of the customer if the center has permanently closed; or 6 (5) have a negative renewal option in which the customer 7 affirmatively must cancel the contract at the end of an agreed 8 initial, or renewal, membership term. 9 10 Section 447950. Any A provision of any a contract for physical 11 fitness services which does not comply with this chapter is 12 unenforceable against the member. 13 14 Section 447960. A contract for physical fitness services may 15 contain clauses which that provide: 16 (1) provide for extension of the term of the agreement for a 17 period equal to a period of temporary disability or pregnancy of 18 the customer, or for any other another just or reasonable cause; 19 (2) specify that the written contract constitutes the entire 20 agreement between the parties; 21 (3) provide for a renewal option, for a duration longer than one 22 month but not more than twelve months, which to be enforceable 23 must be exercised by the buyer in writing, or by payment by the 24 buyer of part or all of the renewal price. A renewal option for a 25 duration longer than one month may be exercised only near the 26 expiration of any a previous contract and for not more than twelve 27 months; 28 (4) provide for an automatic renewal option, for a duration of 29 no longer than one month, which to be enforceable must be 30 disclosed in bold type of at least fourteenpoint font on the front 31 page of the contract and must be initialed by the customer. The 32 customer will must be given the ability to optin opt in to the 33 automatic renewal provision at the time the initial contract is 34 executed by initialing an optin provision. Near the expiration of 35 the initial contract, the facility shall notify the customer in writing 36 at the customer’s last known address of the automatic renewal 37 option which that the customer selected at the time the initial 38 contract was executed. Price may not increase or decrease in an 39 automatically renewed contract without written notice to the 40 customer of at least thirty, but not more than sixty days prior to, 41 before the effective date of the change in price; 42 (5) specify that cancellation of a contract voids automatic 43 renewal provisions.;

[546] 6 1 (6) for monthtomonth terms, except that agreements with 2 monthtomonth contract terms must have a definite period with a 3 duration of no longer than one year; 4 (7) for payments that are automatically debited from a 5 customer’s banking or credit card account, except that automatic 6 debits may not extend beyond the initial or renewal contract term. 7 8 Section 447970. Any A right of action or defense which the 9 member may raise based on the contract for physical fitness 10 services is preserved against any assignee or successor to the 11 contract. 12 13 Section 447980 (1)(A) Every A center which that enters into 14 prepaid or credit contracts for physical fitness services of over 15 three months’ duration or over two hundred dollars in amount shall 16 must maintain with the administrator a surety bond in a sum to be 17 determined by the administrator based on the estimated future 18 costs to service contracts sold, but not to exceed fifty thousand 19 dollars. 20 (2)(B) In lieu of the bond required in this section, the center 21 may furnish under penalty of perjury information which 22 reasonably demonstrates financial responsibility as will enable the 23 center to satisfy the possible claims against the bond. In the event 24 the center is controlled by, under common control with, or controls 25 other corporations and the other corporation agrees in writing to 26 satisfy the claims against a bond allowed under this section, the 27 financial responsibility of the other corporation must be considered 28 in determining the requirement for a bond. In determining whether 29 if the center has the requisite financial responsibility, the 30 administrator may consider the operating and business history, 31 reputation, and management within and without the State, as well 32 as the operating and business history and reputation of any a 33 business controlled by, under common control with, or controlling 34 the center. The provisions of subsections (1)(A) and (2)(B) of this 35 section do not apply to physical fitness service facilities that have 36 been in operation for five years or more on the effective date of 37 this Chapter in 1985. 38 (3)(C) Each A center is required to notify the administrator 39 upon substantial change of its financial status and to submit an 40 annual report. 41 (4)(D) No A person may not offer physical fitness services in 42 this State without first obtaining a certificate of authority from the 43 administrator. A certificate of authority must be issued by the

[546] 7 1 administrator upon submission of items (a)(1) through (f)(7) of this 2 section. The applicant must submit: 3 (a)(1) A a formal application for the certificate in such form 4 and detail as the administrator requires.; 5 (b)(2) A a certified copy of its charter or articles of 6 incorporation and its bylaws, if any.; 7 (c)(3) If if a corporation, a certified copy of the certificate of 8 authority or good standing certificate from the Secretary of State of 9 South Carolina.; 10 (d)(4) A a copy of its membership agreement.; 11 (e)(5) A a copy of any contract to be issued.; 12 (f)(6) A a list of outlets at which physical fitness services 13 will be offered.; and 14 (g)(7) Any other relevant information required by the 15 administrator. 16 (5)(E) No A certificate of authority may must not be issued by 17 the administrator until the center pays an initial certificate of 18 authority fee of fifty dollars an for each outlet. Certificates A 19 certificate of authority may be renewed upon payment of an annual 20 renewal fee of fifty dollars an for each outlet on or before by 21 December thirtyfirst. 22 (6)(F) A copy of the Certificate certificate of Authority 23 authority required by this chapter must be posted conspicuously at 24 every location where monies or contracts are received by the 25 center. 26 (7)(G) It is unlawful for any a center or person acting on behalf 27 of a center required to obtain and maintain a Certificate certificate 28 of Authority authority under pursuant to this chapter to advertise, 29 sell, or offer to sell the use of physical fitness services when if a 30 valid certificate is not on file with the administrator. 31 (8)(H) The administrator may file a request for a contested case 32 hearing with the Administrative Law Court to obtain a cease and 33 desist order or an order revoking, suspending, or vacating the 34 certificate of authority of a center, if the department determines 35 that the center has violated or failed to comply with any a 36 provision of this chapter or regulation promulgated under the 37 authority of this chapter or if the department shows that: 38 (a)(1) a document or declaration required by subsection (4) 39 (D), items (a)(1) through (g)(7) were false or misleading; or 40 (b)(2) by clear and convincing evidence the center or its 41 agents, officers, or employees have engaged in false, fraudulent, or 42 deceptive conduct in its dealings with customers.

[546] 8 1 (9)(I) Instead of revocation, suspension, or refusal to continue 2 a certificate of authority of a center, the administrative law judge 3 may assess an administrative penalty for a violation of subsection 4 (4)(D) or (8)(H) of this section not to exceed five hundred dollars 5 for each violation, not to exceed five thousand dollars for matters 6 commenced in any calendar year. These penalties may be assessed 7 in connection with orders to cease and desist. 8 (J) Failure of a center to obtain a certificate of authority 9 renders any written or oral contract, agreement, or membership 10 voidable at the option of the consumer. 11 12 Section 447990. The administrator shall administer this chapter 13 and may promulgate regulations, subject to the Administrative 14 Procedures Act, necessary to carry out its provisions. 15 16 Section 4479100. (1) No A center shall may not advertise 17 physical fitness services which that are not operating or available 18 without clearly and conspicuously disclosing in the advertisement 19 that such they are not presently operating or available. 20 (2) No A center shall may not advertise physical fitness 21 services which that are not operating or available in each and every 22 outlet unless the advertisement clearly and conspicuously discloses 23 the facilities or services which that are not operating or available at 24 each outlet. 25 (3) Substantiation for physical fitness services advertising 26 claims, and information necessary to determine the amount of the 27 bonds required by this chapter, must be provided upon request of a 28 circuit solicitor, the Attorney General, or the Department of 29 Consumer Affairs. 30 31 Section 4479110. The State of South Carolina and its political 32 subdivisions and any notforprofit corporations are exempt from the 33 terms of this chapter. 34 35 Section 4479120. (A) Any A person who violates any a 36 provision of this chapter is guilty of a misdemeanor and upon 37 conviction must be fined not less than five hundred dollars nor or 38 more than five thousand dollars or be imprisoned for no more than 39 three years, or both. 40 (B) A violation of any a provision of this chapter is considered 41 a violation of Section 39520 of the South Carolina Unfair Trade 42 Practices Act.

[546] 9 1 (C) The department or the Attorney General may file an action 2 in circuit court to enforce the provisions of this chapter.” 3 4 SECTION 2. This act takes effect upon approval by the 5 Governor. 6 XX 7

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