It is enacted by the General Assembly as follows:

SECTION 1. Chapter 5-50 of the General Laws entitled "Health Clubs" is hereby repealed in its entirety and substituted therefore is the following chapter:

{ADD 5-50-1. Definition of terms. -- Whenever used in this chapter:

(1) "Health club" means any corporation, partnership, unincorporated association, or other business enterprise offering facilities for the preservation, maintenance, encouragement or development of physical fitness or well-being in return for the payment of a fee entitling the payer to the use of such facilities. The term shall include, but shall not be limited, to "health spas", "health clubs", "health studios", "figure salons", "sports clubs", "aerobic dance studios", "weight control studios", "gyms", and anywhere exercise facilities are available but shall not include any non profit organization, any private club owned and operated by its members or any facility owned or operated by the State of Rhode Island or any of its political subdivisions.

(2) "Business day" means any day except Sunday or a legal holiday.

(3) "Health club contract" means a written agreement whereby a buyer is entitled to membership in a health club or use of the facilities of a health club for a period longer than seven (7) days.

(4) "Buyer or Purchaser" means a natural person who enters into a health club contract.

(5) "Services actually received" includes any period during which the facilities of the health club are available to the buyer and are actually used by the buyer.

(6) "Disability" means a condition which will exist for more than forty-five (45) days and prevents a buyer from utilizing the health club to the same extent the buyer did before the commencement of such condition.

(7) "Department" means the Department of Attorney General, unless otherwise described.

(8) "Unopened facility" means a health club that is not fully constructed, open or available for use at the time the seller and buyer enter into a contract for health club services.

(9) "Seller" means any person, firm, corporation, partnership, unincorporated association, franchise, franchisor, or other business enterprise which operates a health club or which offer or enters into contracts for health club services. ADD}

{ADD 5-60-2. Registration -- Fees -- Renewals -- Suspension or revocation. -- (A) No person, firm, corporation or other entity shall operate or cause to be operated a health club unless duly registered as provided in this chapter.

(B) Each health club shall be registered with the Department.

A health club shall file a registration statement in accordance with subsection (C) of this section before entering into a health club contract with a buyer. All contracts entered into when a health club does not have a current registration statement filed shall be void. A nonrefundable registration fee of one hundred dollars ($100.00) is required of all health clubs. Registration shall be valid for one year from the effective date thereof and may be annually renewed with the Department by making the filing required by subsection (C) of this section and paying a renewal fee of fifty ($50.00) dollars. Whenever, prior to expiration of a seller's annual registration, there is material change in the information required by subsection (C) of this section, the seller shall, within ten (10) days, file an addendum updating the information with the Department.

(C) The registration forms to be provided by the Consumer Protection Unit of the Department shall include: (1) name and address of the health club and any multiple location operations; (2) names and residential addresses of officers, directors and majority stockholders of the health club; (3) parent company if any; (4) approximate square footage of the health club; (5) type of available facilities; (6) type of membership plans offered and their cost; (7) copy of the contract for health club services; (8) a full and complete disclosure of any pending or completed litigation, or any complaint filed with governmental authority against the health club or any of its officers or directors within the last three years; (9) proof of bonding as required by section 5-50-3; (10) appropriate certification or documentation from the municipality where the health club is located that the facility is in compliance with applicable zoning and planning regulations, fire regulations and building codes. It shall be the responsibility of the applicant to provide such documentation to the Department. The Department may waive this requirement for applicants from municipalities without such codes or regulations; and (11) the names and locations of any health club in which any of the principals may have been associated in the last three (3) years.

The principals who leave a health club will remain subject to the provisions of this section and chapter until such time that notice is given to the Department that they are no longer associated with the registered health club. Any replacement principal shall file with the Department a notice which shall be made in the form of an updated registration application. Any changes in physical locations within Rhode Island must be made in writing to the Department within ten (10) days of the move.

(D) No health club shall engage in any act or practice which is in violation of the provisions of this chapter or any regulation adopted to carry out the provisions of this chapter, or engage in conduct likely to mislead, deceive or defraud the buyer, the public or the local authority. The Department may refuse to grant or renew a registration or may suspend or revoke the registration of any health club which engages in any conduct prohibited by this chapter or does not comply with the statutory requirements set forth in Rhode Island General Laws sections 5-50-3 and 5-50-7. ADD}

{ADD 5-50-3. Bonding. -- (a) Prior to the execution of any contract for health club services, every seller which sells contracts for health club services, except non-profit organizations, weight loss and control services which do not provide physical exercise facilities and classes, and which do not obligate the customer for more than thirty (30) days, and which do not require an initiation fee as a condition of said contract, shall for each individual health club location or facility obtain a surety bond in the amount of ten thousand dollars ($10,000) for a facility with less than ten thousand (10,000) square feet of permanently covered non-court sport exercise/aerobic/fitness area; twenty thousand dollars ($20,000) for facilities between ten thousand (10,000) square feet and twenty-five thousand (25,000) square feet of permanently covered non-court sport exercise/aerobic/fitness area; and thirty thousand dollars ($30,000) for facilities with greater than twenty-five thousand (25,000) square feet of permanently covered non-court sport exercise/aerobic/fitness area. Proof of bonding must be presented at the time of registration or re-registration. ADD}

{ADD 5-50-4. Contract contents -- Notice to buyer of right to cancel contract -- Right of contract cancellation -- Refund. -- (A) A copy of every health club contract shall be delivered to the buyer at the time the contract is signed. All health club contracts must be in writing signed by the buyer, must designate the date on which the buyer actually signs the contract, and must contain a statement of the buyer's rights which substantially complies with this section. The statement must: (a) appear in the contract under the conspicuous caption: "BUYER'S RIGHT TO CANCEL", and (b) read as follows:

"If you wish to cancel this contract, you may cancel in person or by mail to the seller. You must give notice in writing that you do not wish to be bound by the contract. This notice must be delivered or mailed before midnight of the tenth (10th) business day after the date of the contract so entered into. All cancellations must be delivered or mailed to:

(Insert name and mailing address of health club)". Notice of the buyer's right to cancel and the method of cancellation under this section shall also be posted clearly and conspicuously on the premises of the health club.

(B) Every contract for health club services shall provide that such contract may be cancelled before midnight of the tenth (10th) day after the date of the contract so entered into. The notice of the buyer's cancellation of his contract shall be in writing and made in person or by mail to the seller at the address specified in the contract. Proof of in person cancellation shall be effectuated by writing "cancellation" and the date of cancellation across the contract. The buyer shall receive a copy of the contract. The signature of the person employed by the health club who registers the cancellation must also appear on the contract.

(C) Every contract for health club services shall provide clearly and conspicuously in writing that after the expiration of the ten day period for cancellation as provided in subsection (A) of this section, that: (1) If a buyer relocates further than fifteen (15) miles from a comparable health club facility operated by the seller; or (2) If a health club facility relocates further than fifteen (15) miles from its current location or the seller does not maintain a health club service within a fifteen (15) mile radius from its current location; or (3) If the health club services or facilities are not available to the buyer because the seller fails to open a planned health club or location, permanently discontinues operation of the health club or location or substantially changes the operation, the buyer shall be relieved from any and all obligations under the contract, and will be entitled to a refund of any prepaid membership under the contract; (4) If a buyer becomes significantly physically or medically disabled for period in excess of three (3) months during the membership term, he or she has the option: (i) to be relieved of liability for payment on that portion of the contract term for which the purchaser is disabled and receive a full refund of any prepaid membership on the contract, or (ii) extend the duration of the contract at no additional cost for a period equal to the duration of the disability. The health club may require that a doctor's certificate be submitted as verification of the disability; (5) In the event of buyer's death, his or her estate shall be relieved of any further obligation for payment under the contract and will be entitled to a refund for any prepaid membership for the unused portion of the contract. The health club may require verification of death; (6) In the event of a sale of health club ownership, the contract is voidable at the option of the buyer;

A health club contract which does not comply with the provisions of this chapter is voidable at the option of the buyer.

Upon cancellation pursuant to this section, the buyer shall be free of any and all obligations under the contract and any prepaid monies pursuant to such contract shall be refunded within fifteen (15) business days of receipt of such notice of cancellation. The right of cancellation shall not be affected by the terms of the contract and may not be waived or otherwise surrendered. ADD}

{ADD 5-50-5. Duration of contracts. -- (A) No contract for health club services shall be for a term longer than twenty-four (24) months, except that upon expiration of the contract, the seller may offer the buyer the right to renew his contract for a similar, shorter or longer period not to exceed twenty-four (24) months.

(B) No contract for health club services shall require payments or financing by the buyer over a period that extends more than one (1) month beyond the expiration of the contract. The installment payments shall be in substantially equal amounts exclusive of the down payment and shall be required to be made at substantially equal intervals, not more frequently than one (1) payment per month.

(C) No contract for health club services may contain any provisions whereby the buyer agrees not to assert against the seller or any assignee or transferee of the health club services contract any claim or defense arising out of the health club services contract or the buyer's activities at the health club. No contract for services may require the buyer to execute a promissory note or series of promissory notes which, when negotiated, cuts off as to third (3rd) parties a defense which the buyer may have against the seller. ADD}

{ADD 5-50-6. Downgrading of membership. -- No buyer shall be charged an additional fee for reducing a membership to a different and lesser grade of membership in the health club. ADD}

{ADD 5-50-7. Pre-opening sales -- Permit and bond required -- Facilities unopened -- Under construction and planned. -- (A) Any health club which is not fully operative or established and which conducts a pre-opening sales campaign must, before advertising or hold a pre-opening sales campaign, obtain a permit from the director of business regulation. The permit shall not be issued until a surety bond is posted in the amount pursuant to section 5-50-3. The director of the department of business regulation may promulgate rules and regulations as may be necessary to carry out of the provisions of this section.

(B) Any person, firm, corporation, or other entity intending to offer health club services at a facility under construction or planned shall register as required by section 5-50-2 before opening for business, entering into any contracts, or accepting any fees and shall maintain a surety bond as required by section 5-50-3.

A health club shall not enter into a contract with a buyer more than twelve (12) months prior to the intended opening of the health club. A buyer is also entitled to a full refund from an unopened seller as provided in section 5-50-4(C). When the facility is substantially completed and fully operational and available for use, the seller shall mail or personally deliver to each buyer a written notice informing the buyer that (1) the facility is available for inspection and use; (2) the buyer has fifteen (15) days after the date of the mailing of the notice to inspect the facility and determine whether it substantially conforms to the written contract, any written materials provided by the seller, or any advertisement by the seller. If it is found that the facilities do not so conform, the buyer may cancel by giving notice to the seller in person or by mail and the buyer shall receive a full refund. If upon reasonable investigation the buyer ascertains that the promised facility was not open and available for use within sixty (60) days after the date promised, and no substantial work was performed to prepare the facility for opening for a period of more than thirty (30) days thereafter the buyer may request a refund from the seller and the buyer shall receive a full refund. ADD}

{ADD 5-50-8. Truth in advertising -- Posting of rates. -- (A) It shall be unlawful for a seller, his agents, employees or other representatives to misrepresent directly or indirectly in its advertising, promotional materials, or in any other manner (a) the size, location(s), facilities or equipment of the health club; (b) the nature extent and availability of the services, courses, programs, guidance, instruction, counselling, assistance, devices or methods; (c) the price structure, price discounts, sales or offers.

(B) Every health club must clearly post a schedule of rates which advises buyers and potential buyers of the charges for the use of the health club facilities. ADD}

{ADD 5-50-9. Remedies, injunctive relief and civil penalties. -- (A) Any buyer of a health club contract which is in material violation of this chapter, has a right to cancel the contract and a right of action against the health club for recovery of triple the amount actually paid to the health club under the contract. In addition to any judgment awarded to the buyer, the court may allow reasonable attorney's fees to be taxed as cost.

(B) The superior court of this state shall have jurisdiction to prevent and restrain violations of this chapter. The court may issue appropriate decrees upon consent and stipulation by the parties. The court may also issue restraining orders. Under no circumstances shall the state be required to post bond in any action hereunder.

(C) The Attorney General is authorized to apply to the superior court for an order temporarily or permanently restraining and enjoining any health club from operating in violation of any provisions of this chapter. The attorney general may institute proceedings as provided in subsection (B) of this section.

(D) Any person may institute proceedings for injunctive relief, temporary or permanent as provided in subsection (B) of this section against threatened loss or damage by a violation of this chapter. A preliminary injunction may be issued upon a showing that the danger of irreparable loss or damage is immediate and, within the court's discretion, the execution of property bond against damages for an injunction improvidently granted. If the court issues a permanent injunction, the plaintiff shall be awarded reasonable attorney's fees, filing fees, and reasonable costs of the suit. Reasonable costs of the suit may include but not be limited to the expenses of discovery and document production.

(E) In addition to the injunctive relief authorized pursuant to subsection (B) of this section, any person, firm, corporation or other entity who violates this chapter may be liable for a civil penalty in a suit by the attorney general of this state of not more than one thousand dollars ($1,000) for each violation. ADD}

{ADD 5-50-10. Common law rights preserved. -- Nothing in this chapter shall be construed so as to nullify or impair any right which a buyer may have against a seller at common law, by statue, or otherwise. The provisions of this chapter are not exclusive and do not relieve the seller, the assigns or contracts from compliance with all other applicable provisions of law. ADD}

{ADD 5-50-11. Severability. -- If any provisions of this chapter or any rule or regulation made thereunder, or the application thereof to any person or circumstance is held invalid by any court of competent jurisdiction, the remainder of the chapter, rule or regulation and the application of such provision to other persons or circumstances shall not be affected thereby. The invalidity of any section or sections or parts of any section of this chapter shall not affect the validity of the remainder of the chapter. ADD}

SECTION 2. This act shall take effect upon passage.